JUAN v. YAP, SR.
(Vicencio, C2020) mortgaged to petitioner Richard Juan (petitioner) two parcels of
March 30, 2011 | Carpio, J. | Implied Trusts
PETITIONER: Richard Juan
RESPONDENTS: Gabriel Yap, Sr.
SUMMARY: By virtue of a Loan Contract, Cañeda Spouses mortgaged
two parcels of land to Richard Juan. The Spouses failed to pay hence,
Juan sought foreclosure of the property and he won the highest bid.
However subsequently, the Cañeda Spouses executed a MOA with
respondent Yap. Under this, the Spouses and Yap agree that Yap is the
real mortgage-creditor in the Contract and Juan is merely a trustee of
Yap. The Spouses and Yap then filed a case to declare the Contract
superseded/novated by the MOA and to annul the previous bid of Juan.
RTC sided with Juan. CA reversed.
The SC held that an implied trust was indeed created based on parol
evidence presented. First, the Spouses acknowledge Yap as the lender
from whom they borrowed the funds. Second, according to the notary
public who drew the contract, Juan’s name as mortgagor only upon
instruction of Yap. Yap disclosed that he trusted Juan, his nephew and
paid employee, to take care of everything because he was mostly abroad.
Clearly, petitioner Juan holds title over the mortgaged properties only
because Yap allowed him to do so. The demands of equity and justice
mandate the creation of an implied trust between the two, barring
petitioner from asserting proprietary claims antagonistic to his duties to
hold the mortgaged properties in trust for respondent. To arrive at a
contrary ruling is to tolerate unjust enrichment, the very evil the fiction
of implied trust was devised to remedy.
DOCTRINE: An implied trust arising from mortgage contracts is not
among the trust relationships the Civil Code enumerates. The Code itself
provides, however, that such listing “does not exclude others established
by the general law on trust.” Under the general principles on trust, equity
converts the holder of property right as trustee for the benefit of another
if the circumstances of its acquisition makes the holder ineligible in good
conscience to hold and enjoy it. As implied trusts are remedies against
unjust enrichment, the only problem of great importance in the field of
constructive trusts is whether in the numerous and varying factual
situations presented, there is a wrongful holding of property and hence, a
threatened unjust enrichment of the defendant.
FACTS:
1. Spouses Maximo and Dulcisima Cañeda (Cañeda Spouses)
land in Talisay Cebu to secure a loan of P1.68 million, payable in
one year.
2. Petitioner Juan is the employee and nephew of respondent
Gabriel yap, Sr. (Yap).
3. The contract was prepared and notarized by Atty. Antonio Solon.
4. Petitioner Juan, represented by Solon, sought the extrajudicial
foreclosure of the mortgage.
5. Although petitioner Juan and respondent Yap participated in the
auction sale, the properties were sold to petitioner for tendering
the highest bid of P2.2 million.
6. No certificate of sale was issued to petitioner, however, for his
failure to pay the sale's commission.
7. Respondent and the Cañeda spouses executed a memorandum of
agreement (MOA) where they agreed that:
a. The Cañeda spouses acknownledge respondent Yap as
their “real mortgage-creditor” and that Juan is merely a
trustee (aka not the real mortgage creditor).
b. Yap allowed the Cañeda spouses to redeem the foreclosed
properties for P1.2 million.
c. The Cañeda spouses and respondent agreed to initiate
judicial action either to annul or reform the contract or
compel Juan to reconvey the mortgagee’s rights to Yap as
trustor.
8. Three days later, the Cañeda spouses and respondent Yap sued
petitioner in the RTC to:
a. Declare Juan as trustee of Yap vis a vis the Contract
b. Annul Juan’s bid for the foreclosed properties
c. Declare the Contract superseded or novated by the MOA
d. Require Juan to pay damages, costs.
9. The Cañeda spouses consigned with the trial court the amoung of
P1.68 million as redemption payment.
10. RTC ruled with petitioner Juan.
a. Petitioner Juan was declared the true and real mortgagee
b. Ordered respondent Yap to pay moral damages and
attorney’s fees and deliver the titles in question
c. Gave primacy to the Contract
d. Rejected respondent Yap’s theory in light of his failure to
assert beneficial interest over the mortgaged properties
for four years.
11. CA reversed and declared respondent Yap the Contract’s actual
mortgagee.
a. Directed Juan to release the redemption payment to
respondent.
 b. Ordered petitioner Juan to pay damaged and fees.
c. Found the following circumstances crucial in its
concurrence with Yap’s theory notwithstanding the
Contract:
i. Solon testified that he drew up the Contract
naming petitioner as mortgagee upon instructions
of respondent;
ii. Dulcisima Cañeda acknowledged respondent as
the creditor from whom she and her husband
obtained the loan the Contract secured.
iii. Respondent shouldered the payment of the
foreclosure expenses.
d. Instead however, of annulling the Contract, the CA held
that reformation was the proper remedy, with the MOA
serving as the correction done by the parties to reveal
their true intent.
12. Hence this appeal by petitioner Juan.
ISSUE/s:
1. WoN an implied trust arose between petitioner Juan and
respondent Yap, binding Juan to hold the beneficial title over the
mortgaged properties in trust for respondent Yap – YES
RULING: Judgment in question is affirmed.
RATIO:
1. An implied trust arising from mortgage contracts is not among
the trust relationships the Civil Code enumerates.
2. The Code itself provides, however, that such listing “does not
exclude others established by the general law on trust …”
3. Under the general principles on trust, equity converts the
holder of property right as trustee for the benefit of
another if the circumstances of its acquisition makes the
holder ineligible “in … good conscience to hold and enjoy
it.”
4. As implied trusts are remedies against unjust enrichment, the
"only problem of great importance in the field of constructive
trusts is whether in the numerous and varying factual
situations presented ... there is a wrongful holding of
property and hence, a threatened unjust enrichment of the
defendant.
5. Applying these principles, the Court recognized unconventional
implied trusts in contracts involving the purchase of housing
units by officers of tenants' associations in breach of their
obligations, the partitioning of realty contrary to the terms of a
compromise agreement, and the execution of a sales contract
indicating a buyer distinct from the provider of the purchase
money.
6. In all these cases, the formal holders of title were deemed
trustees obliged to transfer title to the beneficiaries in
whose favor the trusts were deemed created. The SC sees
no reason to bar the recognition of the same obligation in
a mortgage contract meeting the standards for the
creation of an implied trust.
7. In the first place, the Cañeda spouses acknowledged respondent
Yap as the lender from whom they borrowed the funds secured by
the Contract.
8. When the Cañeda spouses sought an extension of time within
which to settle their loan, they directed their request not to
petitioner Juan but to respondent Yap who granted the extension.
9. Petitioner juan, therefore, was a stranger to the loan
agreement, the principal obligation the Contract merely
secured.
10. Secondly, Solon, the notary public who drew up and notarized the
Contract, testified that he placed petitioner's name in the
Contract as the mortgagor upon the instruction of respondent Yap.
11. Respondent Yap himself explained that he found this
arrangement convenient because at the time of the
Contract's execution, he was mostly abroad and could not
personally attend to his businesses in the country.
12. Respondent Yap disclosed that while away, he trusted
petitioner Juan, his nephew by affinity and paid employee,
to “take care of everything.”
13. This arrangement mirrors that in Tigno v. Court of Appeals
a. Where the notary public who drew up a sales contract
testified that he placed the name of another person
in the deed of sale as the vendee upon instructions
of the actual buyer, the source of the purchase
money, who had to go abroad to attend to pressing
concerns.
b. In settling the competing claims between the nominal
buyer and the financier in Tigno, the SC gave credence to
the parol evidence of the financier and found the
nominal buyer liable to hold the purchased
property in trust of the actual buyer under an
implied trust.
c. No reason has been proffered why the SC should arrive at
a different conclusion here.
14. Lastly, it was respondent Yap, not petitioner Juan, who
shouldered the payment of foreclosure expenses.
15. Juan’s failure to explain this oddity, coupled with the fact that no
certificate of sale was issued to him (despite tendering the highest
bid) for his non-payment of the commission, undercuts his
posturing as the real mortgagor.
16. Clearly then, petitioner Juan holds title over the mortgaged
properties only because respondent Yap allowed him to do
so.
17. The demands of equity and justice mandate the creation of
an implied trust between the two, barring petitioner Juan
from asserting proprietary claims antagonistic to his
duties to hold the mortgaged properties in trust for
respondent Yap. To arrive at a contrary ruling is to
tolerate unjust enrichment, the very evil the fiction of
implied trust was devised to remedy.
 HEIRS OF NARVASA, SR. v. IMBORNAL (Faderguya, D2021)
732 SCRA 171 (2014)
Petitioners: Heirs of Francisco Narvasa, Heirs of Petra Imbornal and
Pedro Ferrer, represented by Mrs. Remedios B. Narvasa-Regacho
Respondents: Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria,
and Eduardo, all surnamed IMBORNAL.
DOCTRINE: The burden of proving the existence of a trust is on the
party asserting its existence of the trust and its element. While implied
trusts may be proven by oral evidence, it must be trustworthy and
received by the courts with extreme caution because oral evidence can be
easily fabricated.
Facts:
● Basilia Imperial had 4 children namely Alejandra, Balbina,
Catalina, and Pablo.
● Francisco Narvasa and Pedro Ferrer were the children of
Alejandra, while petitioner Petra Imbornal was the daughter of
Balbina.
● Collectively Petitioners here are the heirs of Francisco, Pedro, and
Petra.
● On the other hand, respondents Emiliana, et al. (there were 7 of
them) are the descendants of Pablo.
● Basilia owned a parcel of land situated in Pangasinan (Sabangan
Property), which she conveyed to her three daughters Balbina,
Alejandra, and Catalina (Imbornal Sisters) in 1920.
● Catalina’s husband Ciriaco applied for and was granted a
homestead patent over a 31k sqm riparian land (Motherland).
○ In 1993, OCT 1462 was issued in his name.
○ In 1973, the OCT was cancelled and a TCT was issued in
the name of Ciriaco’s heirs.
● Ciriaco and his heirs occupied the northern portion of the
Motherland, while respondents occupied the southern portion.
● In 1949, the First Accretion (59k sqm) adjoined the southern
portion of the motherland. OCT was issued in the name of
respondent Victoriano.
● In 1971, the Second Accretion (32k sqm) joined the southern
portion of the first accretion. OCT was issued in the names of all
the respondent.
● Francisco et al., filed a complaint for reconveyance claiming their
rights over the entire motherland.
○ They allege that Ciriaco, with the help of Catalina, urged
Balbina and Alejandra to sell the Sabangan property, and
that Ciriaco used the proceeds to fund his
homestead patent application over the Motherland.
○ They allege that Ciriaco agreed that once the
patent is approved, he will be deemed to be holding
the motherland in trust for the Imbornal Sisters
(Alejandra and Balbina).
● Petitioner Francisco et al. said that they did not assert their claim
over the land because they respected respondent’s rights, until
they discovered that respondents have repudiated their shares.
● Respondents contend that the properties are covered by Torrens
title, free from any encumbrances.
● RTC - Land belongs to Francisco et al.
○ An implied trust existed.
○ Ciriaco was only able to acquire Motherland through the
proceeds realized from the sale of Sabangan property.
○ Imbornal Sisters and consequently, Francisco et al. are
entitled to their shares over the Motherland.
● CA - Reversed RTC ruling
○ Title over Motherland negates existence of trust.
● Francisco contends that the proceeds of Sabangan sale were used
for the pending homestead application. And through fraud,
Ciriaco led the sisters to believe that they had a share to the land.
(Art. 1456 was used as their basis) As such, Francisco can
claim ownership over the Motherland.
Issue: WON there is an Implied Trust - NO
Ruling:
● An implied trust arises, not from any presumed intention of the
parties, but by operation of law.
● Nevertheless, the burden of proving the existence of a trust is on
the party asserting its existence.
● Furthermore, such proof must be clear and satisfactorily show the
existence of the trust and its elements. While implied trusts may
be proven by oral evidence, the evidence must be trustworthy and
received by the courts with extreme caution because oral evidence
can be easily fabricated.
● In this case, aside from the oral evidence offered by Francisco that
the Motherland had been mistakenly registered in favor of
Ciriaco.
● But, the process of application for a homestead patent is a rigid
one (actual possession, cultivation, and improvement of the
homestead). Ciriaco underwent such process and duly satisfied
the conditions imposed.
 ● As such, it is highly implausible that the Motherland had been
acquired and registered by mistake or through fault as would
create an implied trust between Imbornal sisters and Ciriaco.
● Failing to rebut such evidence, no implied trust existed.
● Prescription Issue: Action for reconveyance based on implied
trust prescribes in 10 years which starts to run from the date of
registration or issuance of title. Here:
○ OCT issued 1933, prescribes on1943
○ OCT on 1st Accretion issued on 1952, prescribes on 1962
○ OCT on 2nd Accretion issued on 1978, prescribes on 1988.
○ It was only on 1984 that a complaint was filed, thus,
action on Motherland and 1st accretion had already
prescribed.

Dispositive:
WHEREFORE, the petition is DENIED. The Decision dated November
28, 2006 and the Resolution dated May 7, 2008 of the Court of Appeals in
CA-G.R. CV No. 57618 are hereby AFFIRMED, and a new judgment is
entered DISMISSING the Amended Complaint dated February 27, 1984
filed in said case.

Notes:
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.
 SALAO v. SALAO (Gamad, D2021)
70 SCRA 65 (1976)
Petitioners: 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,
Respondents: 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,
DOCTRINE:
IMPLIED TRUST MAY BE PROVEN BY ORAL EVIDENCE. — Article
1457 of the Civil Code allows an implied trust to be proven by oral
ISSUE: W/N there was an implied trust?
evidence. Trustworthy oral evidence is required to prove an implied trust
because oral evidence can be easily fabricated.
HELD: NO.
NO TRUST CREATED OVER QUESTIONED PROPERTY. — 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 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 as being held in
trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao.
FACTS:
1. What’s clear is Benita Salao is Valentin’s heir and he alleges the
Calunuran fishpond was assigned to Valentin through an oral
partition. Juan opposes on the ground he and Ambrosia
exclusively owns the same.
2. Spouses Manuel and Valentina Salao had four children: Patricio,
Alejandra, Banli, and Ambrosia. Manuel died in 1885. His eldest
son, Patricio, died in 1886, survived by his only child, Valentin
Salao. In 1914, Valentina died and her estate was administered
by Ambrosia. Such estate was partitioned extrajudicially and
signed by her four legal heirs: Alejandra, Juan, Ambrosia, and
Valentin. To each of the legal heirs was adjudicated a distributive
share valued at 8,135.25Php, but the fishponds and ricelands
given to Valentin had an aggregate appraised value of 13,501Php
which exceeded his distributive share. Thus in the deed of
partition he was directed to pay to his co-heirs to sum of
5,365.75Php.
3. In 1911, prior to the death of Valentina, Juan and Ambrosia
secured a Torrens title over a 47-hectare fishpond in Pampanga in
their names. Thereafter, Juan Salao died, leaving his share of the
fishpond to his son, Juan, Jr. A year before her death, Ambrosia
also donated her share in the fishpond to Juan, Jr.
4. Plaintiff Benita Salao, the daughter of Valentin Salao, filed this
petition against Juan, Jr. seeking reconveyance to them of the
fishpond, attesting that Valentin and Alejandra were included in
that joint venture, and that the funds used to acquire the
fishpond were the earnings of the properties supposedly inherited
from Manuel Salao. They contend that there the fishpond was
held in trust by Ambrosia as the share of Benita’s father Valentin
in the alleged joint venture.
1. There was no community of property among Juan Salao, Sr.,
Ambrosia Salao, and Valentin Salao when the fishponds were
acquired. Benita Salao alleged that there was a co-ownership over
the lands inherited from Manuel Salao, but this was not proven
by any competent evidence. 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 the conveys the land. That means that any
transaction affecting the registered land should be evidenced by a
registrable 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 or participation in the two fishponds is very
suggestive of the absence of such interest.
2. Did Juan and Ambrosia hold in trust the Calunuran fishpond for
Valentin? No.
a. Here, there’s no evidence to provide there was an express
trust over the Calunuran fishpond in Valentin’s favor.
Only parol evidence was presented to prove the alleged
trust claiming there was an oral partition assigning the
Calunuran fishpond to Valentin. An express trust
concerning an immovable can’t be proved by parol
evidence.
3. But is the parol evidence presented sufficient to prove an implied
trust?
 a. On this point, the evidence also fails. It’s incredible to
believe the 47 hectare Calunuran fishpond would be
assigned to Valentin by mere word of mouth. In contrast,
for a mere 17 hectare of land Valentina left, the Heirs had
to execute an elaborate 22 page document. Further, the
Calunuran fishpond is registered land but Benita Salao
failed to present the registrable deed over the same,
despite the lapse of 40 years.
b. Consequently, Benita failed to prove the existence of a
trust by clear, satisfactory, and convincing evidence. A
trust can’t rest on vague and uncertain evidence or loose,
equivocal, or indefinite declarations. If the trust is to be
proven by parol evidence, such parol evidence must be
trustworthy.
c. There was no resulting trust in this case because there
was never any intention on the part of the parties to
create a trust. Further, there’s no constructive trust
because the registration of the Calunuran fishpond in the
names of Juan and Ambrosia wasn’t vitiated by fraud or
mistake.
4. Lastly, even assuming there was a constructive trust, the action
would still be barred by prescription or laches. The reason being
the Calunuran fishpond was registered in 1911 but the action for
reconveyance was file din 1952, way after the 10-year prescriptive
period.

Dispositive: The trial court's judgment is affirmed. No pronouncement

as to costs.
 PNB v. COURT OF APPEALS (Guevarra, D2021)
217 SCRA 347 (1993)
Petitioners: Philippine National Bank
Respondents: B. P. Mata & Co. Inc.
DOCTRINE: Although the concept of trusts is nowhere to be found in
the Spanish Civil Code, the framers of our present Civil Code
incorporated implied trusts, which includes constructive trusts, on top
of quasi-contracts, both of which embody the principle of equity above
strict legalism.
Facts:
● Private Respondent B. P. Mata & Co. Inc. (Mata), is a private
corporation engaged in providing goods and services to shipping
companies. Since 1966, it has acted as a manning or crewing
agent for several foreign firms, one of which is Star Kist Foods,
Inc., USA (Star Kist). As part of their agreement, Mata makes
advances for the crew's medical expenses, National Seaman's
Board fees, Seaman's Welfare fund, and standby fees and for the
crew's basic personal needs.
● Subsequently, Mata sends monthly billings to its foreign principal
Star Kist, which in turn reimburses Mata by sending a
telegraphic transfer through banks for credit to the latter's
account.
● Against this background, on February 21, 1975, Security Pacific
National Bank (SEPAC) of Los Angeles which had an agency
arrangement with Philippine National Bank (PNB), transmitted
a cable message to the International Department of PNB to pay
the amount of US$14,000 to Mata by crediting the latter's account
with the Insular Bank of Asia and America (IBAA), per order of
Star Kist.
● Upon receipt of this cabled message on February 24, 1975, PNB's
International Department noticed an error and sent a service
message to SEPAC Bank. The latter replied with instructions
that the amount of US$14,000 should only be for US$1,400.
● On the basis of the cable message dated February 24, 1975,
Cashier's Check No. 269522 in the amount of US$1,400
(P9,772.96) representing reimbursement from Star Kist, was
issued by the Star Kist for the account of Mata on February 25,
1975 through the Insular Bank of Asia and America (IBAA).
● However, 14 days after, PNB effected another payment through
Cashier's Check No. 270271 in the amount of US$14,000
(P97,878.60) purporting to be another transmittal of
reimbursement from Star Kist,
● Six years later, PNB requested Mata for refund of US$14,000
(P97,878.60) after it discovered its error in effecting the second
payment.
● On February 4, 1982, PNB filed a civil case for collection and
refund of US$14,000 against Mata arguing that based on a
constructive trust under Article 1456 of the Civil Code,it has a
right to recover the said amount it erroneously credited to
respondent Mata.
● Manila RTC: dismissing the complaint ruling that it falls
squarely under Article 2154 on solutio indebiti and not under
Article 1456 on constructive trust.
● CA: affirmed and held that petitioner's demand for the return
ofUS$14,000 cannot prosper because its cause of action had
already prescribed under Article 1145, paragraph 2 of the Civil
Code (action upon a quasi contract prescribes in 6 yrs) Petitioner's
complaint was filed almost 7 yrs after mistaken payment to
private respondent.
● Petitioner: Action has not yet prescribed. It is a constructive
trust thus, within the prescriptive period of ten (10) years as
provided by Article 1144, paragraph 2 of the Civil Code.
● Private respondent: contends that the case at bar is one of solutio
indebiti and not a constructive trust.
Issue/s:
1. WON petitioner may still claim the US$14,000 it erroneously
paid private respondent under a constructive trust. –NO
Ratio:
1. Although only 7 years lapsed after petitioner erroneously credited
private respondent with the said amount and that under Article
1144, petitioner is well within the prescriptive period for the
enforcement of a constructive or implied trust. Petitioner's claim
cannot prosper since it is already barred by laches.
● It is a well-settled rule now that an action to enforce an implied
trust, whether resulting or constructive, may be barred not only
by prescription but also by laches.
● While prescription is concerned with the fact of delay, laches
deals with the effect of unreasonable delay. It is amazing that it
took petitioner almost seven years before it discovered that it had
erroneously paid private respondent. Petitioner would attribute
its mistake to the heavy volume of international transactions
handled by the Cable and Remittance Division of the
 International Department of PNB. Such specious reasoning is not
persuasive.
● It is unbelievable for a bank, and a government bank at that,
which regularly publishes its balanced financial statements
annually or more frequently, by the quarter, to notice its error
only seven years later. As a universal bank with worldwide
operations, PNB cannot afford to commit such costly mistakes.
Moreover, as between parties where negligence is imputable to
one and not to the other, the former must perforce bear the
consequences of its neglect. Hence, petitioner should bear the cost
of its own negligence.
THE COURT’S DISCUSSION ON TRUST
IMPLIED TRUSTS
Resulting trust Constructive trusts
Spanish Civil Code, the framers of our present Civil Code
incorporated implied trusts, which includes constructive
trusts, on top of quasi-contracts, both of which embody the
principle of equity above strict legalism.
Applying American case law:
quasi-contractual obligations Constructive trusts
- give rise to a personal -are enforceable by a proceeding in
liability ordinarily enforceable by equity to compel the defendant to
an action at law surrender specific property.
In both, a relationship is "forced" by operation of law upon the parties,
not because of any intention on their part but in order to prevent
unjust enrichment, thus giving rise to certain obligations not within
the contemplation of the parties.

