Trust Compiled Cases

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BUS-ORG: TRUST

FULL TEXT

I. INTRODUCTION

B. ESSENCE OF TRUST

CASES:

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 148788 November 23, 2007

SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and VICTORIANO CAÑEZO Petitioners,vs.CONCEPCION ROJAS, Respondent.

D E C I S I O N

NACHURA,J .:

This is a petition for review on certiorari from the Decision1 of the Court of Appeals, datedSeptember 7, 2000, in CA-G.R. SP No. 53236, and Resolution dated May 9, 2001.

On January 29, 1997, petitioner Soledad Cañezo filed a Complain t2 for the recovery of realproperty plus damages with the Municipal Trial Court (MTC) of Naval, Biliran, against herfather’s second wife, respondent Concepcion Rojas. The subject property is an unregisteredland with an area of 4,169 square meters, situated at Higatangan, Naval, Biliran. Cañezoattached to the complaint a Joint Affidavit3 executed on May 10, 1979 by Isidro Catandijan andMaximina Cañezo attesting to her acquisition of the property.

In her complaint, the petitioner alleged that she bought the parcel of land in 1939 fromCrisogono Limpiado, although the transaction was not reduced into writing. Thereafter, sheimmediately took possession of the property. When she and her husband left for Mindanao in1948, she entrusted the said land to her father, Crispulo 4 Rojas, who took possession of, andcultivated, the property. In 1980, she found out that the respondent, her stepmother, was inpossession of the property and was cultivating the same. She also discovered that the taxdeclaration over the property was already in the name of Crispulo Rojas .5

In her Answer, the respondent asserted that, contrary to the petitioner’s claim, it was herhusband, Crispulo Rojas, who bought the property from Crisogono Limpiado in 1948, whichaccounts for the tax declaration being in Crispulo’s name. From then on, until his death in 1978,Crispulo possessed and cultivated the property. Upon his death, the property was included in

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his estate, which was administered by a special administrator, Bienvenido Ricafort. Thepetitioner, as heir, even received her share in the produce of the estate. The respondent furthercontended that the petitioner ought to have impleaded all of the heirs as defendants. She alsoargued that the fact that petitioner filed the complaint only in 1997 means that she had alreadyabandoned her right over the property .6

On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the petitioner, thus:

WHEREFORE, premises considered, the Court finds a preponderance of evidence in favor ofplaintiff Soledad Cañezo and against defendant Concepcion Rojas by declaring plaintiff the trueand lawful owner of the land more particularly described under paragraph 5 of the complaint andhereby orders defendant Concepcion Rojas:

a) To vacate and surrender possession of the land to plaintiff;

b) To pay plaintiff the sum of P34,000.00 actual damages, P10,000.00 for attor ney’s feesand litigation expenses; and

c) To pay the costs.

SO ORDERED.7

Despite the respondent’s objection that the verbal sale cannot be proven without infrin ging theStatute of Frauds, the MTC gave credence to the testimony of the petitioners’ two witnessesattesting to the fact that Crisogono Limpiado sold the property to the petitioner in 1939. TheMTC also found no evidence to show that Crispulo Rojas bought the property from CrisogonoLimpiado in 1948. It held that the 1948 tax declaration in Crispulo’s name had little significanceon respondent’s claim, considering that in 1948, the "country was then rehabilitating itself fromthe ravages of the Second World War" and "the government was more interested in the

increase in tax collection than the observance of the niceties of law. "8

The respondent appealed the case to the Regional Trial Court (RTC) of Naval, Biliran. OnOctober 12, 1998, the RTC reversed the MTC decision on the ground that the action hadalready prescribed and acquisitive prescription had set in. The dispositive portion of theDecision reads:

WHEREFORE, premises considered, the decision of the Municipal Trial Court of Naval, Biliranawarding ownership of the disputed land to the plaintiff and further allowing recovery ofdamages is hereby REVERSED in toto. There is no award of damages.

The said property remains as the legitime of the defendant Concepcion Rojas and her children.

SO ORDERED.9

However, acting on petitioner’s motion for reconsideration, the RTC a mended its originaldecision on December 14, 1998 .10 This time, it held that the action had not yet prescribedconsidering that the petitioner merely entrusted the property to her father. The ten-yearprescriptive period for the recovery of a property held in trust would commence to run only fromthe time the trustee repudiates the trust. The RTC found no evidence on record showing that























Crispulo Rojas ever ousted the petitioner from the property. The dispositive portion of theamended decision reads as follows:

WHEREFORE, in view of the foregoing considerations, the decision of this Court dated October12, 1998 is hereby set aside and another is hereby entered modifying the decision of the Courta quo and declaring Soledad Rojas Vda. De Cañezo as the true and lawful owner of a parcel ofland, more particularly described and bounded as follows:

A parcel of land situated at Higatangan, Naval, Biliran, bounded on the North by PolicarpioLimpiado; on the South by Fidel Limpiado; on the East by Seashore; and on the West byCrispolo (sic) Limpiado with an approximate area of 4,169 square meters per Tax DeclarationNo. 2258, later under Tax Declaration No. 4073 in the name of Crispolo Rojas and later in thename of the Heirs of Crispolo Rojas.

Further, ordering defendant-appellant Concepcion Rojas and all persons claiming rights orinterest under her to vacate and surrender possession of the land aforecited to the plaintiff orany of her authorized representatives, Ordering the Provincial and/or Municipal Assessor’sOffice to cancel the present existing Tax Declaration in the name of Heirs of Crispolo Rojasreferring to the above-described property in favor of the name of Soledad Rojas Vda. DeCañezo, Ordering the defendant-appellant Concepcion Rojas to pay the plaintiff-appellee thesum of P34,000.00 in actual damages, and to pay for the loss of her share in money value ofthe products of the coconuts of said land from 1979 to 1997 and to pay further until the case isterminated at the rate of P200.00 per quarter based on the regular remittances of the lateCrispolo Rojas to the plaintiff-appellee, and to pay the costs.

SO ORDERED.11

The respondent filed a motion to reconsider the Amended Decision but the RTC denied thesame in an Order dated April 25, 1999.

She then filed a petition for review with the Court of Appeals (CA), which reversed the AmendedDecision of the RTC on September 7, 2000, thus:

WHEREFORE, the amended decision dated December 14, 1998 rendered in Civil Case No. B-1041 is hereby REVERSED and SET ASIDE. The complaint filed by Soledad Cañezo before theMunicipal Trial Court of Naval, Biliran is hereby DISMISSED on grounds of laches andprescription and for lack of merit.

SO ORDERED.12

The CA held that the petitioner’s inaction for several years casts a serious doubt on her claim of

ownership over the parcel of land. It noted that 17 years lapsed since she discovered thatrespondent was in adverse possession of the property before she instituted an action to recoverthe same. And during the probate proceedings, the petitioner did not even contest the inclusionof the property in the estate of Crispulo Rojas. 13

The CA was convinced that Crispulo Rojas owned the property, having bought the same fromCrisogono Limpiado in 1948. Supporting this conclusion, the appellate court cited the followingcircumstances: (1) the property was declared for taxation purposes in Crispulo’s name and hehad been paying the taxes thereon from 1948 until his death in 1978; (2) Crispulo adversely















possessed the same property from 1948 until his death in 1978; and (3) upon his death in 1978,the property was included in his estate, the proceeds of which were distributed among hisheirs.14

The CA further held that, assuming that there was an implied trust between the petitioner andher father over the property, her right of action to recover the same would still be barred byprescription since 49 years had already lapsed since Crispulo adversely possessed thecontested property in 1948 .15

On May 9, 2001, the CA denied the petitioner’s motion for reconsideration for lack of merit.16

In this petition for review, the petitioner, substituted by her heirs, assigns the following errors:

That the Court of Appeals committed grave abuse o f discretion in setting aside petitioner’scontention that the Petition for Review filed by respondent CONCEPCION ROJAS before theCourt of Appeals was FILED OUT OF TIME;

That the Court of Appeals erred and committed grave abuse of discretion amounting to lack orexcess of jurisdiction when it decided that the filing of the case by SOLEDAD CAÑEZO forRecovery of Real Property was already barred by PRESCRIPTION AND LACHES.17

The petitioner insists that the respondent’s petition for review before the CA was filed out oftime. The petitioner posits that the CA may not grant an additional extension of time to file thepetition except for the most compelling reason. Sh e contends that the fact that respondent’scounsel needed additional time to secure the certified copy of his annexes cannot beconsidered as a compelling reason that would justify an additional period of

extension. She admits, though, that this issue was raised for the first time in their motion forreconsideration, but insists that it can be raised at any time since it concerns the jurisdiction of

the CA over the petition.The petitioner further posits that prescription and laches are unavailing because there was anexpress trust relationship between the petitioner and Crispulo Rojas and his heirs, and expresstrusts do not prescribe. Even assuming that it was not an express trust, there was a resultingtrust which generally does not prescribe unless there is repudiation by the trustee.

For her part, the respondent argues that the petitioners are now estopped from questioning theCA Resolution granting her second motion for extension to file the petition for review. She notesthat the petitioner did not raise this issue in the comment that she filed in the CA. In any case,the grant of the second extension of time was warranted considering that the certified true copyof the assailed RTC orders did not arrive at the office of respondent’s counsel in Cebu Cit y in

time for the filing of the petition.On the merits, the respondent asserts that the complaint is barred by prescription, laches andestoppel. From 1948 until his death in 1978, Crispulo cultivated the property and was inadverse, peaceful and continuous possession thereof in the concept of owner. It took thepetitioner 49 years from 1948 before she filed the complaint for recovery of the property in 1997.Granting that it was only in 1980 that she found out that the respondent adversely possessedthe property, still petitioner allowed 17 years to elapse before she asserted her alleged rightover the property.



















Finally, the respondent maintains that the other co-owners are indispensable parties to thecase; and because they were not impleaded, the case should be dismissed.

The petition has no merit.

On the procedural issue raised by the petitioner, we find no reversible error in the grant by theCA of the second motion for extension of time to file the respondent’s petition. The grant ordenial of a motion for extension of time is addressed to the sound discretion of the court .18 TheCA obviously considered the difficulty in securing a certified true copy of the assailed decisionbecause of the distance between the office of respondent’s counsel and the trial court as acompelling reason for the request. In the absence of any showing that the CA granted themotion for extension capriciously, such exercise of discretion will not be disturbed by this Court.

On the second issue, the petitioner insists that her right of action to recover the property cannotbe barred by prescription or laches even with the respondent’s uninterrupted possession of theproperty for 49 years because there existed between her and her father an express trust or aresulting trust. Indeed, if no trust relations existed, the possession of the property by therespondent, through her predecessor, which dates back to 1948, would already have given riseto acquisitive prescription in accordance with Act No. 190 (Code of Civil Procedure).19 UnderSection 40 of Act No. 190, an action for recovery of real property, or of an interest therein, canbe brought only within ten years after the cause of action accrues. This period coincides with theten-year period for acquisitive prescription provided under Section 41 20 of the same Act.

Thus, the resolution of the second issue hinges on our determination of the existence of a trustover the property --- express or implied --- between the petitioner and her father.

A trust is the legal relationship between one person having an equitable ownership of propertyand another person owning the legal title to such property, the equitable ownership of the formerentitling him to the performance of certain duties and the exercise of certain powers by thelatter .21 Trusts are either express or implied .22 Express trusts are those which are created by thedirect and positive acts of the parties, by some writing or deed, or will, or by words evincing anintention to create a trust .23 Implied trusts are those which, without being expressed, arededucible from the nature of the transaction as matters of intent or, independently, of theparticular intention of the parties, as being superinduced on the transaction by operation of lawbasically by reason of equity .24 An implied trust may either be a resulting trust or a constructivetrust.

It is true that in express trusts and resulting trusts, a trustee cannot acquire by prescription aproperty entrusted to him unless he repudiates the trust .25 The following discussion isinstructive:

There is a rule that a trustee cannot acquire by prescription the ownership of property entrustedto him, or that an action to compel a trustee to convey property registered in his name in trustfor the benefit of the cestui que trust does not prescribe, or that the defense of prescriptioncannot be set up in an action to recover property held by a person in trust for the benefit ofanother, or that property held in trust can be recovered by the beneficiary regardless of thelapse of time.

That rule applies squarely to express trusts. The basis of the rule is that the possession of atrustee is not adverse. Not being adverse, he does not acquire by prescription the property held


































in trust. Thus, Section 38 of Act 190 provides that the law of prescription does not apply "in thecase of a continuing and subsisting trust."

The rule of imprescriptibility of the action to recover property held in trust may possibly apply toresulting trusts as long as the trustee has not repudiated the trust.

x x x x

Acquisitive prescription may bar the action of the beneficiary against the trustee in an expresstrust for the recovery of the property held in trust where (a) the trustee has performedunequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such positiveacts of repudiation have been made known to the cestui que trust, and (c) the evidence thereonis clear and conclusive .26

As a rule, however, the burden of proving the existence of a trust is on the party asserting itsexistence, and such proof must be clear and satisfactorily show the existence of the trust and itselements .27 The presence of the following elements must be proved: (1) a trustor or settlor whoexecutes the instrument creating the trust; (2) a trustee, who is the person expressly designatedto carry out the trust; (3) the trust res , consisting of duly identified and definite real properties;and (4) the cestui que trust, or beneficiaries whose identity must be clear .28 Accordingly, it wasincumbent upon petitioner to prove the existence of the trust relationship. And petitioner sadlyfailed to discharge that burden.

The existence of express trusts concerning real property may not be established by parolevidence .29 It must be proven by some writing or deed. In this case, the only evidence tosupport the claim that an express trust existed between the petitioner and her father was theself-serving testimony of the petitioner. Bare allegations do not constitute evidence adequate tosupport a conclusion. They are not equivalent to proof under the Rules of Court .30

In one case, the Court allowed oral testimony to prove the existence of a trust, which had beenpartially performed. It was stressed therein that what is important is that there should be anintention to create a trust, thus:

What is crucial is the intention to create a trust. While oftentimes the intention is manifested bythe trustor in express or explicit language, such intention may be manifested by inference fromwhat the trustor has said or done, from the nature of the transaction, or from the circumstancessurrounding the creation of the purported trust.

However, an inference of the intention to create a trust, made from language, conduct orcircumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain orindefinite declarations. An inference of intention to create a trust, predicated only on

circumstances, can be made only where they admit of no other interpretation .31

Although no particular words are required for the creation of an express trust, a clear intention tocreate a trust must be shown; and the proof of fiduciary relationship must be clear andconvincing. The creation of an express trust must be manifested with reasonable certainty andcannot be inferred from loose and vague declarations or from ambiguous circumstancessusceptible of other interpretations .32































In the case at bench, an intention to create a trust cannot be inferred from the petitioner’stestimony and the attendant facts and circumstances. The petitioner testified only to the effectthat her agreement with her father was that she will be given a share in the produce of theproperty, thus:

Q: What was your agreement with your father Crispulo Rojas when you left this propertyto him?

A: Every time that they will make copra, they will give a share.

Q: In what particular part in Mindanao [did] you stay with your husband?

A: Bansalan, Davao del Sur.

Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas comply with hisobligation of giving your share the proceeds of the land?

A: When he was still alive, he gave us every three months sometimes P200.00 andsometimes P300.00 .33

This allegation, standing alone as it does, is inadequate to establish the existence of a trustbecause profit-sharing per se, does not necessarily translate to a trust relation. It could also bepresent in other relations, such as in deposit.

What distinguishes a trust from other relations is the separation of the legal title and equitableownership of the property. In a trust relation, legal title is vested in the fiduciary while equitableownership is vested in a cestui que trust. Such is not true in this case. The petitioner alleged inher complaint that the tax declaration of the land was transferred to the name of Crispulowithout her consent. Had it been her intention to create a trust and make Crispulo her trustee,

she would not have made an issue out of this because in a trust agreement, legal title is vestedin the trustee. The trustee would necessarily have the right to transfer the tax declaration in hisname and to pay the taxes on the property. These acts would be treated as beneficial to thecestui que trust and would not amount to an adverse possession .34

Neither can it be deduced from the circumstances of the case that a resulting trust wascreated. 1âwphi1 A resulting trust is a species of implied trust that is presumed always to havebeen contemplated by the parties, the intention as to which can be found in the nature of theirtransaction although not expressed in a deed or instrument of conveyance. A resulting trust isbased on the equitable doctrine that it is the more valuable consideration than the legal title thatdetermines the equitable interest in property .35

While implied trusts may be proved by oral evidence, the evidence must be trustworthy andreceived by the courts with extreme caution, and should not be made to rest on loose, equivocalor indefinite declarations. Trustworthy evidence is required because oral evidence can easily befabricated.36 In order to establish an implied trust in real property by parol evidence, the proofshould be as fully convincing as if the acts giving rise to the trust obligation are proven by anauthentic document. An implied trust, in fine, cannot be established upon vague andinconclusive proof .37 In the present case, there was no evidence of any transaction between thepetitioner and her father from which it can be inferred that a resulting trust was intended.























In light of the disquisitions, we hold that there was no express trust or resulting trust establishedbetween the petitioner and her father. Thus, in the absence of a trust relation, we can onlyconclude that Crispu lo’s uninterrupted possession of the subject property for 49 years, coupledwith the performance of acts of ownership, such as payment of real estate taxes, ripened intoownership. The statutory period of prescription commences when a person who has neither titlenor good faith, secures a tax declaration in his name and may, therefore, be said to haveadversely claimed ownership of the lot .38 While tax declarations and receipts are not conclusiveevidence of ownership and do not prove title to the land, nevertheless, when coupled with actualpossession, they constitute evidence of great weight and can be the basis of a claim ofownership through prescription.39 Moreover, Section 41 of Act No. 190 allows adversepossession in any character to ripen into ownership after the lapse of ten years. There could beprescription under the said section even in the absence of good faith and just title .40

All the foregoing notwithstanding, even if we sustain petitioner’s claim that she was the owner ofthe property and that she constituted a trust over the property with her father as the trustee,such a finding still would not advance her case.

Assuming that such a relation existed, it terminated upon Crispulo’s death in 1978. A trustterminates upon the death of the trustee where the trust is personal to the trustee in the sensethat the trustor intended no other person to administer it .41 If Crispulo was indeed appointed astrustee of the property, it cannot be said that such appointment was intended to be conveyed tothe respondent or any of Crispulo’s other heirs. Hence, after Crispulo’s death, the respondenthad no right to retain possession of the property. At such point, a constructive trust would becreated over the property by operation of law. Where one mistakenly retains property whichrightfully belongs to another, a constructive trust is the proper remedial device to correct thesituation.42

A constructive trust is one created not by any word or phrase, either expressly or impliedly,evincing a direct intention to create a trust, but one which arises in order to satisfy the demandsof justice. It does not come about by agreement or intention but in the main by operation of law,construed against one who, by fraud, duress or abuse of confidence, obtains or holds the legalright to property which he ought not, in equity and good conscience, to hold .43

As previously stated, the rule that a trustee cannot, by prescription, acquire ownership overproperty entrusted to him until and unless he repudiates the trust, applies to express trusts andresulting implied trusts. However, in constructive implied trusts, prescription may superveneeven if the trustee does not repudiate the relationship. Necessarily, repudiation of the said trustis not a condition precedent to the running of the prescriptive period .44 A constructive trust,unlike an express trust, does not emanate from, or generate a fiduciary relation. While in anexpress trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in aconstructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary .45 The relation of trustee and cestui que trust does not in fact exist, and the holding of aconstructive trust is for the trustee himself, and therefore, at all times adverse.

In addition, a number of other factors militate against the petitioner’s case. First, the petitioner isestopped from asserting ownership over the subject property by her failure to protest itsinclusion in the estate of Crispulo. The CA, thus, correctly observed that:



































Even in the probate proceedings instituted by the heirs of Crispulo Rojas, which included her asa daughter of the first marriage, Cañezo never contested the inclusion of the contested propertyin the estate of her father. She even participated in the project of partition of her father’s estatewhich was approved by the probate court in 1984. After personally receiving her share in thepr oceeds of the estate for 12 years, she suddenly claims ownership of part of her father’s estatein 1997.

The principle of estoppel in pais applies when -- by one’s acts, representations, admissions, orsilence when there is a need to speak out -- one, intentionally or through culpable negligence,induces another to believe certain facts to exist; and the latter rightfully relies and acts on suchbelief, so as to be prejudiced if the former is permitted to deny the existence of those facts .46 Such a situation obtains in the instant case.

Second, the action is barred by laches. The petitioner allegedly discovered that the propertywas being possessed by the respondent in 1980 .47 However, it was only in 1997 that she filedthe action to recover the property. Laches is negligence or omission to assert a right within areasonable time, warranting a presumption that the party entitled to it has either abandoned ordeclined to assert it .48

Finally, the respondent asserts that the court a quo ought to have dismissed the complaint forfailure to implead the other heirs who are indispensable parties. We agree. We note that thecomplaint filed by the petitioner sought to recover ownership, not just possession of theproperty; thus, the suit is in the nature of an action for reconveyance. It is axiomatic that ownersof property over which reconveyance is asserted are indispensable parties. Without them beingimpleaded, no relief is available, for the court cannot render valid judgment. Being indispensableparties, their absence in the suit renders all subsequent actions of the trial court null and void forwant of authority to act, not only as to the absent parties but even as to those present. Thus,when indispensable parties are not before the court, the action should be dismissed .49 At anyrate, a resolution of this issue is now purely academic in light of our finding that the complaint isalready barred by prescription, estoppel and laches.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals, dated September 7, 2000, and Resolution dated May 9, 2001, are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA Associate Justice




















Manila

SECOND DIVISION

G.R. No. L-26699 March 16, 1976

BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO ALCURIZA,ARTURO ALCURIZA, OSCAR ALCURIZA and ANITA ALCURIZA, the latter two beingminors are represented by guardian ad li tem , ARTURO ALCURIZA,plaintiffs-appellants,vs.JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the Intestate ofJUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO, MARIASALAO VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL SALAO DE SANTOS, andPABLO P. SALAO, as successors-in-interest of the late JUAN S. SALAO, together withPABLO P. SALAO, Administrator, defendants-appellants.

Eusebio V. Navarro for plaintiffs-appellants.

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

AQUINO,J .:

This litigation regarding a forty-seven-hectare fishpond located at Sitio Calunuran, Hermosa,Bataan involves the law of trusts and prescription. The facts are as follows:

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot fourchildren named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in 1885. Hiseldest son, Patricio, died in 1886 survived by his only child. Valentin Salao.

There is no documentary evidence as to what, properties formed part of Manuel Salao's estate,if any. His widow died on May 28, 1914. After her death, her estate was administered by herdaughter Ambrosia.

It was partitioned extrajudicially in a deed dated December 29, 1918 but notarized on May 22,1919 (Exh. 21). The deed was signed by her four legal heirs, namely, her three children,

Alejandra, Juan and Ambrosia, and her grandson, Valentin Salao, in representation of hisdeceased father, Patricio.

The lands left by Valentina Ignacio, all located at Barrio Dampalit were as follows:

Nature of Land



(1) One-half interest in a fishpond which she had inherited from her parents, Feliciano Ignacioand Damiana Mendoza, and the other half of which was owned by her co-owner, Josefa Sta.

Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700

(2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418

(3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989

(4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469

(5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased from Bernabe andHonorata Ignacio by Valentina Ignacio on November 9, 1895 with a bodega for salt . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205

(6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

(7) One-half interest in a fishpond with a total area of 10,424 square meters, the other half wasowned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217

(8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454

(9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January 27, 1890 with ahouse and two camarins thereon . . . . . . . . . . . . . . . . . . 8,065

(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square meters, of which2,173 square meters were sold to Justa Yongco . . . . . . . . . .9,505

TOTAL . . . . . . . . . . . . .. 179,022 square



To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share valued atP8,135.25. In satisfaction of his distributive share, Valentin Salao (who was then already forty-eight years old) was given the biggest fishpond with an area of 50,469 square meters, a smallerfishpond with an area of 6,989 square meters and the riceland with a net area of 9,905 squaremeters. Those parcels of land had an aggregate appraised value of P13,501 which exceededValentin's distributive share. So in the deed of partition he was directed to pay to his co-heirsthe sum of P5,365.75. That arrangement, which was obviously intended to avoid thefragmentation of the lands, was beneficial to Valentin.

In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina Ignacio yMendoza, ha venido administrando sus bienes la referida Ambrosia Salao" "cuya administracionlo ha sido a satisfaccion de todos los herederos y por designacion los mismos". It was expresslystipulated that Ambrosia Salao was not obligated to render any accounting of her administration"en consideracion al resultado satisfactorio de sus gestiones, mejoradas los bienes y pagodaspor ella las contribusiones (pages 2 and 11, Exh. 21).

By virtue of the partition the heirs became "dueños absolutos de sus respectivas propiedadas, ypodran inmediatamente tomar posesion de sus bienes, en la forma como se han distribuido yllevado a cabo las adjudicaciones" (page 20, Exh. 21).

The documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio her twochildren, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT No. 185 of theRegistry of Deeds of Pampanga, in their names for a forty-seven-hectare fishpond located atSitio Calunuran, Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosacadastre because that part of Lubao later became a part of Bataan.

The Calunuran fishpond is the bone of contention in this case.

Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in the fishpondbusiness. Where they obtained the capital is not shown in any documentary evidence. Plaintiffs'version is that Valentin Salao and Alejandra Salao were included in that joint venture, that thefunds used were the earnings of the properties supposedly inherited from Manuel Salao, andthat those earnings were used in the acquisition of the Calunuran fishpond. There is nodocumentary evidence to support that theory.

On the other hand, the defendants contend that the Calunuran fishpond consisted of landspurchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906, 1907 and 1908 as, shownin their Exhibits 8, 9, 10 and 13. But this point is disputed by the plaintiffs.

However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and AmbrosiaSalao secured a Torrens title for the Calunuran fishpond in 1911 they exercised dominical rightsover it to the exclusion of their nephew, Valentin Salao.



Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800 the Calunuranfishpond to Vicente Villongco. The period of redemption was one year. In the deed of sale(Exh19) Ambrosia confirmed that she and her brother Juan were the dueños proindivisos of thesaid pesqueria. On December 7, 1911 Villongco, the vendee a retro, conveyed the samefishpond to Ambrosia by way of lease for an anual canon of P128 (Exh. 19-a).

After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia and Juan sold itunder pacto de retro to Eligio Naval for the sum of P3,360. The period of redemption was alsoone year (Exh. 20). The fishpond was later redeemed and Naval reconveyed it to the vendors aretro in a document dated October 5, 1916 (Exh. 20-a).

The 1930 survey shown in the computation sheets of the Bureau of Lands reveals that theCalunuran fishpond has an area of 479,205 square meters and that it was claimed by JuanSalao and Ambrosia Salao, while the Pinanganacan fishpond (subsequently acquired by Juanand Ambrosia) has an area of 975,952 square meters (Exh. 22).

Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia Salao bought forfour thousand pesos from the heirs of Engracio Santiago a parcel of swampland planted tobacawan and nipa with an area of 96 hectares, 57 ares and 73 centares located at Sitio Lewa,Barrio Pinanganacan, Lubao, Pampanga (Exh. 17-d).

The record of Civil Case No. 136, General Land Registration Office Record No. 12144, Court ofFirst Instance of Pampanga shows that Ambrosia Salao and Juan Salao filed an application forthe registration of that land in their names on January 15, 1916. They alleged in their petitionthat "han adquirido dicho terreno por partes iguales y por la compra a los herederos del finado,Don Engracio Santiago" (Exh. 17-a).

At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia testified for theapplicants. On that same day Judge Moir rendered a decision, stating, inter alia, that the heirs ofEngracio Santiago had sold the land to Ambrosia Salao and Juan Salao. Judge Moir "ordena laadjudicacion y registro del terreno solicitado a nombre de Juan Salao, mayor de edad y deestado casado y de su esposa Diega Santiago y Ambrosia Salao, de estado soltera y mayor deedad, en participaciones iguales" (Exh. 17-e).

On November 28, 1916 Judge Moir ordered the issuance of a decree for the said land. Thedecree was issued on February 21, 1917. On March 12, 1917 Original Certificate of Title No.472 of the Registry of Deeds of Pampanga was issued in the names of Juan Salao and

Ambrosia Salao.

That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the Hermosacadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1).

Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His nephew,Valentin Salao, died on February 9, 1933 at the age of sixty years according to the deathcertificate (Exh. A. However, if according to Exhibit 21, he was forty-eight years old in 1918, hewould be sixty-three years old in 1933).

The intestate estate of Valentin Salao was partitioned extrajudicially on December 28, 1934between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza (Exh. 32). His



estate consisted of the two fishponds which he had inherited in 1918 from his grandmother,Valentina Ignacio.

If it were true that he had a one-third interest in the Calunuran and Lewa fishponds with a totalarea of 145 hectares registered in 1911 and 1917 in the names of his aunt and uncle, AmbrosiaSalao and Juan Y. Salao, Sr., respectively, it is strange that no mention of such interest wasmade in the extrajudicial partition of his estate in 1934.

It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her grandniece,plaintiff Benita Salao, three lots located at Barrio Dampalit with a total area of 5,832 squaremeters (Exit. L). As donee Benita Salao signed the deed of donation.

On that occasion she could have asked Ambrosia Salao to deliver to her and to the children ofher sister, Victorina, the Calunuran fishpond if it were true that it was held in trust by Ambrosiaas the share of Benita's father in the alleged joint venture.

But she did not make any such demand. It was only after Ambrosia Salao's death that shethought of filing an action for the reconveyance of the Calunuran fishpond which was allegedlyheld in trust and which had become the sole property of Juan Salao y Santiago (Juani).

On September 30, 1944 or during the Japanese occupation and about a year before AmbrosiaSalao's death on September 14, 1945 due to senility (she was allegedly eighty-five years oldwhen she died), she donated her one-half proindiviso share in the two fishponds in question toher nephew, Juan S. Salao, Jr. (Juani) At that time she was living with Juani's family. He wasalready the owner of the the other half of the said fishponds, having inherited it from his father,Juan Y. Salao, Sr. (Banli) The deed of denotion included other pieces of real property owned by

Ambrosia. She reserved for herself the usufruct over the said properties during her lifetime (Exh.2 or M).

The said deed of donation was registered only on April 5, 1950 (page 39, Defendants' Recordon Appeal).

The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January 26,1951 informed Juan S. Salao, Jr. that his clients had a one-third share in the two fishponds andthat when Juani took possession thereof in 1945, he refused to give Benita and Victorina'schildren their one-third share of the net fruits which allegedly amounted to P200,000 (Exh. K).

Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin Salaodid not have any interest in the two fishponds and that the sole owners thereof his father Banliand his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and 1917, and that heJuani was the donee of Ambrosia's one-half share (Exh. K-1).

Benita Salao and her nephews and niece filed their original complaint against Juan S. Salao, Jr.on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36). They amended theircomplaint on January 28, 1955. They asked for the annulment of the donation to Juan S. Salao,Jr. and for the reconveyance to them of the Calunuran fishpond as Valentin Salao's supposedone-third share in the 145 hectares of fishpond registered in the names of Juan Y. Salao, Sr.and Ambrosia Salao.



Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the Torrens titlesecured by his father and aunt. He also invoked the Statute of Frauds, prescription and laches.

As counter-claims, he asked for moral damages amounting to P200,000, attorney's fees andlitigation expenses of not less than P22,000 and reimbursement of the premiums which he hasbeen paying on his bond for the lifting of the receivership Juan S. Salao, Jr. died in 1958 at theage of seventy-one. He was substituted by his widow, Mercedes Pascual and his six childrenand by the administrator of his estate.

In the intestate proceedings for the settlement of his estate the two fishponds in question wereadjudicated to his seven legal heirs in equal shares with the condition that the properties wouldremain under administration during the pendency of this case (page 181, Defendants' Recordon Appeal).

After trial the trial court in its decision consisting of one hundred ten printed pages dismissed theamended complaint and the counter-claim. In sixty-seven printed pages it made a laboriousrecital of the testimonies of plaintiffs' fourteen witnesses, Gregorio Marcelo, NorbertoCrisostomo, Leonardo Mangali Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili, PolicarpioSapno, Elias Manies Basilio Atienza, Benita Salao, Emilio Cagui Damaso de la Peña, Arturo

Alcuriza and Francisco Buensuceso, and the testimonies of defendants' six witnesses, MarcosGalicia, Juan Galicia, Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and PabloP. Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a rebuttal witness).

The trial court found that there was no community of property among Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and Pinanganacan (Lewa) lands wereacquired; that a co-ownership over the real properties of Valentina Ignacio existed among herheirr after her death in 1914; that the co-ownership was administered by Ambrosia Salao andthat it subsisted up to 1918 when her estate was partitioned among her three children and hergrandson, Valentin Salao.

The trial court surmised that the co-ownership which existed from 1914 to 1918 misled theplaintiffs and their witnesses and caused them to believe erroneously that there was a co-ownership in 1905 or thereabouts. The trial court speculated that if valentin had a hand in theconversion into fishponds of the Calunuran and Lewa lands, he must have done so on a salaryor profit- sharing basis. It conjectured that Valentin's children and grandchildren were given by

Ambrosia Salao a portion of the earnings of the fishponds as a reward for his services orbecause of Ambrosia's affection for her grandnieces.

The trial court rationalized that Valentin's omission during his lifetime to assail the Torrens titlesof Juan and Ambrosia signified that "he was not a co-owner" of the fishponds. It did not givecredence to the testimonies of plaintiffs' witnesses because their memories could not be trustedand because no strong documentary evidence supported the declarations. Moreover, theparties involved in the alleged trust were already dead.

It also held that the donation was validly executed and that even if it were void Juan S. Salao,Jr., the donee, would nevertheless be the sole legal heir of the donor, Ambrosia Salao, andwould inherit the properties donated to him.

Both parties appealed. The plaintiffs appealed because their action for reconveyance wasdismissed. The defendants appealed because their counterclaim for damages was dismissed.



The appeals, which deal with factual and legal issues, were made to the Court of Appeals.However, as the amounts involved exceed two hundred thousand pesos, the Court of Appealselevated the case to this Court in its resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R).

Plaintiffs' appeal. — An appellant's brief should contain "a subject index index of the matter inthe brief with a digest of the argument and page references" to the contents of the brief (Sec. 16[a], Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of Court).

The plaintiffs in their appellants' brief consisting of 302 pages did not comply with thatrequirement. Their statements of the case and the facts do not contain "page references to therecord" as required in section 16[c] and [d] of Rule 46, formerly section 17, Rule 48 of the 1940Rules of Court.

Lawyers for appellants, when they prepare their briefs, would do well to read and re-readsection 16 of Rule 46. If they comply strictly with the formal requirements prescribed in section16, they might make a competent and luminous presentation of their clients' case and lightenthe burden of the Court.

What Justice Fisher said in 1918 is still true now: "The pressure of work upon this Court is sogreat that we cannot, in justice to other litigants, undertake to make an examination of thevoluminous transcript of the testimony (1,553 pages in this case, twenty-one witnesses havingtestified), unless the attorneys who desire us to make such examination have themselves takenthe trouble to read the record and brief it in accordance with our rules" (Palara vs. Baguisi 38Phil. 177, 181). As noted in an old case, this Court decides hundreds of cases every year and inaddition resolves in minute orders an exceptionally considerable number of petitions, motionsand interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573).

Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to 14 of their firstcause of action they made certain averments to establish their theory that Valentin Salao had aone-third interest in the two fishponds which were registrered in the names of Juan Y. Salao, Sr.(Banli) and Ambrosia Salao.

Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the allegations" inparagraphs I to 10 and 12 of the first cause of action with the qualification that Originalcertificates of Title Nos. 185 and 472 were issued "more than 37 years ago" in the names ofJuan (Banli) and Ambrosia under the circumstances set forth in Juan S. Salao, Jr.'s "positivedefenses" and "not under the circumstances stated in the in the amended complaint".

The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin admission of theallegations in their first cause of action that there was a co-ownership among Ambrosia, Juan,

AIejandra and Valentin, all surnamed Salao, regarding the Dampalit property as early as 1904or 1905; that the common funds were invested the acquisition of the two fishponds; that the 47-hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in the l919 partition andthat there was a verbal stipulation to to register "said lands in the name only of Juan Y. Salao".

That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules of Court the answershould "contain either a specific dinial a statement of matters in accordance of the cause orcauses of action asserted in the complaint". Section 7 of the same rule requires the defendantto "deal specificaly with each material allegation of fact the truth of wihich he does not admit



and, whenever practicable shall set forth the substance of the matters which he will rely upon tosupport his denial". "Material averments in the complaint, other than those as to the amountdamage, shall be deemed admitted when specifically denied" (Sec. 8). "The defendant may setforth set forth by answer as many affirmative defenses as he may have. All grounds of defensesas would raise issues of fact not arising upon the preceding pleading must be specificallypleaded" (Sec. 9).

What defendant Juan S. Salao, Jr. did in his answer was to set forth in his "positive defenses"the matters in avoidance of plaintiffs' first cause of action which which supported his denials ofparagraphs 4 to 10 and 12 of the first cause of action. Obviously, he did so because he found itimpracticable to state pierceneal his own version as to the acquisition of the two fishponds or tomake a tedious and repetitious recital of the ultimate facts contradicting allegations of the firstcause of action.

We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules of Court. Itmay be noted that under the present Rules of Court a "negative defense is the specific denial oft the material fact or facts alleged in the complaint essential to plaintiff's cause of causes ofaction". On the other hand, "an affirmative defense is an allegation of new matter which, whileadmitting the material allegations of the complaint, expressly or impliedly, would neverthelessprevent or bar recovery by the plaintiff." Affirmative defenses include all matters set up "by ofconfession and avoidance". (Sec. 5, Rule 6, Rules of Court).

The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar cases aredistinguishable from the instant case. In the El Hogar case the defendant filed a laconic answercontaining the statement that it denied "generally ans specifically each and every allegationcontained in each and every paragraph of the complaint". It did not set forth in its answer anymatters by way of confession and avoidance. It did not interpose any matters by way ofconfession and avoidance. It did not interpose any affirmative defenses.

Under those circumstances, it was held that defendant's specific denial was really a generaldenial which was tantamount to an admission of the allegations of the complaint and which

justified judgment on the pleadings. That is not the situation in this case.

The other nine assignments of error of the plaintiffs may be reduced to the decisive issue ofwhether the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and

Ambrosia Salao. That issue is tied up with the question of whether plaintiffs' action forreconveyance had already prescribed.

The plaintiffs contend that their action is "to enforce a trust which defendant" Juan S. Salao, Jr.allegedly violated. The existence of a trust was not definitely alleged in plaintiffs' complaint.They mentioned trust for the first time on page 2 of their appelants' brief.

To determine if the plaintiffs have a cause of action for the enforcement of a trust, it isnecessary to maek some exegesis on the nature of trusts (fideicomosis). Trusts in Anglo-

American jurisprudence were derived from the fideicommissa of the Roman law (Government ofthe Philippine Islands vs. Abadilla, 46 Phil. 642, 646).

"In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to thebeneficial enjoyment of property, the legal title to which is vested in another, but the word 'trust'



is frequently employed to indicate duties, relations, and responsibilities which are not strictlytechnical trusts" (89 C.J.S. 712).

A person who establishes a trust is called the trustor; one in whom confidence is reposed asregards property for the benefit of another person is known as the trustee; and the person forwhose benefit the trust has been created is referred to as the beneficiary" (Art. 1440, CivilCode). There is a fiduciary relation between the trustee and the cestui que trust as regardscertain property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505).

"Trusts are either express or implied. Express trusts are created by the intention of the trustor orof the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "Noexpress trusts concerning an immovable or any interest therein may be proven by parolevidence. An implied trust may be proven by oral evidence" ( Ibid, Arts. 1443 and 1457).

"No particular words are required for the creation of an express trust, it being sufficient that atrust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs.Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which arecreated by the direct and positive acts of the parties, by some writing or deed, or will, or bywords either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 72).

"Implied trusts are those which, without being expressed, are deducible from the nature of thetransaction as matters of intent, or which are superinduced on the transaction by operation oflaw as matter of equity, independently of the particular intention of the parties" (89 C.J.S. 724).They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).

"A resulting trust. is broadly defined as a trust which is raised or created by the act orconstruction of law, but in its more restricted sense it is a trust raised by implication of law and

presumed to have been contemplated by the parties, the intention as to which is to be found inthe nature of their transaction, but not expressed in the deed or instrument of conveyance (89C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of the Civil Code.(See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinezvs. Graño 42 Phil. 35).

On the other hand, a constructive trust is -a trust "raised by construction of law, or arising byoperation of law". In a more restricted sense and as contra-distinguished from a resulting trust, aconstructive trust is "a trust not created by any words, either expressly or impliedly evincing adirect intension to create a trust, but by the construction of equity in order to satisfy thedemands of justice." It does not arise "by agreement or intention, but by operation of law." (89C.J.S. 726-727).

Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of law,

considered a trustee of an implied trust for the benefit of the person from whom the propertycomes" (Art. 1456, Civil Code).

Or "if a person obtains legal title to property by fraud or concealment, courts of equity willimpress upon the title a so-called constructive trust in favor of the defrauded party". Such aconstructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the P. I., 49Phil. 244).



Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there wasan express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol evidencewas offered by them to prove the alleged trust. Their claim that in the oral partition in 1919 of thetwo fishponds the Calunuran fishpond was assigned to Valentin Salao is legally untenable.

It is legally indefensible because the terms of article 1443 of the Civil Code (already in forcewhen the action herein was instituted) are peremptory and unmistakable: parol evidence cannotbe used to prove an express trust concerning realty.

Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or constructive,regarding the two fishponds?

Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust. The trialcourt's firm conclusion that there was no community of property during the lifetime of Valentina;Ignacio or before 1914 is substantiated by defendants' documentary evidence. The existence ofthe alleged co-ownership over the lands supposedly inherited from Manuel Salao in 1885 is thebasis of plaintiffs' contention that the Calunuran fishpond was held in trust for Valentin Salao.

But that co-ownership was not proven by any competent evidence. It is quite improbablebecause the alleged estate of Manuel Salao was likewise not satisfactorily proven. The plaintiffsalleged in their original complaint that there was a co-ownership over two hectares of land leftby Manuel Salao. In their amended complaint, they alleged that the co-ownership was overseven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal. In their brief theyalleged that the fishponds, ricelands and saltbeds owned in common in Barrio Dampalit had anarea of twenty-eight hectares, of which sixteen hectares pertained to Valentina Ignacio andeleven hectares represented Manuel Salao's estate.

They theorized that the eleven hectares "were, and necessarily, the nucleus, nay the very root,of the property now in litigation (page 6, plaintiffs-appellants' brief). But the eleven hectareswere not proven by any trustworthy evidence. Benita Salao's testimony that in 1918 or 1919Juan, Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares of lands located inBarrio Dampalit is not credible. As noted by the defendants, Manuel Salao was not evenmentioned in plaintiffs' complaints.

The 1919 partition of Valentina Ignacio's estate covered about seventeen hectares of fishpondsand ricelands (Exh. 21). If at the time that partition was made there were eleven hectares ofland in Barrio Dampalit belonging to Manuel Salao, who died in 1885, those eleven hectareswould have been partitioned in writing as in the case of the seventeen hectares belonging toValentina Ignacio's estate.

It is incredible that the forty-seven-hectare Calunuran fishpond would be adjudicated to Valentin

Salao mere by by word of mouth. Incredible because for the partition of the seventeen hectaresof land left by Valentina Ignacio an elaborate "Escritura de Particion" consisting of twenty-twopages had to be executed by the four Salao heirs. Surely, for the partition of one hundred forty-five hectares of fishponds among three of the same Salao heirs an oral adjudication would nothave sufficed.

The improbability of the alleged oral partition becomes more evident when it is borne in mindthat the two fishponds were registered land and "the act of registration" is "the operative act"that conveys and affects the land (Sec. 50, Act No. 496). That means that any transaction



affecting the registered land should be evidenced by a registerable deed. The fact that ValentinSalao and his successors-in-interest, the plaintiffs, never bothered for a period of nearly fortyyears to procure any documentary evidence to establish his supposed interest ox participationin the two fishponds is very suggestive of the absence of such interest.

The matter may be viewed from another angle. As already stated, the deed of partition forValentina Ignacio's estate wag notarized in 1919 (Exh. 21). The plaintiffs assert that the twofishponds were verbally partitioned also in 1919 and that the Calunuran fishpond was assignedto Valentin Salao as his share.

Now in the partition of Valentina Ignacio's estate, Valentin was obligated to pay P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia administered the two fishponds andwas the custodian of its earnings, then it could have been easily stipulated in the deedpartitioning Valentina Ignacio's estate that the amount due from Valentin would just be deductedby Ambrosia from his share of the earnings of the two fishponds. There was no such stipulation.Not a shred of documentary evidence shows Valentin's participation in the two fishponds.

The plaintiffs utterly failed to measure up to the yardstick that a trust must be proven by clear,satisfactory and convincing evidence. It cannot rest on vague and uncertain evidence or onloose, equivocal or indefinite declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).

Trust and trustee; establishment of trust by parol evidence; certainty of proof. — Where a trust is to be established by oral proof, the testimony supporting it mustbe sufficiently strong to prove the right of the alleged beneficiary with as muchcertainty as if a document proving the trust were shown. A trust cannot beestablished, contrary to the recitals of a Torrens title, upon vague andinconclusive proof. (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).

Trusts; evidence needed to establish trust on parol testimony. — In order toestablish a trust in real property by parol evidence, the proof should be as fullyconvincing as if the act giving rise to the trust obligation were proven by anauthentic document. Such a trust cannot be established upon testimonyconsisting in large part of insecure surmises based on ancient hearsay.(Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).

The foregoing rulings are good under article 1457 of the Civil Code which, as already noted,allows an implied trust to be proven by oral evidence. Trustworthy oral evidence is required toprove an implied trust because, oral evidence can be easily fabricated.

On the other hand, a Torrens title is generally a conclusive of the ownership of the land referredto therein (Sec. 47, Act 496). A strong presumption exists. that Torrens titles were regularly

issued and that they are valid. In order to maintain an action for reconveyance, proof as to thefiduciary relation of the parties must be clear and convincing (Yumul vs. Rivera and Dizon, 64Phil. 13, 17-18).

The real purpose of the Torrens system is, to quiet title to land. "Once a title is registered, theowner may rest secure, without the necessity of waiting in the portals of the court, or sitting inthe mirador de su casa, to avoid the possibility of losing his land" (Legarda and Prieto vs.Saleeby, 31 Phil. 590, 593).



There was no resulting trust in this case because there never was any intention on the part ofJuan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was noconstructive trust because the registration of the two fishponds in the names of Juan and

Ambrosia was not vitiated by fraud or mistake. This is not a case where to satisfy the demandsof justice it is necessary to consider the Calunuran fishpond " being held in trust by the heirs ofJuan Y. Salao, Sr. for the heirs of Valentin Salao.

And even assuming that there was an implied trust, plaintiffs' action is clearly barred byprescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Quinianovs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9,February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan and Reyes, 114 Phil. 377).

Under Act No. 190, whose statute of limitation would apply if there were an implied trust in thiscase, the longest period of extinctive prescription was only ten year (Sec. 40; Diaz vs. Gorrichoand Aguado, 103 Phil. 261, 266).

The Calunuran fishpond was registered in 1911. The written extrajudicial demand for itsreconveyance was made by the plaintiffs in 1951. Their action was filed in 1952 or after thelapse of more than forty years from the date of registration. The plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if they had any rights at all. Vigilanti prospiciunt

jura or the law protects him who is watchful of his rights (92 C.J.S. 1011, citing Esguerra vs.Tecson, 21 Phil. 518, 521).

"Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim,since it is human nature for a person to assert his rights most strongly when they are threatenedor invaded". "Laches or unreasonable delay on the part of a plaintiff in seeking to enforce a rightis not only persuasive of a want of merit but may, according to the circumstances, be destructiveof the right itself." (Buenaventura vs. David, 37 Phil. 435, 440-441).

Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of theCalunuran fishpond, it is no longer n to Pass upon the validity of the donation made by

Ambrosia Salao to Juan S. Salao, Jr. of her one-half share in the two fishponds The plaintiffshave no right and personality to assil that donation.

Even if the donation were declared void, the plaintiffs would not have any successional rights to Ambrosia's share. The sole legal heir of Ambrosia was her nephew, Juan, Jr., her nearestrelative within the third degree. Valentin Salao, if living in 1945 when Ambrosia died, would havebeen also her legal heir, together with his first cousin, Juan, Jr. (Juani). Benita Salao, thedaughter of Valentin, could not represent him in the succession to the estate of Ambrosia sincein the collateral line, representation takes place only in favor of the children of brothers or sisterswhether they be of the full or half blood is (Art 972, Civil Code). The nephew excludes a

grandniece like Benita Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia vs.Iturralde 5 Phil. 176).

The trial court did not err in dismissing plaintiffs' complaint.

Defendants' appeal. — The defendants dispute the lower court's finding that the plaintiffs filedtheir action in good faith. The defendants contend that they are entitled to damages because theplaintiffs acted maliciously or in bad faith in suing them. They ask for P25,000 attorneys feesand litigation expenses and, in addition, moral damages.



We hold that defemdamts' appeal is not meritorious. The record shows that the plaintiffspresented fifteen witnesses during the protracted trial of this case which lasted from 1954 to1959. They fought tenaciously. They obviously incurred considerable expenses in prosecutingtheir case. Although their causes of action turned out to be unfounded, yet the pertinacity andvigor with which they pressed their claim indicate their sincerity and good faith.

There is the further consideration that the parties were descendants of common ancestors, thespouses Manuel Salao and Valentina Ignacio, and that plaintiffs' action was based on theirhonest supposition that the funds used in the acquisition of the lands in litigation were earningsof the properties allegedly inherited from Manuel Salao.

Considering those circumstances, it cannot be concluded with certitude that plaintiffs' actionwas manifestly frivolous or was primarily intended to harass the defendants. An award fordamages to the defendants does not appear to be just and proper.

The worries and anxiety of a defendant in a litigation that was not maliciously instituted are notthe moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022, August14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra ). The instant case is not among the casesmentioned in articles 2219 and 2220 of the Civil Code wherein moral damages may berecovered. Nor can it be regarded as analogous to any of the cases mentioned in those articles.