a trust raised by implication of

law and presumed always to have one not created by words either
The distinction is more procedural than substantive.
been contemplated by the parties, expressly or impliedly, but by
the intention of which is found in construction of equity in order to
While petitioner may indeed opt to avail of an action to enforce a
the nature of the transaction, but satisfy the demands of justice.
constructive trust or the quasi-contract of solutio indebiti, it has
not expressed in the deed or
been deprived of a choice, for prescription has effectively blocked
instrument of conveyance.
quasi-contract as an alternative, leaving only constructive trust
Ex: Ex: Article 1456 as the feasible option.
Articles 1448 to 1455 of the Civil
Code.
Dispositive:
WHEREFORE, the decision of the Court of Appeals dismissing
● Mata, in receiving the US$14,000 in its account through IBAA, petitioner's claim against private respondent is AFFIRMED
had no intent of holding the same for a supposed beneficiary or
cestui que trust, namely PNB. But under Article 1456, the law
construes a trust, namely a constructive trust, for the benefit of
the person from whom the property comes, in this case PNB, for
reasons of justice and equity.
● Undoubtedly, the instant case fulfills the indispensable requisites
of solutio indebiti as defined in Article 2154.
● While the principle of undue enrichment or solutio indebiti, is not
new, having been incorporated in the subject on quasi-contracts
in Title XVI of Book IV of the Spanish Civil Code entitled
"Obligations incurred without contract," the chapter on Trusts is
fairly recent, having been introduced by the Code Commission in
1949. Although the concept of trusts is nowhere to be found in the
 ALEJANDRO TY v. SYLVIA TY (Armand, C2020)
April 30, 2008| Azcuna, J. | Implied Trusts
PETITIONERS: Alejandro Ty
RESPONDENTS: Sylvia Ty, as administratix of the Inestate Estate of
Alexander Ty
SUMMARY: Alejandro Ty (father of the deceased, Alexander Ty) is
opposing Slyvia Ty’s (wife of deceased) petition for the settlement of
Alecander’s intestate estate. There are 3 properties in question – in
EDSA, Wack Wack, and a condominium unit in Greenhills. Alejandro is
claiming ownership over the properties and alleged that they were merely
registered in Alexander’s name for him to hold in trust for his brothers
and sisters. Slyvia denied that the subject properties were being held in
trust by his deceased husband, claiming that they had they were
financially capable of purchasing such properties as they had multiple
business. The RTC granted the application for preliminary injunction and
decided in favor of Alejandro regarding the recovery of the property. CA
reversed the RTC stating that the implication created by law under Art.
1448 does not apply if the property was in the name of the purchaser’s
child, Alexander. CA ruled that Alejandro was not able to show by clear
preponderance of evidence that his son and Slyvia were not financially
capable of purchasing said property, nor that the money used to purchase
said properties really came from him. Moreover, assuming that the
money came from him, that it would still not establish an implied trust as
it would be considered a donation, or a gift, by express mandate of the
saving clause of Art 1448 of the CC. The CA believed that at most,
Alejandro paid for part of the purchase price of the EDSA property. Ths
issue is WoN there was an implied trust – NO. SC affirmed CA ruling
with modification that Slyvia is obliged to collate into the mass of the
estate of Alejandro, in the event of his death, the EDSA property as an
advance of Alexander’s share in his estae, to the extent that Alejandro
paid for part of its purchase price.
DOCTRINE: Art. 1448. There is an implied trust when property is sold,
and the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the property.
The former is the trustee, while the latter is the beneficiary. However, if
the person to whom the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale, no trust is implied by
law, it being disputably presumed that there is a gift in favor of the child.
Express trust over real property cannot be constituted when not in
writing; but it may be proved as an implied trust.
FACTS:
1. Alexander Ty, son of Alejandro Ty and husband of Sylvia Ty, died
of cancer at the age of 34. Sylvia filed a petition for the settlement
of Alexander’s intestate estate. She also asks court to sell or
mortgage properties in order to pay the estate tax amounting to
P4,714,560.02 assessed by the BIR. The properties include a
parcel of land in EDSA Greenhills, a residential land in Wack
Wack, and the Meridien condominium unit in Annapolis,
Greenhills.
2. Alejandro Ty (father) opposed the move and filed for recovery of
the property with prayer for preliminary injunction and/or
temporary restraining order.
3. Alejandro claims that he owns the EDSA, Wack Wack and
Meridien condo unit because he paid for them. The property was
supposedly registered in trust for Alexander’s brothers and sisters
in case Alejandro dies. Alejandro also claimed that Alexander had
no financial capacity to purchase the disputed property, as the
latter was only dependent on the former. To bolster his claim,
Alejandro presented the income tax returns of Alexander from
1980-1984, and the profit and loss statement of Slyvia’s Joji San
General Merchandising from 1981-1984.
4. Alejandro added that defendant acted in bad faith in including
the subject properties in the inventory of Alexander Ty’s estate,
for she was well aware that Alexander was simply holding the
said properties in trust for his siblings.
5. Sylvia denied that the subject properties were held in trust by
Alexander Ty for his siblings. She contended that, contrary to
plaintiff’s allegations, Alexander purchased the EDSA property
with his own money; that Alexander was financially capable of
purchasing the EDSA property as he had been managing the
family corporations ever since he was 18 years old, aside from the
fact that he was personally into the business of importing luxury
cars. As to the Meridien Condominium and Wack-Wack property,
defendant likewise argued that she and Alexander Ty, having
been engaged in various profitable business endeavors, they had
the financial capacity to acquire said properties.
6. She likewise claimed that asserted that the alleged verbal trust
agreement over the subject properties between the plaintiff and
Alexander Ty is not enforceable under the Statute of Frauds; that
plaintiff is barred from proving the alleged verbal trust under the
Dead Man’s Statute; that the claim is also barred by laches; that
defendant’s title over the subject properties cannot be the subject
of a collateral attack; and that plaintiff and counsel are engaged
in forum-shopping.
7. The RTC granted the application for preliminary injunction and
 decided in favor of Alejandro regarding the recovery of the
property. The RTC ordered Slyvia to transfer or convey the
subject properties in favor of plaintiff and the Register of Deeds
for Mandaluyong City to transfer and issue in the name of
Alejandro the corresponding certificates of title, for Slyvia to pay
plaintiff the amount of P100,000.00, as moral damages
and P200,000.00, as attorney’s fees plus the cost of the suit.
Slyvia appealed to the CA.
8. CA reversed the RTC stating that the implication created by law
under Art. 1448 does not apply if the property was in the name of
the purchaser’s child, Alexander. CA ruled that Alejandro was not
able to show by clear preponderance of evidence that his son and
Slyvia were not financially capable of purchasing said property,
nor that the money used to purchase said properties really came
from him. Moreover, assuming that the money came from him,
that it would still not establish an implied trust as it would be
considered a donation, or a gift, by express mandate of the saving
clause of Art 1448 of the CC. The CA believed that at most,
Alejandro paid for part of the purchase price of the EDSA
property. Alejandro appealed to the SC.
the price of the sale, and in this case this is undisputed, NO
TRUST IS IMPLIED BY LAW. The law, instead, disputably
presumes a donation in favor of the child. (Art 1448). The Court
also noted that Alejandro failed to prove that he did not intend a
donation. However, the court conceded that at least part of the
purchase price for the property came from Alejandro. The net
effect of all the foregoing is that respondent is obliged to collate
into the mass of the estate of petitioner, in the event of his death,
the EDSA property as an advance of Alexander’s share in the
estate of his father, to the extent that petitioner provided a part of
its purchase price.
2. MERIDIEN CONDO AND WACK WACK PROPERTY - The court
held that Alejandro failed to prove that purchase money came
from him. The review of the records clearly show that Alexander
was capable of purchasing the property as he had been working
for nine years, had a car care business, and was actively engaged
in the business dealings of several family corporations from which
he received emoluments and other benefits. Hence, NO implied
trust created because there was no proof that plaintiff had paid
for said properties.

ISSUE:
1. WoN there was an implied trust under Art. 1448 of the Civil
Code? - NO

HELD: WHEREFORE, the petition is PARTLY GRANTED in that the

Decision of the Court of Appeals dated July 27, 2004 and its Resolution
dated October 18, 2004, in CA-G.R. No. 66053, are AFFIRMED, with
the MODIFICATION that respondent is obliged to collate into the mass
of the estate of petitioner, in the event of his death, the EDSA property as
an advance of Alexander Ty’s share in the estate of his father, to the
extent that petitioner provided a part of its purchase price.