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

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

But once it is conceded that the plaintiffs acted in good faith in filing their action there would beno basis for adjudging them liable to the defendants for attorney's fees and litigation expenses(See Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA61).

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

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

Barredo (Chairman), Antonio, Concepcion, Jr. and Martin, JJ., concur.

Fernando (Chairman, Second Division), J., took no part.



Martin, J., was designated to sit in the Second Division.




Manila

SECOND DIVISION

G.R. No. 161237 January 14, 2009

PERFECTO MACABABBAD, Jr.,* deceased, substituted by his heirs Sophia Macababbad,Glenn M. Macababbad, Perfecto Vener M. Macababbad III and Mary Grace Macababbad,and SPS. CHUA SENG LIN AND SAY UN AY, petitionersvs.FERNANDO G. MASIRAG, FAUSTINA G. MASIRAG, CORAZON G. MASIRAG,LEONOR G. MASIRAG, and LEONCIO M. GOYAGOY, respondent

FRANCISCA MASIRAG BACCAY, PURA MASIRAG FERRER-MELAD, AND SANTIAGOMASIRAG, Intervenors- Respondents.

D E C I S I O N

BRION,J .:

Before us is the Petition for Review on Certiorari filed by Perfecto Macababbad, Jr .1 (Macababbad ) and the spouses Chua Seng Lin ( Chua ) and Say Un Ay ( Say ) (collectively calledthe petitioners ), praying that we nullify the Decision2 of the Court of Appeals (CA) and theResolution3 denying the motion for reconsideration that followed. The assailed decisionreversed the dismissal Orde r 4 of the Regional Trial Court (RTC ), Branch 4, Tuguegarao City,Cagayan, remanding the case for further trial.

BACKGROUND On April 28, 1999, respondents Fernando Masirag ( Fernando ), Faustina Masirag ( Faustina ),Corazon Masirag ( Corazon ), Leonor Masirag (Leonor ) and Leoncio Masirag Goyagoy ( Leoncio )(collectively called the respondents ), filed with the RTC a complaint5 against Macababbad, Chuaand Say .6 On May 10, 1999, they amended their complaint to allege new matters .7 Therespondents alleged that their complaint is an action for:

quieting of title, nullity of titles, reconveyance, damages and attorney’s fee s 8 against thedefendants [petitioners here] x x x who cabal themselves in mala fides of badges of frauddishonesty, deceit, misrepresentations, bad faith, under the guise of purported instrument,nomenclature “EXTRA -JUDICIAL SETTLEMENT WITH SIMULTANEOUS SALE OF PORTION

OF REGISTERED LAND (Lot 4144)”, dated December 3, 1967, a falsification defined and penalized under Art. 172 in relation to Art. 171, Revised Penal Code, by “causing it to a ppearthat persons (the plaintiffs herein [the respondents in this case]) have participated in any act or

proceeding when they (the plaintiffs herein [the respondents in this case]) did not in fact so participate” in the “EXTRA -JUDICIAL SETTLEMENT WITH SIMULTANEOUS SALE OFPORTION OF REGISTERED LAND (Lot 4144” – covered by Original Certificate of Title No.1946) [sic].9

The amended complaint essentially alleged the following :10

http://www.lawphil.net/judjuris/juri2009/jan2009/gr_161237_2009.html#fnt*



http://www.lawphil.net/judjuris/juri2009/jan2009/gr_161237_2009.html#fnt1










































The deceased spouses Pedro Masirag ( Pedro ) and Pantaleona Tulauan ( Pantaleona ) were theoriginal registered owners of Lot No. 4144 of the Cadastral Survey of Tuguegarao (Lot No.4144), as evidenced by Original Certificate of Title (OCT) No. 1946.11 Lot No. 4144 contained anarea of 6,423 square meters.

Pedro and Pantaleona had eight (8) children, namely, Valeriano, Domingo, Pablo, Victoria,Vicenta, Inicio, Maxima and Maria. Respondents Fernando, Faustina, Corazon and LeonorMasirag are the children of Valeriano and Alfora Goyagoy, while Leoncio is the son of Vicentaand Braulio Goyagoy. The respondents allegedly did not know of the demise of their respectiveparents; they only learned of the inheritance due from their parents in the first week of March1999 when their relative, Pilar Quinto, informed respondent Fernando and his wife BarbaraBalisi about it. They immediately hired a lawyer to investigate the matter.

The investigation disclosed that the petitioners falsified a document entitled ―Extra -judicialSettlement with Simultaneous Sale of Portion of Registered Land (Lot 4144) dated December 3,1967 ‖12 (hereinafter referred to as the extrajudicial settlement of estate and sale ) so that therespondents were deprived of their shares in Lot No. 4144. The document purportedly bore therespondents’ signatures, making them appear to have participated in the execution of thedocument when they did not; they did not even know the petitioners. The document ostensiblyconveyed the subject property to Macababbad for the sum of P1,800.00 .13 Subsequently, OCTNo. 1946 was cancelled and Lot No. 4144 was registered in the names of its new owners underTransfer Certificate of Title (TCT) No. 13408,14 presumably after the death of Pedro andPantaleona. However, despite the supposed sale to Macababbad, his name did not appear onthe face of TCT No. 13408 .15 Despite his exclusion from TCT No. 13408, his ―Petition foranother owner’s duplicate copy of TCT No. 13408,‖ filed in the Court of First Instance ofCagayan, was granted on July 27, 1982 .16

Subsequently, Macababbad registered portions of Lot No. 4144 in his name and sold otherportions to third parties.17

On May 18, 1972, Chua filed a petition for the cancellation of TCT No. T-13408 and theissuance of a title evidencing his ownership over a subdivided portion of Lot No. 4144 covering803.50 square meters. On May 23, 1972, TCT No. T-18403 was issued in his name .18

Based on these allegations, the respondents asked: (1) that the extrajudicial settlement ofestate and sale be declared null and void ab initio and without force and effect, and that Chuabe ordered and directed to execute the necessary deed of reconveyance of the land; if theyrefuse, that the Clerk of Court be required to do so; (2) the issuance of a new TCT inrespondents’ name and the cancellation of Macababbad’s and Chua’s certificates of title; and(3) that the petitioners be ordered to pay da mages and attorney’s fees.

Macababbad filed a motion to dismiss the amended complaint on July 14, 1999, while Chua andSay filed an ―Appearance with Motion to Dismiss‖ on September 28, 1999.

On December 14, 1999, the RTC granted the motion of Francisca Masirag Baccay, PuraMasirag Ferrer-Melad, and Santiago Masirag for leave to intervene and to admit their complaint-in-intervention. The motion alleged that they have common inheritance rights with therespondents over the disputed property.

THE RTC RULING



































The RTC, after initially denying the motion to dismiss, reconsidered its ruling and dismissedthe complaint in its Order 19 dated May 29, 2000 on the grounds that: 1) the action, whichwas filed 32 years after the property was partitioned and after a portion was sold toMacababbad, had already prescribed; and 2) there was failure to implead indispensableparties, namely, the other heirs of Pedro and Pantaleona and the persons who havealready acquired title to portions of the subject property in good faith .20

The respondents appealed the RTC’s order dated May 29, 2000 to the CA on the followinggrounds:

I

THE COURT A QUO ERRED IN DISMISSING THE CASE

II

THE COURT A QUO ERRED IN INTERPRETING THE NATURE OF APPELLANTS’ CAUSE

OF ACTION AS THAT DESIGNATED IN THE COMPLAINT’S TITLE AND NOT IN (SIC) THE ALLEGATIONS IN THE COMPLAINT21

The petitioners moved to dismiss the appeal primarily on the ground that the errors therespondents raised involved pure questions of law that should be brought before the SupremeCourt via a petition for review on certiorari under Rule 45 of the Rules of Court. Therespondents insisted that their appeal involved mixed questions of fact and law and thus fellwithin the purview of the CA’s appellate jurisdi ction.

THE CA DECISION22

The CA ignored23 the jurisdictional issue raised by the petitioners in their motion to dismiss, took

cognizance of the appeal, and focused on the following issues: 1) whether the complaintstated a cause of action; and 2) whether the cause of action had been waived, abandonedor extinguished.

The appellate court reversed and set aside the RTC’s dismissal of the complaint. On thefirst issue, it ruled that the complaint “carve(d) out a sufficient and adequate cause of action xxx.One can read through the verbosity of the initiatory pleading to discern that a fraud wascommitted by the defendants on certain heirs of the original owners of the property and that, asa result, the plaintiffs were deprived of interests that should have gone to them as successors-in-interest of these parties. A positive deception has been alleged to violate legal rights. This isthe ultimate essential fact that remains after all the clutter is removed from the pleading.Directed against the defendants, there is enough to support a definitive adjudication. ” 24

On the second issue, the CA applied the Civil Code provision on implied trust, i.e., that a personwho acquires a piece of property through fraud is considered a trustee of an implied trust for thebenefit of the person from whom the property came. Reconciling this legal provision with Article1409 (which defines void contracts) and Article 1410 (which provides that an action to declare acontract null and void is imprescriptible), the CA ruled that the respondents’ cause of action hadnot prescribed, because “in assailing the extrajudicial partition as void, the [respondents] havethe right to bring the action unfettered by a prescriptive period. ” 25





























THE PETITION FOR REVIEW ONCERTIORARI

The Third Division of this Court initially denied26 the petition for review on certiorari for thepetitioners’ failure to show any reversible error committed by the CA. However, it subsequentlyreinstated the petition. In their motion for reconsideration, the petitioners clarified the groundsfor their petition, as follows:

A. THE HONORABLE COURT OF APPEALS DID NOT HAVE JURISDICTION TO PASSUPON AND RULE ON THE APPEAL TAKEN BY THE RESPONDENTS IN CA-GR CV NO.68541.27

In the alternative, ex abundanti cautela, the petitioners alleged other reversible errorssummarized as follows: 28

The RTC dismissal on the ground that indispensable parties were not impleaded hasalready become final and executory because the CA did not pass upon this ground ;29

The respondents' argument that there was no failure to implead indispensable partiessince the other heirs of Pedro and Pantaleona who were not impleaded were notindispensable parties in light of the respondents' admission that the extra-judicialsettlement is valid with respect to the other heirs who sold their shares to PerfectoMacababbad is erroneous because innocent purchasers for value of portions of Lot 4144who are also indispensable parties were not impleaded; 30

The CA erred in reconciling Civil Code provisions Article 1456 and Article 1410, inrelation to Article 1409;31

The CA erred in saying that the Extra-judicial Partition was an inexistent and voidcontract because it could not be said that none of the heirs intended to be bound by thecontract .32

The respondents argued in their Comment that :33

The appeal was brought on mixed questions of fact and law involving prescription,laches and indispensable parties;

The non-inclusion of indispensable parties is not a ground to dismiss the claim The respondents’ action is not for reconveyance. Rather, it is an action to declare the

sale of their respective shares null and void; An action for the nullity of an instrument prescribes in four (4) years from discovery of

the fraud. Discovery was made in 1999, while the complaint was also lodged in 1999.Hence, the action had not yet been barred by prescription;

Laches had not set in because the action was immediately filed after discovery of thefraud.

OUR RULING We find the petition devoid of merit.

Questions of Fact v. Questions of Law

A question of law arises when there is doubt as to what the law is on a certain state of factswhile there is a question of fact when the doubt arises as to the truth or falsity of the allegedfacts.34 A question of law may be resolved by the court without reviewing or evaluating the






































evidence .35 No examination of the probative value of the evidence would be necessary toresolve a question of law .36 The opposite is true with respect to questions of fact, whichnecessitate a calibration of the evidence .37

The nature of the issues to be raised on appeal can be gleaned from the appellant’s notice ofappeal filed in the trial court and in his or her brief as appellant in the appellate court .38 In theirNotice of Appeal, the respondents manifested their intention to appeal the assailed RTC orderon legal grounds and “on the basis of the environmental facts. ” 39 Further, in their Brief, thepetitioners argued that the RTC erred in ruling that their cause of action had prescribed and thatthey had ―slept on their rights. ‖

40 All these indicate that questions of facts were involved, or wereat least raised, in the respondents’ appeal with the CA.

In Crisostomo v. Garcia ,41 this Court ruled that prescription may either be a question of law orfact; it is a question of fact when the doubt or difference arises as to the truth or falsity of anallegation of fact; it is a question of law when there is doubt or controversy as to what the law ison a given state of facts. The test of whether a question is one of law or fact is not theappellation given to the question by the party raising the issue; the test is whether the appellatecourt can determine the issue raised without reviewing or evaluating the evidence. Prescription,evidently, is a question of fact where there is a need to determine the veracity of factual matterssuch as the date when the period to bring the action commenced to run .42

Ingjug-Tiro v. Casals ,43 instructively tells us too that a summary or outright dismissal of an actionis not proper where there are factual matters in dispute which require presentation andappreciation of evidence. In this cited case whose fact situation is similar to the present case,albeit with a very slight and minor variation, we considered the improvident dismissal of acomplaint based on prescription and laches to be improper because the following must still beproven by the complaining parties:

f i rs t , that they were the co-heirs and co-owners of the inherited property; second , that their co-heirs-co-owners sold their hereditary rights thereto without their knowledge and consent; th i rd , that forgery, fraud and deceit were committed in the execution of the Deed of ExtrajudicialSettlement and Confirmation of Sale since Francisco Ingjug who allegedly executed the deed in1967 actually died in 1963, hence, the thumbprint found in the document could not be his;four th , that Eufemio Ingjug who signed the deed of sale is not the son of Mamerto Ingjug, and,therefore, not an heir entitled to participate in the disposition of the inheritance; f i f th , thatrespondents have not paid the taxes since the execution of the sale in 1965 until the presentdate and the land in question is still declared for taxation purposes in the name of MamertoIngjug, the original registered owner, as of 1998; s ix th , that respondents had not takenpossession of the land subject of the complaint nor introduced any improvement thereon; andseventh, that respondents are not innocent purchasers for value.

As in Ingjug-Tiro , the present case involves factual issues that require trial on the merits. Thissituation rules out a summary dismissal of the complaint.

Proper Mode of A ppeal

Since the appeal raised mixed questions of fact and law, no error can be imputed on therespondents for invoking the appellate jurisdiction of the CA through an ordinary appeal. Rule41, Sec. 2 of the Rules of Court provides:







































Modes of appeal.

(a) Ordinary appeal - The appeal to the Court of Appeals in cases decided by the Regional TrialCourt in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with thecourt which rendered the judgment or final order appealed from and serving a copy thereof uponthe adverse party.

In Murillo v. Consul ,44 this Court had the occasion to clarify the three (3) modes of appeal fromdecisions of the RTC, namely: (1) ordinary appeal or appeal by writ of error, where judgmentwas rendered in a civil or criminal action by the RTC in the exercise of original jurisdiction,covered by Rule 41; (2) petition for review, where judgment was rendered by the RTC in theexercise of appellate jurisdiction, covered by Rule 42; and (3) petition for review to the SupremeCourt under Rule 45 of the Rules of Court. The first mode of appeal is taken to the CA onquestions of fact or mixed questions of fact and law. The second mode of appeal is brought tothe CA on questions of fact, of law, or mixed questions of fact and law. The third mode of appealis elevated to the Supreme Court only on questions of law.

Prescr ipt ion

A ruling on prescription necessarily requires an analysis of the plaintiff’s cause of action basedon the allegations of the complaint and the documents attached as its integral parts. A motion todismiss based on prescription hypothetically admits the allegations relevant and material to theresolution of this issue, but not the other facts of the case .45

Unfortunately, both the respondents’ complaint and amended complaint are poorly worded,verbose, and prone to misunderstanding. In addition, therefore, to the complaint, we deem itappropriate to consider the clarifications made in their appeal brief by the petitioners relating tothe intent of their complaint. We deem this step appropriate since there were no matters raisedfor the first time on appeal and their restatement was aptly supported by the allegations of theRTC complaint. The respondents argue in their Appellant’s Brief that:

x x x Although reconveyance was mentioned in the title, reconveyance of which connotes thatthere was a mistake in titling the land in question in the name of the registered owner indicatedtherein, but in the allegations in the body of the allegations in the body of the instant complaint,it clearly appears that the nature of the cause of action of appellants, [ sic ] they wanted to getback their respective shares in the subject inheritance because they did not sell said shares toappellee Perfecto Macababbad as the signatures purported to be theirs which appeared in theExtrajudicial Settlement with Simultaneous Sale of Portion of Registered Land (Lot 4144) wereforged.

As appellants represented 2 of the 8 children of the deceased original owners of the land in

question who were Pedro Masirag and Pantaleona Talauan, the sale is perfectly valid withrespect to the other 6 children, and void ab initio with respect to the appellants .46

The respondents likewise argue that their action is one for the annulment of the extrajudicialsettlement of estate and sale bearing their forged signatures. They contend that their action hadnot yet prescribed because an action to declare an instrument null and void is imprescriptible. Intheir Comment to the petition for review, however, the respondents modified their position andargued that the sale to the petitioners pursuant to the extrajudicial settlement of estate and sale was void because it was carried out through fraud; thus, the appropriate prescription period is















four (4) years from the discovery of fraud. Under this argument, respondents posit that theircause of action had not yet prescribed because they only learned of the extrajudicial settlementof estate and sale in March 1999; they filed their complaint the following month.

The petitioners, on the other hand, argue that the relevant prescriptive period here is ten (10)years from the date of the registration of title, this being an action for reconveyance based on animplied or constructive trust.

We believe and so hold that the respondents’ amended complaint s ufficiently pleaded a causeto declare the nullity of the extrajudicial settlement of estate and sale, as they claimed in theiramended complaint. Without prejudging the issue of the merits of the respondents’ claim and onthe assumption that the petitioners already hypothetically admitted the allegations of thecomplaint when they filed a motion to dismiss based on prescription, the transfer may be nulland void if indeed it is established that respondents had not given their consent and that thedeed is a forgery or is absolutely fictitious. As the nullity of the extrajudicial settlement of estateand sale has been raised and is the primary issue, the action to secure this result will notprescribe pursuant to Article 1410 of the Civil Code.

Based on this conclusion, the necessary question that next arises is: What then is the effect ofthe issuance of TCTs in the name of petitioners? In other words, does the issuance of thecertificates of titles convert the action to one of reconveyance of titled land which, under settled

jurisprudence, prescribes in ten (10) years?

Precedents say it does not; the action remains imprescriptible, the issuance of the certificates oftitles notwithstanding. Ingjug-Tiro is again instructive on this point:

Article 1458 of the New Civil Code provides: "By the contract of sale one of the contractingparties obligates himself of transfer the ownership of and to deliver a determinate thing, and theother to pay therefor a price certain in money or its equivalent." It is essential that the vendorsbe the owners of the property sold otherwise they cannot dispose that which does not belong tothem. As the Romans put it: " Nemo dat quod non habet. " No one can give more than what hehas. The sale of the realty to respondents is null and void insofar as it prejudicedpetitioners' interests and participation therein. At best, only the ownership of the sharesof Luisa, Maria and Guillerma in the disputed property could have been transferred torespondents.

Consequently, respondents could not have acquired ownership over the land to the extent of theshares of petitioners. The issuance of a certificate of title in their favor could not vest uponthem ownership of the entire property; neither could it validate the purchase thereofwhich is null and void. Registration does not vest title; it is merely the evidence of suchtitle. Our land registration laws do not give the holder any better title than what heactually has. Being null and void, the sale to respondents of the petitioners' sharesproduced no legal effects whatsoever.

Similarly, the claim that Francisco Ingjug died in 1963 but appeared to be a party to theExtrajudicial Settlement and Confirmation of Sale executed in 1967 would be fatal to the validityof the contract, if proved by clear and convincing evidence. Contracting parties must be juristicentities at the time of the consummation of the contract. Stated otherwise, to form a valid andlegal agreement it is necessary that there be a party capable of contracting and party capable ofbeing contracted with. Hence, if any one party to a supposed contract was already dead at the



time of its execution, such contract is undoubtedly simulated and false and therefore null andvoid by reason of its having been made after the death of the party who appears as one of thecontracting parties therein. The death of a person terminates contractual capacity.

In actions for reconveyance of the property predicated on the fact that the conveyancecomplained of was null and void ab ini t io , a claim of prescription of action would beunavailing. "The action or defense for the declaration of the inexistence of a contractdoes not prescribe." Neither could laches be invoked in the case at bar. Laches is a doctrinein equity and our courts are basically courts of law and not courts of equity. Equity, which hasbeen aptly described as "justice outside legality," should be applied only in the absence of, andnever against, statutory law. Aequetas nunguam contravenit legis . The positive mandate of Art.1410 of the New Civil; Code conferring imprescriptibility to actions for declaration of theinexistence of a contract should preempt and prevail over all abstract arguments based only onequity. Certainly, laches cannot be set up to resist the enforcement of an imprescriptible legalright, and petitioners can validly vindicate their inheritance despite the lapse of time .47

We have a similar ruling in Heirs of Rosa Dumaliang v. Serban .48

The respondents’ action is therefore imprescriptible and the CA committed no reversible error inso ruling.

Laches

Dismissal based on laches cannot also apply in this case, as it has never reached thepresentation of evidence stage and what the RTC had for its consideration were merely theparties’ pleadings. Laches is evidentiary in nature and cannot be established by mereallegations in the pleadings .49 Without solid evidentiary basis, laches cannot be a valid groundto dismiss the respondents’ complaint.

Non-joinder of Indispensable par t ies is not aGround fo r a Mot ion to Dismiss

The RTC dismissed the respondents’ amended complaint because indispensable parties werenot impleaded. The respondents argue that since the extrajudicial settlement of estate and sale was valid with respect to the other heirs who executed it, those heirs are not indispensableparties in this case. Innocent purchasers for value to whom title has passed from Macababbadand the spouses Chua and Say are likewise not indispensable parties since the titles sought tobe recovered here are still under the name of the petitioners

We also find the RTC dismissal Order on this ground erroneous.

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder ofparties is a ground for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties isground for dismissal of an action. Parties may be dropped or added by order of the court onmotion of any party or on its own initiative at any stage of the action and on such terms as are

just. Any claim against a misjoined party may be severed and proceeded with separately.















In Domingo v. Scheer ,50 this Court held that the proper remedy when a party is left out is toimplead the indispensable party at any stage of the action. The court, either motu proprio orupon the motion of a party, may order the inclusion of the indispensable party or give theplaintiff opportunity to amend his complaint in order to include indispensable parties. If theplaintiff to whom the order to include the indispensable party is directed refuses to comply withthe order of the court, the complaint may be dismissed upon motion of the defendant or uponthe court's own motion.51 Only upon unjustified failure or refusal to obey the order to include orto amend is the action dismissed .52

Rule 3, Sec. 7 of the Rules of Court defines indispensable parties as those who are parties ininterest without whom no final determination can be had of an action .53 They are those partieswho possess such an interest in the controversy that a final decree would necessarily affecttheir rights so that the courts cannot proceed without their presence .54 A party is indispensable ifhis interest in the subject matter of the suit and in the relief sought is inextricably intertwinedwith the other parties’ inter est .55

In an action for reconveyance, all the owners of the property sought to be recovered areindispensable parties. Thus, if reconveyance were the only relief prayed for, impleadingpetitioners Macababbad and the spouses Chua and Say would suffice. On the other hand,under the claim that the action is for the declaration of the nullity of extrajudicial settlement ofestate and sale , all of the parties who executed the same should be impleaded for a completeresolution of the case. This case, however, is not without its twist on the issue of impleadingindispensable parties as the RTC never issued an order directing their inclusion. Under thislegal situation, particularly in light of Rule 3, Section 11 of the Rules of Court, there can be nobasis for the immediate dismissal of the action.

In relation with this conclusion, we see no merit too in the petitioners’ argument that the RTCruling dismissing the complaint on respondents’ failure to implead indispensable parties hadbecome final and executory for the CA’s failure to rule on the issue. This argument lacks legalbasis as nothing in the Rules of Court states that the failure of an appellate court to rule on anissue raised in an appeal renders the appealed order or judgment final and executory withrespect to the undiscussed issue. A court need not rule on each and every issue raised ,56 particularly if the issue will not vary the tenor of the Court’s ultimate ruling. In the present case,the CA ruling that overshadows all the issues raised is what is stated in the dispositive portion ofits decision, i.e., ―the orde r of the lower court dismissing the case is SET ASIDE and the case isremanded for further proceeding.‖

In sum, the CA correctly reversed the RTC dismissal of the respondents’ complaint.

WHEREFORE, premises considered, we DENY the petition for review for lack of merit.

SO ORDERED.ARTURO D. BRION

Associate Justice































II. EXPRESS TRUST

B. ESSENTIAL CHARACTERISTICS


Manila

THIRD DIVISION

G.R. No. 117228 June 19, 1997

RODOLFO MORALES, represented by his heirs, and PRISCILA MORALES, petitioners,vs.COURT OF APPEALS (Former Seventeenth Division), RANULFO ORTIZ, JR., and

ERLINDA ORTIZ,respondents.