RATIO:
1. EDSA PROPERTY - No, there was no implied trust created in
relation to the EDSA property. If the person to whom the title is
conveyed is the child of the one paying the price of the sale, no
trust is implied by law under Art. 1448, the so-called purchase
money resulting trust. The said article provides an exception:
“However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale,
NO TRUST is IMPLIED by LAW, it being disputable presumed
that there is a gift in favor of the child.” In other words, If the
person to whom the title is conveyed is the child of the one paying
 PNB v. AZNAR (Reine, C2020)
May 30, 2011 | Leonardo-De Castro, J. | Express Trusts
PETITIONER: Philippine National Bank
RESPONDENTS: Merelo Aznar, Matias Aznar III, Jose Aznar
(represented by his heirs), Ramon Barcenilla, Rosario Barcenilla, Jose
Enad (represented by his heirs), Ricardo Gabuya(represented by his
heirs)
SUMMARY: RISCO ceased operations due to business reverses. Thus, in
order to rehabilitate RISCO, Aznar et al contributed P212,720 to
purchase 3 parcels of lands, all situated in Cebu. The amount contributed
by Aznar, et. al constituted as liens and encumbrances on the properties
as annotated in the titles of said lots. Such annotation was made
pursuant to the Minutes of the Special Meeting of the Board of Directors
of RISCO (Minutes). Various subsequent annotations were made on the
same titles, including the Notice of Attachment and Writ of Execution in
favor of PNB. As a result, a Certificate of Sale was issued in favor of PNB
being the lone and highest bidder of the 3 parcels of land. Aznar, filed a
complaint for the quieting of title. However, PNB countered that Aznar,
et.al have no right of action for quieting of titles since the order of the
court directing the issuance of titles to PNB had already become final and
executory. PNB further asserted that Aznar, et al, as mere stockholders
of RISCO do not have any legal or equitable right over the properties of
the corporation. PNB posited that even if Aznar et al monetary lien had
not expired, their only recourse was to require the reimbursement or
refund of their contribution. The Trial Court rendered judgment against
PNB on the basis of express trust but the CA reversed the ruling of the
Trial Court.
The SC ruled that Aznar, et al have no title to quiet over the subject
properties and their true cause of action is already barred by prescription.
The agreement contained in the Minutes of the Special Meeting was a
loan by the therein named stockholders to RISCO. The Court is
not persuaded by the contention of Aznar, et al., that the language of the
subject Minutes created an express trust. 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. No such reasonable certitude in the
creation of an express trust obtains in the case at bar. In fact, a careful
scrutiny of the plain and ordinary meaning of the terms used in the
Minutes does not offer any indication that the parties thereto intended
that Aznar, et al., become beneficiaries under an express trust and that
RISCO serve as trustor.
DOCTRINE: 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. No such reasonable certitude in the creation of an
express trust obtains in the case at bar. In fact, a careful scrutiny of the
plain and ordinary meaning of the terms used in the Minutes does not
offer any indication that the parties thereto intended that Aznar, et al.,
become beneficiaries under an express trust and that RISCO serve as
trustor.
FACTS:
1. In 1958, RISCO ceased operation due to business reverses. In the
desire to rehabilitate RISCO, the plaintiffs (Aznar, et.al)
contributed a total of P212, 720 which was used in the purchase
of 3 parcels of lands, all situated in Cebu. After the purchase of
the lots, titles were issued in the name of RISCO. The amount
contributed by Aznar, et. al constituted as liens and
encumbrances on the properties as annotated in the titles of said
lots. Such annotation was made pursuant to the Minutes of the
Special Meeting of the Board of Directors of RISCO (Minutes).
2. Various subsequent annotations were made on the same titles,
including the Notice of Attachment and Writ of Execution in favor
of PNB. As a result, a Certificate of Sale was issued in favor of
PNB being the lone and highest bidder of the 3 parcels of land.
3. Aznar, et. al filed the instant complaint seeking the quieting of
their supposed title to the subject properties, declaratory relief,
cancellation of TCT and reconveyance with temporary restraining
order and preliminary injunction. Aznar, et.al alleged that the
subsequent annotations on the titles are subject to the prior
annotation of their liens and encumbrances. Aznar, et.al further
contended that the subsequent writs and processes annotated on
the titles are all null and void for want of valid service upon
RISCO and on them, as stockholders. They argued that the Final
Deed of Sale and TCT No. 119848 are null and void as these were
issued only after 28 years and that any right which PNB may
have over the properties had long become stale.
4. On the other hand, PNB countered that Aznar, et.al have no right
of action for quieting of titles since the order of the court directing
the issuance of titles to PNB had already become final and
executory and their validity cannot be attacked except in a direct
proceeding for their annulment. PNB further asserted that Aznar,
et al, as mere stockholders of RISCO do not have any legal or
equitable right over the properties of the corporation. PNB
posited that even if Aznar et al monetary lien had not expired,
 their only recourse was to require the reimbursement or refund of
their contribution.
5. The Trial Court rendered a decision against PNB on the basis
that there was an express trust created over the subject
properties whereby RISCO was the trustee and stockholders,
Aznar, et.al were the beneficiaries or the cestui que trust.
6. The CA reversed the ruling of the Trial Court stating that the
monetary contributions made by Aznar, et al., to RISCO can only
be characterized as a loan secured by a lien on the subject
lots, rather than an express trust.
ISSUE/s:
WoN the contributions made by the stockholders of RISCO were merely a
loan secured by their lien over the properties, subject to reimbursement
or refund rather than an express trust?- YES, merely a loan not
express trust
RULING: WHEREFORE the petition of AZNAR is denied for lack of
merit. The petition of PNB is granted. The complaint filed by Aznar, et.al
is dismissed.
RATIO:
1. A thorough and comprehensive scrutiny of the records would
reveal that this case should be dismissed because Aznar, et al.,
have no title to quiet over the subject properties and their true
cause of action is already barred by prescription.
2. The Court agrees with the CA that the agreement contained in
the Minutes of the Special Meeting of the RISCO Board of
Directors was a loan by the therein named stockholders to
RISCO: “The term lien as used in the Minutes is defined as a
discharge on property usually for the payment of some debt
or obligation. A lien is a qualified right or a proprietary
interest which may be exercised over the property of
another. It is a right which the law gives to have a debt
satisfied out of a particular thing. It signifies a legal claim
or charge on property; whether real or personal, as
a collateral or security for the payment of some debt or
obligation.Hence, from the use of the word lien in the
Minutes, We find that the money contributed by plaintiffs-
appellees was in the nature of a loan, secured by their liens
and interests duly annotated on the titles. The annotation
of their lien serves only as collateral and does not in any
way vest ownership of property to plaintiffs.”
3. The Court is not persuaded by the contention of Aznar, et al.,
that the language of the subject Minutes created an express trust.
4. 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. 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.Express trusts, sometimes
referred to as direct trusts, are intentionally created by
the direct and positive acts of the settlor or the trustor by
some writing, deed, or will or oral declaration. It is
created not necessarily by some written words, but by the
direct and positive acts of the parties.
5. 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. No such reasonable
certitude in the creation of an express trust obtains in the
case at bar. In fact, a careful scrutiny of the plain and
ordinary meaning of the terms used in the Minutes does
not offer any indication that the parties thereto intended
that Aznar, et al., become beneficiaries under an express
trust and that RISCO serve as trustor.
6. Aznar, et al., have no right to ask for the quieting of title of the
properties at issue because they have no legal and/or equitable
rights over the properties that are derived from the previous
registered owner which is RISCO, the pertinent provision of the
law is Section 2 of the Corporation Code (Batas Pambansa Blg.
68), which states that a corporation is an artificial being created
by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident
to its existence. As a consequence thereof, a corporation has a
personality separate and distinct from those of its stockholders
and other corporations to which it may be connected
7. In the case at bar, there is no allegation, much less any proof,
that the corporate existence of RISCO has ceased and the
corporate property has been liquidated and distributed to
the stockholders. The records only indicate that, as per
Securities and Exchange Commission (SEC) Certification,
the SEC merely suspended RISCOs Certificate of
Registration beginning on September 5, 1988 due to its
non-submission of SEC required reports and its failure to
operate for a continuous period of at least five years.
8. Aznar, et al., who are stockholders of RISCO, cannot claim
ownership over the properties at issue in this case on the strength
 of the Minutes which, at most, is merely evidence of a loan
agreement between them and the company. There is no indication
or even a suggestion that the ownership of said properties were
transferred to them which would require no less that the said
properties be registered under their names. For this reason, the
complaint should be dismissed since Aznar, et al., have no cause
to seek a quieting of title over the subject properties.
9. At most, what Aznar, et al., had was merely a right to be repaid
the amount loaned to RISCO. Unfortunately, the right to seek
repayment or reimbursement of their contributions used
to purchase the subject properties is already barred by
prescription.
10. The pertinent Civil Code provision on prescription which is
applicable to the issue at hand is Article 1144(1): 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.
11. In Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.the
Court held that the term written contract includes the minutes of
the meeting of the board of directors of a corporation, which
minutes were adopted by the parties although not signed by them.
12. Applied to the case at bar, the Minutes which was approved
on March 14, 1961 is considered as a written contract
between Aznar, et al., and RISCO for the reimbursement of
the contributions of Aznar, et.al. As such, Aznar, et.al had
a period of 10 years from 1961 within which to enforce the
said written contract. However, it does not appear that
Aznar, et al., filed any action for reimbursement or refund of their
contributions against RISCO or even against PNB. Instead the
suit that Aznar, et al., brought before the trial court only on
January 28, 1998 was one to quiet title over the properties
purchased by RISCO with their contributions. It is unmistakable
that their right of action to claim for refund or payment of their
contributions had long prescribed.
 Sime Darby Pilipinas, Inc v. Mendoza (Cristelle, C2020)
June 19, 2013| Carpio, J. | Resulting Trusts
PETITIONER: SIME DARBY PILIPINAS, INC
RESPONDENTS: JESUS B. MENDOZA.
SUMMARY: Sime Darby bought a club share in Alabang country club
but it placed the share under the name of Mendoza in trust for Sime
Darby. From the time of purchase Sime Darby paid for the club shares.
When Mendoza retired, Sime Darby wanted to sell the club share but
before the sale could push through, the broker required Sime Darby to
secure an authorization to sell from Mendoza since the club share was
still registered in Mendoza’s name. Mendoza refused to sign unless Sime
Darby pays him 300,000. Sale did not push through and Sime Darby was
forced to return the payment to the prospective buyer. Sime Darby filed a
complaint for damages with writ of preliminary injunction against
Mendoza because he used the facilities and privileges of ACC to the
damage and prejudice of Sime Darby.
Issue: Whether or not Sime Darby is the owner of the ACC share? YES
Sime Darby is the owner. Held: While the share was bought by Sime
Darby and placed under the name of Mendoza, his title is only
limited to the usufruct, or the use and enjoyment of the club’s
facilities and privileges while employed with the company. In
Thomson v. Court of Appeals, we held that a trust arises in favor
of one who pays the purchase price of a property in the name of
another, because of the presumption that he who pays for a thing
intends a beneficial interest for himself. Sime Darby’s payments
of monthly billings of the subject share bolster Mendoza’s
possession in trust rather than his ownership over the share.
With this, the right of plaintiff over the share is clear and
unmistakable.
DOCTRINE: A trust arises in favor of one who pays the purchase price
of a property in the name of another, because of the presumption that he
who pays for a thing intends a beneficial interest for himself. While Sime
Darby paid for the purchase of the club share, Mendoza was given the
legal title. Thus, a resulting trust is presumed as a matter of law.
FACTS:
1. Petitioner Sime Darby employed Jesus B. Mendoza as sales
manager to handle sales, marketing, and distribution of the
company's tires and rubber products. On 3 July 1987, Sime Darby
bought a Class “A” club share in Alabang Country Club (ACC)
from Margarita de Araneta as evidenced by a Deed of Absolute
Sale.
2. The share, however, was placed under the name of
Mendoza in trust for Sime Darby since the By-Laws of ACC
state that only natural persons may own a club share. As
part of the arrangement, Mendoza endorsed the Club Share
Certificate in blank and executed a Deed of Assignment, also in
blank, and handed over the documents to Sime Darby.
3. From the time of purchase in 1987, Sime Darby paid for the
monthly dues and other assessments on the club share. When
Mendoza retired in April 1995, Sime Darby fully paid Mendoza
his separation pay amounting to more than P3,000,000. Sometime
in July 2004, Sime Darby found an interested buyer of the club
share.
4. Before the sale could push through, the broker required
Sime Darby to secure an authorization to sell from
Mendoza since the club share was still registered in
Mendoza’s name.
5. However, Mendoza refused to sign the required authority to sell or
special power of attorney unless Sime Darby paid him the amount
of P300,000, claiming that this represented his unpaid separation
benefits. As a result, the sale did not push through and Sime
Darby was compelled to return the payment to the prospective
buyer.
6. On 13 September 2005, Sime Darby filed a complaint for damages
with writ of preliminary injunction against Mendoza with the
Regional Trial Court (RTC) of Makati City, Branch 132. Sime
Darby claimed that it was the practice of the company to extend
to its senior managers and executives the privilege of using and
enjoying the facilities of various club memberships.
7. Sime Darby added that during Mendoza’s employment with the
company until his retirement in April 1995, Sime Darby regularly
paid for the monthly dues and other assessments on the ACC
Class “A” club share. Further, Sime Darby alleged that Mendoza
sent a letter dated 9 August 2004 to ACC and requested all
billings effective September 2004 be sent to his personal address.
8. Despite having retired from Sime Darby for less than 10 years
and long after the employment contract of Mendoza with the
company has been severed, Mendoza resumed using the facilities
and privileges of ACC, to the damage and prejudice of Sime
Darby.
9. Thus, Sime Darby prayed that a restraining order be issued,
pending the hearing on the issuance of a writ of preliminary
 injunction, enjoining Mendoza from availing of the club’s facilities
and privileges as if he is the owner of the club share.
10. On 15 November 2005, Mendoza filed an Answer alleging
ownership of the club share. Mendoza stated that Sime Darby
purchased the Class “A” club share and placed it under his name
as part of his employee benefits and bonus for past exemplary
service.
11. Mendoza admitted endorsing in blank the stock certificate
covering the club share and signing a blank assignment of rights
only for the purpose of securing Sime Darby’s right of first refusal
in case he decides to sell the club share. Mendoza also alleged
that when he retired in 1995, Sime Darby failed to give some of
his retirement benefits amounting to P300,000.
12. Mendoza filed a separate Opposition to Sime Darby’s application
for restraining order and preliminary injunction stating that
there was no showing of grave and irreparable injury warranting
the relief demanded.
13. On 30 April 2007, the trial court rendered a Decision in favor of
Sime Darby. Mendoza filed an appeal with the Court of Appeals.
On 30 March 2012, the appellate court reversed the ruling of the
trial court. The appellate court ruled that Sime Darby failed to
prove that it has a clear and unmistakable right over the club
share of ACC.
ISSUES:
1. Whether or not Sime Darby is entitled to damages and injunctive
relief against Mendoza, its former employee? YES
2. Whether or not Sime Darby is the owner of the ACC share? YES
Sime Darby is the owner or the share.
RULING: WHEREFORE, we GRANT the petition. We SET
ASIDE the 30 March 2012 Decision and 6 June 2012 Resolution of the
Court of Appeals in CA-G.R. CV No. 89178. We REINSTATE the 30
April2007 Decision of the Regional Trial Court of Makati City, Branch
132 in Civil Case No. 05-821.
RATIO:
1. Yes. In order for a writ of preliminary injunction to issue, the
following requisites must be present: (a) invasion of the right
sought to be protected is material and substantial; (b) the right of
the complainant is clear and unmistakable, and (c) there is an
urgent and paramount necessity for the writ to prevent serious
damage. The twin requirements of a valid injunction are the
existence of a right and its actual or threatened violations. All the
elements are present in the instant case.
2. Petitioner Sime Darby has sufficiently established its right over
the subject club share. Such fact was clearly proved when in the
application form dated 17 July 1987 of the ACC for the purchase
of the club share, Sime Darby placed its name in full as the owner
of the share and Mendoza as the assignee of the club share.
3. Even during the trial, at Mendoza’s cross-examination, Mendoza
identified his signature over the printed words “name of assignee”
as his own and when confronted with his Reply-Affidavit, he did
not refute Sime Darby’s ownership of the club share as well as
Sime Darby’s payment of the monthly billings from the time the
share was purchased.
4. When the share was registered under the name of mendoza, the
latter signed the stock certificate in blank as well as the deed of
assignment and placed the certificate under the possession of the
sime darby. Hence, Sime darby did not intend to relinquish its
interest and right over the subject, rather it intended to have
the share held in trust by defendant, until a new grantee is
named. Clearly, Mendoza admission of signing the club
share certificate and the assignment of rights, both in
blank, and turning it over to Sime Darby. show that there
existed a trust relationship between the parties.
5. While the share was bought by Sime Darby and placed
under the name of Mendoza, his title is only limited to the
usufruct, or the use and enjoyment of the club’s facilities
and privileges while employed with the company. In
Thomson v. Court of Appeals, we held that a trust arises in
favor of one who pays the purchase price of a property in
the name of another, because of the presumption that he
who pays for a thing intends a beneficial interest for
himself. Sime Darby’s payments of monthly billings of the
subject share bolster Mendoza’s possession in trust rather
than his ownership over the share. With this, the right of
plaintiff over the share is clear and unmistakable.
6. While Sime Darby paid for the purchase price of the club
share, Mendoza was given the legal title. Thus, a resulting
trust is presumed as a matter of law. The burden then shifts
to the transferee to show otherwise. Mendoza, as the transferee,
claimed that he only signed the assignment of rights in blank in
order to give Sime Darby the right of first refusal in case he
decides to sell the share later on.
7. A right of first refusal, in this case, would mean that Sime Darby
has a right to match the purchase price offer of Mendoza’s
 prospective buyer of the club share and Sime Darby may buy back dispose of the club share in any manner it sees fit without undue
the share at that price. However, Mendoza’s contention of the interference from Mendoza, who lost his right to use the club
right of first refusal is a self-serving statement. share when he retired from the company
8. He did not present any document to show that there was such an
agreement between him and the company, not even an
acknowledgment from Sime Darby that it actually intended the
club share to be given to him as a reward for his performance and
past service.
9. In fact, the circumstances which occurred after the purchase of
the club share point to the opposite. Mendoza signed the share
certificate and assignment of rights both in blank, Mendoza
turned over possession of the documents to Sime Darby, From the
time the share was purchased in 1987 until 1995, Sime Darby
paid for the monthly bills pertaining to the share and since 1987,
the monthly bills were regularly sent to Sime Darby’s business
address until Mendoza requested in August 2004, long after he
retired from the employ of the company, that such bills be
forwarded to his personal address starting September 2004.
10. Sime Darby did not intend to give up its beneficial interest and
right over the share. The company merely wanted Mendoza
to hold the share in trust since Sime Darby, as a
corporation, cannot register a club share in its own name
under the rules of the ACC. At the same time, Mendoza, as a
senior manager of the company, was extended the privilege of
availing a club membership, as generously practiced by Sime
Darby.
11. (Mendoza’s unreasonable demands) Mendoza violated Sime
Darby’s beneficial interest and right over the club share after he
was informed by Atty. Ronald E. Javier of Sime Darby’s plan to
sell the share to an interested buyer. Mendoza refused to give an
authorization to sell the club share unless he was paid P300,000
allegedly representing his unpaid retirement benefit. In August
2004, Mendoza tried to appropriate the club share and demanded
from ACC that he be recognized as the true owner of the share as
the named member in the stock certificate as well as in the
annual report issued by ACC.
12. Despite being informed by Sime Darby to stop using the facilities
and privileges of the club share, Mendoza continued to do so.
Thus, in order to prevent further damage and prejudice to itself,
Sime Darby properly sought injunction in this case.
13. SC grants the damages and injunctive relief sought by Sime
Darby, as the true owner of the ACC Class "A" club share. Sime
Darby has the right to be protected from Mendoza's act of using
the facilities and privileges of ACC. Sime Darby may choose to
 GABUTAN v. NACALABAN (Cera, C2020)
June 29, 2016 | JARDELEZA, J. | Purchase Money Resulting Trust
PETITIONER:Gabutan et al. (Heirs of Melecia)
RESPONDENTS: Nacalaban, et al. (Heirs of Godofredo)
SUMMARY: Heirs of Godofredo sold a parcel of land to Capitol College.
Heirs of Melecia opposed the sale since they stated that it is Melecia who
is the real owner of the land who merely entrusted the land to Godofredo.
It was Melecia’s money that was used to purchase the land. The Court
held that Melecia owned the property under the concept of purchase
money resulting trust since it was proven that at the time of purchase,
Melecia gave the money to Godofredo with family members present and
that under Melecia’s orders, the lot was name under Godofredo’s since he
was residing at CDO.
DOCTRINE:The trust created referred to as a purchase money
resulting trust, occurs when there is :
1. an actual payment of money, property or services, or an
equivalent, constituting valuable consideration;
2. and such consideration must be furnished by the alleged
beneficiary of a resulting trust.
FACTS:
1. Godofredo Nacalaban (Godofredo) purchased a land in Poblacion,
Cagayan de Oro City.In effect, TCT covering the property was
issued in the name of Godofredo. He then built a house on it.
2. Godofredo died. He was survived by his wife, Baldomera, and
their children.
3. Baldomera issued a Certification stating that she was allowing
her mother Melecia to build and occupy a house on the portion of
the property. Accordingly, the house was declared for taxation
purposes. The tax declaration presented in evidence showed that
Melecia owned the building on the land owned by Godofredo.
4. Upon Baldomera’s death, her children executed an Extrajudicial
Settlement with Sale where they adjudicated unto themselves
the property and sold it to the Cagayan Capitol College. The TCT
ISSUE/s:
covering the property was issued in the name of the College.
5. Melecia died and was survived by her children. In a letter, the
College requests that the heirs of Melecia who were occupying
the house on the property, to vacate the premises.
6. Gabutan, et al. filed a Complaint for Reconveyance of Real
Property, Declaration of Nullity of Contracts, Partition and
Damages with Writ of Preliminary Attachment and Injunction
RATIO:
against Nacalaban, et al. and the College.
7. They alleged that:
a. Melecia bought the property using her own money but
Godofredo had the Deed of Absolute Sale executed in his
name instead of his mother-in-law;
b. Godofredo and Baldomera were only trustees of the
property in favor of the real owner and beneficiary,
Melecia;
c. they only knew about the Extrajudicial Settlement with
Sale upon verification with the Registry of Deeds; and
d. the College was a buyer in bad faith, being aware they
were co-owners of the property.
8. In its Answer, the College claimed that it is a buyer in good faith
and for value, having "made exhaustive investigations and
verifcations from all reliable sources" that Melecia and her heirs
were staying in the property by mere tolerance.
9. It alleged that: (1) in the tax declaration of the residential house,
Melecia admitted that the lot owner is Godofredo; (2) the
occupancy permit of Melecia was issued only after Godofredo
issued a certification to the effect that Melecia was allowed to
occupy a portion of the property; and
10. (3) the Extrajudicial Settlement with Sale was published in three
consecutive issues of Mindanao Post, a newspaper of general
circulation.
11. The College filed a separate Complaint for Unlawful Detainer and
Damages with the MTC against Heirs of Melecia. The MTC ruled
in favor of the College which states that the Heirs of Melecia to
vacate the land. RTC affirmed the MTC Decision.
12. In the reconveyance case, the RTC decided in favor of Gabutan, et
al (Heirs of Melecia). The RTC found the testimonies of their
witnesses credible, in that the money of Melecia was used in
buying the property but the name of Godofredo was used when
the title was obtained because Godofredo lived in Cagayan de Oro
City while Melecia lived in Misamis Oriental. Thus, the RTC held
that a trust was established by operation of law pursuant to
Article 1448 of the Civil Code.
1. WON the action for reconveyance filed by Gabutan, et al. (Heirs of
Melecia) is proper -YES
2. RULING: Yes, the action of reconveyance filed by Gabutan, et. al
(Heirs of Melecia) since it was established that the true owner
was Melecia through implied trust given by Melecia to Godofredo.
An implied resulting trust was created between Melecia and Godofredo this only meant that Baldomera acknowledged that the property
1. Article 1448 of the Civil Code provides in part that there is an belongs to Melecia.
implied trust when property is sold, and the legal estate is 8. Having established the creation of an implied resulting trust, the
granted to one party but the price is paid by another for the action for reconveyance filed by Gabutan, et al., the heirs of
purpose of having the beneficial interest of the property. The Melecia in whose benefit the trust was created, is proper
former is the trustee, while the latter is the beneficiary.
2. The trust created here, which is also referred to as a purchase The College is a buyer in bad faith
money resulting trust, occurs when there is: 1. Firstly, as correctly pointed out by Gabutan, et al., Nacalaban, et
a. an actual payment of money, property or services, or an al. are not the registered owners of the property, but Godofredo.
equivalent, constituting valuable consideration; 2. Secondly, the College was aware that aside from Nacalaban, et
b. and such consideration must be furnished by the alleged al., the Heirs of Melecia, were also in possession of the property.
beneficiary of a resulting trust. The College cited the tax declaration which bore an annotation
3. These two elements are present here. that Melecia owned a residential building and Godofredo owned
4. Gabutan, et al., through the testimonies of the heirs of Melecia the lot. Also, apart from filing an ejectment case against the Heirs
established that Melecia's money was used in buying the of Melecia, the College retained part of the purchase price for the
property, but its title was placed in Godofredo's name. She demolition of Melecia's building as well.
purchased the property because Felisia wanted to build a
pharmacy on it. On one occasion in Melecia's house, and when the
entire family was present, Melecia gave Godofredo the money to
purchase the property. Melecia entrusted the money to Godofredo
because he was in Cagayan de Oro, and per Melecia's instruction,
the deed of sale covering the property was placed in his name.
5. It was allegedly her practice to buy properties and place them in
her children's name, but it was understood that she and her
children co-own the properties.
6. Melecia built a residential building on the property, where her
daughter Crisanta and some of her grandchildren resided.
Godofredo also thereafter built a house on the property. Twice, he
also mortgaged the property to secure loans. Melecia allowed him
to do so because she trusted him. After Godofredo's death, and
when Baldomera fell ill, there were family discussions to transfer
the title in Melecia's name so Melecia's children can divide it
together with the rest of Melecia's properties. Said plans always
fell through.
7. Nacalaban, et al., on the other hand, denied the arrangement
between Melecia and Godofredo, and maintained that it was
really the latter who purchased the property from its original
owners, as evidenced by their possession of the Deed of
Conditional Sale and the title being in Godofredo's name. if
Godofredo really bought the property with his own money, it was
surprising that Baldomera did not transfer the title of the
property to her name when Godofredo died in 1974. Baldomera
did not do so until her death in 1994 despite being pressed by her
siblings to partition the property. The RTC correctly deduced that
 PARINGIT v. BAJIT (Perral, C2020)
Sept, 29, 2010 | Abad, J. | Implied Trust
PETITIONER: SPS. FELIPE & JOSEFA PARINGIT
RESPONDENTS: MARCIANA P. BAJIT, ADOLIO PARINGIT and
ROSARIO PARINGIT ORDOÑO.
SUMMARY: SPS. Julia and Aurelia Paringit leased a lot, owned by
Terocel Realty, they built a home, lived and raised their 5 children in the
said lot. When Terocel Realty offered to sell the said lot to their long-time
tenant, Julian do not have enough financial capacity to make such
purchase, so he decided to seek help from his children. Among all his
children, Felipe, is the only one who had the financial capability to meet
the offer of said realty. With this, Julian executed a deed of assignment of
leasehold right in favor of Felipe and wife that would enable them to
acquire the lot. When the sale was already perfected, there insued a
dispute among the children on the ownership of the land. To resolve this.
Julian executed an affidavit stating that the land was bought by Felipe
and his wife for the benefit of all his children. This affidavit was signed
by all the children except one, and the wife of Felipe also signed the
affidavit as a representative of Felipe who was away at that time. After
the land was purchased and before Julian died, Marciana et. al., lived in
the said property while Felipe and his wife lived in a different house.
Upon the death of Julian, Felipe and wife sent a demand letter to pay
rent for occupying the property from 1900 to 1995. Marcian et. al.,
refused to pay or reply to the letter believeing that they had the right to
occypy the land. This prompted Felipe and wife to file an ejectment suit
against them, in which, the lower court decided in favor of Felipe and
ejected Marcian et. al., and their families in the said property. Marcian
et.al filed for an action to annul the title and reconveyance of property
before the RTC. Marciana et al did not won the case in the RTC because
of insufficient of evidence to prove that Felipe and wife indeed bought the
property for all of Julian’s children. Aggrieved, they filed an appeal before
the CA, CA reversed the RTC’s decision. Felipe and wife appealed to SC.
The issue presented in this case is WoN the Felipe and his wife
purchased the subject lot under an implied trust for the benefit
of all the children of Julian. SC held in favor of Marciana et. al., The
court held that the circumstances of the case shows that Felipe and wife
purchase of the land falls under the rubric of implied trust provided in
Article 1450 of CC.
DOCTRINE: Implied trust under Article 1450 1 of CC presupposes a
situation where a person, using his own funds, buys a property
on behalf of another, who in turn in the meantime may not have
the funds to purchase it.
Title of the property is for the time being placed in the name of
the trustee, the person who pays for it, until he is reimbursed by
the beneficiary, the person for whom the trustee bought land. It is only
after the beneficiary reimburses the trustee if the purchase price
that the former can compel conveyance of the property from the
latter.
FACTS: (Note: Julian Paringit and Marciana et. al., or as the affidavit
states, all of the children of Julian”- Trustors and beneficiaries at the
same time; sps. Felipe and wife- Trustees)
1. During their lifetime sps. Julian and Aurelia Paringit leased a lot
on Norma St. Sampaloc, Manila from Terocel Realty. They built
their home there and raise 5 children (Florencio, Felipe,
Marciana, Adolio, and Rosario). Aurelia died on the year 1972.
2. For having occupied the lot for years, Terocel Realty offered to sell
it to Julian but he did not have enough money at that time to
meet the payment deadline.
3. Julian sought the help of his children so he can buy the property
but only his son Felipe and wife had financial resources at that
time to help him. To bring about the purchase, on Jan 16, 1984,
Julian executed a deed of assignment of leasehold right in favor of
Felipe and his wife that would enable them to acquire the lot.
Subsequently, as intended, the latter bought the land from
Terocel Realty for P55,500 payable on installments.
4. April 12, 1984, Feliper and wife paid the last installment, and in
turn, Realty company executed a deed of absolute sale in their
favor and turned ove the title to them.
5. Feb. 25, 1985, due to issues among Julian’s children regarding the
ownership of the lot, Julian executed an affidavit clarifying the
nature of FIlepe and his wife’s purchaseof the lot, and claimed
that it was nought for the benedit of all his children. (see the
content of the affidavit: last part of digest)
1If the price of a sale of property is loaned or paid by one person for the benefit of
another and the conveyance is made to the lender or payor to secure the payment
of the debt, a trust arises by operation of law in favor of the person to whom the
money is loaned or for whom its is paid. The latter may redeem the property and
compel a conveyance thereof to him.
6. Expressing their concurrence with what their father said in his
affidavit, Felipe’s siblings (Marciana, Rosario, and Adolfo,
hereinafter “Martiana, et al.) signed the same. Josefa, wife of
Felipe, also signed the affidavit for Felipe who was in Saudi
Arabia. Only Florencsio did not sign.
7. Jan. 23, 1987, Felipe and his wife registered their purchase of the
lot, resulting in the issuance of TCT in their names. Despite the
title however, the sps. Moved to another to house on the same
street a year after. Marciana, et at., continued to occupy the lot
with their families without paying rent. This situation continued
until their father, Julian, died om Dec. 21, 1994.
8. Approx. a year after their father’s death, Felipe and his wife sent
a demand letter to Marciana, et al., asking them to pay rental
arrearages for occupying the property from March 1990 to Dec.
1995 for P2,400/m, totaling to P168,000.
9. Marciana, et al., refused to pay believing that they have the right
to occupy the house and lot, it being an inheritance from their
parents. On March 1996, Felipe and his wife filed and ejectment
suit against respondents. The suit was successful, resulting in the
ejectment of Marciana, et al., and their families from the
property. Shortly after, Felipe and his wife moved into the same.
10. Aggrieved, July 1996, Marciana, et al., filed the present action
against Felipe and his wife for the annulment of title anc
reconveyance of property before the RTC.
11. In Felipe’s answer, he denied any knowledge of the agreement
among the siblings that the property would devolve to them all
(that purchase would benefit all the children as reflected in the
affidavit of Julian). Josefa, the wife, claimed that she signed the
affidavit only because Marciana, et al. would get mad at her if she
won’t, and she signed it only as proof that she received it.
12. While Marciana, et al., insisted that the agreement was that
Felipe and his wife would acquire the lot for the benefit of all
siblings. They even tried to reimburse the said sps. For their
shares in the lot’s price.
13. Furthermore, the claimed, that Adolio even offered to pay P32K
for his 30 sqm portion of the lot but Felipe and his wife did not
accept it. Other siblings also tried to offer to pay their shares of
the purchase price too but sps just avoided them. They also
denied pressuring the wife of Felipe into signing the document,
and that it was even the wife who caused the drafting og the
affidavit.
14. RTC rendered a decision finding the evidence of Marciana, et al.,
insufficient to prove that Felipe and his wife bought the subject
lot for all the siblings. Aggrieved, Marciana et al., appealed to the
CA which reversed the ruling of RTC ordering Felipe and his wife
to reconvey to Marciana, et al., their proportionate share in the
lot upon reimbursement of what the spouses paid to acquire it
plus legal interest.
15. CA found that Felipe and his wife’s purchase of the lot falls under
the rubric of the implied trust under article 1450..
16. Felipe and his wife filed an MR but was denied by CA. Hence, this
present petition for review filed before the SC.
ISSUE/s:
1. WoN the Felipe and his wife purchased the subject lot
under an implied trust for the benefit of all the children of
Julian. – YES
2. WoN Marciana, et al.’s right of action was barred by prescription
ot laches. - NO
RULING: SC DENIES the petition, and AFFIRMS the decision of the CA
with MODIFICATION that respondents Marciana Paringit Bajit, Adolio
Paringit, and Rosario Paringit Ordoño reimburse petitioners Felipe and
Josefa Paringit of their corresponding share in the purchase price plus
expenses advanced by petitioners amounting toP60,000.00 with legal
interest from April 12, 1984 until fully paid.
RATIO:
1. CA’s ruling: (which was affirmed by SC)
1. CA found that Felipe and his wife purchase of the lot falls
under the rubric of implied trust provided in Article 1450
of the CC. Implied trust under this provision
presupposes a situation where a person, using his
own funds, buys a property on behalf of another,
who in turn in the meantime may not have the
funds to purchase it.
2. Title of the property is for the time being placed in
the name of the trustee, the person who pays for it,
until he is reimbursed by the beneficiary, the person
for whom the trustee bought land. It is only after the
beneficiary reimburses the trustee if the purchase
price that the former can compel conveyance of the
property from the latter.
2. Felipe and his wife’s contention: (generally, They insist that they
had no agreement with Marciana et al., regarding the sps
purchase of the lot for the benefit of all of Julian’s children)
 1. That they did not lend money to Marciana et al., for the
purchase of the lot
2. That they did not buy if for the benefit of the siblings
3. That the conveyance of the lot was not to secure the
payment of any supposed loan.
3. SC ruling:
1. The circumstances of the present case are actually what
implied trust is about. Although no express agreement
covered Felipe and his wife’s purchase of the lof for the
siblings and their father, it came about by operation of
law and is protected by it.
2. The nature of the transaction established the implied
trust and this in turn gave rise to the rights and
obligations provided by law. Implied trust is a rule
of equity, independent of the particular intention of
the parties.
3. FF. circumstances shows that Felipe and his wife bought
the lot for the benefit of Julian and his children, rather
thatn for themselves (w/c made sps Felipe a trustee of the
said lot for the benefit of the beneficiary by operation of
law):
1. House originally belonged to Julian and Aurelia
who built it. When Aurelia died, Julian and all
their children inherited her conjugal share of the
house (making them co-owners). Thus, when
Terocel Realty granted its long time tenants the
right to acquire the lots, the right technically
belonged to Julian and all his children. If Julina
really intended to sell the entire house and assign
the right to acquire the lot to Felipe and his wife,
he could have arranged for Felipe’s other siblings
to give their conformity as co-owners to such sale.
And if Felipe and his wife intended to buy the lot
for themselves, knowing that Felipe’s siblings co-
owned the lot, had taken steps to secure their
conformity to the purchase.
2. Julian clearly stated in his affidavit that Felipe
and his wife bought the lot from Terocel Realty on
his behalf and on behalf of his other children.
That Felipe and his wife advanced the payment
because Julian and his other children did not then
have the money to purchase the said lot in time to
meet Terocel’s deadline. Julian added that his
other children were to reimburse Felipe for the
money he advanced for them.
3. It should be noted that Felipe, acting thru his
wife, countersigned Julian’s affidavit the way his
siblings did. The document expressly
acknowledged the parties' intention to establish
an implied trust between Felipe and his wife, as
trustees, and Julian and the other children as
trustors (and beneficiaries at the same time).
Josefa, Felipe's wife, of course claims that she
signed the document only to show that she
received a copy of it. But her signature did not
indicate that fact. She signed the document in the
manner of the others.
4. If Felipe and his wife really believed that the
assignment of the house and the right to buy the
lot were what their transactions with Julian were
and if the spouses also believed that they became
absolute owners of the same when they paid for
the lot and had the title to it transferred in their
name in 1987, then their moving out of the house
in 1988 and letting Marciana, et al., continue to
occupy the house did not make sense. They would
make sense only if, as Marciana, et al., and their
deceased father claimed, Felipe and his wife
actually acquired the lot only in trust for Julian
and all the children.
5. Felipe and wife demanded rent from Marciana, et
al., only on Dec. of 1995, a year following Julian's
death on Dec. of 1994. This shows that from 1984
when they bought the lot to Dec. of 1995, when
they made their demand on the occupants to
leave, or for over 10 years, Felipe and his wife
respected the right of the siblings to reside on the
property. This is incompatible with their claim
that they bought the house and lot for themselves
back in 1984. Until they led the suit, they did
nothing to assert their supposed ownership of the
house and lot.
4. 2nd issue: ..on prescription and laches
1. While the contention of Felipe and wife is true that an
implied trust prescribes within 10 yrs from the time of the
right of action accrues, it should be noted that in an
implied trust, the beneficiary’s cause of action arises when
 the trustee repudiates the trust, not when the trust was
created as Felipe and wife would have it.
2. In this case, pouses of course registered the lot in their
names in January 1987 but they could not be said to have
repudiated the implied trust by that registration. Their
purchase of the land and registration of its title in their
names are not incompatible with implied trust. It was
understood that they did this for the benefit of Julian and
all the children.
3. Even assuming that Felipe and his wife's registration of
the lot in their names in January 1987 constituted a
hostile act or a violation of the implied trust, Marciana, et
al., had 10 years or until January of 1997 within which to
bring their action. Here, they filed such action in July
1996 well within the period allowed them.
4. On laches2:
1. Marciana, et al., had no reason to le an earlier
suit against Felipe and his wife since the latter
had not bothered them despite their purchase of
the lot in their names on January 30, 1984.
2. Only about 12 years later or on December 18,
1995 when they wrote their demand letter did the
spouses take an adverse attitude against
Marciana, et al. The latter led their action to
annul Felipe and his wife's title and have the
same transferred to their names not too long later
on July 24, 1996.