DAVIDE, JR., J .:

In this petition for review oncertiorari under Rule 45 of the Rules of Court, petitioners urge thisCourt to reverse the 20 April 1994 decision of the Court of Appeals (Seventeenth Division) inCA-G.R. CV No. 34936, 1 which affirmed in toto the 26 August 1991 decision of the RegionalTrial Court of Calbayog City in Civil Case No. 265.

Civil Case No. 265 was an action for recovery of possession of land and damages with a prayerfor a writ of preliminary mandatory injunction filed by private respondents herein, spousesRanulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales. The complaint prayed that privaterespondents be declared the lawful owners of a parcel of land and the two-storey residentialbuilding standing thereon, and that Morales be ordered to remove whatever improvements heconstructed thereon, vacate the premises, and pay actual and moral damages, litigationexpenses, attorney's fees and costs of the suit.

On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo Avelino and JuanaRicaforte, filed a motion to intervene in Case No. 265. No opposition thereto having been filed,the motion was granted on 4 March 1988. 2

On 30 November 1988 Rodolfo Morales passed away. In its order of 9 February 1989 3 the trialcourt allowed his substitution by his heirs, Roda, Rosalia, Cesar and Priscila, all surnamedMorales . Thereafter, pre-trial and trial on the merits were had and the case was submitted fordecision on 16 November 1990.

On 26 August 1991 the Trial Court rendered its decision 4 in favor of plaintiffs, privaterespondents herein, the dispositive portion of which reads as follows:



WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs and againstDefendants-Intervenor:

1. Declaring the Plaintiffs the absolute and rightful owners of the premises inquestion;

2. Ordering the Defendants-Intervenor to:

a. vacate from the premises in question;

b. remove the beauty shop thereat;

c. jointly and severally, pay the Plaintiffs, a monthly rental ofP1,500.00 of the premises starting from March 1987, and theamounts of P75,000.00 for moral damages, P5,000.00 forlitigation expenses, and P10,000.00 for Attorney's fees; and

d. to pay the costs.The injunction issued in this case is hereby made permanent.

SO ORDERED. 5

The following is trial court's summary of the evidence for the plaintiffs:

The evidence adduced by the Plaintiffs discloses that the Plaintiffs are theabsolute and exclusive owners of the premises in question having purchased thesame from Celso Avelino, evidenced by a Deed of Absolute Sale (Exh. "C"), apublic instrument. They later caused the transfer of its tax declaration in thename of the female plaintiff (Exh. "I") and paid the realty taxes thereon (Exh. "K"& series).

Celso Avelino (Plaintiffs' predecessor in interest) purchased the land in questionconsisting of two adjoining parcels while he was still a bachelor and the CityFiscal of Calbayog City from Alejandra Mendiola and Celita Bartolome, through a"Escritura de Venta" (Exh. "B"). After the purchase, he caused the transfer of thetax declarations of the two parcels in his name (Exhs. "D" & "E to "G" & "H") aswell as consolidated into one the two tax declarations in his name (Exh. "F").With the knowledge of the Intervenor and the defendant, (Cross-examination ofMorales, t.s.n. pp. 13-14) Celso Avelino caused the survey of the premises inquestion, in his name, by the Bureau of Lands (Exh. "J"). He also built hisresidential house therein with Marcial Aragon (now dead) as his master carpenterwho was even scolded by him for constructing the ceiling too low.

When the two-storey residential house was finished, he took his parents,Rosendo Avelino and Juana Ricaforte, and his sister, Aurea, who took care ofthe couple, to live there until their deaths. He also declared this residential housein his tax declaration to the premises in question (Exh. "F") and paid the



corresponding realty taxes, keeping intact the receipts which he comes to get or Aurea would go to Cebu to give it to him (t.s.n. Morales, pp. 4-6).

After being the City Fiscal of Calbayog, Celso Avelino became an ImmigrationOfficer and later as Judge of the Court of First Instance in Cebu with his sister,

Aurea, taking care of the premises in question. While he was already in Cebu,the defendant, without the knowledge and consent of the former, constructed asmall beauty shop in the premises in question.

Inasmuch as the Plaintiffs are the purchasers of the other real properties of Celso Avelino, one of which is at Acedillo (now Sen. J.D. Avelino) street, after theywere offered by Celso Avelino to buy the premises in question, they examinedthe premises in question and talked with the defendant about that fact, the latterencouraged them to purchase the premises in question rather than the propertygoing to somebody else they do not know and that he will vacate the premises assoon as his uncle will notify him to do so. Thus, they paid the purchase price andExh. "C" was executed in their favor.

However, despite due notice from his uncle to vacate the premises in question(Exh. "N"), the defendant refused to vacate or demolish the beauty shop unlesshe is reimbursed P35,000.00 for it although it was valued at less than P5,000.00.So, the Plaintiffs demanded, orally and in writing (Exhs. "L" & "M") to vacate thepremises. The defendant refused.

As the plaintiffs were about to undertake urgent repairs on the dilapidatedresidential building, the defendant had already occupied the same, taking inpaying boarders and claiming already ownership of the premises in question,thus they filed this case.

Plaintiffs, being the neighbors of Celso Avelino, of their own knowledge arecertain that the premises in question is indeed owned by their predecessor-in-interest because the male plaintiff used to play in the premises when he was stillin his teens while the female plaintiff resided with the late Judge Avelino.Besides, their inquiries and documentary evidence shown to them by Celso

Avelino confirm this fact. Likewise, the defendant and Intervenor did not reside inthe premises in question because they reside respectively in Brgy. Tarobucanand Brgy. Trinidad (Sabang), both of Calbayog City with their own residentialhouses there.

Due to the damages they sustained as a result of the filing of this case, theplaintiffs are claiming P50,000.00 for mental anguish; monthly rental of the

premises in question of P1,500.00 starting from March 1987; litigation expensesof P5,000.00 and P10,000.00 for Attorney's fees. 6

The trial court's summary of the evidence for the defendants and intervenor is as follows:

Defendants'-Intervenor's testimonial evidence tend to show that the premises isquestion (land and two-storey building) is originally owned by the spouses,Rosendo Avelino and Juana Ricaforte, who, through their son, Celso Avelino,through an Escritura de Venta (Exh. "2") bought it from the Mendiolas on July 8,



1948. After the purchase the couple occupied it as owners until they died. Juanadied on May 31, 1965 while Rosendo died on June 4, 1980. Upon their demise,their children: Trinidad A. Cruz, Concepcion A. Peralta, Priscila A. Morales and

Aurea Avelino (who died single) succeeded as owners thereof, except Celso Avelino who did not reside in the premises because he was out of Calbayog formore than 30 years until his death in Cebu City.

The premises in question was acquired by Celso Avelino who was entrusted byRosendo with the money to buy it. Rosendo let Celso buy it being the only son.The property is in the name of Celso Avelino and Rosendo told his children aboutit (TSN, Morales, p. 21). In 1950 Rosendo secured gratuitous license (Exh. "1")and constructed the two-storey house, having retired as Operator of the Bureauof Telecommunications, buying lumber from the father of Simplicia Darotel andpaying the wages of Antonio Nartea as a laborer.

In 1979, defendant Rodolfo Morales constructed beside the two-storey houseand beauty shop for his wife with the consent of Celso and the latter's sisters.

Priscila Morales was aware that the premises in question was surveyed in thename of Celso but she did not make any attempt, not even her father, to changethe muniment of title to Rosendo Avelino. Despite the fact that Intervenor has twosons who are lawyers, no extra-judicial settlement was filed over the premises inquestion since the death of Rosendo Avelino up to the present.

Celso Avelino kept the receipts for the realty tax payments of the premises.Sometimes Aurea would go to Cebu to deliver these receipts to Celso or thelatter will come to get them. Rodolfo also gave some of the receipts to Celso.

The sale of the subject premises to the Plaintiffs is fraudulent because it includedher (Intervenor's) share and the beauty shop of her son, the defendant.

As a result of this case she is worried and suffered moral damages, lost herhealth, lacks sleep and appetite and should be compensated for P80,000.00 andthe expenses for litigation in the amount of P30,000.00 until the case is finished.

The Intervenor would not claim ownership of the premises if her son, thedefendant is not being made to vacate therefrom by the Plaintiffs. 7

The trial court reached the aforementioned disposition on the basis of its findings of facts andconclusions, which we quote:

During the ocular inspection of the premises in question on April 4, 1988,conducted by the Court upon motion of the parties, the Court found that the two-storey residential building urgently needed major general repairs and althoughthe bedrooms seemed occupied by lodgers, neither the defendant nor theIntervernor informed the Court where or in which of the rooms they occupied.

Observing the questioned premises from the outside, it is easily deducible that ithas not been inhabited by a true or genuine owner for a long time because thetwo-story building itself has been left to deteriorate or ruin steadily, the paint



peeling off, the window shutters to be replaced, the lumber of the eaves about tofall and the hollow-block fence to be straightened out, a portion along Umbriastreet (West) cut in the middle with the other half to the south is tilting while thepremises inside the fence farther from the beauty shop to be cleaned.

From the evidence adduced by the parties, the following facts are undisputed:

1. The identity of the premises in question which is a parcel of land together withthe two residential building standing thereon, located at corner Umbria St. (on theWest) and Rosales Blvd. (on the North), Brgy. Central, Calbayog City, with anarea of 318 sq. meters, presently covered by Tax Declaration No. 47606 in thename of the female Plaintiff and also bounded on the East by lot 03-002 (1946)and on the South by lot 03-006 (1950);

2. The Deeds of Conveyance of the questioned premises — the Escritura deVenta (Exh. "B") from the Mendiolas to Celso Avelino and the Deed of Sale (Exh."C") from Celso Avelino to the Plaintiffs— are both public instruments;

3. The couple, Rosendo and Juana Avelino as well as their daughter, Aurea,resided and even died in the disputed premises;

4. The defendant, Rodolfo Morales, constructed the beauty parlor in the saidpremises and later occupied the two-storey residential house;

5. Not one of the children or grandchildren of Rosendo Avelino ever contestedthe ownership of Celso Avelino of the disputed premises;

6. There has no extra-judicial-partition effected on the subject property since thedeath of Rosendo Avelino although two of the Intervenor's children are full-

pledged lawyers;7. Since the premises in question had been acquired by Celso Avelino, it hasbeen declared in his name for taxation purposes and the receipts of the realtytaxes thereon were kept by him, some were either delivered to him by Aurea orby defendant; and

8. Ever since the Plaintiffs acquired the disputed premises, its tax declaration isnow in the name of the female Plaintiff with the current realty taxes thereon paidby her.

A very careful study and meticulous appraisal of the evidence adduced by bothparties and the applicable laws and jurisprudence show a preponderance ofevidence conclusively in favor of the Plaintiffs, due to the following facts andcircumstances, all borne of the record.

One. While Plaintiffs claim of ownership over the premises in question is dulysupported by documentary evidences, such as the Deed of Conveyance (Exhs."B" and "C"), Tax declarations and payments of the realty taxes on the disputedproperty, both as to the land and the two-storey building (Exhs. "D", "E", "F", "G","H", and "I" and "K" and series) and the survey plan of the land (Exh. "J"),



Defendants-Intervenor's claim of ownership is based merely on testimonialevidence which is self-serving and cannot prevail over documentary evidencebecause it is a settled rule in this jurisdiction that testimonial evidence cannotprevail over documentary evidence.

Two. While Plaintiffs' evidence of ownership of the disputed premises is clear,positive, categorical and credible, Intervenor's testimony that the disputedpremises was acquired by his brother (p. 16); that the document of conveyanceof the land and the building (p. 14) is in the name of her brother; that it wassurveyed in her brother's name with her knowledge (pp. 13-14); that during thelifetime of her father the muniments of title of the premises was never transferredin her father's name (pp. 10-11 & 20); that not one of the heirs of Rosendo

Avelino ever contested Celso Avelino's ownership thereof, despite theirknowledge (p. 21); that no extra-judicial partition or settlement was instituted byall the female children of Rosendo Avelino, especially by the Intervenor herselfeven though two of her children are full-pledge lawyers (p. 15); and the fact thatthe Intervenor is not even interested to see the document of the disputedpremises (19), very clearly show that her claim is neither positive nor categoricalbut is rather unconvincing.

Three. The foregoing testimony of the Intervenor also show that she is already inlaches.

Four. The present condition of the premises, especially the two-storey buildingwhich has been left to deteriorate or ruin steadily clearly betrays or beliesIntervenor's pretense of ownership of the disputed premises.

Five. If the premises in question is really owned in common by the children ofRosendo and Juana Avelino, why is it that the surviving sisters of the Intervenordid not join her in this case and intervene to protect their respective interests?

Six. On the witness chair, Intervenor's demeanor and manner of testifying showthat she was evasive and shifty and not direct in her answers to simple questionsthat she was admonished by the Court not be evasive and be direct orcategorical in her answers; and which rendered her testimony unworthy of fullfaith and credit.

Seven. That Plaintiff's predecessor-in-interest is the true and absolute owner ofthe disputed premises having purchased it from the Mendiolas while he was theCity Fiscal of Calbayog and still a bachelor and later became an ImmigrationOfficer and later became a CFI (now RTC) Judge when the two-storey building

was constructed by Marcial Aragon, thus he declared both the land and theresidential building in his name, had it surveyed in his name and continuouslypaid the realty taxes thereon, is more in conformity with common knowledge,experience and belief because it would be unnatural for a man to continuouslypay realty taxes for a property that does not belong to him. Thus, our SupremeCourt, ruled: "Tax receipts are not true evidence of ownership, but no person inhis right mind would continue paying taxes for land which he thinks does notbelong to him." (Ramos vs. Court of Appeals, 112 SCRA 543).



Eight. Intervenor's claim of implied trust is untenable because even from thedifferent cases mentioned in her Memorandum, it is very apparent that in orderfor implied trust to exist there must be evidence of an equitable obligation of thetrustee to convey, which circumstance or requisite is absent in this case. What isinstead clear from the evidence is Celso Avelino's absolute ownership of thedisputed property, both as to the land and the residential house (Exh. "F") whichwas sold to the Plaintiffs (Exh. "C") while Intervenors self-serving andunconvincing testimony of co-ownership is not supported by any piece of credibledocumentary evidence.

On the contrary, the last part of Art. 1448 of Our New Civil Code bolstersPlaintiff's ownership over the disputed premises. It expressly provides: ". . .However, if the person to whom the title is conveyed is a child , legitimate orillegitimate, of the one paying the price of the sale, no trust is implied by law, itbeing disputably presumed that there is a gift in favor of the child." (emphasissupplied).

Finally, from the testimony of the Intervenor (p. 22) the truth is out in that theIntervenor is putting up her pretense of ownership over the disputed premisesonly when the defendant was being advised to vacate and only to shield him fromvacating therefrom. Thus, on question of the Court, she declared:

Q When your father died, as a co-owner were you not interestedto look at the document so that you can lawfully claim, act asowner of that land?

A We just claim only when my son, Rodolfo was driven by thePlaintiff.

Q In other words what you are saying is that if your son was notdispossessed of the property in question, you would not claimownership?

A No, sir.

In her Memorandum, Intervenor raises the issue whether or not the plaintiffs areentitled to the damages being claimed which were duly supported or proven bydirect evidence.

On this particular issue, the Plaintiffs' evidence has established that before thePlaintiffs paid the purchase price of the premises in question, they talked with the

defendant about the intended sale and the latter even encouraged them topurchase it and that he will vacate the premises as soon as the payment is madetherefore (TSN, Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchaseprice and Exh. "C" was duly executed by the owner in their favor. The defendant,however, despite his encouragement and notice from his uncle to vacate thesubject premises (Exh. "N") reneged on his words and refused to vacate ordemolish his beauty shop inside the premises in question unless he is paidP35,000.00 for it although it is valued at less than P5,000.00.



With that unreasonable demand of the defendant, the plaintiffs demanded, orallyand in writing (Exhs. "L" and "M") to vacate the premises. The defendant refused.

Later, as the plaintiffs were about to undertake urgent repairs on the dilapidatedresidential building and make it as their residence, they found out that thedefendant rather than vacate the premises, had already occupied the saidresidential building and admitted lodgers to it ( id ., p. 24) and claimed ownershipthereof, to the damage, prejudice and injury and mental anguish of the plaintiffs.So, the plaintiffs, as the true and lawful owners of the premises in question, filedthe instant case incurring expenses in the process as they hired the services of alawyer to protect their interests from the willful and wrongful acts or omissions ofthe defendant. 8

Dissatisfied with the trial court's decision, defendants heirs of Rodolfo Morales and intervenorPriscila Morales, petitioners herein, appealed to the Court of Appeals, which docketed theappeal as CA-G.R. CV No. 34936, and in their Appellant's Brief they assigned the followingerrors:

1. The RTC erred in ruling that Celso Avelino, appellee's predecessor-in-interest,was the true and lawful owner of the house and lot in question.

2. . . . in not ruling that Celso Avelino purchased the house and lot in question asa mere trustee, under an implied trust, for the benefit of the truster, his father,Rosendo Avelino, and the latter's heirs.

3. . . . in ruling that the Intervenor is barred by laches from asserting her status asa beneficiary of the aforesaid implied trust.

4. . . . in ruling that Celso Avelino validly sold the house and lot in question to

appellees without the consent of the other heirs of Rosendo Avelino and JuanaRicaforte Avelino.

5. . . in declaring appellees the absolute and rightful owners of the house and lotin question by virtue of the sale of those properties to them by Celso Avelino.

6. . . . in not ruling that appellants are rightful co-owners and possessors of thehouse and lot in question in their capacities as heirs of Rosendo Avelino andJuana Ricaforte Avelino, the true owners of those properties.

7. . . . in ordering defendants to remove the beauty shop on the disputed landinstead of declaring Rodolfo Morales a builder in good faith and providing for the

protection of his rights as such.8. . . . in ordering appellants to vacate the disputed premises and to payappellees a monthly rental, moral damages, litigation expenses, and attorney'sfees.

9. . . . in not awarding appellants the damages and costs prayed for in "answerwith counterclaim" and "answer in intervention," considering that the action to



dispossess them of the house and land in question is clearly without legalfoundation. 9

In its decision of 20 April 199410 the Court of Appeals affirmed the decision of the trial court.

Their motion to reconsider the decision having been denied in the resolution 11 of 14 September1994 for lack of merit, petitioners filed the instant petition wherein they claim that:

1. Respondent CA erred in adopting the trial court's reasoning that "it would beunnatural for a man to continuously pay realty taxes for a property that does notbelong to him" on the basis of a misreading and misapplication of Ramos v .Court of Appeals , 112 SCRA 543 (1982). Respondent CA also erred inconcluding that the payment of realty taxes is conclusive evidence of ownership,which conclusion ignores this Honorable Court's rulings in Ferrer-Lopez v . Courtof Appeals , 150 SCRA 393 (1987), De Guzman v . Court of Appeals , 148 SCRA75 (1987), and heirs of Celso Amarante v . Court of Appeals , 185 SCRA 585(1990).

2. . . . in relying on Conception Peralta's alleged "Confirmation" (Exhibit O) inruling that Celso Avelino (and later the respondents) had exclusive and absoluteownership of the disputed property. Exhibit O was not identified by the purportedaffiant at the trial, and was therefore plainly hearsay. Respondent CA erred inadmitting Exhibit O in evidence over the objection of the petitioner's counsel.

3. . . . in inferring and surmising that Celso Avelino's alleged exclusive ownershipof the disputed property was affirmed by the inaction of his four sisters.

4. . . . in ruling that the petitioners' testimonial evidence could not prevail over therespondent's evidence for the purpose of establishing the existence of an implied

trust. This ruling ignores this Honorable Court's decision in De Los Santos v .Reyes , 205 SCRA 437 (1992).

5. . . . in ignoring unrebutted evidence on record that Celso Avelino held title tothe disputed property merely as a trustee for his father, mother, and siblings. Inso doing, respondent CA: (i) ignored decided cases where this Honorable Courtfound the existence of trusts on the bases of similar evidence, including thecases of Valdez v . Olorga , 51 SCRA 71 (1973), De Buencamino, et al . v . DeMatias , 16 SCRA 849 (1966), Gayos v . Gayos , 67 SCRA 146 (1975), andCustodio v . Casiano , 9 SCRA 841 (1963); and (ii) refused to apply the clearlanguage of Article 1448 of the Civil Code.

6. . . . in not ruling that Rodolfo Morales should have at least been regarded as abuilder in good faith who could not be compelled to vacate the disputed propertyor to pay a monthly rental unless he was first indemnified for the cost of what hehad built. In so doing, respondent CA: (i) refused to apply the clear language of

Articles 448 and 453 of the Civil Code; and (ii) ignored this Honorable Court'srulings in Municipality ofOas v Roa , 7 Phil. 20 (1906) Merchant v . City of Manila ,11 Phil. 116 (1908), Martinez v . Baganus , 28 Phil. 500 (1914), Grana v . Court of

Appeals , 109 Phil. 260 (1960), and Miranda v . Fadullon , 97 Phil. 810 (1955).



7. . . . in affirming the Trial Court's award of damages in favor of the respondents.In so doing, respondent CA: (i) misapplied Articles 2199, 2208, 2219, and 2220of the Civil Code; and (ii) ignored this Honorable Court's ruling inSan MiguelBrewery, Inc . v . Magno , 21 SCRA 292 (1967).

8. . . . in refusing to rule that the respondents are liable to petitioners for moraldamages, and attorney's fees and costs of litigation. In so doing, respondent CAignored unrebutted evidence on record and Articles 2208, 2217, and 2219 of theCivil Code.

On 13 September 1995, after the filing of private respondent's comment on the petition andpetitioner's reply thereto, we resolved to deny the petition for failure of petitioners to sufficientlyshow that the respondent Court of Appeals committed reversible error.

Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration of our resolution of13 September 1995 based on the following grounds:

1. The Honorable Court erred in not ruling that at the very least, Rodolfo Moralesshould have been considered a builder in good faith who could not be compelledto vacate the disputed property or to pay monthly rental unless he was firstindemnified for the cost of what he had built.

2. . . . in not ruling that the Court of Appeals and the Trial Court gravelymisapplied the law in ruling that there was no implied trust over the premises.

3. . . . in not ruling that the Court of Appeals and the Trial Court gravelymisapplied the law in awarding damages to the respondents.

We required respondents to comment on the motion for reconsideration; however it was not

until 1 July 1996 and after we required their counsel to show cause why he should not bedisciplinarily dealt with for failure to file comment when said counsel filed the comment by mail.Upon prior leave of court, petitioners filed a reply to the comment.

On 19 August 1996 we granted petitioners' motion for reconsideration and required the partiesto submit their respective memoranda. Petitioners and private respondents submitted theirmemoranda on 4 and 28 October 1996, respectively.

The grant of the motion for reconsideration necessarily limits the issues to the three groundspostulated in the motion for reconsideration, which we restate as follows:

1. Did Celso Avelino purchase the land in question from the Mendiolas on 8 July1948 as a mere trustee for his parents and siblings or, simply put, is the propertythe former acquired a trust property?

2. Was Rodolfo Morales a builder in good faith?

3. Was there basis for the award of damages, attorney's fees and litigationexpenses to the private respondents?



We shall discuss these issues in seriatim .

I

A trust is the legal relationship between one person having an equitable ownership in propertyand another person owning the legal title to such property, the equitable ownership of the formerentitling him to the performance of certain duties and the exercise of certain powers by thelatter. 12 The characteristics of a trust are:

1. It is a relationship;

2. it is a relationship of fiduciary character;

3. it is a relationship with respect to property, not one involving merely personalduties;

4. it involves the existence of equitable duties imposed upon the holder of the title

to the property to deal with it for the benefit of another; and5. it arises as a result of a manifestation of intention to create the relationship. 13

Trusts are either express or implied. Express trusts are created by the intention of the trustor orof the parties, while implied trusts come into being by operation of law, 14 either throughimplication of an intention to create a trust as a matter of law or through the imposition of thetrust irrespective of, and even contrary to, any such intention. 15 In turn, implied trusts are eitherresulting or constructive trusts. Resulting trusts are based on the equitable doctrine thatvaluable consideration and not legal title determines the equitable title or interest and arepresumed always to have been contemplated by the parties. They arise from the nature orcircumstances of the consideration involved in a transaction whereby one person thereby

becomes invested with legal title but is obligated in equity to hold his legal title for the benefit ofanother. On the other hand, constructive trusts are created by the construction of equity in orderto satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intentionagainst one who, by fraud, duress or abuse of confidence, obtains or holds the legal right toproperty which he ought not, in equity and good conscience, to hold. 16

A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:

Art. 1448. There is an implied trust when property is sold, and the legal estate isgranted to one party but the price is paid by another for the purpose of having thebeneficial interest of the property. The former is the trustee, while the latter is thebeneficiary. 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 isimplied by law, it being disputably presumed that there is a gift in favor of thechild.

The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust . 17 The trust is created in order to effectuate what the lawpresumes to have been the intention of the parties in the circumstances that the personto whom the land was conveyed holds it as trustee for the person who supplied thepurchase money. 18



To give rise to a purchase money resulting trust, it is essential that there be:

1. an actual payment of money, property or services, or an equivalent,constituting valuable consideration;

2. and such consideration must be furnished by the alleged beneficiary of aresulting trust. 19

There are recognized exceptions to the establishment of an implied resulting trust. The first isstated in the last part of Article 1448 itself. Thus, where A pays the purchase money and title isconveyed by absolute deed to A's child or to a person to whom A stands in loco parentis andwho makes no express promise, a trust does not result, the presumption being that a gift wasintended. Another exception is, of course, that in which an actual contrary intention is proved.