2Failure or neglect, for an unreasonable and unexplained length of tume, to do

that which, by exercising due diligence could or shoukd have been done earlier.
 DE OCAMPO v. ZAPORTEZA (Clark, C2020)
August 31, 1929 | Villamor, J. | Equitable Mortgage
PETITIONER: Agripino De Ocampo, et. al.
RESPONDENTS: Juan Zaporteza, et. al.
SUMMARY: Juan Zaporteza et al (respondents) maintains that the trial
court erred in holding that the instrument Exhibit A is a mortgage deed,
and not a deed of sale subject to repurchase, contending that Agripino de
Ocampo et al (petitioners) executed the instrument Exhibit A in favor of
Zaporteza. Also, that de Ocampo received the price of the sale, and that
there was no fraud in the execution of the instrument in question. De
Ocampo is contending that there is a mistake of said writing and a failure
to express the true intent and agreement of the parties. De Ocampo
contends that the contract between the parties is in reality a simple
mortgage, but was made to appear as if it were a sale, subject to
repurchase, at the suggestion of Nazario P. de Mesa the attorney for
Zaporteza. Exhibit A was executed in March 1924, the decree
adjudicating lot No. 4210, which includes the two parcels of land in
question (2000 coconut trees), even if the registration proceeding had not
yet been issued given such was only issued in August 31, 1925. The trial
court took cognizance of the registration proceeding and a certificate of
transfer was issued in favor of Zaporteza which included the entire lot no.
4210 containing 2000 coconut trees. The issue is WoN the instrument
Exhibit A is a mortgage rather than a sale subject to repurchase. The SC
held that it is an equitable mortgage. Zaporteza only held the certificate
of transfer in trust for de Ocampo as to the portion of the lot containing
1,300 coconut trees, and therefore, Zaporteza is bound to execute a deed
in favor of de Ocampo transferring said portion to them.
DOCTRINE: When an absolute conveyance of property effected only as a
means to secure performance of obligation of the grantor, it is an
equitable mortgage.
FACTS:
1. Facts started here: Juan Zaporteza et al (respondents)
maintains that the trial court erred in holding that the
instrument Exhibit A is a mortgage deed, and not a deed of sale
subject to repurchase, contending that the parties herein
submitted an agreed statement of facts wherein it appeared that
the Agripino de Ocampo et al (petitioners) executed the
instrument Exhibit A in favor of Zaporteza. Also, that de Ocampo
received the price of the sale, and that there was no fraud in the
execution of the instrument in question.
2. Petitioner de Ocampo is contending that there is a mistake of said
writing and a failure to express the true intent and agreement of
the parties.
3. The evidence of de Ocampo shows that:
a. The portion of land conveyed to Zaporteza by de Ocampo
added to that conveyed to them by the deceased Alejandro
de Ocampo, only comprises an area of land planted with
700 coconut trees.
b. The conveyance by the deceased Alejandro de Ocampo and
that subsequently made by Agripino de Ocampo were only
to secure the amount of P1,000 received by the former,
and the P2,000 furnished by Zaporteza to pay a debt of
the deceased to the National Bank (P1,604.44) and
funeral expenses (P400).
4. De Ocampo contends by means of witnesses Agripino and
Gregorio de Ocampo that the contract between the parties is in
reality a simple mortgage, but was made to appear as if it were a
sale, subject to repurchase, at the suggestion of Nazario P. de
Mesa the attorney for Zaporteza (who told them that, as it was a
question between brothers, there was no objection to drawing up
the deed in that form).
5. Also that if the agreement were evidenced as a loan, Zaporteza
might appear in a bad light if the transaction were not
dissimulated, in view of which, De Ocampo gave a substantially
correct account of the conversations between the parties which
preceded the execution of the document in question.
6. Exhibit A was executed in March 1924, the decree adjudicating
lot No. 4210, which includes the two parcels of land in question
(2000 coconut trees), even if the registration proceeding had not
yet been issued given such was only issued in August 31, 1925.
7. On January 27, 1926, the trial court that took cognizance of the
registration proceeding, amended its decree, on motion of
Zaporteza, by including therein the lien of a sale subject to
repurchase for P3,000 (700 coconut trees) for the period of three
years from March 4, 1924.
8. On June 18, 1926, the original certificate was issued and,
subsequently, on September 14, 1927, the certificate of transfer
was issued in favor of Zaporteza.
9. It is a fact duly proven in the proceedings that the certificate of
transfer in favor of Zaporteza includes not only the two parcels
described in the instrument Exhibit A, planted with 700 coconut
trees, but all of lot No. 4210, which, according to the evidence,
contains 2,000 coconut trees.
 10. Therefore, it is evident that the certificate of transfer, Exhibit 1,
in so far as it includes a portion of land planted with 1,300
coconut trees (since the entire Lot no. 4210 contains 2000 coconut
trees), to which the Zaporteza are not at all entitled, should not
be given legal effect, especially when said certificate of transfer
has been obtained Zaporteza during the pendency of the present
action wherein the value of the instrument Exhibit A is precisely
the matter in dispute.
11. The instant appeal seeks the reversal of the judgment holding
that the contract Exhibit A is a mortgage rather than a sale
subject to repurchase.

ISSUE:
1. WoN the instrument Exhibit A is a mortgage rather than a sale
subject to repurchase – It is a mortgage

RULING: With regards to the two portions described in the instrument

Exhibit A, we affirm the judgment appealed from, ruling that within
ninety days from the date this decision becomes final, the administrator
of the estate of the deceased Alejandro de Ocampo must redeem the land
which is the subject mater of the contract, paying the sum of P3,000 to
Zaporteza, who shall restore said land to the administrator, provided that
if the administrator fails to exercise this right within the period fixed, the
ownership of the land described in the deed Exhibit A shall be
consolidated Zaporteza. So ordered.

RATIO:
1. When a deed of sale a retro was intended to cover a loan made by
the purported seller from the purported buyer, then the doctrines
upheld in previous jurisprudences are applicable in the instant
case in the sense that Zaporteza only held the certificate of
transfer in trust for de Ocampo as to the portion of the lot
containing 1,300 coconut trees, and therefore, Zaporteza is bound
to execute a deed in favor of de Ocampo transferring said portion
to them.
2. When an absolute conveyance of property effected only as
a means to secure performance of obligation of the
grantor, it is an equitable mortgage.
 MIGUEL J. OSSORIO PENSION FOUNDATION v. CA (Emar,
C2020)
June 28, 2010| Carpio, J.| Implied Trust
PETITIONER: MIGUEL J. OSSORIO PENSION FOUNDATION,
INCORPORATED (Miguel Foundation/MJOPFI)
RESPONDENTS: CA and COMMISSIONER OF INTERNAL REVENUE
SUMMARY: Miguel Foundation was organized for the purpose of
administering the employees trust fund of VMC employees. It decided to
invest a part of the trust fund to purchase a lot together with VMC and
VFC. The lot was registered under the name of VMC. They later on sold
the lot to Metrobank and there was P6m paid to the BIR for the sales tax.
The Miguel Foundation claims that it is tax exempt under Sec. 53 (b) [now,
60(b)] of the Tax code which states that “tax … shall not apply to
employee's trust…” so it filed a claim for tax refund but was denied by the
BIR so it brought the case to the CIR which failed to act on it. It, then, filed
a petition in the Court of Tax Appeals which ruled that Miguel Foundation
(1) failed to show co-ownership over the lot and (2) is not the pension trust
itself but is a separate entity whose function is to administer the pension
plan, and it is therefore, not entitled to the tax exemption. The case went
to the CA which concurred with the finding of the CTA and so it appealed
to the SC. The issue is WON Miguel Foundation can claim tax refund
because it is tax exempt although it is (1) not the registered owner of the
title of the object of sale and (2) that it is merely a trustee of the trust fund.
The court ruled that yes, it is tax exempt because Art. 1452 of the CC
states that a trust is created by force of law when two or more persons
agree to purchase a property and by common consent the legal title is
taken in the name of one of them for the benefit of all and therefore, the
fact that the TCT was named solely in VMC doesn’t mean that Miguel
foundation is not a co-owner. The Memorandum of Agreement (MoA)
acknowledging Miguel Foundations ownership of the lot proved the fact of
ownership of Miguel Foundation of the 49.59% of the lot, and Employees
Trust Fund is still the beneficial owner of such portion.
DOCTRINE: “A foundation existing for the purpose of holding title to, and
administering, the tax-exempt Employees’ Trust Fund established for the
benefit of the employees, has the personality to claim tax refunds due the
Employers’ Trust Fund.” (From outline) “No particular words are required
for the creation of a trust, it being sufficient that a trust is clearly
intended. It is immaterial whether or not the trustor and the trustee know
that the relationship which they intend to create is called a trust, and
whether or not the parties know the precise characteristic of the
relationship which is called a trust because what is important is
whether the parties manifested an intention to create the kind of
relationship which in law is known as a trust.” (From case)
FACTS:
1. Miguel Foundation was organized for the purpose of holding title
to and administering the employees trust/retirement funds
(Employees Trust Fund) established for the benefit of the
Victorias Milling Company, Inc. (VMC) employees
2. Miguel Foundation, as trustee, claims that:
a. The income earned by the Employees Trust Fund is tax
exempt under the Tax Code.
b. It decided to invest part of the Employees Trust Fund to
purchase a lot in Muntinlupa and bought it through
VMC
c. Its investment in the lot came about upon the invitation
of VMC, which also purchased 2 lots.
d. Its share in the lot is 49.59%.
3. Miguel Foundations investment manager, Citytrust Banking
Corporation (Citytrust) regularly reported the Employees Trust
Funds share in the lot.
4. The lot is covered by a title with VMC as the registered
owner.
5. Miguel Foundation claims that its Board of Trustees authorized
the sale of its share in the lot for funds to pay:
a. retirement and pension benefits of VMC employees
and
b. reimbursement of advances made by VMC
6. VMC negotiated the sale of the lot with Metrobank for P81.6m
and signed the Deed of Absolute Sale as the sole vendor.
7. Metrobank, as withholding agent, paid the BIR P6m as tax on
the sale.
8. Miguel Foundation alleges that the parties who co-owned the lot
executed a notarized MoA as to the proceeds of the sale, the
pertinent provisions of which state:
The said parcels of land are actually co-owned by the following:
BLOCK 4, LOT 1 COVERED BY TCT NO. 183907
% SQ.M.
AMOUNT MJOPFI 49.59% 450.00 P 5,504,748.25
VMC 32.23% 351.02 3,578,294.70
VFC 18.18% 197.98 2,018,207.30
3. Since Lot 1 has been sold for P81,675,000.00 (gross of
7.5% withholding tax and 3% brokers commission,
MJOPFIs share in the proceeds of the sale is
 P40,500,000.00 (gross of 7.5% withholding tax and 3%
brokers commission. However, MJO Pension Fund is
indebted to VMC representing pension benefit advances
paid to retirees amounting to P21,425,141.54, thereby
leaving a balance of P14,822,358.46 in favor of MJOPFI.
Check for said amount of P14,822,358.46 will therefore be
issued to MJOPFI as its share in the proceeds of the sale
of Lot 1. The check corresponding to said amount will be
deposited with MJOPFIs account with BPI Asset
Management & Trust Group which will then be invested
by it in the usual course of its administration of MJOPFI
funds.
9. Miguel Foundation claims that:
a. It’s a co-owner of the lot as trustee of the Employees
Trust Fund, based on the notarized MoA presented before
the appellate courts.
b. VMC has confirmed that Miguel Foundation, as
trustee of the Employees Trust Fund, is VMC’s co-
owner of the lot.
c. Its ownership of the lot is supported by the excerpts of
the minutes and the resolutions of Miguel
Foundations Board Meetings.
d. There is no dispute that the Employees Trust Fund is
exempt from income tax.
e. The Employees Trust Fund's 49.59% share in the
income tax paid (P3,037,500) should be refunded as
it it purchased 49.59% of the lot as a trustee, using funds
of the Employees Trust Fund.
f. Tax exemption of the Employees Trust Fund rendered the
payment of P3,037,500 as illegal or erroneous.
10. Miguel Foundation filed a claim for tax refund.
11. BIR told Miguel Foundation that it is not exempt from tax on its
income from the sale of real property under the Sec 26 of Tax
Code and asked it to submit documents to prove its co-ownership
of the MBP lot and its exemption from tax.
12. Miguel Foundation replied that the applicable provision granting
its claim for tax exemption is not Section 26 but Section 53(b) of
the Tax Code and that its co-ownership of the MBP lot is
evidenced by Board Resolution Nos. 92-34 & 96-46 and the
memoranda of agreement among Miguel Foundation, VMC
and its subsidiaries.
13. BIR failed to act on Miguel Foundations claim for refund.
14. Miguel Foundation elevated its claim to the CIR which did not
also act on its claim for refund.
15. Miguel Foundation filed a petition for tax refund before the Court
of Tax Appeals which denied the petition.
According to the Court of Tax Appeals:
16. Miguel Foundation, to show co-ownership over the lot presented:
a. Secretary’s Certificate showing how the purchase and
eventual sale of the lot came about.
b. Memoranda of Agreement showing the following:
i. Lot was co-owned by VMC & MJOPFI on a 50/50
basis
ii. VMC held the property in trust for North Legaspi
Corporation, North Negros Marketing Co., Inc.,
Victorias Insurance Factors Corporation, Victorias
Science Foundation. and Canetown Corporation.
iii. That the previous agreement (ii) was cancelled
and it showed that the MBP lot was co-owned by
Miguel Foundation, VMC & VFC.
17. Pieces of evidence are self-serving and cannot by themselves
prove Miguel Foundations co-ownership of the MBP lot when
the TCT, the Deed of Absolute Sale, and the Monthly
Remittance Return of Income Taxes Withheld (Remittance
Return) disclose otherwise.
18. Miguel Foundation failed to present any evidence to prove
that the money used to purchase the MBP lot came from
the Employees' Trust Fund.
19. Under Section 53(b) [now Section 60(b)] of the Tax Code 3, it is not
Miguel Foundation that is entitled to exemption from income tax
but the income/earnings of the Employees Trust Fund.
20. Miguel Foundation is not the pension trust itself but it is a
separate and distinct entity whose function is to
administer the pension plan for some VMC employees and
Miguel Foundation is estopped from claiming a tax exemption
21. VMC has led the government to believe that it is the sole
owner of the lot through its execution of the Deeds of Absolute
Sale both during the purchase and subsequent sale of the lot and
through the registration of the MBP lot in VMCs name.
Consequently, the tax was also paid in VMCs name alone.
3 CHAPTER X: ESTATES AND TRUSTS
SEC. 60. Imposition of Tax. - xxx
(B) Exception. - The tax imposed by this Title shall not apply to employee's
trust…
 22. Miguel Foundation may not now claim a refund of a portion of the
tax paid by the mere expediency of presenting Secretarys
Certificates and memoranda of agreement in order to
prove its ownership. These documents are self-serving and
merit very little weight.
23. Miguel Foundation filed its Petition for Review before the CA
which denied it.
According to the CA:
24. Documentary evidence of Miguel Foundation are largely self-
serving and they failed to show that the funds used to
purchase the MBP lot came from the Employees Trust
Fund.
25. Efforts towards ensuring that legal documents pertaining to
its investments (title to the lot) were really in its name
should have been exerted, considering its awareness of the
resulting tax benefit that such foresight or providence would
produce.
26. In allowing the title of the property to be placed solely in the
name of its co-owner (VMC), although Miguel Foundation owned
a much bigger portion thereof, Miguel Foundation failed to
ensure a fix so to speak, on its investment, and the CA is not
impressed by the documents which the Miguel Foundation
presented, as the same apparently allowed mobility of the
subject real estate assets between or among the Miguel
Foundation, the VMC and the latter's subsidiaries. Given the fact
that the subject parcel of land was registered and sold under the
name solely of VMC, even as payment of taxes was also made
only under its name,
27. CA concurred with the finding of the CTA that Miguel
Foundation's claim for refund of withheld creditable tax is
bereft of solid juridical basis.
28. Miguel Foundation elevated the case before the SC.
ISSUES:
1. WON Miguel Foundation/ the Employees Trust Fund is estopped
from claiming that the Employees Trust Fund is the beneficial
owner of 49.59% of the lot and that VMC merely held 49.59% of
the lot in trust for the Employees Trust Fund. -NO
2. If not, WON they have sufficiently established that the
Employees Trust Fund is the beneficial owner of 49.59% of the
lot, and thus entitled to tax exemption for its share in the
proceeds from the sale of the lot – YES
3. WON Miguel Foundation can sufficiently establish that Miguel
Foundation, as trustee of the Employees Trust Fund, has a
common agreement with VMC and VFC that they shall jointly
purchase the lot and put the lot title in the name of VMC for the
benefit Miguel Foundation, VMC and VFC - YES
RULING: WHEREFORE, we GRANT the petition and SET ASIDE the
Decision of 30 May 2003 of the Court of Appeals in CA-G.R. SP No.
61829. Respondent Commissioner of Internal Revenue is directed to
refund petitioner Miguel J. Ossorio Pension Foundation, Incorporated, as
trustee of the Employees Trust Fund, the amount of P3,037,500,
representing income tax erroneously paid.
RATIO:
1. The law allows a co-owner of a parcel of land to register his
proportionate share in the name of another co-owner in whose
name the entire land is registered.
2. The second co-owner serves as a legal trustee of the first co-
owner insofar as the proportionate share of the first co-
owner is concerned. The first co-owner remains the owner of
his proportionate share. Art. 1452, CC:
3. Art. 1452. If two or more persons agree to purchase a property
and by common consent the legal title is taken in the name of one
of them for the benefit of all, a trust is created by force of law
in favor of the others in proportion to the interest of each.
4. For Art. 1452 to apply, a co-owner only needs to show is that
there is common consent among the purchasing co-owners
to put the legal title to the purchased property in the
name of one co-owner for the benefit of all. Once this
common consent is shown, a trust is created by force of law.
5. BIR has no option but to recognize such legal trust as well
as the beneficial ownership of the real owners because the trust
is created by force of law. The fact that the title is registered
solely in the name of one person is not conclusive that he alone
owns the property.
6. Miguel Foundation, as trustee of the Employees Trust Fund,
has more than sufficiently established that it has an agreement
with VMC and VFC to purchase jointly the MBP lot and to
register the MBP lot solely in the name of VMC for the benefit of
Miguel Foundation, VMC and VFC.
7. Factual findings of the CTA are reviewable by the court when
judgment is based on a misapprehension of facts.
8. Appellate courts failed to consider the genuineness and due
execution of the notarized MoA acknowledging Miguel
Foundations ownership of the lot.
9. BIR failed to present any clear and convincing evidence to prove
that the following evidence are fictitious and has no legal effect:
a. Notarized MoA
b. VMC/registered owner didn’t repudiate Miguel
Foundation’s share in lot
c. Portfolio Mix Analysis for years 1994-1997 showing
Miguel Foundation invested P5.5m in the lot prepared by
Citytrust (reputable banking institution)
10. Registration of a land under the Torrens system does not create
or vest title, because registration is not one of the modes of
acquiring ownership. TCT is merely an evidence of ownership
over a particular property and its issuance in favor of a
particular person does not foreclose the possibility that
the property may be co-owned by persons not named in
the certificate, or that it may be held in trust for another
person by the registered owner.
11. No particular words are required for the creation of a trust, it
being sufficient that a trust is clearly intended. It is immaterial
whether or not the trustor and the trustee know that the
relationship which they intend to create is called a trust, and
whether or not the parties know the precise characteristic of the
relationship which is called a trust because what is important
is whether the parties manifested an intention to create
the kind of relationship which in law is known as a trust.
12. Tigno v. CA: implied trust arises where a person purchases
land with his own money and takes conveyance thereof in the
name of another. Property is held on resulting trust in favor of
the one furnishing the consideration for the transfer, unless a
different intention or understanding appears. The trust
which results under such circumstances does not arise from a
contract or an agreement of the parties, but from the facts
and circumstances; that is to say, the trust results because
of equity and it arises by implication or operation of law.
13. The notarized MoA and the certified true copies of the Portfolio
Mix Analysis prepared by Citytrust prove that Miguel
Foundation invested P5.5m , using funds of the Employees'
Trust Fund, to purchase the lot. Since the lot was registered
in VMCs name only, a resulting trust is created by operation
of law. A resulting trust is based on the equitable doctrine
that valuable consideration and not legal title determines
the equitable interest and is presumed to have been
contemplated by the parties. Based on this resulting trust, the
Employees Trust Fund is considered the beneficial co-
owner of the MBP lot.
14. Miguel Foundation has sufficiently proven that it had a
common consent or agreement with VMC and VFC to jointly
purchase the MBP lot. The absence of Miguel Foundations
name in the TCT does not prevent Miguel Foundation from
claiming before the BIR that the Employees Trust Fund is
the beneficial owner of 49.59% of the lot and that VMC
merely holds 49.59% of the MBP lot in trust, through
Miguel Foundation, for the benefit of the Employees Trust
Fund.
15. BIR has acknowledged that the owner of a land can validly
place the title to the land in the name of another person. In
BIR Ruling, a certain Amelia purchased a land and registered it
in the names of Armin and Amelito as trustees on the condition
that upon demand by Amelia, the trustees would transfer the
land in favor of their sister, Arleen May. The BIR ruled that an
implied trust is deemed created by law and the transfer of
the land to the beneficiary is not subject to capital gains
tax or creditable withholding tax.
16. Income from employees trust fund is exempt from income tax.
17. BIR previously ruled that the private employees benefit trust
funds, which included Miguel Foundation, have met the
requirements of the law and the regulations and therefore
qualify as reasonable retirement benefit plans within the
contemplation of the Tax Code. The income from the trust
fund investments is therefore exempt from the payment of
income tax and consequently from the payment of the
creditable withholding tax on the sale of their real
property.
18. Documents issued and certified by Citytrust showing that
money from the Employees Trust Fund was invested in the
lot cannot be brushed aside by the BIR as self-serving, in
the light of previous cases holding that Citytrust was indeed
handling the money of the Employees Trust Fund. These
documents, together with the notarized MoA, establish that
Miguel Foundation, on behalf of the Employees Trust Fund,
indeed invested in the purchase of the lot. Thus, the Employees'
Trust Fund owns 49.59% of the lot.
19. Miguel Foundation has proven that the income from the sale of
the MBP lot came from an investment by the Employees' Trust
Fund, Miguel Foundation, as trustee of the Employees Trust
Fund, is entitled to claim the tax refund of P3,037,500 which was
erroneously paid in the sale of the MBP lot.
 HEIRS OF TANAK PANGAWARAN PATIWAYAN v. MARTINEZ
(Mel, C2020)
June 10, 1986| Gutierrez, JR., J.| Resulting Trust (which is a kind of
Implied Trust)
PETITIONER: HEIRS OF TANAK PANGAWARAN PATIWAYAN,
namely: PATIWAYAN MANANQUE, ARABIA, RAMIR, SARAMIA,
INOBODAN, SAMLAN, PINJAMAT, and NORMA, all surnamed
PATIWAYAN, all represented herein by their attorney-in-fact, RAMIR
PATIWAYAN,
 during the first and second marriages, there were no liquidations
RESPONDENTS: HON. ANTONIO M. MARTINEZ, in his capacity as
Presiding Judge of the Court of First Instance of Davao, Branch VI;
TAGWALAN PANGARAWAN BALANG ATIS; BOCAOCAWI (Moro);
JANE DOE and JILL DOE, minors, represented herein by their natural
mother and guardian NAPSA (Mora)
SUMMARY: Pangawara, a Moro, had married legitimately three
successive times without liquidation of conjugal partnerships formed
during the first and second marriages. When Pangawaran died in 1938,
Tagwalan Pangawaran, the son by the third marriage, being the only
male child of Pangawaran allegedly prevailed upon the other heirs that
he should act as administrator and overseer of the entire property but in
due time he shall cause the partition and distribution of the respective
shares of all the rightful heirs. But instead Tagwalan filed an application
for free patent over the parcel of land with the Bureau of Lands resulting
thereafter in the issuance of Free Patent and Original Certificate of Title.
Tagwalan was able to have the property registered solely in his name
since 'he falsified the application for free patent by stating falsely that he
was the only heir of Pangawaran when in truth and in fact there were
other heirs like the herein plaintiff Tanak and the other defendants. So
petitoners filed a complaint against the private respondents for
annulment of title, reconveyance of successional shares, partition,
accounting and damages. The issue is WON an implied trust was
created in favor of the co-heirs of Tagwalan? – Yes, an implied
trust was created. that since respondent Tagwalan, through fraud
was able to secure a title in his own name to the exclusion of his
co-heirs who equally have the right to a share of the land covered
by the title, an implied trust was created in favor of said co-heirs.
Respondent Tagwalan is deemed to merely hold the property for
their and his benefit.
DOCTRINE: 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.
FACTS:
1. On July 1, 1976, Tanak Pangawaran-Patiwayan filed a complaint
against the private respondents for annulment of title,
reconveyance of successional shares, partition, accounting and
damages.
2. The complaint, in substance, alleged that a certain Pangawaran
during his lifetime married legitimately three successive times;
that complainant is the daughter by the second marriage; that
of the conjugal partnership after the death of Pangawaran's
respective spouses; that respondent Tagwalan is the child by the
third marriage; and that since the latter was the only son of
Pangawaran, he was able to convince his co-heirs that he should
act as administrator of the properties left by Pangawaran but
instead, managed to obtain a patent in his own name and later an
original certificate of title to the complainant's prejudice.
3. Respondents filed an answer denying the marriage of
Pangawaran to complainant Tanak's mother alleging that
Pangawaran married only twice, the offsprings of which are the
respondents themselves.
4. Tanak Pangawaran-Patiwayan died on January 8, 1978 and her
heirs were substituted as complainants in the case.
5. On December 15, 1977, the respondents filed a motion to dismiss
on the following grounds: (a) the trial court has no jurisdiction to
annul the Free Patent Application and the Original Certificate of
Title issued in favor of respondent Tagwalan since the complaint
did not join as plaintiffs the Director of Lands and the Secretary
of Agriculture and Natural Resources and since the prerogative to
file a complaint exclusively belongs to the Solicitor General under
Section 101 of the Public Land Act; (b) there is non-exhaustion of
administrative remedies; and (c) the action has prescribed.
6. The trial court granted the motion to dismiss. The following are
its findings:
(included the stories of the families of Pangawaran)
- a certain Pangawaran (Moro) during his lifetime cultivated
and occupied a parcel of land situated at Binuring, Tigatto,
Davao City, which was declared for taxation purposes in his
own name. He died in 1938. During his lifetime, he had 3
wives one after the other. His first wife was Najo (Mora), with
whom he begot 2 children, and it was during this union that
the 16 hectares of land was first cultivated by Pangawaran.
When Najon died, there was no liquidation of the conjugal
partnership and partition of the successional shares of the
then surviving heirs as Pangawaran continued in his
 cultivation and acts of ownership over the aforesaid parcel of
land as if he himself was the only and sole owner thereof.
- Then, Pangawaran married Antiras who assisted
Pangawaran in the cultivation of the parcel of land in
question. The second marriage produced Tanak Pangawaran.
Antiras died and there was likewise no liquidation of the
conjugal partnership then subsisting.
- Then Pangawaran for the third time got married to a certain
Aranan and the same situation as afore narrated persisted
during the marriage to Aranan resulted in a child by the
name of Tagwalan Pangawaran.
- When Pangawaran died in 1938, Tagwalan Pangawaran, the
son by the third marriage, being the only male child of
Pangawaran allegedly prevailed upon the other heirs that he
should act as administrator and overseer of the entire
property but in due time he shall cause the partition and
distribution of the respective shares of all the rightful heirs.
- However, on December 14, 1962, defendant Tagwalan filed an
application for free patent over the parcel of land with the
Bureau of Lands resulting thereafter in the issuance of Free
Patent and subsequently, Original Certificate of Title.
- It is alleged in the complaint that Tagwalan was able to have
the property registered solely in his name since 'he falsified
the application for free patent by stating falsely that he was
the only heir of Pangawaran when in truth and in fact there
were other heirs like the herein plaintiff Tanak and the other
defendants
- It is further alleged in the complaint that ever since the
application for free patent, Tagwalan exercised and usurped
rights of ownership over the entire land as if he is the sole
owner thereof reaping therefrom the fruits of his own
personal profit to the unlawful unjust and illegal exclusion of
herein plaintiff Tanak. The complaint finally states that it
was only on or about April 1976 when plaintiff learned for the
first time of defendant Tagwalan's perfidy. And, despite
repeated demands for partition and delivery of the rightful
share in the inheritance of their common father's property,
defendant Tagwalan refused to do so to the prejudice of
plaintiff Tanak.
7. The trial court ruled that the court had no jurisdiction to
entertain the same since the action should have been brought by
the Solicitor General in the name of the Republic of the
Philippines and also because the action has prescribed.
8. Petitioners filed for a motion for reconsideration. The petitioners
maintain that the trial court has jurisdiction over the case which
is mainly an action for reconveyance based on implied trust and
not an action for reversion which may only be filed by the
Solicitor General. They state that if the complaint alleges fraud
by Tagwalan, it is only to emphasize the fraudulent
circumstances under which he was able to secure a title over his
father's land to the exclusion of other persons who are his
co-heirs. The petitioners further contend that since the action is
one for reconveyance based on implied trust, the respondent court
still has jurisdiction over the case because such action prescribes
in ten (10) years and since the original certificate of title was
issued on July 19, 1966 and the action was filed on July 1, 1976,
the ten-year prescriptive period has not yet elapsed.
ISSUE: WON an implied trust was created in favor of the co-heirs
of Tagwalan? – Yes, an implied trust was created.
RULING:
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
GRANTED and the decision of the respondent court dated March 8, 1978
and its order dated April 18, 1978 are hereby ANNULLED and SET
ASIDE. The case is ordered remanded to the respondent court for further
proceedings. Costs against the private respondents.
RATIO:
1. The petitioners' main purpose in bringing the action is to recover
their rightful share of their inheritance and this fact was even
admitted by the trial court when it stated that: "A reading of the
aforequoted argument of plaintiff Tanak would reveal that the
primary objective of the suit is for plaintiff Tanak to have her
rightful share in the property and in the process to have the
certificate of title cancelled."
2. When the patent was issued, the property in question ceased to
become part of the public domain and, therefore, even if
respondent Tagwalan eventually is proven to have procured the
patent and the original certificate of title by means of fraud, the
land would not revert back to the state but will be partitioned
among the rightful heirs which also include Tagwalan and his
co-respondents.
3. There is no question that respondent Tagwalan is qualified to
apply for a free patent over the land in question because his
father initiated the grounds for entitlement and had become
entitled to such patent by virtue of cultivating the land during his
lifetime and declaring the same as his property for taxation
 purposes. Tagwalan, therefore, as heir of Pangawaran, became 9. The rules are well-settled that when a person through fraud
entitled to the same privilege through his father and applied for a succeeds in registering the property in his name, the law
parent in his instead. However, he was not the only one who creates what is called a "constructive or implied trust" in
was entitled to this privilege because he was not the only favor of the defrauded party and grants the latter the
heir of Pangawaran. This is where the fraud came in, right to recover the property fraudulently registered
manifesting itself in Tagwalan's pretense that he was the within a period of ten years
sole heir of Pangawaran.
4. In the case at bar, because of Pangawaran's cultivation of the
land throughout his lifetime, he became entitled to the free patent
and such entitlement benefitted his heirs after he died. Therefore,
in the event that the petitioners are able to prove that they are
entitled to a share in the land, there is no need for the land to
first revert back to the public domain before they could acquire
their share. By virtue of the free patent issued thereon, the land
ceased to be public.
5. Another ground upon which the petitioner's action was dismissed
is prescription. According to the respondent court, it lost
jurisdiction over the case because it was brought after the lapse of
one year from the date of the issuance of the original certificate of
title.
6. This, again, is a patent error. The respondent court seems to be
unmindful of the fact that since respondent Tagwalan,
through fraud was able to secure a title in his own name to
the exclusion of his co-heirs who equally have the right to
a share of the land covered by the title, an implied trust
was created in favor of said co-heirs. Respondent
Tagwalan is deemed to merely hold the property for their
and his benefit.
7. As we have ruled in the case of Gonzales vs. Jimenez, Sr.
We believe, however, that this case is covered by Article 1456 of our
new Civil Code which provides: 'If property is acquired
through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.' Since it
appears that the land in question was obtained by defendants thru
fraudulent representations by means of which a patent and a title
were issued in their name, they are deemed to hold it in trust for
the benefit of the person prejudiced by it.
8. Therefore, it is clear that the prescriptive period which is
applicable in this case is ten (10) years. Consequently, the
action of petitioner was not yet barred since it was filed on
July 1, 1976 while the last day for filing such action was on July
19, 1976, ten years after the issuance of the original certificate of
title.
 HEIRS OF EMILIO CANDELARIA v. ROMERO (Siquian, D2021)  In the present case, it is apparent that Emilio furnished the
109 Phil. 500 (1960) consideration intending to obtain a beneficial interest in the
property in question. Having supplied the money, it is presumed
Petitioners: Heirs of Emilio Candelaria, etc.
that he intended to purchase the lot for his own benefit.
Respondents: Luisa Romero, et al.
 Moreover, by entering into an agreement with Emilio that “the
necessary documents of transfer will be made later,” Lucas
DOCTRINE: It is also the rule that there is an implied trust when a
acknowledged the he merely held the property in trust for his
person purchases land with his own money and takes conveyance thereof
brother with the understanding that it will eventually be
in the name of another.
conveyed to the plaintiff’s predecessor in interest.
 Lastly, by acknowledging the presence of trust, the plaintiff’s
Facts: action cannot be said to have been barred by lapse of time. The
 Parties to this case are the heirs of Emilio Candelaria as plaintiff case is therefore remanded for further proceedings.
and Luisa Romero, and the heirs of Lucas as defendants.
 Emilio and Lucas Candelaria bought a lot on an installment Dispositive:
basis. Lucas paid the first two installments but because of Wherefore, the order of dismissal appealed from is hereby reversed and
sickness which caused him to be bedridden, he sold his share to the case remanded to the court a quo for further proceedings. So ordered
his brother Emilio who continued to pay the purchase price until without costs.
the obligation to pay had been fully satisfied.
 The TCT was however issued under the name of Lucas.
Nevertheless, Lucas acknowledges that he merely held the title in
trust for his brother with the understanding that “the necessary
documents of transfer will be made later” and this fact was
known not only to him but also to the defendants.
 However upon his death, his heirs refused to reconvey the lot to
plaintiff despite repeated demands.
 Plaintiff brought an action in the CFI for a complaint for
reconveyance of real property. The lower court however dismissed
the case on the ground that an express trust, and not an implied
trust, was created and that the action had already prescribed.

Issue/s:
What kind of trust was created? Express or implied trust? (IMPLIED
TRUST)

Ratio:
 Where the grantee takes the property under an agreement to
convey to another on certain conditions, a trust results for the
benefit of such other or his heirs.
 It is also the rule that there is an implied trust when a person
purchases land with his own money and takes conveyance thereof
in the name of another.
 In such a case, the property is held on a resulting trust in favor of
the one furnishing the consideration for the transfer. This kind of
trust is from equity and arises by implication or operation of law.
 CUAYCONG v. CUAYCONG (Torio, D2021)
21 SCRA 1192 (1967)
Petitioners: GERTRUDES F. CUAYCONG, ET AL.
Respondents: LUIS D. CUAYCONG, ET AL.
DOCTRINE: Art. 1453 (When property is conveyed to a person in
reliance upon his declared intentions to hold it for or transfer it to
another or the grantor, there is an implied trust in favor of the person
whose benefit is contemplated.) applies if the person conveying the
property did not expressly state that he was establishing the trust.
Facts:
● Eduardo Cuaycong is married to Clotilde de Leon. Eduardo and
Clotilde died in 1936 and 1940, respectively. They had no
children.
● Eduardo was survived by his 3 brothers (Lino, Justo, and
Meliton) and sister (Basilisa). Lino had 8 children. Justo had a
son. Meliton and Basilsa had no children.
● After Eduardo's death, his properties were distributed to his
heirs, as written in his will, except 2 haciendas (Hacienda Sta.
Cruz and Hacienda Pusod) both known as Hacienda Bacayan.
Hacienda Bacayan comprises of 8 lots, all of which are titled in
the name of Luis, son of Justo.
● In 1961, the surviving descendants of Lino (died in 1937) filed a a
case against Justo, Luis, and Benjamin (one of the sons of Lino)
for conveyance of inheritance before the CFI of Negros Occidental.
● The descendants argue that:
○ Eduardo, in several occasions, informed his brothers and
sister that he and his wife had an understanding and
made arrangements with Luis and Justo that it was their
desire to divide Hacienda Bacayong among his brothers
and sister and his wife Clotilde.
○ With the consent of his wife, Eduardo had asked his
siblings to pay his wife Php75K (half the value of the
hacienda) and then divide equally the remaining 1/2 share
of Eduardo.
○ the siblings failed to pay the 1/2 share of Clotilde over the
hacienda, which were later acquired by Luis and had it
titled under his name through clever strategy fraud,
misrepresentation, and in disregard of Eduardo's wishes
○ as the 2 haciendas were the subject of transactions
between the spouses Cuaycong and Justo and Luis,
Eduardo told Justo and Luis, and the two agreed, to hold
in trust what might belong to his brothers and sister as a
result of the arrangements and deliver to them their
share when the proper time comes
○ as early as 1936 Lino demanded for his share and
especially after Eduardo and Clotilde's death, the
plaintiff's demanded their shares
○ their demands had been refused and in 1960, during the
estate proceedings of Praxedes (deceased wife of Luis), the
latter fraudulently made it appear that plaintiffs had
nothing to do with the land
● Luis moved to dismiss the complaint on the grounds of
unenforceability of the claim under the statute of frauds, no cause
of action, and prescription. Plaintiffs filed their answer opposing
the motion and seeking to have Benjamin be declared in default
for his failure to answer.
● CFI ruled that the trust alleged refers to an immovable, which
under Art. 1443 of the Civil Code may not be proved by parole
evidence. CFI gave plaintiffs 10 days to file amended complaint
alleging the written evidence of the alleged trust, otherwise, the
case will be dismissed. Plaintiffs failed to file amended complaint
so CFI said it's useless to declare Benjamin in default. Plaintiffs
manifested that the claim is based on an implied trust and that
they couldn't add a written instrument of trust because they
didn't have one. CFI dismissed the case and refused to declare
Benjamin in default. MR denied. Plaintiffs appealed to SC, hence,
the case at bar.
Issue: Was the trust alleged by plaintiffs an express or implied trust?--
EXPRESS
Ratio:
● An express trust is one created by the intention of the trustor or
of the parties and an implied trust is one that comes into being by
operation of law. If the intention to establish a trust is clear, the
trust is express. If the intent to establish a trust is to be taken
from circumstances or other matters indicative of such intent,
then the trust is implied
● In this case, par. 8 of the complaint (see fact 5d) clearly shows
that plaintiffs alleged an express trust over an immovable,
especially since it is alleged that the trustor expressly told the
defendants of his intention to establish the trust.
● Plaintiffs argue that the whole complaint, not just par. 8, should
be considered, in which case an implied trust should be construed.
Plaintiffs cited Art. 1453, which states: "When property is
 conveyed to a person in reliance upon his declared intentions to
hold it for or transfer it to another or the grantor, there is an
implied trust in favor of the person whose benefit is
contemplated."
● SC said argument is untenable. Art. 1453 applies if the person
conveying the property did not expressly state that he was
establishing the trust. In this case, plaintiffs alleged that
Eduardo expressed such intent.
● 3. Assuming that there's an implied trust, the right alleged has
already presecribed. Right to enforce an implied trust prescribed
in 10 years. In this case, while plaintiffs allege that they already
demanded from and was refused by Luis and Justo in 1936, the
case was only filed in 1961-- more than the 10-year prescriptive
period. Moreover, action to recover real property also prescribes
in 10 years.

Dispositive:
Order of dismissal of the lower court appealed from is hereby affirmed,
without costs. So ordered
 ADAZA v. COURT OF APPEALS (Leonardo, C2020)
Mar. 21, 1989 | Feliciano, J. | Implied Trust
PETITIONER: Horacio Adaza, Felicidad Marundan (Horacio’s wife)
RESPONDENTS: Honorable Court of Appeals, Violeta Adaza assisted
by her husband Lino Amor
SUMMARY: Father of the parties to the case Victor Sr. executed a Deed
of Donation to Violeta for a Dapitan Property. Horacio and Violeta
applied for a homestead patent covering the land and the land
registration was made under Violeta’s name alone. After a few years,
Violeta signed a Deed of Waiver stating that although the land was
registered under Violeta’s name alone, ½ lot is owned by Horacio as co-
owner. Violeta and her husband later claim in a complaint before the
court that the land was an unconditional donation and that Violeta
signed the Deed of Waiver due to Horacio’s fraud and misrepresentation.
Trial court found in favor of Horacio, noting that the Deed of Waiver was
binding and affirming Horacio to be a co-owner of the land. CA reversed
this decision.
The SC affirmed the trial court’s decision. The Deed of Waiver is binding
and is an admission that Violeta held the Dapitan land in trust for
Horacio. The Deed of Donation executed by Victor Sr. to Violeta created
an implied trust for Horacio with respect to the subject property.
DOCTRINE:
Article 1449: There is an implied trust when a donation is made to a
person but it appears that although the legal estate is transmitted to the
donee, he nevertheless is either to have no beneficial interest or only a
part thereof.
FACTS:
1. Victor Adaza and Rosario Gonzales had 6 children: petitioner
Horacio, Homero, Demosthenes, respondent Violeta, Teresita, and
Victor Jr.
2. Before dying, Victor Sr. executed a Deed of Donation. It covered a
land in Dapitan City, Zamboanga del Norte with an area of 13.36
hectares in favor of Violeta (single at the time). She accepted the
donation in the same instrument, both donor and donee
acknowledging it before the Notary Public.
3. The donated land was then part of the public domain, being
disposable public land, and was held and cultivated by Victor Sr.
for many years. With the help of her brother Horacio, Violeta filed
4 Homestead Patent is a mode of acquiring alienable and disposable lands of the
public domain for agricultural purposes conditioned upon actual cultivation and
residence.
5 Content found at the end of the digest
a homestead4 application covering the said land.
4. The application was approved, then an Original Certificate of
Title along with the tax declaration were also issued both in
Violeta’s name.
5. No record shows when Violeta married but in 1962, she and her
husband Lino Amar obtained a loan from Philippine National
Bank. She secured the loan with a mortgage of the subject
property, all while Homero was still administering it.
6. Horacio was appointed Provincial Fiscal of Davao Oriental, so he
moved from Dapitan City to Davao Oriental. After 4 years,
Horacio came back to Dapitan to celebrate the town fiesta with a
family gathering in his house.
7. There, Horacio asked Violeta to sign a Deed of Waiver5, stating
that the Dapitan property was owned in common by Violeta and
Horacio even though the certificate of the title had been issued
under her name only. The Deed also provided for the waiver,
transfer and conveyance by Violeta in favor of Horacio ½ of the
property together with all the improvements. Violeta signed the
Deed of Waiver, along with Horacio and Homero signing as
witnesses.
8. A few months later, Violeta with her husband Lino filed a
complaint to annul the Deed of Waiver and sought damages
against Hoacio and his wife Felicidad. Violeta alleges: (1) she was
the absolute owner of the land by virtue of an unconditional
donation executed by their father Victor Sr.; (2) she was te
registered owner of the same land; (3) she signed the Deed of
Waiver because of Horacio’s fraud and misrepresentation and
undue influence.
9. Horacio answers that he and Violeta are co-owners although the
property was registered under her name alone and that Violeta’s
ownership was subject to his rights as co-owner and the obligation
to keep or use the property for the benefit of their parents while
either of the parents was still alive. He also contends that Violeta
freely and voluntarily executed the Deed of Waiver.
10. Trial court declared the Deed of Waiver as binding and that
Horacio was ½ co-owner of the subject lot. Violeta appealed to the
CA, the latter reversing the findings of the trial court. CA held
tha Deed was without cause or consideration since the subject
land was unconditionally donated to Violeta alone and that the
Deed being “congenitally bad” in form for not following the
 requirements under the Civil Code cannot be considered
gratuitous or a donation. MR was denied and now petitioners are
before the SC for review.
ISSUE/s:
2. WoN the Deed of Donation by Victor Sr. to Violeta created an
implied trust in favor of Horacio with respect to ½ of the Dapitan
property. – YES
RULING: SC affirmed the trial court’s decision, resinstating that the
Deed of Waiver as binding and that Horacio was ½ co-owner of the
subject lot.
RATIO:
1. The Deed of Donation includes a crossed-out paragraph which
reads
“That the done shall share ½ of the entire property with one of
her brothers or sisters after the death of the donor.
That the doneed do hereby receive and accept this gift and
donation made in her favor by the donor, not subject to any
condition, and do hereby express her appreciation and
gratefulness for the kindness and generosity of the donor.”
2. Horacio testifies that it was their father’s intention to donate the
land to him and Violeta, in accordance to the crossed-out
provision. Horacio himself crossed-out the provision with their
father’s consent to make it appear the the land was being donated
solely to Violeta to easily facilitate the issuance of the title in her
name. This is noteworthy, considering that at the time the
donation was executed, the land was still for public disposal.
3. Intent of the donor Victor Sr. to make both Violeta and Horacio
co-owners of the land is apparent with the Deed of Waiver
executed by Violeta. She signed it in the presence of their other
siblings, with the records bereft of any indication of any evil
intent or malice on the part of siblings to collude against their
sister Violeta. Another Deed of Waiver was also signed by their
other siblings, covering other lands. Records show that the
parents made it practice to have lands acquired by them in title in
the name of one or another of the children. 3 of the 4 parcels
acquired by the parents were placed in the name of one of the
children. 2 letters written by Violeta to Horacio were also
submitted as evidence, showing that Violeta acknowledges
Horacio’s ½ share of the land.
4. The statement 6 in the Deed of Waiver is an admission that
Violeta held the Dapitan land in trust for Horacio. The Deed of
Donation created an implied trust for Horacio with
respect to the subject property.
“Article 1449: There is an implied trust when a donation is made
to a person but it appears that although the legal estate is
transmitted to the donee, he nevertheless is either to have no
beneficial interest or only a part thereof.”
5. Violeta’s contention that there was long delay and inaction by
Horacio is unmerited. A continued recognition of the existence of
a trust precludes the defense of laches. The mentioned 2 letters
written by Violeta show that there was a recognition in her part
of the trust imposed on her by law. Horacio’s reliance on his blood
relationship with his sister and the trust and confidence normally
connoted in our culture by that relationship should not be taken
against him.
**Content of the Deed of Waiver:
"DEED OF WAIVER
KNOW ALL MEN BY THESE PRESENTS:
I, VIOLETA G. ADAZA of legal age, married to Lino Amor, Filipino, with
residence and postal address at Dapitan City, am the absolute owner in
fee simple of a parcel of land situated in Dapitan City, known as Lot No.
Psu-141743, with an area of 13.3618 hectares more or less, covered by
TRANSFER CERTIFICATE OF TITLE NO. T-11111, (sic) of the Registry
of Property of Zamboanga del Norte, and declared for taxation purposes
under Tax Declaration No. 2926 (sic), with an assessed value of
P4,340.00.
Whereas, aforesaid property is owned in common by me and my
brother, HORACIO G. ADAZA, although the certificate of title was
issued only in my sole name;
NOW, THEREFORE, for and in consideration of the premises
aforestated, I do hereby WAIVE, TRANSFER, RELINQUISH AND
CONVEY unto the said HORACIO G. ADAZA, of legal age, married to
Felicidad Marundan, Filipino, and a resident of Dapitan City, all my
rights, interest, participation and ownership over the ONEHALF (1/2)
PORTION of the aforesaid property, together with all the improvements,
found and existing over the said one-half.
6 Text in bold in the content of the Deed of Waiver found at the end of the digest
IN WITNESS WHEREOF, I have hereunto affixed my signature this 28th
day of
July, 1971, at Dapitan City, Philippines.