Also where the purchase is made in violation of an existing statute and in evasion of its expressprovision, no trust can result in favor of the party who is guilty of the fraud. 20

As a rule, the burden of proving the existence of a trust is on the party asserting its existence,and such proof must be clear and satisfactorily show the existence of the trust and its elements.21 While implied trusts may be proved by oral evidence, 22 the evidence must be trustworthy andreceived by the courts with extreme caution, and should not be made to rest on loose, equivocalor indefinite declarations. Trustworthy evidence is required because oral evidence can easily befabricated. 23

In the instant case, petitioners' theory is that Rosendo Avelino owned the money for thepurchase of the property and he requested Celso, his son, to buy the property allegedly in trustfor the former. The fact remains, however, that title to the property was conveyed to Celso.

Accordingly, the situation is governed by or falls within the exception under the third sentence of Article 1448, which for convenience we quote:

. . . However, if the person to whom the title is conveyed is a child, legitimate orillegitimate, of the one paying the price of the sale, no trust is implied by law , itbeing disputably presumed that there is a gift in favor of the child. (Emphasissupplied).

On this basis alone, the case for petitioners must fall. The preponderance of evidence,as found by the trial court and affirmed by the Court of Appeals, established positive actsof Celso Avelino indicating, without doubt, that he considered the property he purchasedfrom the Mendiolas as his exclusive property. He had its tax declaration transferred inhis name, caused the property surveyed for him by the Bureau of Lands, and faithfullypaid the realty taxes. Finally, he sold the property to private respondents.

The theory of implied trust with Celso Avelino as the truster and his parents Rosendo Avelinoand Juan Ricaforte as trustees is not even alleged, expressly or impliedly, in the verified Answerof Rodolfo Morales 24 nor in the Answer in Intervention of Priscila A. Morales. 25 In the former,Rodolfo alleged that:

A. [T]he lot and the two-storey building in question . . . which are actuallypossessed by Rodolfo Morales, defendant herein, and by his parents — Priscila

A. Morales and Cesar Morales — and consequently, the ones now in litigation in





highest respect, because it is the trial court that has the direct opportunity to observe them onthe stand and detect if they are telling the truth or lying through their teeth. The assessment isaccepted as correct by the appellate court and binds it, absent a clear showing that it wasreached arbitrarily. 33 In this case, petitioners failed to assail, much less overcome, the followingobservation of the trial court:

Six. On the witness chair, Intervenor's demeanor and manner of testifying showthat she was evasive and shifty and not direct in her answers to simple questionsthat she was admonished by the Court not to be evasive and direct andcategorical in her answers; and which rendered her testimony unworthy of fullfaith and credit. 34

Likewise fatal to petitioners' cause is that Concepcion Peralta's sworn Confirmation dated 14May 1987 cannot be considered hearsay evidence due to Concepcion's failure to testify. On thecontrary, it is an exception to the hearsay rule under Section 38 of Rule 130 of the Rules ofCourt, it having been offered as evidence of an act or declaration against interest. As declarantConcepcion was a daughter of Rosendo Avelino and Juana Ricaforte, and a sister of Celso

Avelino and intervenor Priscila Morales, Concepcion was thus a co-heir of her siblings, andwould have had a share, equal to that of each of her co-heirs, in the estate of Rosendo andJuana. However, Concepcion explicitly declared therein thus:

That my aforenamed brother [Celso Avelino], during the time when he was CityFiscal of Calbayog City and still a bachelor, out of his own money, bought theparcels of land located at corner Umbria Street and Rosales Blvd., Brgy. Central,Calbayog City, from Culets Mendiola de Bartolome and Alejandra Fua Mendiolaby virtue of a Deed of Sale entered as Doc. No. 37; Page No. 20; Book No. XI;Series of 1948 in the Notarial Book of Atty. Celedonio Alcazar, Notary Public ofCalbayog, Samar; Likewise, out of his own money, he constructed a residentialbuilding on the lot which building is made of strong materials.

If indeed the property was merely held in trust by Celso for his parents, Concepcionwould have been entitled to a proportionate part thereof as co-heir. However, by herConfirmation, Concepcion made a solemn declaration against interest. Petitioners,realizing that the Confirmation was admissible, attempted to cushion its impact byoffering in evidence as Exhibit "4" 35 Concepcion's affidavit, dated 16 June 1987, whereinConcepcion stated:

3. The property in question (particularly the house), however forms part of thestate of our deceased parents, and, therefore, full and complete conveyance ofthe right, title and interest in and to such property can only be effected with theagreement of the other heirs, namely, my sisters Trinidad A. Cruz and Priscila A.Morales, and myself.

Note that Concepcion seemed to be certain that only the house formed part of the estateof her deceased parents. In light of the equivocal nature of Concepcion's later affidavit,the trial court and the Court of Appeals did not then err in giving more weight toConcepcion's earlier Confirmation.

At bottom, the crux of the matter is whether petitioners discharged their burden to prove theexistence of an implied trust. We rule in the negative. Priscila's justification for her and her



sisters' failure to assert co-ownership of the property based on the theory of implied trust is, tosay the least, flimsy. In light of their assertion that Celso Avelino did not have actual possessionof the property because he "was away from Calbayog continuously for more than 30 years untilhe died on October 31, 1987, 36 and the established fact that the tax declarations of the propertywere in Celso's name and the latter paid the realty taxes thereon, there existed no valid andcogent reason why Priscila and her sisters did not do anything to have their respective shares inthe property conveyed to them after the death of Rosendo Avelino in 1980. Neither is there anyevidence that during his lifetime Rosendo demanded from Celso that the latter convey the landto the former, which Rosendo could have done after Juana's death on 31 May 1965. Thisomission was mute and eloquent proof of Rosendo's recognition that Celso was the real buyerof the property in 1948 and the absolute and exclusive owner thereof.

II

Was Rodolfo Morales a builder in good faith? Petitioners urge us to so rule and apply Article448 of the Civil Code, which provides:

The owner of the land on which anything has been built, sown or planted in goodfaith, shall have the right to appropriate as his own the works, sowing or planting,after payment of the indemnity provided for in articles 546 and 548, or to obligethe one who built or planted to pay the price of the land, and the one who sowed,the proper rent. However, the builder or planter cannot be obliged to buy the landif its value is considerably more than that of the building or trees. In such case,he shall pay reasonable rent, if the owner of the land does not choose toappropriate the building or trees after proper indemnity. The parties shall agreeupon the terms of the lease and in case of disagreement, the court shall fix theterms thereof.

Clearly, Article 448 applies only when the builder, planter or sower believes he has the right toso build, plant or sow because he thinks he owns the land or believes himself to have a claim oftitle. 37 In the instant case Rodolfo Morales knew from the very beginning that he was not theowner of the land. He alleged in his answer that the land was acquired by his grandparentsRosendo Avelino and Juana Ricaforte and he constructed the shop building in 1979 "upon duepermission and financial assistance from his mother, Priscila A. Morales and from his auntsTrinidad A. Cruz and Concepcion A. Peralta . . . , with the knowledge and consent of his uncleCelso Avelino. 38

Petitioners, however, contend that:

Even assuming the argument that Rodolfo Morales was a builder in bad faith because he wasaware of Celso Avelino's supposed exclusive ownership of the land, still, however, the

unrebutted evidence shows that Celso Avelino consented to Rodolfo Morales' construction ofthe beauty shop on the land. — TSN, April 4, 1988, p. 40; TSN, April 4, 1988, p. 40; TSN,October 19, 1990, p. 21. Under Article 453 of the Civil Code, such consent is considered badfaith on the part of the landowner. In such a case, the rights of the landowner and the buildershall be considered as though both acted in good faith. 39

This so-called unrebutted testimony was rejected by the courts below, and with good reason.First, it was clearly self-serving and inconsistent with petitioners' vigorous insistence that Celso

Avelino was away from Calbayog City continuously for more than 30 years until he died on



October 31, 1987." 40 The circumstances of when and where allegedly the consent was givenare unclear. Second, only Celso Avelino could have rebutted it; but the testimony was givenafter Avelino's death, thus forever sealing his lips. Reason and fairness demand that theattribution of an act to a dead man must be viewed with utmost caution. Finally, having insistedwith all vigor that the land was acquired by Rosendo Avelino and Juanita Ricaforte, it would bemost unlikely that Rodolfo would have taken the trouble of securing Celso's consent, who hadbeen "continuously away from Calbayog City for more than 30 years," for the construction of theshop building.

III

We cannot however give our affirmance to the awards of moral damages, attorney's fees andlitigation expenses.

Pursuant to Article 2217 of the Civil Code, moral damages, which include physical suffering,mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,social humiliation, and similar injury may be recovered in the cases enumerated in Article 2219and 2220 of the same Code. 41 For moral damages to be recovered, it must be shown that theyare the proximate result of the defendant's wrongful act or omission in the cases provided for in

Articles 2219 and 2220, i .e ., it must be shown that an injury was suffered by the claimant andthat such injury sprang from any of the cases stated in Articles 2219 and 2220. 42 Moraldamages are emphatically not intended to enrich a plaintiff at the expense of the defendant.They are awarded only to enable the injured party to obtain means, diversion, or amusementsthat will serve to alleviate the moral sufferings he underwent, by reason of the defendant'sculpable action and must, perforce, be proportionate to the suffering inplicted. 43 In the samevein, moral damages must be understood to be in concept of grants, not punitive or corrective innature, calculated to compensate the claimant for the injury suffered. 44

In the instant case, the private respondents have not convincingly shown that they suffered"mental anguish" for certain acts of herein petitioner which fell under any of the casesenumerated in Articles 2219 and 2220 of the Civil Code. However, the trial court invoked

Articles 19, 20, 21, 2217, 2219, 2220 to support the award for moral damages. Article 2220 isdefinitely inapplicable since this is not a case of willful injury to property or breach of contract.

The attendant circumstances in this case also reject the application of Articles 19, 20 and 21 ofthe Chapter on Human Relations of the Civil Code.

Accordingly, for lack of factual and legal basis, the award of moral damages must be set aside.

For the same reason the award of attorney's fees and litigation expenses must suffer the samefate. The award of attorney's fees is the exception rather than the rule and counsel's fees are

not to be awarded every time a party wins a suit. The power of the court to award attorney'sfees under Article 2208 of the Civil Code demands factual, legal and equitable justification; itsbasis cannot be left to speculation and conjecture. 45 The general rule is that attorney's feescannot be recovered as part of damages because of the policy that no premium should beplaced on the right to litigate. 46

WHEREFORE, premises considered, except as to the award of moral damages, attorney's feesand litigation expenses which are hereby DELETED, the judgment of the respondent Court of

Appeals is AFFIRMED.



Cost against petitioners.

SO ORDERED.

Narvasa, C.J., Melo and Panganiban, JJ., concur.

Francisco, J., is on leave.



C. ELEMENTS


ManilaSECOND DIVISION

G.R. No. L-49087 April 5, 1982

MINDANAO DEVELOPMENT AUTHORITY, now the SOUTHERN PHILIPPINESDEVELOPMENT ADMINISTRATION,petitioner,vs.THE COURT OF APPEALS and FRANCISCO ANG BANSING,respondents.

CONCEPCION JR., J .:

Petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 48488-R,entitled: "Mindanao Development Authority, etc., plaintiff-appellee, versus Francisco AngBansing defendant-appellant", which reversed the decision of the Court of First Instance ofDavao and dismissed the complaint filed in Civil Case No. 6480 of the said court.

It is not disputed that the respondent Francisco Ang Bansing was the owner of a big tract of landwith an area of about 300,000 sq.m., situated in Barrio Panacan Davao City. On February 25,1939, Ang Bansing sold a portion thereof, with an area of about 5 hectares to Juan Cruz YapChuy The contract provided, among others, the following:

That I hereby agree to work for the titling of the entire area of my land under myown expenses and the expenses for the titling of the portion sold to me shall beunder the expenses of the said Juan Cruz Yap Chuy. 1

After the sale, the land of Ang Banging was surveyed and designated as Lot 664-B, Psd-1638.Lot 664-B was further subdivided into five (5) lots and the portion sold to Juan Cruz Yap Chuyshortened to Juan Cruz, was designated as Lot 664B-3, with an area of 61.107 square meters,more or less. 2 On June 15-17 and December 15, 1939, a cadastral survey was made and Lot664-B-3 was designated as Lot 1846-C of the Davao Cadastre. On December 23, 1939, JuanCruz sold Lot 1846-C to the Commonwealth of the Philippines for the amount of P6,347.50. 3 Onthat same day, Juan Cruz, as vendor, and C.B. Cam and Miguel N. Lansona as sureties,executed a surety bond in favor of the vendee to guarantee the vendor's absolute title over theland sold. 4

The cadastral survey plan was approved by the Director of Lands on July 10, 1940, 5 and onMarch 7, 1941, Original Certificate of Title No. 26 was issued in the means of Victoriana AngBansing, Orfelina Ang Bansing and Francisco Ang Bansing as claimants of the land, pursuant toDecree No. 745358 issued on July 29, 1940. On March 31, 1941, OCT No. 26 was cancelledpursuant to a Deed of Adjudication and Transfer Certificate of Title No. 1783 was issued in thename of Francisco Ang Bansing. 6



On that day, March 31, 1941, Ang Banging sold Lot 1846-A to Juan Cruz and TCT No. 1783was cancelled. TCT No. 1784 was issued in the name of Juan Cruz, for Lot 1846-A and TCTNo. 1785 was issued in the name of Ang Bansing for the remaining Lots 1846-B, 1846-C, 1846-D, and 1846-E. Later, Ang Bansing sold two subdivision lots of Lot 1846-B, namely: Lot 1846-B-2-C and Lot 1846-B-1 to Vedasto Corcuera for which TCT No. 2551 and TCT No. 2552,respectively, were issued in the name of the said Vedasto Corcuera on August 10, 1946.Thereafter, Lot 1848-A, with an area of 9.6508 hectares, and Lots 1846-B-A and 1848- B-2-D allsubdivided portions of Lot 1846-B, were similarly conveyed to Juan Cruz for which TCT No.2599 and TCT No. 2600, respectively, were issued in the name of Juan Cruz on September 26,1946. TCT No. 2601 was issued in the name of Ang Bansing for the remainder of the property,including the lot in question. Then, another portion of 1846-B, designated in the subdivision planas Lot 1848-B-2-B was sold to Juan Cruz for which TCT No. 184 was issued in the latter'sname. On November 28, 1946, after these conveyances, there remained in the possession of

Ang Bansing under TCT No. 2601, Lot 1846-C, the lot in question; Lot 1846-D; and Lot 1846-E.However, TCT No. 2601 was again partially cancelled when Ang Bansing sold Lot 1846-D toVedasto Corcuera. 7

On February 25, 1965, the President of the Philippines issued Proclamation No. 459,transferring ownership of certain parcels of land situated in Sasa Davao City, to the MindanaoDevelopment Authority, now the Southern Philippines Development Administration, subject toprivate rights, if any. Lot 1846-C, the disputed parcel of land, was among the parcels of landtransferred to the Mindanao Development Authority in said proclamation. 8

On March 31, 1969, Atty. Hector L. Bisnar counsel for the Mindanao Development Authority,wrote Ang Bansing requesting the latter to surrender the Owner's duplicate copy of TCT No.2601 so that Lot 1846-C could be formally transferred to his client but Ang Bansing refused. 9 Consequently, on April 11, 1969, the Mindanao Development Authority filed a complaint againstFrancisco Ang Bansing before the Court of First Instance of Davao City, docketed therein asCivil Case No. 6480, for the reconveyance of the title over Lot 1846-C, alleging, among others,the following:

xxx xxx xxx

9. That the deed of sale, marked as Annex 'A', it was stipulated by the partiesthat the defendant would work to secure title of his entire tract of land of about 30hectares defraying the expenses for the same and the expenses for the title ofthe portion sold by the defendant to Juan Cruz Yap Chuy shall be borned by thelatter;

10. That the defendant as vendor and the one who worked to secure the title ofhis entire tract of land which included the portion sold by him. to Juan Cruz YapChuy acted in the capacity of and/or served as trustee for any and all parties whobecome successor-in-interest to Juan Cruz Yap Chuy and the defendant wasbound and obligated to give, deliver and reconvey to Juan Cruz Yap Chuy and/orhis successor-in-interest the title pertaining to the portion of land sold andconveyed by him to Juan Cruz Yap Chuy by virtue of the deed of sale marked as

Annex 'A' and his affidavit marked as Annex 'C'. 10

In answer, Ang Bansing replied:



xxx xxx xxx

9. That defendant admits that in Annex'A'of the complaint, it was agreed andstipulated in paragraph 6 thereof that:

That I hereby agree to work for the titling of the entire area of myland under my own expense and the expenses for the titling of theportion sold to me shall be under the expenses of the said JuanCruz Yap Chuy.

and defendant in fact secured at his expense his OCT No. 26 for his entire land;that in the process of defendant's securing his title neither Juan Cruz Yap Chuynor the Commonwealth of the Philippines asserted any right to ownership of thesubject property and that was almost 30 years ago until plaintiff filed itscomplaint, thus plaintiff is forever barred from claiming any right over the subjectproperty. There was no real sale made but only the intention to sell a portion ofthe land as stated by defendant in Annex 'C' of the complaint.

10. That defendant denies allegations contained in paragraph 10 of the complaintthat he acted as the trustee of Juan Cruz Yap Chuy Defendant was never such;matter of fact Juan Cruz Yap Chuy for the last 26 years, that is until he. died inOctober, 1965, never made any demand to have the title of the subject propertytransferred in his name because he knew all the time that the alleged sale in hisfavor was per se null and void he also knew that no sale was ever consummated.11

After trial, the Court of First Instance of Davao City found that an express trust had beenestablished and ordered the reconveyance of the title to Lot 1846-C of the Davao Cadastre tothe plaintiff Mindanao Development Authority.12

Ang Banging appealed to the Court of Appeals and the said appellate court ruled that noexpress trust has been created and, accordingly, reversed the judgment and dismissed thecomplaint. 13

Hence, the present recourse.

The petition is without merit. As found by the respondent Court of Appeals, no express trust hadbeen created between Ang Banging and Juan Cruz over Lot 1846-C of the Davao Cadastre."Trusts are either express or implied. Express trusts are created by the intention of the trustor orof the parties. Implied trusts come into being by operation of law." 14 It is fundamental in the lawof trusts that certain requirements must exist before an express trust will be recognized.

Basically, these elements include a competent trustor and trustee, an ascertainable trust res ,and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless eachof the above elements is required to be established, and, if any one of them is missing, it is fatalto the trusts. Furthermore, there must be a present and complete disposition of the trustproperty, notwithstanding that the enjoyment in the beneficiary will take place in the future. It isessential, too, that the purpose be an active one to prevent trust from being executed into alegal estate or interest, and one that is not in contravention of some prohibition of statute or ruleof public policy. There must also be some power of administration other than a mere duty toperform a contract although the contract is for a third-party beneficiary. A declaration of terms is



essential, and these must be stated with reasonable certainty in order that the trustee mayadminister, and that the court, if called upon so to do, may enforce, the trust." 15

In this case, the herein petitioner relies mainly upon the following stipulation in the deed of saleexecuted by Ang Bansing in favor of Juan Cruz to prove that an express trust had beenestablished with Ang Bansing as the settlor and trustee and Juan Cruz as the cestui que trust orbeneficiary:

That I hereby agree to work for the titling of the entire area of my land under myown expenses and the expenses for the titling of the portion sold to me shall beunder the expenses of said Juan Cruz Yap Chuy.

The above-quoted stipulation, however, is nothing but a condition that Ang Bansing shall paythe expenses for the registration of his land and for Juan Cruz to shoulder the expenses for theregistration of the land sold to him. The stipulation does not categorically create an obligation onthe part of Ang Bansing to hold the property in trust for Juan Cruz. Hence, there is no expresstrust. It is essential to the creation of an express trust that the settlor presently andunequivocally make a disposition of property and make himself the trustee of the property forthe benefit of another. 16

In case of a declaration of trust, the declaration must be clear and unequivocalthat the owner holds property in trust for the purposes named. 17

While Ang Bansing had agreed in the deed of sale that he will work for the titling of "the entirearea of my land under my own expenses," it is not clear therefrom whether said statement refersto the 30-hectare parcel of land or to that portion left to him after the sale. A failure on the part ofthe settlor definitely to describe the subject-matter of the supposed trust or the beneficiaries orobject thereof is strong evidence that he intended no trust. 18

The intent to create a trust must be definite and particular. It must show a desire to passbenefits through the medium of a trust, and not through some related or similar device. 19

Clear and unequivocal language is necessary to create a trust and mere precatory languageand statements of ambiguous nature, are not sufficient to establish a trust. As the Court statedin the case of De Leon vs. Packson , 20 a trust must be proven by clear, satisfactory andconvincing evidence; it cannot rest on vague and uncertain evidence or on loose, equivocal orindefinite declarations. Considering that the trust intent has not been expressed with such clarityand definiteness, no express trust can be deduced from the stipulation aforequoted.

Nor will the affidavit executed by Ang Banging on April 23, 1941,21 be construed as havingestablished an express trust. As counsel for the herein petitioner has stated, "the only purpose

of the Affidavit was to clarify that the area of the land sold by Ang Bansing to Juan Cruz YapChuy is not only 5 hectares but 61,107 square meters or a little over six (6) hectares." 22

That no express trust had been agreed upon by Ang Bansing and Juan Cruz is evident from thefact that Juan Cruz, the supposed beneficiary of the trust, never made any attempt to enforcethe alleged trust and require the trustee to transfer the title over Lot 1846-C in his name. Thus,the records show that the deed of sale, covering Lot 1846-C, was executed by Ang Bansing infavor of Juan Cruz on February 25, 1939. Two years later, or on March 31, 1941, Ang Bansingsold Lot 1846-A to the said Juan Cruz for which TCT No. 1784 was issued in the name of Juan



Cruz. Subsequently thereafter, Lot 1848-A, with an area of 9.6508 hectares, and Lots 1846-Aand 1848-B-2-D, all subdivided portions of Lot 1846-B, were similarly conveyed to the said JuanCruz for which TCT No. 2599 and TCT No. 2600, respectively, were issued in the name of JuanCruz on September 26, 1946. Then, another portion of 'Lot 1¬846-B, designated in thesubdivision plan as Lot 1848-B-2-13, was sold to Juan Cruz for which TCT No. 184 was issuedin his name on November 28, 1948. Despite these numerous transfers of portions of the original30-hectare parcel of land of Ang Bansing to Juan Cruz and the issuance of certificates of title inthe name of Juan Cruz, the latter never sought the transfer of the title to Lot 1846-C in hisname. For sure, if the parties had agreed that Ang Bansing shall hold the property in trust forJuan Cruz until after the former shall have obtained a certificate of title to the land, the latterwould have asked for the reconveyance of the title to him in view of the surety bond executed byhim in favor of the Commonwealth Government wherein he warrants his title over the property.The conduct of Juan Cruz is inconsistent with a trust and may well have probative effect againsta trust.

But, even granting, arguendo , that an express trust had been established, as claimed by theherein petitioner, it would appear that the trustee had repudiated the trust and the petitionerherein, the alleged beneficiary to the trust, did not take any action therein until after the lapse of23 years. Thus, in its Reply to the Defendant's Answer, filed on June 29, 1969, the hereinpetitioner admitted that "after the last war the City Engineer's Office of Davao City maderepeated demands on the defendants for the delivery and conveyance to the CommonwealthGovernment, now the Republic of the Philippines, of the title of land in question, Lot 1846-C, butthe defendant ignored and evaded the same." 23 Considering that the demand was made inbehalf of the Commonwealth Government, it is obvious that the said demand was made beforeJuly 4, 1946, when the Commonwealth Government was dismantled and the Republic of thePhilippines came into being. From 1946 to 1969, when the action for reconveyance was filedwith the Court, 23 years had passed. For sure, the period for enforcing the rights of the allegedbeneficiary over the land in question after the repudiation of the trust by the trustee, had alreadyprescribed.

Needless to say, only an implied trust may have been impressed upon the title of Ang Bangingover Lot 1846-C of the Davao Cadastre since the land in question was registered in his namealthough the land belonged to another. In implied trusts, there is neither promise nor fiduciaryrelations, the so-called trustee does not recognize any trust and has no intent to hold theproperty for the beneficiary." 24 It does not arise by agreement or intention, but by operation oflaw. Thus, if property is acquired through mistake or fraud, the person obtaining it is, by force oflaw, considered a trustee of an implied trust for the benefit of the person from whom theproperty comes. 25

If a person obtains legal title to property by fraud or concealment, courts of equity will impressupon the title a so-called constructive trust in favor of the defrauded party. 26

There is also a constructive trust if a person sells a parcel of land and thereafter obtains title to itthrough fraudulent misrepresentation. 27

Such a constructive trust is not a trust in the technical sense and is prescriptible; it prescribes in10 years. 28

Here, the 10-year prescriptive period began on March 31, 1941, upon the issuance of OriginalCertificate of Title No. 26 in the names of Victoriana Ang Bansing Orfelina Ang Bansing and



Francisco Ang Banging. From that date up to April 11, 1969, when the complaint forreconveyance was filed, more than 28 years had passed. Clearly, the action for reconveyancehad prescribed.

Besides, the enforcement of the constructive trust that may have been impressed upon the titleof Ang Bansing over Lot 1846-C of the Davao Cadastre is barred by laches. 29 It appears thatthe deed of sale in favor of the Commonwealth Government was executed by Juan Cruz onDecember 23, 1939, during the cadastral proceedings, and even before the cadastral surveyplan was approved by the Director of Lands on July 10, 1940. But, the vendee therein did notfile an answer, much less an opposition to the answer of Ang Bansing in the said Cadastralproceedings. The judgment rendered in the said cadastral proceeding, awarding the lot inquestion to Ang Bansing is already final. After an inexcusable delay of more than 28 years andacquiescence to existing conditions, it is now too late for the petitioner to complain.

WHEREFORE, the petition should be, as it is hereby, DENIED. No costs.

SO ORDERED.

De Castro, Ericta and Escolin, JJ., concur.

Barredo, J. (Chairman), I reserve my vote.



D. ESSENTIALLY CONTRACTUAL


Manila

SECOND DIVISION

G.R. No. 162033 May 8, 2009

HEIRS OF TRANQUILINO LABISTE (also known as Tranquilino Laviste) represented by:(1) GERARDO LABISTE, representing the Heirs of Gregorio Labiste;(2) OBDULLIA LABISTE GABUAN, representing the heirs of Juan Labiste;(3) VICTORIA G. CHIONG, representing the Heirs of Eulalia Labiste;(4) APOLINARIA LABISTE YLAYA, representing the Heirs of Nicolasa Labiste;(5) DEMOSTHENES LABISTE, representing the Heirs of Gervacio Labiste;(6) ALEJANDRA LABISTE; representing the Heirs of SINFROCIO LABISTE, and

(7) CLOTILDE LABISTE CARTA, representing the Heirs of Andres Labiste, Petitioners,vs.HEIRS OF JOSE LABISTE, survived by his children,(1) ZACARIAS LABISTE, deceased and survived by his children, namely: CRESENCIALABISTE and EUFRONIO LABISTE;(2) BERNARDINO LABISTE, deceased and survived by his children, namely:POLICARPIO LABISTE, BONIFACIO LABISTE, FELIX LABISTE, GABINA LABISTE,CAYETANA LABISTE and ISABEL LABISTE;(3) LUCIA LABISTE, deceased and survived by her children, namely: ISAAC LABISTE,GENARO LABISTE, BRAULIA LABISTE, BRAULIO LABISTE, ASUNCION LABISTE,ALFONSO LABISTE and CLAUDIA LABISTE;(4) EPIFANIO LABISTE and CLAUDIA LABISTE; deceased and survived by his children,

namely SILVESTRE LABISTE, PAULA LABISTE and GERARDA LABISTE;(5) ANA LABISTE, deceased and survived by her children, namely: MAXIMO LABISTE,MOISES LABISTE, GERVACIO LABISTE, SATURNINA LABISTE and QUIRINO LABISTE;(6) SEVERO LABISTE, deceased and survived by his children, Namely: FELIX LABISTE,RUFINA LABISTE, SIMPLICIO LABISTE, VICENTE LABISTE and PATRICIO LABISTE, Respondents.

D E C I S I O N

TINGA,J .:

This is a petition for review1 under Rule 45 of the Rules of Court of the Court of Appeals’

Decision dated 30 June 20032

in CA-G.R. CV No. 65829. reversing the decision of the RegionalTrial Court (RTC) of Cebu City, Branch 9. The appellate court denied petitioners ’3 motion forreconsideration in a Resolution dated 15 January 2004.

The factual antecedents are as follows:

On 29 September 1919, the late Epifanio Labiste (Epifanio), on his own and on behalf of hisbrothers and sisters who were the heirs of Jose Labiste (Jose), purchased from the Bureau ofLands Lot No. 1054 of the Banilad Friar Lands Estate, with an area of 13,308 square meters,

http://www.lawphil.net/judjuris/juri2009/may2009/gr_162033_2009.html#fnt1












located at Guadalupe, Cebu City for P36.00 .4 Subsequently, on 9 June 1924, then Bureau ofLands Director Jorge B. Vargas executed Deed of Conveyance No. 12536 selling and cedingLot No. 1054 to Epifanio and his brothers and sisters who were the heirs of Jose .5

After full payment of the purchase price but prior to the issuance of the deed of conveyance,Epifanio executed an Affidavit6 (Affidavit of Epifanio) in Spanish on 10 July 1923 affirming thathe, as one of the heirs of Jose, and his uncle and petitioners’ predecessor -in-interest,Tranquilino Labiste (Tranquilino), then co-owned Lot No. 1054 because the money that waspaid to the government came from the two of them. Tranquilino and the heirs of Jose continuedto hold the property jointly.

Sometime in 1928, the Register of Deeds of Cebu City issued Original Certificate of Title No.3878 for Lot No. 1054. On 2 May 1928, Engineer Espiritu Bunagan (Engr. Bunagan), DeputyPublic Land Surveyor, subdivided Lot No. 1054 into two lots: Lot No. 1054-A with an area of6,664 square meters for Tranquilino and Lot No. 1054-B with an area of 6,664 square meters forEpifanio. The subdivision plan prepared by Engr. Bunagan was approved by Jose P. Dans,

Acting Director of Lands on 28 October 1928.7

Subsequently, on 18 October 1939, the heirs of Tranquilino 8 purchased the one-half (1/2)interest of the heirs of Jos e9 over Lot No. 1054 for P300.00, as evidenced by the Calig-onan saPanagpali t10 executed by the parties in the Visayan dialect. The heirs of Tranquilino immediatelytook possession of the entire lot.

When World War II broke out, the heirs of Tranquilino fled Cebu City and when they came backthey found their homes and possessions destroyed. The records in the Office of the Register ofDeeds, Office of the City Assessor and other government offices were also destroyed during thewar. Squatters have practically overrun the entire property, such that neither petitioners norrespondents possess it.

In October 1993, petitioners learned that one of the respondents ,11 Asuncion Labiste, had filedon 17 September 1993 a petition for reconstitution of title over Lot No. 1054. Petitionersopposed the petition at first but by a compromise agreement between the parties dated 25March 1994, petitioners withdrew their opposition to expedite the reconstitution process. Underthe compromise agreement, petitioners were to be given time to file a complaint so that theissues could be litigated in an ordinary action and the reconstituted title was to be depositedwith the Clerk of Court for a period of sixty (60) days to allow petitioners to file an action forreconveyance and to annotate a notice of lis pendens. The Register of Deeds of Cebu Cityissued the reconstituted title, TCT No. RT-7853 ,12 in the name of "Epifanio Labiste, married toTomasa Mabitad, his brothers and sisters, heirs of Jose Labiste" on 14 December 1994.However, respondents did not honor the compromise agreement.

Petitioners filed a complaint13

for annulment of title seeking the reconveyance of property anddamages on 13 January 1995, docketed as Civil Case No. CEB-16943, with the RTC of CebuCity. Respondents claimed that the Affidavit of Epifanio and the Calig-onan sa Panagpalit wereforgeries and that petitioners’ action had long prescribed or barred b y laches .14

The RTC in a Decision dated 23 August 1999 15 ruled in favor of petitioners. After evaluating thedocuments presented by petitioners, the RTC found that they are genuine and authentic asancient documents and that they are valid and enforceable .16 Moreover, it held that the actionhad not prescribed as the complaint was filed about a year after the reconstitution of the title by





















































respondents. The judicial reconstitution was even opposed by petitioners until a compromiseagreement was reached by the parties and approved by the RTC which ordered thereconstitution. The RTC further held that the reconstituted title did not give any more right torespondents than what their predecessors-in-interest actually had as it is limited to thereconstitution of the certificate as it stood at the time of its loss or destruction .17

On appeal, the Court of Appeals, while affirming petitioners’ right to the property, neverthelessreversed the RTC’s decision on the ground of prescription and laches. It affirmed the RTC’sfindings that the Affidavit and the Calig-onan sa Panagpalit are genuine and authentic, and thatthe same are valid and enforceable documents .18 Citing Article 1144 of the Civil Code, it heldthat petitioners’ cause of action had prescribed for the action must be brought wit hin ten (10)years from the time the right of action accrues upon the written contract which in this case waswhen petitioners’ predecessors -in-interest lost possession over the property after World War II.

Also, the lapse of time to file the action consti tutes neglect on petitioners’ part so the principle oflaches is applicable .19

Hence, the present petition.

The genuineness and authenticity of the Affidavit of Epifanio and the Calig-onan sa Panagpalitare beyond cavil. As we have ruled in a litany of cases, resort to judicial review of the decisionsof the Court of Appeals under Rule 45 is confined only to errors of law .20 The findings of fact bythe lower court are conclusive absent any palpable error or arbitrariness .21 The Court finds noreason to depart from this principle. Moreover, it is a long settled doctrine that findings of fact ofthe trial court, when affirmed by the Court of Appeals, are binding upon the Court. It is not thefunction of the Supreme Court to weigh anew the evidence already passed upon by the Court of

Appeals for these are deemed final and conclusive and may not be reviewed on appeal .22

The sole issue th at the Court has to resolve is whether or not petitioners’ cause of action hasprescribed.

The Court of Appeals erred in applying the rules on prescription and the principle of lachesbecause what is involved in the present case is an express trust.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested inanother. It is a fiduciary relationship that obliges the trustee to deal with the property for thebenefit of the beneficiary.23 Trust relations between parties may either be express or implied. Anexpress trust is created by the intention of the trustor or of the parties. An implied trust comesinto being by operation of law.24

Express trusts are created by direct and positive acts of the parties, by some writing or deed, orwill, or by words either expressly or impliedly evincing an intention to create a trust .25 Under

Article 1444 of the Civil Code, "[n]o particular words are required for the creation of an expresstrust, it being sufficient that a trust is clearly intended." The Affidavit of Epifanio is in the natureof a trust agreement. Epifanio affirmed that the lot brought in his name was co-owned by him, asone of the heirs of Jose, and his uncle Tranquilino. And by agreement, each of them has beenin possession of half of the property. Their arrangement was corroborated by the subdivisionplan prepared by Engr. Bunagan and approved by Jose P. Dans, Acting Director of Lands.

As such, prescription and laches will run only from the time the express trust is repudiated. TheCourt has held that for acquisitive prescription to bar the action of the beneficiary against the







































trustee in an express trust for the recovery of the property held in trust it must be shown that: (a)the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestuique trust ; (b) such positive acts of repudiation have been made known to the cestui que trust ,and (c) the evidence thereon is clear and conclusive .26 http://sc.judiciary.gov.ph/jurisprudence/2007/november2007/148788.htm - _ftn Respondentscannot rely on the fact that the Torrens title was issued in the name of Epifanio and the otherheirs of Jose. It has been held that a trustee who obtains a Torrens title over property held intrust by him for another cannot repudiate the trust by relying on the registration .27 The rulerequires a clear repudiation of the trust duly communicated to the beneficiary. The only act thatcan be construed as repudiation was when respondents filed the petition for reconstitution inOctober 1993. And since petitioners filed their complaint in January 1995, their cause of actionhas not yet prescribed, laches cannot be attributed to them.

It is hornbook doctrine that laches is a creation of equity and its application is controlled byequitable considerations. Laches cannot be used to defeat justice or perpetrate fraud andinjustice.28 Neither should its application be used to prevent the rightful owners of a propertyfrom

recovering what has been fraudulently registered in the name ofanother.http://sc.judiciary.gov.ph/jurisprudence/2006/mar2006/G.R. No. 157954.htm - _ftn 29 Theequitable remedy of laches is, therefore, unavailing in this case.

However, to recover the other half of the property covered by the private Calig-onan saPanagpalit and to have it registered on the title of the property, petitioners should have filed anaction to compe l30 respondents, as heirs of the sellers in the contract ,31 to execute a public deedof sale. A conveyance of land made in a private document does not affect its validity. Article1358,like its forerunner Article 1280 of the Civil Code of Spain, does not require theaccomplishment of the acts or

contracts in a public instrument in order to validate the act or contract but only to insure itsefficacy,32 so that after the existence of said contract has been admitted, the party bound maybe compelled to execute the proper document .33 But even assuming that such action was filedby petitioners, the same had already prescribed. 1avvphi1

It is settled that only laws existing at the time of the execution of a contract are applicablethereto and not later statutes, unless the latter are specifically intended to have retroactiveeffect.34 Consequently, it is the Old Code of Civil Procedure (Act No. 190) which applies in thiscase since the Calig-onan sa Panagpalit was executed on 18 October 1939 while the New CivilCode took effect only on 30 August 1950. And section 43 of Act No. 190, like its counterpart

Article 1144 of the New Civil Code, provides that action upon a written contract must be filedwithin ten years.35

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appealsdated 30 June 2003 in CA-G.R. CV No. 65829 is REVERSED and SET ASIDE and the Decisionof the Regional Trial Court of Cebu City, Branch 9 dated 23 August 1999 is

REINSTATED with MODIFICATION in petitioners are hereby DECLARED the absolute ownersof one-half of Lot No. 1054 or Lot No. 1054-A under TCT No. RT-7853. The Register of Deedsof Cebu City is hereby ORDERED to CANCEL TCT No. RT-7853 in part and issue a new










































Transfer Certificate of Title to petitioners, heirs of Tranquilino Labiste, covering Lot No. 1054-A.No costs.

SO ORDERED.

DANTE O. TINGA Associate Justice



E. RULES OF ENFORCEABILITY


Manila

THIRD DIVISION

G.R. No. 178645 January 30, 2009

LINA PEÑALBER, Petitioner,vs.QUIRINO RAMOS, LETICIA PEÑALBER, and BARTEX INC., Respondents.

D E C I S I O N

CHICO-NAZARIO,J .:

Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of Court is theDecision1 dated 15 December 2006 of the Court of Appeals in CA-G.R. CV No. 69731. SaidDecision reversed and set aside the Decisio n2 dated 19 January 2000 of the Regional TrialCourt (RTC) of Tuguegarao City, Branch 2, in Civil Case No. 3672, which declared petitionerLina Peñalber the owner of the Bonifacio property subject of this case and ordered respondentspouses Quirino Ramos and Leticia Peñalber to reconvey the same to petitioner.

The factual and procedural antecedents of the case are set forth hereunder.

Petitioner is the mother of respondent Leticia and the mother-in-law of respondent Quirino,husband of Leticia. Respondent Bartex, Inc., on the other hand, is a domestic corporation whichbought from respondent spouses Ramos one of the two properties involved in this case.

On 18 February 1987, petitioner filed before the RTC a Complaint for Declaration of Nullity ofDeeds and Titles, Reconveyance, Damages, [with] Application for a Writ of PreliminaryProhibitory Injunction against the respondents .3 It was docketed as Civil Case No. 3672.

First Cause of Action

Firstly, petitioner alleged in her Complaint that she was the owner of a parcel of land situated inUgac Norte, Tuguegarao, Cagayan, with an area of 1,457 sq.m. and covered by TransferCertificate of Title (TCT) No. T-433734 of the Register of Deeds for the Province of Cagayan,registered in petitioner’s name. A residential house and a warehouse were constructed on thesaid parcel of land which petitioner also claimed to own (the land and the improvements thereonshall be hereinafter referred to as the Ugac properties ). Petitioner averred that in the middlepart of 1986, she discovered that TCT No. T-43373 was cancelled on 13 May 1983 and TCTNo. T-580435 was issued in its stead in the name of respondent spouses Ramos. Uponverification, petitioner learned that the basis for the cancellation of her title was a Deed ofDonation of a Registered Land, Residential House and Camarin ,6 which petitioner purportedlyexecuted in favor of respondent spouses Ramos on 27 April 1983. Petitioner insisted that hersignature on the said Deed of Donation was a forgery as she did not donate any property to


























respondent spouses Ramos. When petitioner confronted the respondent spouses Ramos aboutthe false donation, the latter pleaded that they would just pay for the Ugac properties in theamount of P1 Million. Petitioner agreed to the proposition of the respondent spouses Ramos.

Subsequently, around 10 January 1987 ,7 petitioner found out that the respondent spousesRamos were selling the Ugac properties to respondent Bartex, Inc. Petitioner then sent her son,Johnson Paredes (Johnson) ,8 to caution respondent Bartex, Inc. that respondent spousesRamos were not the lawful owners of the said properties. Johnson was allegedly able to conveypetitioner’s caveat to a representative of respondent Bartex, Inc. Petitioner also warnedrespondent spouses Ramos not to sell the Ugac properties anymore, otherwise, she would filethe necessary action against them. The respondent spouses Ramos then assured her that theywould do no such thing. As a precaution, petitioner executed an Affidavit of Adverse Claim overthe Ugac Properties on 19 January 1987 and caused the same to be annotated on TCT No. T-58043 on the same day. Despite petitioner’s warnings, respondent spouses Ramos stillexecuted in favor of respondent Bartex, Inc. a Deed of Absolute Sale 9 over the Ugac propertieson 12 January 1987 for a total price of P150,000.00. As a result, TCT No. T-58043 in the nameof respondent spouses Ramos was cancelled and TCT No. T-68825 10 in the name ofrespondent Bartex, Inc. was issued on 20 January 1987.

Petitioner contended that the Deed of Absolute Sale executed by respondent spouses Ramos infavor of respondent Bartex, Inc. did not convey any valid title, not only because respondentBartex, Inc. was a buyer in bad faith, but also because respondent spouses Ramos did not ownthe Ugac properties. Thus, petitioner prayed for the declaration of nullity of (1) the Deed ofDonation of a Registered Land, Residential House and Camarin purportedly executed bypetitioner in favor respondent spouses Ramos; (2) TCT No. T-58043, issued in the name ofrespondent spouses Ramos; (3) the Deed of Absolute Sale executed by the respondentspouses Ramos in favor of respondent Bartex, Inc.; and (4) TCT No. T-68825, issued in thename of respondent Bartex, Inc. Should petitioner’s prayer not be granted, petitioner sought inthe alternative that respondent spouses Ramos be ordered to pay the assessed value of theUgac properties, which was about P1.5 Million. Petitioner further prayed that TCT No. T-43373,in her name, be declared valid and active.

Second Cause of Action

Secondly, petitioner claimed that for many years prior to 1984, she operated a hardware store ina building she owned along Bonifacio St., Tuguegarao, Cagayan. However, the commercial lot(Bonifacio property) upon which the building stood is owned by and registered in the name ofMaria Mendoza (Mendoza), from whom petitioner rented the same.

On 22 March 1982, petitioner allowed respondent spouses Ramos to manage the hardwarestore. Thereafter, in 1984, Mendoza put the Bonifacio property up for sale. As petitioner did nothave available cash to buy the property, she allegedly entered into a verbal agreement withrespondent spouses Ramos with the following terms:

[1.] The lot would be bought [by herein respondent spouses Ramos] for and in behalf of[herein petitioner];

[2.] The consideration of P80,000.00 for said lot would be paid by [respondent spousesRamos] from the accumulated earnings of the store;

















[3.] Since [respondent spouses Ramos] have the better credit standing, they would bemade to appear in the Deed of Sale as the vendees so that the title to be issued in theirnames could be used by [them] to secure a loan with which to build a bigger building andexpand the business of [petitioner].

In accordance with the above agreement, respondent spouses Ramos allegedly entered into acontract of sale 11 with Mendoza over the Bonifacio property,12 and on 24 October 1984, TCTNo. T-6276913 covering said property was issued in the names of respondent spouses Ramos.

On 20 September 1984, respondent spouses Ramos returned the management of the hardwarestore to petitioner. On the bases of receipts and disbursements, petitioner asserted that theBonifacio property was fully paid out of the funds of the store and if respondent spouses Ramoshad given any amount for the purchase price of the said property, they had already sufficientlyreimbursed themselves from the funds of the store. Consequently, petitioner demanded fromrespondent spouses Ramos the reconveyance of the title to the Bonifacio property to her but thelatter unjustifiably refused.

Petitioner insisted that respondent spouses Ramos were, in reality, mere trustees of theBonifacio property, thus, they were under a moral and legal obligation to reconvey title over thesaid property to her. Petitioner, therefore, prayed that she be declared the owner of theBonifacio property; TCT No. T-62769, in the name of respondent spouses, be declared null andvoid; and the Register of Deeds for the Province of Cagayan be directed to issue another title inher name.

On 2 March 1987, respondent spouses Ramos accordingly filed before the RTC their Answe r 14 to petitioner’s Complaint. As regards the first cause of action, respondent spouses Ramosalleged that petitioner, together with her son, Johnson, and the latter’s wife, Maria TeresaParedes, mortgaged the Ugac properties to the Development Bank of the Philippines (DBP) on19 August 1990 for the amount of P150,000.00. When the mortgage was about to be foreclosedbecause of the failure of petitioner to pay the mortgage debt, petitioner asked respondentspouses Ramos to redeem the mortgaged property or pay her mortgage debt to DBP. In return,petitioner promised to cede, convey and transfer full ownership of the Ugac properties to them.Respondent spouses Ramos paid the mortgage debt and, in compliance with her promise,petitioner voluntarily transferred the Ugac properties to the former by way of a Deed of Donationdated 27 April 1983. After accepting the donation and having the Deed of Donation registered,TCT No. T- 58043 was issued to respondent spouses Ramos and they then took actual andphysical possession of the Ugac properties. Respondent spouses Ramos asserted thatpetitioner had always been aware of their intention to sell the Ugac properties as they postedplacards thereon stating that the said properties were for sale. Respondent spouses Ramosfurther averred that petitioner also knew that they finally sold the Ugac properties to respondentBartex, Inc. for P150,000.00. Thus, respondent spouses Ramos maintained that petitioner wasnot entitled to any reimbursement for the Ugac properties.

With regard to petitioner’s second cause of action involving the Bonifacio property, respondentspouses Ramos contended that they were given not only the management, but also the fullownership of the hardware store by the petitioner, on the condition that the stocks andmerchandise of the store will be inventoried, and out of the proceeds of the sales thereof,respondent spouses Ramos shall pay petitioner’s outstanding obligations and liabilities. Aftersettling and paying the obligations and liabilities of petitioner, respondent spouses Ramosbought the Bonifacio property from Mendoza out of their own funds.


















Lastly, even if petitioner and respondent spouses Ramos belonged to the same family, thespouses Ramos faulted petitioner for failing to exert efforts to arrive at an amicable settlement oftheir dispute. Hence, respondent spouses Ramos sought, by way of a counterclaim againstpetitioner, moral and exemplary damages and attorney’s fees, for allegedly filing a false, flimsyand frivolous complaint.

On 27 April 1987, respondent Bartex, Inc. filed before the RTC its own Answer to petitioner’sComplaint, alleging, inter alia, that when a representative of the corporation inquired about theUgac properties for sale, respondent spouses Ramos presented their owner’s dupl icate copy ofTCT No. T-58043, together with the tax declarations covering the parcel of land and thebuildings thereon. Respondent Bartex, Inc. even verified the title and tax declarations coveringthe Ugac properties with the Register of Deeds and the Office of the Municipal Assessor as toany cloud, encumbrance or lien on the properties, but none were found. Respondent spousesRamos were then actually occupying the Ugac properties and they only vacated the same afterthe consummation of the sale to respondent Bartex, Inc. Respondent Bartex, Inc. claimed thatthe sale of the Ugac properties by respondent spouses Ramos to the corporation was alreadyconsummated on 12 January 1987, and the documents conveying the said properties were bythen being processed for registration, when petitioner caused the annotation of an adverseclaim at the back of TCT No. T-58043 on 19 January 1987. As respondent Bartex, Inc. wasnever aware of any imperfection in the title of respondent spouses Ramos over the Ugacproperties, it claimed that it was an innocent purchaser in good faith.

Trial of the case thereafter ensued.

On 19 January 2000, the RTC promulgated its decision, ruling on petitioner’s first cause ofaction in this wise:

On the first cause of action, the Court finds the testimony of [herein petitioner] Lina Penalber(sic) denying her execution of the deed of donation over the Ugac property in favor of [hereinrespondent spouses] Quirino Ramos and Leticia Penalber-Ramos (sic) insufficient to supportthe said cause of action. A notarial document is, by law, entitled to full faith and credit upon itsface (Arrieta v. Llosa, 282 SCRA 248) and a high degree of proof is needed to overthrow thepresumption of truth in the recitals contained in a public document executed with all legalformalities (People vs. Fabro, 277 SCRA 19). Hence, in order to contradict the facts containedin a notarial document and the presumption of regularity in its favor, these (sic) must beevidence that is clear, convincing and more than merely preponderant (Calahat vs. Intermediate

Appellate Court, 241 SCRA 356). In the case at bench, [petitioner] claims that she did notexecute the deed of donation over the Ugac property in favor of [respondent spouses Ramos].Such denial, by itself, is not sufficient to overcome the presumption of regularity of the notarialdeed of donation and its entitlement to full faith and credit. While it is true that, generally, theparty who asserts the affirmative side of a proposition has the burden of proof, which in thisinstance is (sic) the [respondent spouses Ramos] who are asserting the validity of the deed ofdonation, [respondent spouses Ramos] can merely rely on the above-stated presumption givento notarial documents and need not present any evidence to support their claim of validity anddue execution of the notarized deed of donation. On the other hand, [petitioner], in addition toher allegation that she did not execute any such deed of donation in favor of [respondentspouses Ramos] should have had her allegedly falsified signature on the deed of donationexamined by qualified handwriting experts to prove that, indeed, she did not execute the same.Her failure to do so results in the failure of her cause .15 (Emphasis ours.)