(SGD.) VIOLETA G. ADAZA

Signed in my presence:
(SGD.) ILLEGIBLE (SGD.) ILLEGIBLE
 DIAZ v. GORRICHO (Eliel, C2020)
March 29, 1958 | Reyes, J. | Constructive Trusts
PETITIONERS: Manuel Diaz, Constancia Diaz, and Sor Petra Diaz
RESPONDENTS: Carmen Gorricho and her husband Francisco Aguado
SUMMARY: Carmen instituted an action against Maria Sevilla. An
attachment of the properties was then given to Carmen. When Maria was
not able to redeem the parcels of land within one year, the sheriff
conveyed such lands to Carmen. However, in the final deed, it was
indicated that the sheriff conveyed not only Maria’s share in the conjugal
properties, but also the share of her deceased husband Francisco. Since
then, Carmen had been in open possession of the parcels of land since
1937.
In 1952, a year after Maria died, the siblings Diaz filed an action against
Carmen to reconvey the share of their father’s interest in the parcels of
land, which was illegally sold by the sheriff to Carmen. The siblings
claimed that Carmen and her husband Aguado was only holding the
share in the parcels of land in constructive trust. Carmen countered,
however, that their cause of acton is barred by laches. The lower court
ruled in favor of Carmen. Hence this appeal. Whether or not the siblings
Diaz are barred by laches.
The SC held that indeed, the siblings Diaz are bound by laches. Although
it is a matter in trust, that repudiation should be expressed, it pertains to
express trusts. The distinction between express trusts and constructive
trusts is that, in the former the trustor has fiduciary relationship and the
delay starts upon the trustor’s repudiation; meanwhile, the latter
(constructive trusts), has no fiduciary relationship or no intention to hold
for the beneficiary the trustee’s interest. Thus, the delay of the trustee
may be barred by laches. Although, Carmen was not able to prove the
unfair injury that they would suffer, the siblings Diaz allowed almost 15
years to elapse knowing well that their share was in possession of
Carmen and Aguado.
DOCTRINE: But in constructive trusts (that are imposed by law), there
is neither promise nor fiduciary relation; the so-called trustee does not
recognize any trust and has no intent to hold for the beneficiary;
therefore, the latter is not justified in delaying action to recover his
property. It is his fault if he delays; hence, he may be estopped by his own
laches.
FACTS:
1. Lots Nos. 1941 and 3073 of the Cadastral Survey of Cabanatuan
originally belonged to the conjugal partnership of the Sps.
Francisco Diaz and Maria Sevilla. Francisco died, survived by his
widow Maria Sevilla and their three children, Manuel, Lolita, and
Constancia Diaz.
2. Carmen Gorricho filed an action agaisnt Maria Sevilla in the CFI
of Manila and in connection their with, a writ of attachment was
issued upon the shares of Maria Sevilla in said lots.
3. Thereafter, said parcels were sold at public auction and
purchased by Carmen, herself. Maria Sevilla failed to redeem
within one year, whereupon the acting provincial sheriff executed
a final deed of sale in favor of Carmen Gorricho.
4. The final deed, however, conveyed to Gorricho by the sheriff, the
whole parcels of land instead of only one-half o the interest of
Maria Sevilla therein (the other being of Francisco’s share in the
conjugal properties).
5. Pursuant to said deed, Carmen obtained the TCTs and has been
possession since April 13, 1937 said land as owner.
6. The year after Maria Sevilla died in 1951, her children filed the
action agaisnt Carmen and her husband Aguado to compel them
to execute in their favor a deed of reconveyance over an undivided
one-half interest over the lots in question (the share therein of
Francisco Diaz illegally conveyed by the provincial sherriff to
Gorricho), which Carmen and Aguado were allegedly holding in
trust for them.
7. Carmen defended that the action of the siblings Diaz has already
prescribed. The trial court ruled that although there was
constructive trust, the action has long been barred by laches and
prescription. Hence this appeal.
ISSUE: WON the siblings Diaz are barred by laches from recovering
their constructive trust (share of Francisco Diaz, their father, in the
parcel of land) - YES
HELD: Wherefore, the judgment appealed from is affirmed, with costs
against appellants.
RATIO:
1. The Amerian law on trusts has always maintain a distinction
between express trusts created by intention of the parties, and
the implied or constructive trusts that are exclusively created by
law, the latter not being trusts in their technical sense.
2. The express trusts disable the trustee from acquiring for his own
benefit the property committed to his management or custody, at
least while he does not openly repudiate the trust, and makes
 such repudiation known to the beneficiary or cestui que trust. For
this reason, the old Code of Civil Procedure declared that the
rules on adverse possession do not apply to “continuing and
subsisting” trusts.
3. But in constructive trusts, as pointed out by the court
below, the rule is that laches constitutes a bar to actions to
enforce the trust, and repudiation is not required, unless
there is concealment of the facts giving rise to the trust.
4. The reason for the difference in treatment is obvious. In express
trusts, the dealy of the beneficiary is directly attributable to the
trustee who undertakes to hold the property for the former, or
who linked to the beneficiary by confidential or fiduciary
relations. The trustee’s possession is, therefore, not adverse to the
beneficiary, until and unless the latter is made aware that the
trust has been repudiated.
5. But in constructive trusts (that are imposed by law), there
is neither promise nor fiduciary relation; the so-called
trustee does not recognize any trust and has no intent to
hold for the beneficiary; therefore, the latter is not
justified in delaying action to recover his property. It is
his fault if he delays; hence, he may be estopped by his
own laches.
6. Of course the equitable doctrine of estoppel by laches
requires that the one invoking it must show, not only the
unjustified inaction, but that some unfair injury would
result to him unless the action is held barred. This
requirement, Carmen and Aguado have not met, and they
are thereby bereft of the protection of this rule.
7. Nevertheless, the Court is of the opinion that the
judgment of dismissal should be upheld, because the
siblings Diaz cause of action to attack the sheriff’s deed
and cancel the TCTs issued to Carmen and Aguado
accrued from the year of issuance and recoding, 1937, and
siblings Diaz have, allowed 15 years to elapse before
taking remedial action in 1952.
8. Even considering that the youngest among them
(Constancia) born in 1918, only became of age in 1939,
more than sufficient time (13 years) has been allowed to
elapse, notwithstanding Camen and Aguado’s public
assertion of title during this entire period, to extinguish
sibling Diaz’s action.
 SING JUCO v. SUNYANTONG (See, C2020)
June 30, 1922 | Romualdez, J. | Fiduciary uses funds or property held in
trust to purchase property which is registered in fiduciary’s name or a
third party
PLAINTIFF-APPELLEES: Sing Juco and Sing Bengco
DEFENDANT-APPELLANTS: Antonio Sunyantong and his wife,
Vicenta Llorente de Sunyantong
SUMMARY: The Sings were given an option by Gay to purchase the San
Antonio Estate. They asked for an extension of the period which was
granted by Gay. Sunyantong was a trusted employee of the Sings. He told
de los Santos, the person tasked by the Sings to evaluate the property,
not to inform the Sings of the favorable impression of the land as the
Sings might blame de los Santos if the estate was a failure. On the
morning of the deadline of the option, Sunyantong called Gay to purchase
the property, not for the Sings, but for his wife. Gay told Sotelo, the
broker of the Sings, that another buyer was willing to buy and Sing
Bengco told Gay, “ella cuidado" (she could do as she pleased). So Gay sold
the estate to Sunyantong. The lower court declared that Sunyantong
should convey the property to the Sings. The issue in this case is WoN
there is a constructive trust and therefore, Sunyantong should convey the
estate to the Sings. The SC held that there is a constructive or equitable
trust and that Sunyantong should convey the estate to the Sings. The
Court not only applied the doctrine that if an employee is guilty of
infidelity, he is liable for the damage caused, it also applied the concept of
"equitable trust" by virtue of which the thing acquired by an
employee is deemed not to have been acquired for his own
benefit or that of any other person but for his principal, and held
in trust for the latter.
DOCTRINE: A confidential employee who, knowing that his principal
was negotiating with the owner of some land for the purchase thereof,
surreptitiously succeeds in buying it in the name of his wife, commits an
act of disloyalty to his principal and is liable for damage. The reparation
of the damage must consist in respecting the contract which was about to
be concluded, and transferring the said land for the same price and upon
the same terms as those on which the purchase was made for the land
sold to the wife of said employee passed to them as what might be
regarded as equitable trust, by virtue of which the thing thus acquired by
an employee is deemed to have been acquired not for his own benefit or
that of any other person but for his principal and held in trust for the
latter.
FACTS:
1. Sing Juco and Sing Bengco, (Sings) obtained from Maria Gay
(Gay) a written option to purchase an estate known as “ San
Antonio Estate,” (estate) which is more than 2000hectares
situated in municipality of Passi, Province of Iloilo, together with
a large cattle existing on the estate.
17. The term of the option expired but the Sings had it extended,
verbally, until 12nn of June 17, 1919.
18. Antontio Sunyantong, (Sunyantong) was at that time, a trusted
employee of the Sings. The Sings didn't mind disclosing to him
their plans concerning the purchase of the estate and their
progress with the negotiations.
19. At one of the meetings about the purchase of the estate,
Sunyantong remarked that it is best to let some days pass before
accepting the terms of the transfer as proposes by Gay so that
Gay will not think that they were coveting the property.
20. Alipio de los Santos was then sent by the Sings to examine the
estate and de los Santos told Sunyantong about his favorable
impression of the estate but Sunyantong told de los Santos not to
inform the Sings about this impression because if it turns out that
the estate was a failure, they might blaim de los Santos.
21. During breakfast on the deadline of the option, Sunyantong called
Gay and offered to buy the estate on the same terms proposed by
Gay which weren’t accepted by the Sings yet. Sunyantong offered
to buy it not for the Sings but for his wife.
22. Gay communicated this to Manuel Sotelo, the broker of the Sings.
Gay wanted to know the decision of the Sings.
23. Sing Bengco, who was present when Gay called Sotelo, instructed
Sotello to inform her at the time that if she did not care to wait
until 12 o'clock, "ella cuidado" (she could do as she pleased). This
is a purely Philippine phrase, an exact translation of the Tagalog
"siya ang bahala" and approximately of the Visayan "ambut sa
iya," sa iya," which has very different, and even contradictory,
meanings.
24. It might be interpreted in several different ways, such as a threat
on the part of Sing Bengco to take legal action against Gay in case
she did not wait until the expiration of the option, or that they
would waive all claims to the option and be agreeable to whatever
action she might take. Interpreting the phrase to mean that the
Sings waived their option to buy, Gay closed the sale of the estate
in favor of the Sunyantong.
25. The lower court decisions were not stated in the case but it is
assumed that Sunyantong was ordered to convey the estate to the
Sings.
ISSUE/s:
1. WoN there is a constructive trust and therefore, Sunyantong
should convey the estate to the Sings – there is a constructive
trust and Sunyantong should convey the estate to the Sings.
RULING: After examination and consideration of the case we do not find
in the appealed judgment any of the errors assigned to it; wherefore the
same is affirmed with costs against the appellants. So ordered.
RATIO:
1. Supposing that Sing Bengco really meant to waive all claims to
the option, the action of Sunyantong in intervening in the
negotiations in the manner in which he did still makes him guilty
of infidelity because he was an employee of the Sings to whom he
owed loyalty and faitfulness.
2. Even if when he purchased it from Gay, the option of the Sings
already expired, the fact still remains that his disloyalty was the
reason Gay did not accept the terms proposed by the Sings
because Sunyantong was another less exigent buyer. Without
such intervention on the part of Sunyantong it is presumed,
taking into account all the circumstances of the case, that the sale
of the estate in question would have been consummated between
Gay and the Sings, perhaps with such advantages to the Sings, as
they expected to obtain by prolonging the negotiations.
3. Such an act of infidelity committed by a trusted employee
calculated to redound to his own benefit and to the detriment of
his employers cannot pass without legal sanction. It is an illicit
act committed with culpa, and, therefore, its agent is liable (art.
1089 of the Civil Code) for the damage caused. (art. 1902 of
the Civil Code)
4. Not identical, but similar, to this infidelity is the abuse of
confidence sanctioned in our Penal Code as a generic
circumstance, nay as specific aggravating one, and even as an
essential element of certain crimes.
5. This reparation provided for in the Civil Code and applied to the
case seems to be limited to the indemnification for damages since
the court is not aware of any express provision in the Code which
imposes upon the person liable, any obligation, such as that of
transferring to the Sings, the estate.
6. But based on the principle relating to commercial agents,
it is expressly established that the estate has to be
transferred to the Sings by Sunyantong, as in the case of
Camacho vs. Municipality of Baliuag.
7. And in the North American law such sanction is expressly
recognized, and a transaction of this nature might be regarded as
an "equitable trust" by virtue of which the thing acquired by
an employee is deemed not to have been acquired for his
own benefit or that of any other person but for his
principal, and held in trust for the latter.
8. So the order of the lower court ordering Sunyantong to execute a
deed of conveyance to the Sings of the estate for the same price is
upheld.
9. Villamor, J., dissenting: Villamor thinks that Sunyantong
should not be ordered to convey the estate to the Sings. The
liability of Sunyantong is should only consist in the reparation of
damage caused to the Sings but this damage has not been proven
because the record shows that the Sings had every opportunity to
take advantage of the option that was granted him to buy the
land, and until the last moment the owner, in view of the fact that
another offer to purchase, which was that of the Sunyantong, was
being made to her, requested said Sing Bengco to give her a
definite answer and the latter simply answered through Manuel
Sotelo that "if she (the owner) could not wait until 12 o'clock ella
cuidado (she could do as she pleased)." By this the Sing Bengco
gave it to understand that he waived his right to the
option and the owner was free to dispose of the estate.
10. Even the majority opinion says in its decisions that the
reparation provided for in the Civil Code is seems limited to the
indemnification of the damages and that the court is not aware of
any express provision in the Code which imposes upon
Sunyantong the obligation to return to the Sings the estate but
the Court, in it attempt to solve the difficulty, related the issue at
bar to article 2887 of the Code of Commerce which was applied in
Camacho vs. Municipality of Baliuag.
7 "Factors can not transact business for their own account, nor interest
themselves in their own name or in that of another person, in negotiations of the
same character as those they are engaged in for their principals, unless the latter
expressly authorize them thereto.
"Should they negotiate without this authorization, the profits of the negotiation
shall be for the principal and the losses for the account of the factor.
"If the principal has granted the factor authorization to make transactions f or his
own account or in union with other persons, the former shall not be entitled to the
profits, nor shall he participate in the losses which may be suffered.
"If the principal has permitted the factor to have an interest in some transaction,
the participation of the latter in the profits shall be, unless there is an agreement
to the contrary, in proportion to the capital he may have contributed; and should
he not have contributed any capital, he shall be considered a working partner."
11. The Code of Commerce should not apply because the Sings were
not businessmen dealing with the sale of real estate, they were
dealing in dry goods and sugar and other articles connected with
the sugar business.
12. In the Camacho case, the money used to purchase the parcels of
land were provided to Camacho by the priest in order that the
lands will remain in the hands of the municipality. The Court
said, "There have been a number of cases before this court in
which a title to real property was acquired by a person in his own
name while acting in a fiduciary capacity, and who afterwards
sought to take advantage of the confidence reposed in him by
claiming the ownership of the property for himself. This court has
invariably held such evidence competent as between the fiduciary
and the cestui que trust."
13. In the case of Uy Aloc vs. Cho Jan Ling, the Chinese club wanted
to acquire property so they had a common fund but only one
member made the purchase using his own name by drawing from
the common func. The court held that the parol proof of the trust
was sufficient to throw down the rights which the plaintiff had by
reason of the duly registered title deeds, and decreed that a
conveyance be made by the defendant to the members of the
association.
14. But in the case under consideration there is no proof of
the Sunyantong having acquired the land in question in
the name or in behalf of the Sings, or at the request of the
latter, or with funds furnished by them. Said Sunyantong
had legal capacity to buy (art. 1457, Civil Code) and are
not within any of the cases prohibited by article 1459 of
the same Code.
 HERNANDEZ v. HERNANDEZ (Zabala, D2021)
645 SCRA 24 (2011)
Petitioners: CORNELIA M. HERNANDEZ
Respondents: CECILIO F. HERNANDEZ
DOCTRINE: The relation of an agent to his principal is fiduciary and
it is elementary that in regard to property subject matter of the agency,
an agent is estopped from acquiring or asserting a title adverse to that
of the principal. His position is analogous to that of a trustee and he
cannot, consistently with the principles of good faith, be allowed to
create in himself an interest in opposition to that of his principal or
cestui que trust.
Facts:
1. The controversy between the parties began when the Republic of
the Philippines, through the DPWH, offered to purchase a portion
of a parcel of land located in Batanagas (Hernandez property) for
use in the expansion of SLEX.
a. The land is pro-indiviso owned by:
i. Cornelia Hernandez (aunt of respondent Cecilio)
ii. Atty. Jose Hernandez (father of respondent
Cecilio) as represented by Panencia Hernandez
iii. Mena Hernandez
iv. *relationships not really that relevant. Just in
case he asks.
b. The Hernandez family rejected the purchase price offered
by the government (first at P35, then at P70) and thus, an
expropriation proceeding was filed before the RTC.
2. Thereafter, the owners of the Hernandez property executed a
letter (service contract) indicating Cecilio as the representative of
the owners of the land and specified his compensation as such.
Specifically, it provided that the compensation of Cecilio will be:
a. 20% of any amount in excess of P70.00 per square meter
of the owners’ respective shares as success fee in the
representation in the expropriation case;
b. Whatever excess beyond 300.00 per square meter of the
area as additional incentive;
c. ₱1,500.00 per onwer for the preparation of the pleading
before the RTC
d. such other reasonable expenses of litigation pro-indiviso.
3. During the course of the expropriation proceedings, respondent
Cecilio was appointed by the RTC as one of the commissioners to
help determine the just compensation.
4. Thereafter, Cornelia and her other co-owners executed an SPA
appointing Cecilio as their "true and lawful attorney" with respect
to the expropriation of the subject property. There was no
mention of the compensation scheme for Cecilio, the attorney-in-
fact.
5. The RTC then rendered a Decision, fixing the just compensation
for the condemned properties at ₱1,500.00 per square meter or a
total of ₱21,964,500.00. Included in the decision is the directive of
the court to pay the amount of ₱4,000.00 to Cecilio, as
Commissioner’s fees.
6. Petitioner then executed a Revocation of the SPA. After the
revocation and with a new lawyer, Cornelia moved for the
withdrawal of her 1/3 share of the just compensation equivalent
to ₱7,321,500.00 – the amount a pro-indiviso owner is to receive.
a. The judge granted the motion, but with the condition that
the money shall be released only to the attorney-in-fact,
Cecilio, in view of the irrevocable nature of the SPA.
Hence, Cecilio was able to get the entire 21M.
7. Cornelia then received a BPI Check from Cecilio, but only for
₱1,123,000.00. Further, she was made to sign a receipt and a
Quitclaim in favor of Cecilio, essentially stating that the said
amount represents her share in the just compensation for the
property and she thus discharges Cecilio from any other
action/demands in connection with the expropriation case.
a. The check was received by Cornelia with a heavy heart,
having been forced to receive it because she needs the
money immediately for medical expenses due to her frail
condition.
8. A few days after, and with the help of her niece, she got a copy of
the decision and learned that she was actually entitled to
7Million. Hence, she sent a letter to Cecilio demanding accounting
of the proceedings. This letter was left unanswered.
9. Cornelia then filed a Complaint for the Annulment of Quitclaim
and Recovery of Sum of Money and Damages against Cecilio.
a. The RTC nullified the quitclaim in favor of Cecilio and
ordered him to pay Cornelia around 6 million pesos with
interest as well as damages.
b. The CA however reversed the decision and ordered the
dismissal of the complaint.
10. In the instant case, Cornelia contends that the distribution of
award that transpired is unjust and prays that the decision of the
RTC reinstated. On the other hand, Cecilio insists that he be
given the compensation he deserves based on the agreement
made in the service contract. This is the contract to which Cecilio
 anchors his claim of validity of the receipt and quitclaim that was
signed in his favor.
Issues: WON Cornelia is entitled to the entire 7million from the
compensation in the expropriation proceedings --- YES
Ratio: The Court declared the service contract as void due to
mistake*, and the receipt and quitclaim void as well for being
fraudulent.
1. As pro-indiviso landowners of the property taken, each one of the
co-owners of the Hernandez property ought to receive an equal
share or one third of the total amount which is equivalent to
₱7,321,500.00.
2. Cecilio’s position would give him 83.07% of the just compensation
due Cornelia as a co-owner of the land. No evidence on record
would show that Cornelia agreed, by way of the service
contract/letter, to give Cecilio 83.07% of the proceeds of the sale of
her land.
a. What is on record is that Cornelia asked for an accounting
of the just compensation from Cecilio several times, but
the request remained unheeded.
b. Right at that point, it can be already said that
Cecilio violated the fiduciary relationship of an
agent and a principal. The relation of an agent to
his principal is fiduciary and it is elementary that
in regard to property subject matter of the agency,
an agent is estopped from acquiring or asserting a
title adverse to that of the principal. His position is
analogous to that of a trustee and he cannot,
consistently with the principles of good faith, be
allowed to create in himself an interest in
opposition to that of his principal or cestui que
trust.
3. Instead of an accounting, what Cornelia received was a receipt
and quitclaim document that was ready for signing.
a. Quitclaims are also contracts and can be voided if there
was fraud or intimidation that leads to lack of consent.
b. The preparation by Cecilio of the receipt and quitclaim
document which he asked Cornelia to sign, indicate that
even Cecilio doubted that he could validly claim 83.07% of
the price of Cornelia’s land on the basis of service
contract.
4. Based on the attending circumstances, the receipt and quitclaim
document is an act of fraud perpetuated by Cecilio. Very clearly,
both the service contract letter- agreement, and the later receipt
and quitclaim document, the first vitiated by mistake and the
second being fraudulent, are void.
5. Cecilio’s last source of authority to collect payment from the
proceeds of the expropriation is the SPA. The SPA, however, must
be appreciated in the light of the fact that Cecilio was appointed
and acted as appraisal commissioner in the expropriation case.
6. Under the Rules of Court, the commissioner to be appointed is
specifically required to be disinterested. As defined, such person
must be free from bias, prejudice or partiality.
a. When Cecilio accepted the position as commissioner and
proceeded to perform the duties of such commissioner
until the completion of his mandate as such, he created a
barrier that prevented his performance of his duties
under the SPA. Due to the nature of his duties and
functions as commissioner, Cecilio became an officer of
the court.
b. Cecilio acted for the expropriation court. Cecilio could not
have been a hearing officer and a defendant at the same
time. Indeed, Cecilio foisted fraud on both the Court and
the Hernandezes when, after his appointment as
commissioner, he accepted the appointment by the
Hernandezes to "represent" and "sue for" them.
7. It should be noted, finally, that, as completion of his appointment
as commissioner, compensation for the work he has done for the
court was awarded, as stated in the decision rendered in the case.
Dispositive:
WHEREFORE, premises considered, the Decision of the Court of
Appeals is hereby REVERSED and SET ASIDE. The Decision of
the RTC of Makati, Branch 150 is REINSTATED with the
following MODIFICATIONS that the interest on the monetary
awards should be at 6% per annum from the time of the filing of
the complaint up to the date of the decision, and at 12% per
annum from finality until fully paid.
*Mistake in the service contract (note na may computations to and all
sa original so you might wanna check but here’s the gist)
It must be noted that at the time the service contract was made, the
Hernandezes had just rejected the government’s offer of ₱35.00 psqm,
which offer last stood at ₱70.00 psqm.
Clear as day, the conditions that moved the parties to the contract were
the base price at ₱70.00 per square meter, the increase of which would be
compensated by 20% of whatever may be added to the base price; and the
ceiling price of ₱300.00 per square meter, which was considerably high
reckoned from the base at ₱70.00, which would therefore, allow Cecilio to
get all that which would be in excess of the elevated ceiling. The ceiling
was, from the base, extraordinarily high, justifying the extraordinary
grant to Cornelio of all that would exceed the ceiling.