With respect to petitioner’s second cause of action, the RTC adjudged that:

On the second cause of action, the Court finds the evidence preponderantly in favor of the[herein petitioner]. The evidence on record shows that when [petitioner] allowed [hereinrespondent spouses Ramos] full management of the hardware store located on the Bonifacioproperty in March, 1982 (sic) an inventory of the stocks in trade in the said store was madeshowing stocks worth P226,951.0 5* and when she got back the store from [respondent spousesRamos] on September 1984, another inventory was made [on] the stocks in trade in the saidstore showing, stocks worth P110,005.88 * or a difference of P116,946.17. * The only reason foran inventory having been made when the hardware store was turned over to [respondentspouses Ramos] was, to the mind of the Court, for the latter to account for the sales of suchstocks. And to arrive at the net amount due to [petitioner], all that is needed to be done is todeduct the value of the stocks present at the store when management was returned to[petitioner] in September 1984 from the value of the stocks found in the hardware store whensaid management was given to [respondent spouses Ramos] in 1982. [Petitioner] claims thatthe purchase price for the Bonifacio property was to be taken from the proceeds of sales fromthe hardware store which, as the evidence on record stands[,] shows a balance in her favor ofmore than P116,000.00. [Respondent spouses Ramos] contend that said amount wasexpended to pay off [petitioner’s] obligations to her suppliers. The record, however, is totallysilent on how much and when [respondent spouses Ramos] paid said alleged obligations of[petitioner] or even who were the said suppliers thus paid. That [petitioner] and [respondentspouses Ramos] agreed that the amount due [petitioner] from the proceeds of the sales of herstocks in the hardware store would be applied to the purchase price of the Bonifacio property issupported by the fact that [petitioner] did not ever ask for an accounting of said proceeds,despite the fact that as early as September, 1984 (sic) she already knew that her stocks left byher in March, 1982 (sic) was already sold by [respondent spouses Ramos] and that there was adifference of P116,000.00 plus which was due to her .16 (Emphasis ours.)

Thus, the RTC decreed:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1. Finding the evidence on record insufficient to prove the [herein petitioner’s] first causeof action, and, hence, dismissing the same;

2. On the second cause of action, in favor of the [petitioner] and against the [hereinrespondent spouses Ramos];

2.1 Declaring the [petitioner] the owner of Lot 2-B of subdivision plan PST-2-01-019316 (sic) with an area of 195 square meters situated along Bonifacio Street,Tuguegarao, Cagayan; and

2.2 Ordering the [respondent spouses Ramos] to reconvey to the [petitioner] thesaid property (Bonifacio property).

With costs de oficio.17 (Emphasis ours.)

On 22 February 2000, respondent spouses Ramos filed with the RTC a Motion forReconsideration 18 of the afore-mentioned decision, assailing the ruling of the RTC onpetitioner’s second cause of action on the ground that the alleged express trust created


















between them and petitioner involving the Bonifacio property could not be proven by parolevidence. In an Orde r 19 dated 17 July 2000, the RTC denied respondent spouses Ramos’Motion for Reconsideration for lack of merit, ratiocinating that respondent spouses Ramos failedto interpose timely objections when petitioner testified on their alleged verbal agreementregarding the purchase of the Bonifacio property. As such, respondent spouses Ramos weredeemed to have waived such objections, which cannot be raised anymore in their Motion forReconsideration. The RTC then reiterated its finding that petitioner’s evidence clearlyestablished her second cause of action. Additionally, the RTC held that the requirement that theparties exert earnest efforts towards an amicable settlement of the dispute had likewise beenwaived by the respondents as they filed no motion regarding the same before the trial.

On 24 July 2000, respondent spouses Ramos elevated their case to the Court of Appeals,insofar as the ruling of the RTC on peti tioner’s second cause of action was concerned .20 Theappeal was docketed as CA-G.R. CV No. 69731.

On 15 December 2006, the Court of Appeals rendered the assailed Decision in favor ofrespondent spouses Ramos.

Finding merit in the appeal, the appellate court observed that the second cause of actioninvolved not only the petitioner and her daughter, but also her son-in-law, who was not coveredby the term "family relations" under Article 15021 of the Family Code. Therefore, Article 15122 ofthe Family Code, requiring the exertion of earnest efforts toward a compromise, did not apply asthe impediment arising from the said provision was limited only to suits between members of thesame family or those encompassed in the term "family relations" under Article 150.

The Court of Appeals also declared that petitioner failed to prove her claim with the requiredquantum of evidence. According to the Court of Appeals:

It appears that before management of the store was transferred to [herein respondent spousesRamos], a beginning inventory of the stocks of the hardware store was made by [hereinpetitioner’s] other children showing stocks amounting to Php226,951.05. After management ofthe hardware store was returned to [petitioner], a second inventory was made with stocksamounting to Php110,004.88 showing a difference of Php116,946.15. Contrary, however, to thefinding of the trial court, We find that said inventory showing such difference is not conclusiveproof to show that the said amount was used to pay the purchase price of the subject lot. In fact,as testified by Johnson Paredes, son of [petitioner] who made the computation on the allegedinventories, it is not known if the goods, representing the amount of Php116,946.17, wereactually sold or not. It may have been taken without actually being sold.

It is a basic rule of evidence that bare allegations, unsubstantiated by evidence, are notequivalent to proof. As between [petitioner’s] bare allegation of a verbal trust agreement, and

the deed of absolute sale between Maria Mendoza and [respondent spouses Ramos], the lattershould prevail.

Although oral testimony is allowed to prove that a trust exists, contrary to the contention of[respondent spouses Ramos], and the court may rely on parol evidence to arrive at a conclusionthat an express trust exists, what is crucial is the intention to create a trust. While oftentimes theintention is manifested by the trustor in express or explicit language, such intention may bemanifested by inference from what the trustor has said or done, from the nature of thetransaction, or from the circumstances surrounding the creation of the purported trust.

















However, an inference of the intention to create a trust, made from language, conduct orcircumstances, must be made with reasonable certainty. It cannot rest on vague, uncertain orindefinite declarations. An inference of intention to create a trust, predicated only oncircumstances, can be made only where they admit of no other interpretation. Here, [petitioner]failed to establish with reasonable certainty her claim that the purchase of the subject lot waspursuant to a verbal trust agreement with [respondent spouses Ramos] .23 (Emphasis ours.)

Thus, the Court of Appeals disposed of the case as follows:

WHEREFORE, in view of the foregoing, the instant appeal is hereby GRANTED and theDecision dated 19 January 2000 of the Regional Trial Court (RTC) of Tuguegarao City, Branch2, with respect to the second cause of action or the Bonifacio Property in Civil Case No. 3672 ishereby REVERSED and SET ASIDE and a new one entered DISMISSING the second cause ofaction of [herein petitioner’s] complaint .24

On 12 January 2007, petitioner sought reconsideration 25 of the foregoing Decision, but it wasdenied by the appellate court in a Resolutio n26 dated 31 May 2007.

To have the ruling of the Court of Appeals overturned, petitioner brought her case before usthrough the instant Petition, raising the following issues: (1) whether the existence of a trustagreement between her and respondent spouses Ramos was clearly established, and (2)whether such trust agreement was valid and enforceable.

At the outset, it is apparent that petitioner is raising questions of fact in the instant Petition. Be itnoted that in a petition for review under Rule 45 of the Rules of Court, only questions of lawmust be entertained. A question of law arises when there is doubt as to what the law is on acertain state of facts, while there is a question of fact when the doubt arises as to the truth orfalsity of the alleged facts.27 When the doubt or difference arises as to the truth or falsehood ofalleged facts or when the query necessarily solicits calibration of the whole evidenceconsidering mostly the credibility of witnesses, existence and relevancy of specific surroundingcircumstances, their relation to each other and to the whole and probabilities of the situation,questions or errors of fact are raised .28 The rule that only questions of law may be raised in apetition for review under Rule 45, however, admits of certain exceptions ,29 among which is whenthe findings of the trial court are grounded entirely on speculation, surmise and conjecture. Aswill be discussed further, we find the afore-mentioned exception to be applicable in the presentPetition, thus, warranting a departure from the general rule.

In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to thebeneficial enjoyment of property, the legal title to which is vested in another, but the word "trust"is frequently employed to indicate duties, relations, and responsibilities which are not strictlytechnical trusts .30 A person who establishes a trust is called the trustor; one in whom confidence

is reposed is known as the trustee; and the person for whose benefit the trust has been createdis referred to as the beneficiary .31 There is a fiduciary relation between the trustee and thebeneficiary (cestui que trust ) as regards certain property, real, personal, money or choses inaction.32

Trusts are either express or implied. Express trusts are created by the intention of the trustor orof the parties. Implied trusts come into being by operation of law .33 Express trusts are thosewhich are created by the direct and positive acts of the parties, by some writing or deed, or will,or by words either expressly or impliedly evincing an intention to create a trust .34 No particular


















































words are required for the creation of an express trust, it being sufficient that a trust is clearlyintended .35 However, in accordance with Article 1443 of the Civil Code, when an express trustconcerns an immovable property or any interest therein, the same may not be proved by parolor oral evidence .36

In the instant case, petitioner maintains that she was able to prove the existence of a trustagreement between her and respondent spouses Ramos. She calls attention to the fact thatrespondent spouses Ramos could not account for the P116,946.15 difference in the beginninginventory and the second inventory of the stocks of the hardware store, and they failed topresent proof to support their allegation that the amount was used to pay the other obligations ofpetitioner. As respondent spouses Ramos never denied the existence of the P116,946.15difference, petitioner contends that they have the burden of proving where this amount hadgone, if indeed they did not use the same to buy the Bonifacio property. Petitioner asserts thatgiven the respondent spouses Ramos’ failure to discharge such burden, the only conclusionwould be that they did use the amount to purchase the Bonifacio property.

Petitioner further alleges that based on the verbal agreement between her and respondentspouses Ramos, a trust agreement was created and that the same is valid and enforceable.Petitioner claims that she is the trustor for it was she who entrusted the Bonifacio property torespondent spouses Ramos as the trustees, with the condition that the same be used to securea loan, the proceeds of which would be used to build a bigger building to expand petitioner’sbusiness. Petitioner maintains that a trust agreement was clearly intended by the parties whenpetitioner left the management of the hardware store to respondent spouses Ramos, with theagreement that the proceeds from the sales from said store be used to buy the lot upon whichthe store stands. The respondent spouses Ramos’ assumption of the management of thehardware store and their eventual purchase of the Bonifacio property indubitably shows thatrespondent spouses Ramos honored their obligation under the verbal agreement. Such beingthe case, it behooved for the respondent spouses Ramos to hold the Bonifacio property forpetitioner’s benefit.

Petitioner’s arguments fai l to persuade.

It bears stressing that petitioner has the burden of proving her cause of action in the instantcase and she may not rely on the weakness of the defense of respondent spouses Ramos.Burden of proof is the duty of any party to present evidence to establish his claim or defense bythe amount of evidence required by law, which is preponderance of evidence in civil cases.Preponderance of evidence 37 is the weight, credit, and value of the aggregate evidence oneither side and is usually considered to be synonymous with the term "greater weight of theevidence" or "greater weight of the credible evidence. It is evidence which is more convincing tothe court as worthy of belief than that which is offered in opposition thereto .38 Therefore, theparty, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden ofproof to obtain a favorable judgment. For the plaintiff, the burden of proof never parts .39 For thedefendant, an affirmative defense is one which is not a denial of an essential ingredient in theplaintiff’s cause of action, but one which, if established, will be a good defense i.e. , anavoidance of the claim .40

From the allegations of the petitioner’s Complaint in Civil Case No. 3672, the alleged verbaltrust agreement between petitioner and respondent spouses Ramos is in the nature of anexpress trust as petitioner explicitly agreed therein to allow the respondent spouses Ramos toacquire title to the Bonifacio property in their names, but to hold the same property for


























petitioner’s benefit. Given that the alleged trust concerns an immovable property, however,respondent spouses Ramos counter that the same is unenforceable since the agreement wasmade verbally and no parol evidence may be admitted to prove the existence of an expresstrust concerning an immovable property or any interest therein.

On this score, we subscribe to the ruling of the RTC in its Order dated 17 July 2000 that saidspouses were deemed to have waived their objection to the parol evidence as they failed totimely object when petitioner testified on the said verbal agreement. The requirement in Article1443 that the express trust concerning an immovable or an interest therein be in writing ismerely for purposes of proof, not for the validity of the trust agreement. Therefore, the saidarticle is in the nature of a statute of frauds. The term statute of frauds is descriptive of statuteswhich require certain classes of contracts to be in writing. The statute does not deprive theparties of the right to contract with respect to the matters therein involved, but merely regulatesthe formalities of the contract necessary to render it enforceable .41 The effect of non-complianceis simply that no action can be proved unless the requirement is complied with. Oral evidence ofthe contract will be excluded upon timely objection. But if the parties to the action, during thetrial, make no objection to the admissibility of the oral evidence to support the contract coveredby the statute, and thereby permit such contract to be proved orally, it will be just as bindingupon the parties as if it had been reduced to writing .42

Per petitioner’s testimony ,43 the Bonifacio property was offered for sale by its owner Mendoza.Petitioner told respondent spouses Ramos that she was going to buy the lot, but the title to thesame will be in the latter’s names. The money from the hardware store managed by respondentspouses Ramos shall be used to buy the Bonifacio property, which shall then be mortgaged bythe respondent spouses Ramos so that they could obtain a loan for building a bigger store. Thepurchase price of P80,000.00 was paid for the Bonifacio property. On 20 September 1984, therespondent spouses Ramos returned the management of the store to petitioner. Thereafter,petitioner allowed her son Johnson to inventory the stocks of the store. Johnson found out thatthe purchase price of P80,000.00 for the Bonifacio property was already fully paid. Whenpetitioner told the respondent spouses Ramos to transfer the title to the Bonifacio property inher name, the respondent spouses Ramos refused, thus, prompting petitioner to file a complaintagainst them.

Similarly, Johnson testified44 that on 22 March 1982, petitioner turned over the management ofthe hardware store to respondent spouses Ramos. During that time, an inventor y45 of the stocksof the store was made and the total value of the said stocks were determined to beP226,951.05. When respondent spouses Ramos returned the management of the store topetitioner on 20 September 1984, another inventory 46 of the stocks was made, with the totalvalue of the stocks falling to P110,004.88. The difference of P116,946.16 was attributed to thepurchase of the Bonifacio property by the respondent spouses Ramos using the profits from thesales of the store.

A careful perusal of the records of the case reveals that respondent spouses Ramos did indeedfail to interpose their objections regarding the admissibility of the afore-mentioned testimonieswhen the same were offered to prove the alleged verbal trust agreement between them andpetitioner. Consequently, these testimonies were rendered admissible in evidence.Nevertheless, while admissibility of evidence is an affair of logic and law, determined asit is by its relevance and competence, the weight to be given to such evidence, onceadmitted, still depends on judicial evaluation .47 Thus, despite the admissibility of the said






























testimonies, the Court holds that the same carried little weight in proving the alleged verbal trustagreement between petitioner and respondent spouses.

Petitioner’s allegations as to the existence of an express trust agreement with respondentspouses Ra mos, supported only by her own and her son Johnson’s testimonies, do not holdwater. As correctly ruled by the Court of Appeals, a resulting difference of P116,946.15 in thebeginning inventory of the stocks of the hardware store (before management was transferred torespondent spouses Ramos) and the second inventory thereof (after management was returnedto petitioner), by itself, is not conclusive proof that the said amount was used to pay thepurchase price of the Bonifacio property, such as would make it the property of petitioner heldmerely in trust by respondent spouses Ramos. Such a conclusion adopted by the RTC is purelyspeculative and non sequitur. The resulting difference in the two inventories might have beencaused by other factors and the same is capable of other interpretations (e. g., that the amountthereof may have been written off as business losses due to a bad economic condition, or thatthe stocks of the store might have been damaged or otherwise their purchase prices haveincreased dramatically, etc.), the exclusion of which rested upon the shoulders of petitioneralone who has the burden of proof in the instant case. This petitioner miserably failed to do. Thefact that respondent spouses Ramos never denied the P116,946.15 difference, or that theyfailed to present proof that they indeed used the said amount to pay the other obligations andliabilities of petitioner is not sufficient to discharge petitioner’s burden to prove the existence ofthe alleged express trust agreement.

WHEREFORE, premises considered, the instant Petition for Review on Certiorari under Rule 45of the Rules of Court is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 69731 dated 15 December 2006 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO Associate Justice



G. KINDS OF EXPRESS TRUST


Manila

EN BANC

G.R. No. 144516 February 11, 2004

DEVELOPMENT BANK OF THE PHILIPPINES, petitionervs.COMMISSION ON AUDIT, respondent.

D E C I S I O N

CARPIO, J .:

The Case

In this special civil action forcertiorari ,1 the Development Bank of the Philippines ("DBP") seeksto set aside COA Decision No. 98-403 2 dated 6 October 1998 ("COA Decision") and COAResolution No. 2000-212 3 dated 1 August 2000 issued by the Commission on Audit ("COA").The COA affirmed Audit Observation Memorandum ("AOM") No. 93-2,4 which disallowed inaudit the dividends distributed under the Special Loan Program ("SLP") to the members of theDBP Gratuity Plan.

Antecedent FactsThe DBP is a government financial institution with an original charter, Executive Order No. 81, 5 as amended by Republic Act No. 8523 6 ("DBP Charter"). The COA is a constitutional body withthe mandate to examine and audit all government instrumentalities and investment of publicfunds.7

The COA Decision sets forth the undisputed facts of this case as follows:

xxx [O]n February 20, 1980, the Development Bank of the Philippines (DBP) Board ofGovernors adopted Resolution No. 794 creating the DBP Gratuity Plan and authorizing thesetting up of a retirement fund to cover the benefits due to DBP retiring officials and employeesunder Commonwealth Act No. 186, as amended. The Gratuity Plan was made effective on June17, 1967 and covered all employees of the Bank as of May 31, 1977.

On February 26, 1980, a Trust Indenture was entered into by and between the DBP and theBoard of Trustees of the Gratuity Plan Fund, vesting in the latter the control and administrationof the Fund. The trustee, subsequently, appointed the DBP Trust Services Department (DBP-TSD) as the investment manager thru an Investment Management Agreement, with the end in



view of making the income and principal of the Fund sufficient to meet the liabilities of DBPunder the Gratuity Plan.

In 1983, the Bank established a Special Loan Program availed thru the facilities of the DBPProvident Fund and funded by placements from the Gratuity Plan Fund. This Special LoanProgram was adopted as "part of the benefit program of the Bank to provide financial assistanceto qualified members to enhance and protect the value of their gratuity benefits" because"Philippine retirement laws and the Gratuity Plan do not allow partial payment of retirementbenefits." The program was suspended in 1986 but was revived in 1991 thru DBP BoardResolution No. 066 dated January 5, 1991.

Under the Special Loan Program, a prospective retiree is allowed the option to utilize in the formof a loan a portion of his "outstanding equity" in the gratuity fund and to invest it in a profitableinvestment or undertaking. The earnings of the investment shall then be applied to pay for theinterest due on the gratuity loan which was initially set at 9% per annum subject to the minimuminvestment rate resulting from the updated actuarial study. The excess or balance of the interestearnings shall then be distributed to the investor-members.

Pursuant to the investment scheme, DBP-TSD paid to the investor-members a total ofP11,626,414.25 representing the net earnings of the investments for the years 1991 and 1992.The payments were disallowed by the Auditor under Audit Observation Memorandum No. 93-2dated March 1, 1993, on the ground that the distribution of income of the Gratuity Plan Fund(GPF) to future retirees of DBP is irregular and constituted the use of public funds for privatepurposes which is specifically proscribed under Section 4 of P.D. 1445. 8

AOM No. 93-2 did "not question the authority of the Bank to set-up the [Gratuity Plan] Fund andhave it invested in the Trust Services Department of the Bank." 9 Apart from requiring therecipients of the P11,626,414.25 to refund their dividends, the Auditor recommended that theDBP record in its books as miscellaneous income the income of the Gratuity Plan Fund("Fund"). The Auditor reasoned that "the Fund is still owned by the Bank, the Board of Trusteesis a mere administrator of the Fund in the same way that the Trust Services Department wherethe fund was invested was a mere investor and neither can the employees, who have still aninchoate interest [i]n the Fund be considered as rightful owner of the Fund." 10

In a letter dated 29 July 1996, 11 former DBP Chairman Alfredo C. Antonio requested then COAChairman Celso D. Gangan to reconsider AOM No. 93-2. Chairman Antonio alleged that theexpress trust created for the benefit of qualified DBP employees under the Trust Agreement 12 ("Agreement") dated 26 February 1980 gave the Fund a separate legal personality. The

Agreement transferred legal title over the Fund to the Board of Trustees and all earnings of theFund accrue only to the Fund. Thus, Chairman Antonio contended that the income of the Fundis not the income of DBP.

Chairman Antonio also asked COA to lift the disallowance of the P11,626,414.25 distributed asdividends under the SLP on the ground that the latter was simply a normal loan transaction. Hecompared the SLP to loans granted by other gratuity and retirement funds, like the GSIS, SSSand DBP Provident Fund.

The Ruling of the Commission on Audit

On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:



The Gratuity Plan Fund is supposed to be accorded separate personality under theadministration of the Board of Trustees but that concept has been effectively eliminated whenthe Special Loan Program was adopted. xxx

The Special Loan Program earns for the GPF an interest of 9% per annum, subject toadjustment after actuarial valuation. The investment scheme managed by the TSD accumulatedmore than that as evidenced by the payment of P4,568,971.84 in 1991 and P7,057,442,41 in1992, to the member-borrowers. In effect, the program is grossly disadvantageous to thegovernment because it deprived the GPF of higher investment earnings by the unwarrantedentanglement of its resources under the loan program in the guise of giving financial assistanceto the availing employees. xxx

Retirement benefits may only be availed of upon retirement. It can only be demanded andenjoyed when the employee shall have met the last requisite, that is, actual retirement under theGratuity Plan. During employment, the prospective retiree shall only have an inchoate right overthe benefits. There can be no partial payment or enjoyment of the benefits, in whatever guise,before actual retirement. xxx

PREMISES CONSIDERED, the instant request for reconsideration of the disallowanceamounting to P11,626,414.25 has to be, as it is hereby, denied. 13

In its Resolution of 1 August 2000, the COA also denied DBP’s second motion forreconsideration. Citing the Court’s ruling in Conte v. COA ,14 the COA concluded that the SLPwas actually a supplementary retirement benefit in the guise of "financial assistance," thus:

At any rate, the Special Loan Program is not just an ordinary and regular transaction of theGratuity Plan Fund, as the Bank innocently represents. xxx It is a systematic investment mixconveniently implemented in a special loan program with the least participation of thebeneficiaries, by merely filing an application and then wait for the distribution of net earnings.The real objective, of course, is to give financial assistance to augment the value of the gratuitybenefits, and this has the same effect as the proscribed supplementary pension/retirement planunder Section 28 (b) of C(ommonwealth) A(ct) 186.

This Commission may now draw authority from the case of Conte, et al. v. Commission on Audit (264 SCRA 19 [1996]) where the Supreme Court declared that "financial assistance" granted toretiring employees constitute supplementary retirement or pension benefits. It was there stated:

"xxx Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms bars the creation of anyinsurance or retirement plan – other than the GSIS – for government officers and employees, inorder to prevent the undue and iniquitous proliferation of such plans. It is beyond cavil that Res.56 contravenes the said provision of law and is therefore, invalid, void and of no effect. To

ignore this and rule otherwise would be tantamount to permitting every other government officeor agency to put up its own supplementary retirement benefit plan under the guise of such"financial assistance." 15

Hence, the instant petition filed by DBP.

The Issues



The DBP invokes justice and equity on behalf of its employees because of prevailing economicconditions. The DBP reiterates that the income of the Fund should be treated and recorded asseparate from the income of DBP itself, and charges that COA committed grave abuse ofdiscretion:

1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN PROGRAMCONSTITUTES A CIRCUMVENTION OF PHILIPPINE RETIREMENT LAWS;

2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLYDISADVANTAGEOUS TO THE GOVERNMENT;

3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM CONSTITUTES ASUPPLEMENTARY RETIREMENT BENEFIT.16

The Office of the Solicitor General ("OSG"), arguing on behalf of the COA, questions thestanding of the DBP to file the instant petition. The OSG claims that the trustees of the Fund orthe DBP employees themselves should pursue this certiorari proceeding since they would bethe ones to return the dividends and not DBP.

The central issues for resolution are: (1) whether DBP has the requisite standing to file theinstant petition for certiorari ; (2) whether the income of the Fund is income of DBP; and (3)whether the distribution of dividends under the SLP is valid.

The Ruling of the Court

The petition is partly meritorious.