It was on these base and ceiling prices, conditions which principally

moved both parties to enter into the agreement on the scheme of
compensation, that an obvious mistake was made. Thereafter, the 1998
"skyrocketed" price of ₱1,500.00 psqm ruled upon by the trial court was
pounced upon by Cecilio thereby giving him the amount of 18M as
compensation.
 GAYONDATO v. TREASURER (Nikki V, C2020)
1926 August 25 | J. Ostrand | G.R. No. L-24597 |
When Property Acquired Through Mistake or Fraud
PETITIONER: Rosario Gayondato
RESPONDENTS: Treasurer of the Philippine Islands, et. al.
SUMMARY: Domingo Gayondato owned lands which he inherited from
his mother. When he married Adela Gasataya, they had a child,
petitioner herein, Rosario Gayondato. When Domingo #1 died, Adela
married Domingo #2 Cuachon. The said lands became the subject of a
cadastral proceeding. In the said case, Domingo #2 appeared on behalf of
Adela and Rosario and filed claims for the lots in which he stated that the
lots were property of “his with Adela Gasataya and of her daughter,
fifteen years of age.” Notwithstanding said statement, CFI erroneously
decreed the registration of lots in the name of Adela alone. Rosario
brought this case against Adela, Domingo #2, Francisco (buyer of the
lots), and Insular Treasurer. CFI ruled in favor of Rosario ordering Adela
and Domingo #2 to pay damages. However, CFI absolved Insular
Treasurer and Rodriguez form the complaint. The issue is WON the
Court erred in absolving the Insular Treasurer by virtue of Sec. 106 of the
Land Registration Act which provides that the assurance fund shall not
be liable in case of breach of trust by the trustee. The SC ruled that
Insular Treasurer must be held liable as the trust referred to in Sec. 106
requires a technical signification of trust (which is not the case here).
DOCTRINE: Where a mother and her minor daughter inherited a large
tract of land, and had it applied for cadastral survey, but title was issued
only in the name of the mother, courts of equity will impress upon the
title, a condition which is generally in a broad sense termed “constructive
trust” in favor of the defrauded party (daughter), but use of “trust” in this
sense is not technically accurate and is not the kind of trust referred to in
Section 106 of the Land Registration Act which must be taken in its
technical and more restricted sense.
FACTS:
1. This action is brought to recover damages in the sum of P30,000
for the erroneous registration in the name of the defendant
Gasataya of three parcels of land which the plaintiff Gayondato
owned at the time of the registration
ISSUES:
2. The three parcels of land were formerly owned by one Domingo
Gayondato, who inherited them from his mother, Ramona
Granada, in 1896. In 1899 Domingo married the defendant Adela
Gasataya, with whom he had a child, the herein plaintiff (Rosario
Gayondato), born in October 1900. Upon the death of Domingo in
the year 1902, Gabino Gasataya, the father of Adela, took charge
of the three parcels of land in question. In 1908 Adela married the
defendant Domingo Cuachon, and Gabino Gasataya thereupon
turned over to them the possession of the land.
3. The three parcels were included in cadastral hearing where the
defendant Domingo Cuachon appeared on behalf of his wife and
stepdaughter and filed claims for the aforesaid lots by way of
answers in which he stated that the lots were the property of "his
with Adela Gasataya and of her daughter, fifteen years of age."
Notwithstanding this statement, the CFI erroneously decreed the
registration of the aforesaid lots in the name of Adela alone.
4. Subsequently, Adela, with the consent of her husband, mortgaged
the property to the National Bank and finally in the year 1920
sold it to the defendant Rodriguez thereby assuming the liability
for a mortgage to the National Bank and for certain other debts.
5. Plaintiff brought this action to recover damages for the said
erroneous registration against Adela (mother), Domingo No. 2
(stepfather), Rodriguez, and Insular Treasurer. Trial Court ruled
in favor of the plaintiff Rosario Gayondato, ordering the
defendants Adela Gasataya and Domingo Cuachon jointly and
severally to indemnify the said plaintiff in the sum of P35,000
and to pay the costs. The Insular Treasurer and Francisco
Rodriguez were absolved from the complaint. From this judgment
the plaintiff appealed.
 1. WON the Court erred in absolving the Insular Treasurer – YES,
Insular Treasurer
2. WON the plaintiff can recover damages by virtue of a trust – YES
RULING: Judgment appealed from is reversed. If the execution of this
judgment is returned unsatisfied and that the execution cannot be
collected except by application to the assurance fund and the court having
jurisdiction over the action shall be satisfied as to the truth of such
return, said court shall order the amount of the execution and costs, or so
much thereof as remains unpaid, to be paid by the Treasurer of the
Philippine Archipelago out of the assurance fund. The complaint will
stand dismissed as to Francisco Rodriguez.
RATIO:
1. Sections 102-103 of the Land Registration Act provides that the
liability of the land registration assurance fund is not confined to
cases where the erroneous registration is due to omission,
mistake, or malfeasance on the part of the employees of the
registration court, but extends to all cases in which a person
wrongfully deprived of any kind or interest therein, without
negligence on the latter’s part, through the bringing of the land
under the provisions of said Act.
2. As the plaintiff-appellant was a minor at the time of the
registration of the land and consequently no negligence can be
imputed to her, it is clear from the sections quoted that in the
absence of special circumstances to the contrary, the assurance
fund is secondarily liable for the damages suffered by her through
the wrongful registration.
3. Insular Treasurer raises the point that Domingo Cuachon and
Adela Gasataya, prior to the registration, must be considered to
have held the property in trust and for the benefit of the plaintiff;
that the relation of trustee and cestui que trust was thus created;
and that the case therefore falls under section 106 of the Land
Registration Act, which provides that "the assurance fund shall
not be liable to pay for any loss or damage or deprivation
occasioned by a breach of trust, whether express, implied, or
constructive, by any registered owner who is a trustee, or by the
improper exercise of any sale in mortgage-foreclosure
proceedings."
4. At first blush the Insular Treasurer’s contention seems quite
plausible. For want of better terms, the words "trust" and
"trustee" are frequently used in a broad and popular sense so as
to embrace a large variety of relations. Thus, 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. The use
of the word "trust" in this sense is not technically accurate – such
trusts "are not trusts at all in the strict and proper signification of
the word "trust"; but as courts are agreed in administering the
same remedy in a certain class of frauds as are administered in
fraudulent breaches of trusts, and as courts and the profession
have concurred in calling such frauds constructive trusts, there
can be no misapprehension in continuing the same phraseology,
while a change might lead to confusion and misunderstanding."
(Perry on Trusts, 5th ed., sec. 166.)
5. If this is the kind of constructive trust referred to in section 106,
it must be conceded that the plaintiff cannot recover damages
from the assurance fund. But that such is not the case, becomes
quite apparent upon an examination of sections 101 and 102,
above quoted, in which the right of recovery from the assurance
fund in cases of registration through fraud or wrongful acts is
expressly recognized and which, in our opinion, clearly show that
the term trust as used in section 106 must be taken in its
technical and more restricted sense. Indeed, if it were to be
regarded in its broadest sense, the assurance fund would, under
the conditions here prevailing, be of little or no value.
6. Bouvier defines a trust in its technical sense as "a right of
property, real or personal, held by one party for the benefit of
another." In the present case we have this situation: The plaintiff
was a minor at the time of the registration of the land and had no
legal guardian. It is true that her mother in whose name the land
was registered was the natural guardian of her person, but that
guardianship did not extend to the property of the minor and
conferred no right to the administration of the same and the
plaintiff, being a minor and under disability, could not create a
technical trust of any kind. Applying Bouvier's definition to this
estate of facts, it is clear that there was no trust in its
technical signification8. The mother had no right of property or
administration in her daughter's estate and was nothing but a
mere trespasser.
7. The wrongdoer who becomes possessed of property under such
circumstances has been styled a "trustee;" but this is for want of a
better term, and because he has no title to property, and really
holds it for the true owner. It might as well be said that, where
two persons conspire to possess themselves of the personal
8Since there is no trust in its technical signification, Insular Treasurer cannot
escape liability by invoking Section 106 of the LRA. Pursuant to Sections 101-102,
Insular Treasurer is liable.
 property of another when he brings trover for its recovery, they
should be styled "trustees," instead of "fort feasors," and should be
permitted to claim the benefit of a lien for care or for provender.
8. From what has been said it follows that the judgment absolving
the Insular Treasurer from the complaint must be reversed. The
property was subject to a life estate of one-third in favor of Adela
Gasataya as the widow of Domingo (Number 1) Gayondato, the
value of which must be deducted from the total value of the fee
simple.
 ESCOBAR v. LOCSIN (Megan, C2020)
Jan. 30, 2943 | Bocobo, J. | Trust
PLAINTIFF-APPELLANT: Eusebia Escobar
DEFENDANT-APPELLEE: Ramon Locsin, in his capacity as special
administrator of the intestate estate of Juana Ringor
SUMMARY: Escobar is the owner of the said lot in dispute. In the course
of a cadastral proceeding, she asked Domingo Sumangil to claim the lot
for her since she is illiterate. Domingo breached the trust by claiming the
lot for himself. It was adjudicated in his favor as a result. Escobar now
prays for the reconveyance of the lot. CFI found that Escobar is the real
owner but dismissed the case since the 1 year period for review of the
decree had elapsed. The question before the Court is WoN reconveyance
is proper. The SC held that yes, the lot in dispute should be reconveyed to
Escobar since the case did not sought to review the decree but to enforce
the trust between her and Sumangil
DOCTRINE: When an agent, taking advantage of the illiteracy of the
principal, claims for himself the property which he was designated to
claim for the principal and manages to have it registered in his own name
and became part of his estate when the agent died, the estate is in equity
bound to execute the deed of conveyance of the lot to the cestui que trust.
The courts have therefore shielded fiduciary relations against every
manner of chicanery or detestable designed cloaked by legal
technicalities. Torrens system was never calculated to foment betrayal in
the performance of a trust.
FACTS:
1. Eusebia Escobar alleged that she is the owner of the subject lot in
dispute.
2. In the course of the cadastral proceedings, she asked Domingo
Sumangil to claim the lot for her since she is illiterate. (Basically
a trust between Sumangil and Escobar was created)
3. However, Sumangil committed a breach of trust by claiming the
lot for himself. As a result, the lot was adjudicated in his
(Sumangil) favor.
4. The subject lot was subsequently passed on to Juana Ringor,
which acquired the land through the partition of the intestate
estate of Domingo Sumangil and Honorata Duque.
5. Escobar now prays for the reconveyance of the lot in question.
6. The CFI of Nueva Ecija found that the plaintiff is the real owner
of the land which she acquired in 1914 by donation propter
nuptias from Pablo Ringor.
7. She has been in possession of the land since that year.
8. Although the trial court recognized that Escobar had equitable
title and the estate of Juana Ringor had legal title, it nevertheless
dismissed the complaint because the 1-year period provided in
Sec. 38 of the Land Registration Act for the review of the decree
had elapsed.
ISSUE/s: WoN the conveyance of the lot is proper – YES.
RULING: The judgment appealed from is hereby reversed, and the
defendant is ordered to convey that lot in question to the plaintiff
within fifteen days from the entry of final judgment herein.
RATIO:
1. The trial court erred in dismissing the case since the complaint
did not seek the review of the decree or the reopening of the
cadastral case, but the enforcement of a trust.
2. The estate of Juana Ringor as the successor in interest of the
trustee, Domingo Sumangil, is in equity bound to execute a deed
of conveyance od this lot to the cestui que trust, Eusebia Escobar.
3. The remedy prayed for has been upheld by this Court in previous
cases, one of which is Severino v. Severino.
4. It held that the Land Registration Act in no way intends to cut off
equitable rights or remedies by issuing a decree of registration.
5. Registered lands and ownership therein, shall in all respects be
subject to the same burdens and incidents attached by law to
unregistered land.
6. A trust is sacred and inviolable.
7. (DOCTRINE IN THE OUTLINE) When an agent, taking
advantage of the illiteracy of the principal, claims for himself the
property which he was designated to claim for the principal and
manages to have it registered in his own name and became part
of his estate when the agent died, the estate is in equity bound to
execute the deed of conveyance of the lot to the cestui que trust.
The courts have therefore shielded fiduciary relations against
every manner of chicanery or detestable designed cloaked by legal
technicalities. Torrens system was never calculated to foment
betrayal in the performance of a trust.
 LOPEZ v. CA (Steph, C2020)
December 16, 2008 | Tinga, J. | Resulting Trust v. Consructive Trust
PETITIONER: Richard Lopez, Trustee of the Trust Estate of Juliana
Lopez-Manzano
RESPONDENTS: Court of Appeals + Lopez/Manzano heirs
SUMMARY: Juliana Lopez made a trust fund in her will covering her
paraphernal property, with Jose her husband as trustee, and in the event
that he would die/renounce, her nephew Enrique would take over. When
Juliana died, Jose had a new proposal on the partition of her estate, and
claimed ½ of Juliana’s paraphernal property belonged to him as sole heir,
and ½ to the trust fund. Court approved. Jose died, was replaced by
Enrique. In his holographic will Jose bequeathed the contested
(paraphernal) property to the respondents. Enrique, as replacement of
Jose, filed for action of reconveyance. RTC and CA say that the action has
prescribed (it was mga 30 years after Jose registered the lands in his
name). SC ruled that yes the action has prescribed because an implied
trust of the constructive kind was created. Prescription runs from the
time the trust was repudiated (when Jose registered the lands in his
name).
DOCTRINE: see ratio 2 a and b.
FACTS:
1. Juliana (deceased) married Jose but did not have any children.
They were a very landed couple and the disputed properties
(property totaling 1500 hectares) are the exclusive
paraphernal property of Juliana.
2. She executed a notarial will where she wanted to make a trust
fund for her paraphernal property (Fideicomiso de Juliana
Lopez Manzano). Jose was supposed to be the administrator, but
if he were to die or renounce, her nephew Enrique would become
administrator and executor.
a. 2/3 of the income for scholarship, 1/3 for administrator’s
expenses.
b. For conjugal property, she bequeathed it all to her
husband, who later bequeathed it to their great
grandchildren
3. Juliana initiated the probate of her will (basically registration w
the Court), but she died before the petition for probate could be
heard.
4. So, Jose took over. However he had a new proposal, and
wanted ½ of Juliana’s paraphernal properties as his legitime
(since he was the sole heir) and the other ½ to go to the trust
fund. He also claimed that they had outstanding debt of 800k.
5. The probate court approved the partition. All the TCT’s over the
parcels of land were issued in Jose’s favor, ½ as trustee of the
trust fund and ½ as heir of Juliana.
6. Jose died and the contested properties went to the respondent
heirs. Enrique became administrator/executor of trust fund.
7. Enrique instituted action for reconveyance of parcels of land with
sum of money against the Lopez/Manzano heirs heirs. (to put it
back in the trust fund)
8. The complaint essentially Alleged that Jose was able to
register in his name the disputed properties, which were the
paraphernal properties of Juliana, either during their
conjugal union or in the course of the performance of his
duties as executor of the testate estate of Juliana and that
upon the death of Jose, the disputed properties were included in
the inventory as if they formed part of Joses estate when in fact
Jose was holding them only in trust for the trust estate of
Juliana.
9. They brought the matter to court, RTC dismissed the action on
the ground of prescription since the lands were registered in
Jose’s name 30 years ago and the action prescribes in 10 years.
CA affirmed.
ISSUES:
1. Has the action for reconveyance prescribed? Yes.
2. WAS AN IMPLIED TRUST CONSTITUTED OVER THE
DISPUTED PROPERTIES WHEN JOSE, THE TRUSTEE,
REGISTERED THEM IN HIS NAME? Yes, an implied trust of
the constructive kind.
RATIO:
1. Court adjudicated ½ paraphernal property to Jose as sole heir.
That enjoys the presumption of regularity.
2. BUT! Since the paraphernal property was supposed to go to the
trust fund, the registration in Jose’s name would be erroneous
and thus it is an implied trust.9 There are 2 kinds of implied
trusts:
a. Resulting Trust - 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
9 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.
 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.
- Basically, what the parties really wanted but was not
expressed in the contract.
b. Constructive Trust - 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
to hold, in equity and good conscience.
- Basically, created by operation of law to prevent unjust
enrichment when property is acquired by fraud or if
without fraud is acquired against equity
3. The mistake in adjudication (ratio #1) created an implied trust of
the constructive kind.
4. Action for reconveyance based on an implied or constructive trust
prescribes in 10 years, counting from the time the trustee
repudiated the trust (when Jose registered the paraphernal
property supposed to go to the trust fund in his name instead).
 PASIÑO v. MONTERROYO (Gly, C2020)
July 31, 2008 | Carpio J. | Principle of Constructive Trusts
PETITIONER: ROGELIO, GEORGE, LOLITA, ROSALINDA, and
JOSEPHINE, all surnamed PASIÑO, represented by their father and
attorney-in-fact JOSE PASIÑO
RESPONDENTS: DR. TEOFILO EDUARDO F. MONTERROYO,
ROMUALDO MONTERROYO, MARIA TERESA MONTERROYO, and
STEPHEN MONTERROYO
SUMMARY: Laureano Pasino (Original owner) filed for a homestead
application over an alienable public land which was granted (Lot 2139).
He later ceded his right to possession to Larumbe. Gavino then started
delivering the owner’s share of the harvest to Larumbe. When Lot No.
2139 was sold, Gavino and his successors delivered the owner’s share of
the harvest to Monterroyo (present possessors). Petitioners committed
actual fraud when they misrepresented in their free patent applications
that they were in possession of the property continuously and publicly.
Court ruled that the issuance of a homestead patent in 1952 in favor of
Laureano was NOT registered. Non-registration of Laureano’s homestead
patent had rendered it functus officio. If the registration of the land is
fraudulent, the person in whose name the land is registered holds it as a
mere trustee, and the real owner is entitled to file an action for
reconveyance of the property
DOCTRINE: Registration of property by one person in his name,
whether by mistake or fraud, the real owner being another person,
impresses upon the title so acquired the character of a constructive trust
for the real owner, which would justify an action for reconveyance. If the
registration of the land is fraudulent, the person in whose name the land
is registered holds it as a mere trustee, and the real owner is entitled to
file an action for reconveyance of the property.
FACTS:
1. The original action was for recovery of possession and damages
with a prayer for a TRO or writ of preliminary injunction filed by
Pasino (Petitioner/Original claimant) against Monterroyo
(Respondents/Present Possessors)
2. Lot No. 2139 with an area of 19,979 square meters, located at
Panul-iran, Abuno, Iligan City, was part of a 24-hectare land
occupied, cultivated and cleared by Laureano Pasiño (Laureano)
in 1933.
a. The 24-hectare land formed part of the public domain
which was later declared alienable and disposable
3. Laureano filed a homestead application over the entire 24-hectare
a. the Bureau of Forestry wrote informed him that the tract
of land covered by his application was not needed for
forest purposes and later was approved by the Director of
Lands and stating that it was recorded in his name for the
land applied for by him.
4. Homestead patent was issued in favor of Laureano after he died.
a. Laureano’s heirs did not receive the order and
consequently, the land was not registered under
Laureano’s name or under that of his heirs.
5. A Cadastral Survey was conducted in Iligan City.
a. The surveyor found that a small creek divided the 24-
hectare parcel of land into two portions, identified as Lot
No. 2138 and Lot No. 2139.
PETITIONER:
1. Petitioners claimed that the heirs (headed by Jose) continuously
possessed and cultivated both lots.
2. Jose’s co-heirs renounced their rights thru a Deed of Quitclaim in
favor of Jose. Jose secured a title in his name for Lot No. 2138.
3. Jose alienated Lot No. 2139 in favor of his children (petitioners in
this case) who filed applications for grant of Free Patent Titles
over their respective shares of Lot No. 2139 which were all
granted.
4. Petitioners alleged that their possession of Lot No. 2139 was
interrupted on 3 January 1993 when respondents forcibly took
possession of the property.
RESPONDENTS:
5. They had been in open, continuous, exclusive and notorious
possession of Lot No. 2139, by themselves and through their
predecessors-in-interest, since 10 July 1949.
6. Conveyances:
a. Rufo Larumbe (Larumbe) sold Lot No. 2139 to Petra
Teves (Petra).
b. Petra executed a deed of sale over Lot No. 2139 in favor of
Vicente Teves (Vicente).
c. Vicente executed a pacto de retro sale over the land in
favor of Arturo Teves (Arturo).
d. Arturo sold Lot No. 2139 in favor of respondents’ father,
Dr. Monterroyo, by virtue of an oral contract.
e. Arturo executed a Deed of Confirmation of Absolute Sale
of Unregistered Land in favor of Dr. Monterroyo’s heirs.
7. Jose was not the owner of Lot No. 2139 and as such, he could not
sell the land to his children.
 a. Petitioners’ OCTs were null and void for having been
procured in violation of the Public Land Act.
b. Land Management Bureau had no authority to issue the
free patent titles because Lot No. 2139 was a private land
RTC Ruling: Lot No. 2139 have acquired the character of a private land
over which the Land Management Bureau has been divested of
jurisdiction;
1. Lot No. 2139 had already acquired the character of a private land
by operation of law. Therefore it already ceased to be a public
land, the Land Management Bureau had no power or authority to
dispose of it by issuing free patent titles
2. The order for the issuance of a patent in favor of Laureano lapsed
and became functus officio when it was not registered with the
Director of Deeds.
a. Laureano ceded the right to possession over half of the
property, denominated as Lot No. 2139, to Larumbe
sometime in 1947.
b. T Laureano offered to sell half of the land to his tenant
Gavino Quinaquin (Gavino) but he did not have money.
c. Later, Gavino learned from Larumbe that he (Larumbe)
acquired half of the land from Laureano. Gavino then
started delivering the owner’s share of the harvest to
Larumbe.
d. Laureano never contested Gavino’s action nor did he
demand that Gavino deliver to him the owner’s share of
the harvest and not to Larumbe.
e. When Lot No. 2139 was sold, Gavino and his successors
delivered the owner’s share of the harvest to Petra,
Vicente, Arturo, Dr. Monterroyo, and Dindo Monterroyo,
successively.
3. Petitioners had failed to present convincing evidence that they
and their predecessors-in-interest were in possession of Lot No.
2139 from 1947 to 1994 when they filed their application for free
patent.
4. Petitioners committed actual fraud when they
misrepresented in their free patent applications that they
were in possession of the property continuously and
publicly.
CA Ruling: Affirmed trial court’s decision.
ISSUES: Who are the rightful owners and possessors of Lot No. 2139?
RULING: The petition is hereby DENIED and the CA Ruling
AFFIRMED.
Respondents were able to establish that they have a better right to Lot
No. 2139 since they had long been in possession of the property in the
concept of owners, by themselves and through their predecessors-in-
interest. Hence, despite the irrevocability of the Torrens titles issued in
their names and even if they are already the registered owners under the
Torrens system, petitioners may still be compelled under the law to
reconvey the property to respondents.
RATIO:
1. Land Management Bureau Had No Jurisdiction To Issue
Free Patent Titles
 Alienable public land held by a possessor, continuously or
through his predecessors-in-interest, openly, continuously and
exclusively for 30 years under The Public Land Act, as
amended is converted to private property by the mere lapse or
completion of the period, ipso jure.
o petitioners’ application for free patent titles was filed
only on 8 January 1994, when Lot No. 2139 had
already become private land ipso jure, the Land
Management Bureau had no jurisdiction to entertain
petitioners’ application.
 preponderance of evidence favors respondents as the
possessors of Lot No. 2139 for over 30 years, by themselves
and through their predecessors-in-interest.
o Pertinent Original Deed of Absolute Sales and the
Deed of Confirmation of Absolute Sale of Unregistered
Real Property executed by Arturo in favor of
respondents.
o Also a certification from the Iligan City Police
Command confirming that Andres Quinaquin made a
report that Petitioners forcibly took his copra which
belied petitioners’ allegation that they were in
possession of Lot No. 2139 and respondents forcibly
took possession of the property only in January 1993.
2. Non-Registration of Homestead Patent Rendered it Functus
Officio
 Once a homestead patent granted in accordance with law is
registered, the certificate of title issued by virtue of the patent
has the force and effect of a Torrens title issued under the
land registration law.
  Registration of patents, and registration is the operative act
to convey the land to the patentee,
o In this case, the issuance of a homestead patent in
1952 in favor of Laureano was NOT registered.
o Further, in this case, Laureano already conveyed Lot
No. 2139 to Larumbe in 1947 before the approval of
his homestead application.
o The trial court found no instance when the owner’s
share of the harvest was delivered to Jose Pasiño.
 Non-registration of Laureano’s homestead patent had
rendered it functus officio.

3. A Counterclaim is Not a Collateral Attack on the Title-

remedial law
 A counterclaim is considered an original complaint
 the attack on the title in a case originally for recovery of
possession cannot be considered as a collateral attack on the
title. Development Bank of the Philippines v. Court of Appeals
is similar to the case before us insofar as petitioner in that
case filed an action for recovery of possession against
respondent who, in turn, filed a counterclaim claiming
ownership of the land. In that case, the Court ruled:

4. Principle of Constructive Trust Applies – RELEVANT TO

AGENCY
Principle of constructive trust
o Registration of property by one person in his name, whether by
mistake or fraud, the real owner being another person, impresses
upon the title so acquired the character of a constructive trust for
the real owner, which would justify an action for reconveyance.
o In the action for reconveyance, the decree of registration is
respected as incontrovertible but what is sought instead is the
transfer of the property wrongfully or erroneously registered in
another’s name to its rightful owner or to one with a better right.
o If the registration of the land is fraudulent, the person in whose
name the land is registered holds it as a mere trustee, and the
real owner is entitled to file an action for reconveyance of the
property.
 HOME GUARANTY CORP v. LA SAVOIE DEVELOPMENT
(Siapno, C2020)
January 28, 2015| Leonen, J. | Pactum Commisorium
PETITIONERS: Home Guaranty Corp.
RESPONDENTS: La Savoie Development
SUMMARY: La Savoie obtained financing for some of its projects
through a securitization process in which PDB issued P150 million in
asset participation certificates aka LSDC certificates to be sold to
investors. The projects financed by these certificates consisted of the
development of real properties. The same properties were conveyed in
trust by La Savoie, as trustor, to Planters Development Bank, as trustee,
and constituted into the La Savoie Asset Pool (Asset Pool). LSDC
certificates were covered by a guaranty extended by Home Guaranty
Corp. through a "Contract of Guaranty" entered into by HGC with La
Savoie and PDB. La Savoie found itself unable to pay its
obligations to its creditors. La Savoie filed for a Petition for
Rehabilitation and pursuant to this RTC issued a Stay Order which
prevented La Savoie from making any payment of its liabilities
outstanding as of the date of the filing of the petition. HGC filed its
comment/opposition even if it was not a creditor and argued that it had
preferential rights over the properties making up the Asset Pool as these
were conveyed as security or collaterals for the redemption of the LSDC
certificates and thus, the properties in the Asset Pool should be excluded
from the coverage of La Savoie’s Petition for Rehabilitation. La Savoie
argued that HGC had no cause of action because HGC did not pay the
holders of the LSDC certificates yet and thus, the properties were still
under La Savoie. But the Stay Order was lifted by the CA and so, HGC
took the chance to pay the holders and pursuant to the provisions of the
Trust Agreement and Contract of Guaranty, PDB automatically executed
a Deed of Assignment of the properties in the Asset Pool in favor of HGC.
Issue is WoN Deed of Assignment was valid. SC ruled NO. SC held that
its execution is in violation of a fundamental principle in the law
governing credit transactions. Elements of pactum commissorium:
1. There should be a property mortgaged by way of security for the
payment of the principal obligation; and
2. There should be a stipulation for automatic appropriation by
the creditor of the thing mortgaged in case of non-payment of the
principal obligation within the stipulated period.
2nd element was shown by the automatic execution of a Deed of
Conveyance without resorting to foreclosure first.
DOCTRINE: Conveyance made by seller of a property acquired through
pactum commisorium is void, and thus not vest title to the buyer. Such a
situation falls squarely under Art. 1456, where the buyer is deemed to
have acquired the property by mistake or through ineffectual transfer.
FACTS:
1. La Savoie Development Corporation (La Savoie) is a domestic-
engaged in the business of real estate development, subdivision
and brokering. With the onset of the Asian financial crisis in
1997, La Savoie found itself unable to pay its obligations to
its creditors.
2. La Savoie filed before the RTC a petition for the declaration of
state of suspension of payments with approval of proposed
rehabilitation plan
3. RTC issued a Stay Order staying the enforcement of all claims
against La Savoie. It prohibited from selling, encumbering,
transferring, or disposing in any manner any of its properties
except in the ordinary course of business. It is further prohibited
from making any payment of its liabilities outstanding as of the
date of the filing of the petition.
4. All creditors and interested parties are directed to file and serve
on La Savoie a verified comment on or opposition to the petition
with supporting affidavits and documents, not later than ten (10)
days before the date of the initial hearing. A Rehabilitation
Receiver of La Savoie was appointed.
5. Following the issuance of the Stay Order, La Savoie's creditors:
Planters Development Bank (PDB), Philippine Veterans
Bank(PVB), and Robinsons Savings Bank (RSB) filed their
Comments and/or Oppositions.
6. Home Guaranty Corporation (HGC) filed an Opposition even
though it was not a creditor of La Savoie asserting that it had an
interest.
7. HGC noted that through the "La Savoie Asset Pool Formation and
Trust Agreement" (Trust Agreement), La Savoie obtained
financing for some of its projects through a securitization process
in which PDB as nominal issuer issued P150 million in asset
participation certificates dubbed as the "La Savoie Development
Certificates" (LSDC certificates) to be sold to investors. The
projects financed by these certificates consisted of the
development of real properties.
8. The same properties were conveyed in trust by La Savoie, as
trustor, to Planters Development Bank, as trustee, and
constituted into the La Savoie Asset Pool (Asset Pool).
9. The redemption of the LSDC certificates upon maturity and the
interest payments on them were backed/collateralized by the
 assets that were conveyed by La Savoie to the Trust.
10. LSDC certificates were covered by a guaranty extended by HGC
through a "Contract of Guaranty" entered into by HGC with La
Savoie and PDB.
11. The Contract of Guaranty states that HGC has the duty of
ensuring that all funds due to the Asset Pool are collected, and
that funds are disbursed for the purposes they were intended for.
12. In the course of HGC’s business, La Savoie collected a total
amount of 60.5M pesos from the buyers of some of the properties
covered by the Asset Pool but was not remitted by La Savoie to
the trust. With La Savoie's failure to complete some of its projects
and failure to remit sales collections, the Asset Pool defaulted in
redeeming and paying interest on the LSDC certificates. Thus, La
Savoie's investors placed a call on the guaranty.
13. With La Savoie's failure to remit collections, however, HGC
suspended the settlement of the investors' call which was then
overtaken by the filing of La Savoie's Petition for Rehabilitation.
14. HGC argued that it and the investors on the LSDC certificates
had preferential rights over the properties making up the Asset
Pool as these were conveyed as security or collaterals for the
redemption of the LSDC certificates. Thus, they should be
excluded from the coverage of La Savoie's Petition for
Rehabilitation.
15. La Savoie filed a Consolidated Answer to the Comments and
Oppositions saying that for the assignment to take effect, HGC
had to first pay the holders of the LSDC certificates. Thus, La
Savoie claimed that Asset Pool properties remained to be its
assets.
16. RTC issued an Order denying due course to La Savoie's Petition
for Rehabilitation and lifting the Stay Order.
17. When the Stay Order was lifted, HGC approved and processed the
call on the guaranty for the redemption of the LSDC certificates.
Thus, HGC, through PDB, paid a total of P128.5 million as
redemption value to certificate holders.
18. PDB then executed a Deed of Assignment and Conveyance in
favor of HGC pursuant to a Trust Agreement and Contract of
Guaranty through which PDB absolutely conveyed and assigned
to HGC the ownership and possession of the entire assets that
formed part of the La Savoie Asset Pool. HGC argues that it now
had the right to collect from La Savoie cash receivables that La
Savoie failed to remit to the Trust.
19. CA reversed and set aside RTC’s decision to lift Stay Order and
reinstated the Stay Order. CA gave due course to the Petition for
Rehabilitation, and remanded the case to the trial court for
further proceedings.
20. CA noted that HGC had no right to make such payment because
it was made after the Petition for Rehabilitation had been
brought by La Savoie and after the issuance of the Stay Order
21. HGC filed a Petition for Review on Certiorari asserting that the
properties comprising the Asset Pool should be excluded from the
rehabilitation proceedings as these have now been removed from
the dominion of La Savoie and have been conveyed and assigned
to it after the Stay Order had been lifted.
22. La Savoie filed its Comment claiming that the assignment and
conveyance to Home Guaranty Corporation was ineffectual
because at the time of the guaranty call, the Stay Order was
admittedly in effect. It added that, even assuming there was full
payment and that the Deed of Assignment and Conveyance was
executed, the Subject Properties remained within the jurisdiction
of the RTC even after the lifting of the Stay Order, and that, as a
result, any contract or document affecting title to the Subject
Properties is also subject to the rehabilitation proceedings
pending with the trial court.
23. La Savoie also asserted that by paying the guaranty, HGC
effectively became its creditor. Excluding the properties
comprising the Asset Pool from the rehabilitation proceedings
would then be tantamount to giving preference to one creditor,
something which is prohibited in rehabilitation proceedings.
ISSUE:
1. (Minor issue) WoN HGC was barred from making payment on the
guaranty call, and that PDB was barred from conveying the
properties comprising the Asset Pool to Home Guaranty
Corporation AFTER the issuance of the Stay Order and pending
La Savoie's Appeal – NO, HGC’s payment on guaranty call and
PDB’s conveyance of properties in Asset Pool to HGIC were done
while the Stay Order was lifted
2. (MAIN ISSUE) WoN the Deed of Assignment made from PDB to
HGC Corporation of the Asset Pool was valid? NO, Transfer made
by PDB to Home Guaranty Corporation was invalid because it
was a pactum commissorium, a CONTRUCTIVE TRUST was
created instead
HELD: WHEREFORE, the Petition is DENIED. The Regional Trial
Court, Branch 142, Makati City is directed to proceed with dispatch in
resolving the Petition for Rehabilitation filed by respondent La Savoie
Development Corporation.
RATIO:
1. These LSDC certificates were secured by the Asset Pool in which
La Savoie conveyed, assigned, delivered all its rights and
interests in the real estate properties to PDB, the trustee, for the
present and future holders of LSDCs.Apart from the Asset Pool,
the LSDC certificates were also secured by a guaranty
2. Section 3.4 of Trust Agreement provides that in the event
that a call is made on HGC for its guaranty, PDB shall
convey to the former the Asset Pool.
3. Section 12 of the Contract of Guaranty provides for the events
where HGIC may be called to pay for the LSDC certificates, one of
which is when La Savoie fails to redeem or pay all or some of the
LSDCs upon maturity from the Asset Pool
8. Section 13 echoes Section 3.4 of the Trust Agreement in providing
for transfer of the Asset Pool in the event of a call on the
guaranty.
9. It is not disputed that La Savoie defaulted in the redemption and
in the payment of interest on the LSDC certificates. It is also
settled that a call was made on HGC to pay for the LSDC
certificates, pursuant to the provisions of the Trust Agreement
and the Contract of Guaranty.
10. Court ruled that for as long as the Stay Order was in effect,
certificate holders were barred from insisting on and receiving
payment, whether from the principal debtor, La Savoie, or from
the guarantor, HGC.
11. Sometime between La Savoie's filing of its Appellant's Brief and
HGC's filing of its Appellee's Brief, HGC approved and processed
the call that was made, prior to the commencement of
rehabilitation proceedings, on its guaranty and proceeded to pay
the holders of LSDC certificates a total amount of P128.5 million
as redemption value. Pursuant to Section 13 of the Contract of
Guaranty, PDB executed in favor of HGC a Deed of Assignment
and Conveyance the possession and ownership over the entire
Asset Pool Project.
12. HGC asserts that the execution of this Deed effectively removed
the properties comprising the Asset Pool from the dominion of La
Savoie and, thus, beyond the reach of La Savoie's rehabilitation
proceedings.
13. La Savoie contends that this transfer was ineffectual as the Stay
Order was in effect at the time of the execution of the Deed and as
affirming Home Guaranty Corporation's ownership is supposedly
tantamount to giving it undue preference as a creditor.
HGC’s payment on guaranty call and PDB’s conveyance of
properties in Asset Pool to HGIC was possible because these were
done when the Stay Order was lifted
14. Rule 3, Section 5 of the Interim Rules, states that Any order
issued by the court under these Rules is immediately executory.
A petition for review or an appeal therefrom shall not stay the
execution of the order unless restrained or enjoined by the
appellate court.
15. The filing of La Savoie's Appeal did not restrain the effectivity of
the Order to lift of Stay Order. It is true that generally, an appeal
stays the judgment or final order appealed from. Rehabilitation
proceedings, however, are not bound by procedural rules spelled
out in the Rules of Court. The Interim Rules, not the Rules of
Court, was the procedural law.
16. Thus, the Order lifting the restrictions on the payment of
claims against La Savoie, remained in effect. La Savoie's
creditors were then free to enforce their claims.
17. Specifically, Home Guaranty Corporation as guarantor was
capacitated, in accordance with Sections 12 and 13 of the
Contract of Guaranty to effect payment to the holders of the
LSDC certificates.
18. Notably, La Savoie failed to intimate that any such condition or
requisite was not satisfied and having established that the Stay
Order was lifted and that this lifting remained in force and was
not restrained
Transfer made by PDB to Home Guaranty Corporation was
ineffectual because it was a pactum commissorium, a
CONTRUCTIVE TRUST was created instead
19. Viewed solely through the lens of the Trust Agreement and the
Contract of Guaranty, the transfer made to Home Guaranty
Corporation on the strength of the Deed of Conveyance appears
valid and binding.
20. However, we find that its execution is in violation of a
fundamental principle in the law governing credit transactions.
We find the execution of a Deed of Conveyance without
resorting to foreclosure to be indicative of pactum
commissorium. Hence, it is void and ineffectual and does
not serve to vest ownership in Home Guaranty
Corporation.
21. Articles 2088 and 2137 of the Civil Code provide:

Art. 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary is
null and void.
Art. 2137. The creditor does not acquire the ownership of the real estate
for non-payment of the debt within the period agreed upon.
Every stipulation to the contrary shall be void. But the creditor may
petition the court for the payment of the debt or the sale of the real
property.
22. In this case, the Rules of Court on the foreclosure of
mortgages shall apply.
23. Elements of pactum commissorium:
(1) There should be a property mortgaged by way of security
for the payment of the principal obligation; and
(2) There should be a stipulation for automatic
appropriation by the creditor of the thing mortgaged in
case of non-payment of the principal obligation within the
stipulated period.
35. In this case, Section 13 of the Contract of Guaranty calls for the
prompt assignment and conveyance to HGC of all the
corresponding properties in the Asset Pool that are held as
security in favor of the guarantor and dispenses with the need of
conducting foreclosure proceedings, judicial or otherwise.
36. This is thus a clear case of pactum commissorium. It is null and
void. Accordingly, whatever conveyance was made by PDB to
HGC in view of this illicit stipulation is ineffectual.
37. All that this transfer engendered is a constructive trust in
which the properties comprising the Asset Pool are held in
trust by Home Guaranty Corporation, as trustee, for the
trustor, La Savoie.
38. Trust is the legal relationship between one person having an
equitable ownership (trustee) in property and another person
owning the legal title to such property (trustor), the equitable
ownership of the trustee entitling him to the performance of
certain duties and the exercise of certain powers by the trustor.
39. Trusts are either express or implied. 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.
40. In turn, implied trusts are either resulting or constructive trusts.
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or
interest and are presumed always to have been contemplated by
the parties arising from the nature and circumstances. 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.
41. The provision on implied trust governing the factual milieu of this
case is provided in Article 1456 of the Civil Code states that “If
property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property comes.”
42. So, too, this case falls squarely under Article 1456 of the Civil
Code. Home Guaranty Corporation acquired the properties
comprising the Asset Pool by mistake or through the ineffectual
transfer (i.e., for being pactum commissorium) made by the
original trustee, Planters Development Bank.
43. Two key points are established from the preceding discussions.
First, the Court of Appeals' June 21, 2005 Decision restored La
Savoie's status as a corporation under receivership. Second, with
all but a constructive trust created between Home Guaranty
Corporation and La Savoie, the properties comprising the Asset
Pool remain within the dominion of La Savoie.
44. On the first point, the restoration of La Savoie's status as a
corporation under receivership brings into operation the rule
against preference of creditors. On the second point, La Savoie's
continuing ownership entails the continuing competence of the
court having jurisdiction over the rehabilitation proceedings to
rule on how the properties comprising the Asset Pool shall be
disposed, managed, or administered in order to satisfy La Savoie's
obligations and/or effect its rehabilitation.
45. The cumulative effect of these is that Home Guaranty
Corporation must submit itself, like La Savoie's other creditors, to
how La Savoie's Petition for Rehabilitation shall be resolved. As a
paying guarantor, Home Guaranty Corporation was subrogated
into the rights of La Savoie's creditors and now stands as the
latter's own creditor. It remains so pending the satisfaction of La
Savoie's obligation and as the void conveyance made to it by
Planters Development Bank failed to terminate in the creditor-
debtor relationship with La Savoie.