The standing of DBP to file this petition for certiorari

As DBP correctly argued, the COA en banc implicitly recognized DBP’s standing when it ruledon DBP’s request for reconsideration from AOM No. 93 -2 and motion for reconsideration fromthe Decision of 6 October 1998. The supposed lack of standing of the DBP was not even anissue in the COA Decision or in the Resolution of 1 August 2000.

The OSG nevertheless contends that the DBP cannot question the decisions of the COA enbanc since DBP is a government instrumentality. Citing Section 2, Article IX-D of theConstitution,17 the OSG argued that:

Petitioner may ask the lifting of the disallowance by COA, since COA had not yet made adefinitive and final ruling on the matter in issue. But after COA denied with finality the motion forreconsideration of petitioner, petitioner, being a government instrumentality, should acceptCOA’s ruling and leave the matter of questioning COA’s decision with the concerned investor -members. 18

These arguments do not persuade us.

Section 2, Article IX-D of the Constitution does not bar government instrumentalities fromquestioning decisions of the COA. Government agencies and government-owned and controlledcorporations have long resorted to petitions for certiorari to question rulings of the COA.19 These



government entities filed their petitions with this Court pursuant to Section 7, Article IX of theConstitution, which mandates that aggrieved parties may bring decisions of the COA to theCourt on certiorari .20 Likewise, the Government Auditing Code expressly provides that agovernment agency aggrieved by a COA decision, order or ruling may raise the controversy tothe Supreme Court on certiorari "in the manner provided by law and the Rules of Court." 21 Rule64 of the Rules of Court now embodies this procedure, to wit:

SEC 2. Mode of review . – A judgment or final order or resolution of the Commission onElections and the Commission on Audit may be brought by the aggrieved party to the SupremeCourt on certiorari under Rule 65, except as hereinafter provided.

The novel theory advanced by the OSG would necessarily require persons not parties to thepresent case – the DBP employees who are members of the Plan or the trustees of the Fund – to avail of certiorari under Rule 65. The petition for certiorari under Rule 65, however, is notavailable to any person who feels injured by the decision of a tribunal, board or officerexercising judicial or quasi-judicial functions. The "person aggrieved" under Section 1 of Rule 65who can avail of the special civil action of certiorari pertains only to one who was a party in theproceedings before the court a quo ,22 or in this case, before the COA. To hold otherwise wouldopen the courts to numerous and endless litigations. 23 Since DBP was the sole party in theproceedings before the COA, DBP is the proper party to avail of the remedy of certiorari .

The real party in interest who stands to benefit or suffer from the judgment in the suit mustprosecute or defend an action. 24 We have held that "interest" means material interest, aninterest in issue that the decision will affect, as distinguished from mere interest in the questioninvolved, or a mere incidental interest. 25

As a party to the Agreement and a trustor of the Fund, DBP has a material interest in theimplementation of the Agreement, and in the operation of the Gratuity Plan and the Fund asprescribed in the Agreement. The DBP also possesses a real interest in upholding thelegitimacy of the policies and programs approved by its Board of Directors for the benefit of DBPemployees. This includes the SLP and its implementing rules, which the DBP Board of Directorsconfirmed.

The income of the Gratuity Plan Fund

The COA alleges that DBP is the actual owner of the Fund and its income, on the followinggrounds: (1) DBP made the contributions to the Fund; (2) the trustees of the Fund are merelyadministrators; and (3) DBP employees only have an inchoate right to the Fund.

The DBP counters that the Fund is the subject of a trust, and that the Agreement transferredlegal title over the Fund to the trustees. The income of the Fund does not accrue to DBP. Thus,

such income should not be recorded in DBP’s books of account.26

A trust is a "fiduciary relationship with respect to property which involves the existence ofequitable duties imposed upon the holder of the title to the property to deal with it for the benefitof another."27 A trust is either express or implied. Express trusts are those which the direct andpositive acts of the parties create, by some writing or deed, or will, or by words evincing anintention to create a trust. 28



In the present case, the DBP Board of Governors’ (now Board of Directors) Resolution No. 794and the Agreement executed by former DBP Chairman Rafael Sison and the trustees of thePlan created an express trust, specifically, an employees’ trust. An employees’ trust is a trustmaintained by an employer to provide retirement, pension or other benefits to its employees. 29 Itis a separate taxable entity 30 established for the exclusive benefit of the employees. 31

Resolution No. 794 shows that DBP intended to establish a trust fund to cover the retirementbenefits of certain employees under Republic Act No. 1616 32 ("RA 1616"). The principal andincome of the Fund would be separate and distinct from the funds of DBP. We quote the salientportions of Resolution No. 794, as follows:

2. Trust Agreement – designed for in-house trustees of three (3) to be appointed by the Board ofGovernors and vested with control and administration of the funds appropriated annually by theBoard to be invested in selective investments so that the income and principal of saidcontributions would be sufficient to meet the required payments of benefits as officialsand employees of the Bank retire under the Gratuity Plan ; xxx

The proposed funding of the gratuity plan has decided advantages on the part of the Bank overthe present procedure, where the Bank provides payment only when an employee retires or on"pay as you go" basis:

1. It is a definite written program, permanent and continuing whereby the Bank providescontributions to a separate trust fund, which shall be exclusively used to meet itsliabilities to retiring officials and employees ; and

2. Since the gratuity plan will be tax qualified under the National Internal Revenue Codeand RA 4917, the Bank’s periodic contributions thereto shall be deductible for taxpurposes and the earnings therefrom tax free. 33 (Emphasis supplied)

In a trust, one person has an equitable ownership in the property while another person owns thelegal title to such property, the equitable ownership of the former entitling him to theperformance of certain duties and the exercise of certain powers by the latter. 34 A person whoestablishes a trust is the trustor. One in whom confidence is reposed as regards property for thebenefit of another is the trustee. The person for whose benefit the trust is created is thebeneficiary. 35

In the present case, DBP, as the trustor, vested in the trustees of the Fund legal title over theFund as well as control over the investment of the money and assets of the Fund. The powersand duties granted to the trustees of the Fund under the Agreement were plainly more than justadministrative, to wit:

1. The BANK hereby vests the control and administration of the Fund in theTRUSTEES for the accomplishment of the purposes for which said Fund is intended indefraying the benefits of the PLAN in accordance with its provisions, and theTRUSTEES hereby accept the trust xxx

2. The TRUSTEES shall receive and hold legal title to the money and/or propertycomprising the Fund, and shall hold the same in trust for its beneficiaries, inaccordance with, and for the uses and purposes stated in the provisions of the PLAN.



3. Without in any sense limiting the general powers of management and administrationgiven to TRUSTEES by our laws and as supplementary thereto, the TRUSTEES shallmanage, administer, and maintain the Fund with full power and authority:

x x x

b. To invest and reinvest at any time all or any part of the Fund in any real estate(situated within the Philippines), housing project, stocks, bonds, mortgages, notes, othersecurities or property which the said TRUSTEES may deem safe and proper, and tocollect and receive all income and profits existing therefrom;

c. To keep and maintain accurate books of account and/or records of the Fund xxx.

d. To pay all costs, expenses, and charges incurred in connection with theadministration, preservation, maintenance and protection of the Fund xxx to employ orappoint such agents or employees xxx.

e. To promulgate, from time to time, such rules not inconsistent with the conditions ofthis Agreement xxx.

f. To do all acts which, in their judgment, are needful or desirable for the properand advantageous control and management of the Fund xxx.36 (Emphasis supplied)

Clearly, the trustees received and collected any income and profit derived from the Fund, andthey maintained separate books of account for this purpose. The principal and income of theFund will not revert to DBP even if the trust is subsequently modified or terminated. The

Agreement states that the principal and income must be used to satisfy all of the liabilities to thebeneficiary officials and employees under the Gratuity Plan, as follows:

5. The BANK reserves the right at any time and from time to time (1) to modify or amend inwhole or in part by written directions to the TRUSTEES, any and all of the provisions of thisTrust Agreement, or (2) to terminate this Trust Agreement upon thirty (30) days’ prior notice inwriting to the TRUSTEES; provided, however, that no modification or amendment which affectsthe rights, duties, or responsibilities of the TRUSTEES may be made without the TRUSTEES’consent; and provided, that such termination, modification, or amendment prior to thesatisfaction of all liabilities with respect to eligible employees and their beneficiaries,does not permit any part of the corpus or income of the Fund to be used for, or divertedto, purposes other than for the exclusive benefit of eligible employees and workers asprovided for in the PLAN . In the event of termination of this Trust Agreement, all cash,securities, and other property then constituting the Fund less any amounts constituting accruedbenefits to the eligible employees, charges and expenses payable from the Fund, shall be paid

over or delivered by the TRUSTEES to the members in proportion to their accrued benefits.37

(Emphasis supplied)

The resumption of the SLP did not eliminate the trust or terminate the transfer of legal title to theFund’s trustees. The records show that the Fund’s Board of Trustees approved the SLP uponthe request of the DBP Career Officials Association. 38 The DBP Board of Directors onlyconfirmed the approval of the SLP by th e Fund’s trustees.



The beneficiaries or cestui que trust of the Fund are the DBP officials and employees who willretire under Commonwealth Act No. 18639 ("CA 186"), as amended by RA 1616. RA 1616requires the employer agency or government instrumentality to pay for the retirement gratuity ofits employees who rendered service for the required number of years. 40 The GovernmentService Insurance System Act of 1997 41 still allows retirement under RA 1616 for certainemployees.

As COA correctly observed, the right of the employees to claim their gratuities from the Fund isstill inchoate. RA 1616 does not allow employees to receive their gratuities until they retire.However, this does not invalidate the trust created by DBP or the concomitant transfer of legaltitle to the trustees. As far back as in Governm ent v. Abadi l la ,42 the Court held that "it is notalways necessary that the cestui que trust should be named, or even be in esse at the time thetrust is created in his favor." It is enough that the beneficiaries are sufficiently certain oridentifiable.43

In this case, the GSIS Act of 1997 extended the option to retire under RA 1616 only toemployees who had entered government service before 1 June 1977. 44 The DBP employeeswho were in the service before this date are easily identifiable. As of the time DBP filed theinstant petition, DBP estimated that 530 of its employees could still retire under RA 1616. Atleast 60 DBP employees had already received their gratuities under the Fund. 45

The Agreement indisputably transferred legal title over the income and properties of the Fund tothe Fund’s trustees. Thus, COA’s directive to record the income of the Fund in DBP’s books ofaccount as the miscellaneous income of DBP constitutes grave abuse of discretion. The incomeof the Fund does not form part of the revenues or profits of DBP, and DBP may not use suchincome for its own benefit. The principal and income of the Fund together constitute the res orsubject matter of the trust. The Agreement established the Fund precisely so that it wouldeventually be sufficient to pay for the retirement benefits of DBP employees under RA 1616without additional outlay from DBP. COA itself acknowledged the authority of DBP to set up theFund. However, COA’s subsequent directive would divest the Fund of income, and defeat thepurpose for the Fund’s creation.

The validity of the Special Loan Program

and the disallowance of P11,626,414.25

In disallowing the P11,626,414.25 distributed as dividends under the SLP, the COA reliedprimarily on Republic Act No. 4968 ("RA 4968") which took effect on 17 June 1967. RA 4968added the following paragraph to Section 28 of CA 186, thus:

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by any

employer. All supplementary retirement or pension plans heretofore in force in any governmentoffice, agency, or instrumentality or corporation owned or controlled by the government, arehereby declared inoperative or abolished: Provided, That the rights of those who are alreadyeligible to retire thereunder shall not be affected.

Even assuming, however, that the SLP constitutes a supplementary retirement plan, RA 4968does not apply to the case at bar. The DBP Charter, which took effect on 14 February 1986,expressly authorizes supplementary retirement plans "adopted by and effective in" DBP, thus:



SEC. 34. Separation Benefits. – All those who shall retire from the service or are separatedtherefrom on account of the reorganization of the Bank under the provisions of this Chartershall be entitled to all gratuities and benefits provided for under existing laws and/orsupplementary retirement plans adopted by and effective in the Bank : Provided, that anyseparation benefits and incentives which may be granted by the Bank subsequent to June 1,1986, which may be in addition to those provided under existing laws and previous retirementprograms of the Bank prior to the said date, for those personnel referred to in this section shallbe funded by the National Government; Provided, further, that, any supplementary retirementplan adopted by the Bank after the effectivity of this Chapter shall require the prior approval ofthe Minister of Finance.

x x x.

SEC. 37. Repealing Clause. – All acts, executive orders, administrative orders, proclamations,rules and regulations or parts thereof inconsistent with any of the provisions of this charter arehereby repealed or modified accordingly. 46 (Emphasis supplied)

Being a special and later law, the DBP Charter 47 prevails over RA 4968. The DBP originallyadopted the SLP in 1983. The Court cannot strike down the SLP now based on RA 4968 in viewof the subsequent DBP Charter authorizing the SLP.

Nevertheless, the Court upholds the C OA’s disallowance of the P11,626,414.25 in dividendsdistributed under the SLP.

According to DBP Board Resolution No. 0036 dated 25 January 1991, the "SLP allows aprospective retiree to utilize in the form of a loan, a portion of their outstanding equity in theGratuity Plan Fund and to invest [the] proceeds in a profitable investment or undertaking." 48 Thebasis of the loanable amount was an employee’s gratuity fund credit, 49 that is to say, what anemployee would receive if he retired at the time he availed of the loan.

In his letter dated 26 October 1983 proposing the confirmation of the SLP, then DBP ChairmanCesar B. Zalamea stated that:

The primary objective of this proposal therefore is to counteract the unavoidable decrease in thevalue of the said retirement benefits through the following scheme:

I. To allow a prospective retiree the option to utilize in the form of a loan, a portion of hisstanding equity in the Gratuity Fund and to invest it in a profitable investment or undertaking.The income or appreciation in value will be for his own account and should provide him thedesired hedge against inflation or erosion in the value of the peso. This is being proposed sincePhilippine retirement laws and the Gratuity Plan do not allow partial payment of

retirement benefits, even the portion already earned, ahead of actual retirement .50

(Emphasis supplied)

As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws on retirement allowthe partial payment of retirement benefits ahead of actual retirement. It appears that DBPsought to circumvent these restrictions through the SLP, which released a portion of anemployee’s retirement benefits to him in the form of a loan. Certainly, the DBP did this forlaudable reasons, to address the concerns of DBP employees on the devaluation of their





c. 182 or 364-day term – DBP Blue Chip Fund

The investment shall be registered in the name of DBP-TSD in trust for availee-investor forhis sole risk and account. Choice of eligible terms shall be at the option of availee-investor.Investments shall be commingled by TSD and Participation Certificates shall be issued toeach availee-investor.

x x x

IV. LOANABLE TERMS

x x x

e. Allowable Investment Instruments – Time – Deposit – DBP T-Bills/CB Bills and DBP BlueChip Fund. TSD shall purchase new securities and/or allocate existing securities portfolio ofGPF depending on liquidity position of the Fund xxx.

x x xg. Security – The loan shall be secured by GS, Certificate of Time Deposit and/or BCFCertificate of Participation which shall be registered in the name of DBP-TSD in trust for nameof availee-investor and shall be surrendered to the TSD for safekeeping. 61 (Emphasis supplied)

In the present case, the Fund allowed the debtor-employee to "borrow" a portion of his gratuityfund credit solely for the purpose of investing it in certain instruments specified by DBP. Thedebtor-employee could not dispose of or utilize the loan in any other way. These instrumentswere, incidentally, some of the same securities where the Fund placed its investments. At thesame time the Fund obligated the debtor-employee to assign immediately his loan to DBP-TSDso that the amount could be commingled with the loans of other employees. The DBP-TSD –

the same department which handled and had custody of the Fund’s accounts – then purchasedor re-allocated existing securities in the portfolio of the Fund to correspond to the employees’loans.

Simply put, the amount ostensibly loaned from the Fund stayed in the Fund, and remainedunder the control and custody of the DBP-TSD. The debtor-employee never had any control orcustody over the amount he supposedly borrowed. However, DBP-TSD listed new or existinginvestments of the Fund corresponding to the "loan" in the name of the debtor-employee, sothat the latter could collect the interest earned from the investments.

In sum, the SLP enabled certain DBP employees to utilize and even earn from their retirementgratuities even before they retired. This constitutes a partial release of their retirement benefits,which is contrary to RA 1616 and the Gratuity Plan. As we have discussed, the latter authorizesthe release of gratuities from the earnings and principal of the Fund only upon retirement.

The Gratuity Plan will lose its tax-exempt status if the retirement benefits are released prior tothe retirement of the employees. The trust funds of employees other than those of privateemployers are qualified for certain tax exemptions pursuant to Section 60(B) – formerly Section53(b) – of the National Internal Revenue Code. 62 Section 60(B) provides:



Section 60. Imposition of Tax. –

(A) Application of Tax. – The tax imposed by this Title upon individuals shall apply to the incomeof estates or of any kind of property held in trust, including:

x x x

(B) Exception. – The tax imposed by this Title shall not apply to employee’s trust which formspart of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or allof his employees (1) if contributions are made to the trust by such employer, or employees, orboth for the purpose of distributing to such employees the earnings and principal of thefund accumulated by the trust in accordance with such plan , and (2) if under the trustinstrument it is impossible, at any time prior to the satisfaction of all liabilities with respect toemployees under the trust, for any part of the corpus or income to be (within the taxable year orthereafter) used for, or diverted to, purposes other than for the exclusive benefit of hisemployees: xxx (Emphasis supplied)

The Gratuity Plan provides that the gratuity benefits of a qualified DBP employee shall bereleased only "upon retirement under th(e) Plan." If the earnings and principal of the Fund aredistributed to DBP employees prior to their retirement, the Gratuity Plan will no longer qualify forexemption under Section 60(B). To recall, DBP Resolution No. 794 creating the Gratuity Planexpressly provides that "since the gratuity plan will be tax qualified under the National InternalRevenue Code xxx, the Bank’s periodic contributions thereto shall be deduct ible for taxpurposes and the earnings therefrom tax free." If DBP insists that its employees may receive theP11,626,414.25 dividends, the necessary consequence will be the non-qualification of theGratuity Plan as a tax-exempt plan.

Finally, DBP invokes justice and equity on behalf of its affected employees. Equity cannotsupplant or contravene the law. 63 Further, as evidenced by the letter of former DBP ChairmanZalamea, the DBP Board of Directors was well aware of the proscription against the partialrelease of retirement benefits when it confirmed the SLP. If DBP wants "to enhance and protectthe value of xxx (the) gratuity benefits" of its employees, DBP must do so by investing themoney of the Fund in the proper and sound investments, and not by circumventing restrictionsimposed by law and the Gratuity Plan itself.

We nevertheless urge the DBP and COA to provide equitable terms and a sufficient periodwithin which the affected DBP employees may refund the dividends they received under theSLP. Since most of the DBP employees were eligible to retire within a few years when theyavailed of the SLP, the refunds may be deducted from their retirement benefits, at least forthose who have not received their retirement benefits.

WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA Resolution No.2000-212 dated 1 August 2000 are AFFIRMED with MODIFICATION. The income of theGratuity Plan Fund, held in trust for the benefit of DBP employees eligible to retire under RA1616, should not be recorded in the books of account of DBP as the income of the latter.

SO ORDERED.

Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.



H. CAPACITIES, RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES

i. TRUSTOR


Manila

EN BANC

G.R. No. L-24597 August 25, 1926

ROSARIO GAYONDATO, plaintiff-appellant,vs.THE TREASURER OF THE PHILIPPINE ISLANDS, ET AL., defendants-appellant.

Arroyo and Evangelista for appellant.Office of the Solicitor-General Reyes for the Treasurer of the Philippine Islands.No appearance for the other appellees.

OSTRAND,J .:

This action is brought to recover damages in the sum of P30,000 for the erroneous registrationin the name of the defendant Gasataya of three parcels of land situated in the municipality ofIsabela, Province of Occidental Negros, and of which the plaintiff was the owner at the time of

the registration.There is practically no dispute as to the facts. The three parcels of land were formerly owned byone Domingo Gayondato, who inherited them from his mother, Ramona Granada, in 1896. In1899 Domingo married the defendant Adela Gasataya, with whom he had a child, the hereinplaintiff, 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 marriedthe defendant Domingo Cuachon, and Gabino Gasataya thereupon turned over to them thepossession of the land.

The three parcels were included in cadastral case No. 11 of the Court of First Instance ofOccidental Negros as lots Nos. 70, 364 and 375, and when that case came on for hearing in

August, 1916, the defendant Domingo Cuachon appeared on behalf of his wife andstepdaughter and filed claims for the aforesaid lots by way of answers in which he stated thatthe lots were the property of "his with Adela Gasataya and of her daughter, fifteen years of age."Notwithstanding this statement, the Court of First Instance erroneously decreed the registrationof the aforesaid lots in the name of Adela Gasataya alone. Subsequently Adela, with theconsent of her husband, mortgaged the property to the National Bank and finally in the year1920 sold it to the defendant Rodriguez for the sum of P13,000, the purchaser, in additionthereto, assuming the liability for a mortgage of P8,000 to the National Bank and for certainother debts amounting to over P4,000.



The complaint in the present case was filed on August 18, 1922, Adela Gasataya, DomingoCuachon, Francisco Rodriguez and the Insular Treasurer being made parties defendant. Uponthe facts above stated the trial court rendered judgment in favor of the plaintiff RosarioGayondato, ordering the defendants Adela Gasataya and Domingo Cuachon jointly andseverally to indemnify the said plaintiff in the sum of P35,000 and to pay the costs. The InsularTreasurer and Francisco Rodriguez were absolved from the complaint. From this judgment theplaintiff appealed.

The sum and substance of the assignments of error is the court erred in absolving the InsularTreasurer from the complaint, and in this we agree with the appellant. The court below appearsto have been under the impression that the liability of the assurance fund is confined to caseswhere the erroneous registration is due to omission, mistake or malfeasance of the part of theemployees of the registration court. That this view is erroneous, is evident from the language ofsection 101 and 102 of the Land Registration Act, which read as follows:

SEC. 101. Any person who without negligence on his part sustains loss or damagethrough any omission, mistake, or misfeasance of the clerk, or register of deeds, or ofany examiner of titles, or of any deputy or clerk of the register of deeds in theperformance of their respective duties under the provisions of this Act, and any personwho is wrongfully deprived of any land or any interest therein, without negligence on his

part, through the bringing of the same under the provisions of this Act or by theregistration of any other person as owner of such land , or by any mistake, omission ormisdescription in any certificate or owner's duplicate, or in any entry or memorandum inthe register or other official book or by any cancellation, and who by the provisions ofthis Act is barred or in any way precluded from bringing an action for the recovery ofsuch land or interest therein, or claim upon the same, may bring in any court ofcompetent jurisdiction an action against the Treasurer of the Philippine Archipelago forthe recovery of damages to be paid, out of the assurance fund.

SEC. 102. If such action be for recovery for loss or damage arising only through anyomission mistake, or misfeasance of the clerk or of the register of deeds, or of anyexaminer of titles, or of any deputy or clerk of the register of deeds in the performance oftheir respective duties under the provisions of this Act, then the Treasurer of thePhilippine Archipelago shall be the sole defendant to such action. But if such action bebrought for loss or damage arising only through the fraud or willful act of some person orpersons other than the clerk, the register of deeds, the examiners of titles, deputies andclerks, or arising jointly through the fraud or wrongful act of such other person or personsand the omission, mistake, or misfeasance of the clerk, the register of deeds, theexaminers of titles, deputies, or clerks, then such action shall be brought against boththe Treasurer of the Philippine Archipelago and such person or persons aforesaid. In allsuch actions where there are defendants other than the Treasurer of the Philippine

Archipelago and damages shall have been recovered, no final judgment shall be enteredagainst the Treasurer of the Philippine Archipelago until execution against the otherdefendants shall be returned unsatisfied in whole or in part, and the officer returning theexecution ]shall certify that the amount still due upon the execution cannot be collectedexcept by application to the assurance fund. Thereupon the court having jurisdiction ofthe action, being satisfied as to the truth of such return, may, upon proper showing,order the amount of the execution and costs or so much thereof as remains unpaid, tobe paid by the Treasurer of the Philippine Archipelago out of the assurance fund. If shallbe the duty of the Attorney- General in person or by deputy to appear and defend all



such duties with the aid of the fiscal of the province in which the land lies or the cityattorney of the City of Manila as the case may be: Provided, however , That nothing inthis Act shall be construed to deprive the plaintiff of any action which he may haveagainst any person for such loss or damage or deprivation of land or of any estate orinterest therein without joining the Treasurer of the Philippine Archipelago as adefendant therein.

As the plaintiff-appellant was a minor at the time of the registration of the land and consequentlyno negligence can be imputed to her, it is clear from the sections quoted that in the absence ofspecial circumstances to the contrary the assurance fund is secondarily liable for the damagessuffered by her through the wrongful registration.

But the Attorney-General in his brief for the Insular Treasurer raises the point that DomingoCuachon and Adela Gasataya prior to the registration must be considered to have held theproperty in trust and for the benefit of the plaintiff; that the relation of trustee and cestui que trustwas 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 ordeprivation occasioned by a breach of trust, whether express, implied, or constructive, by anyregistered owner who is a trustee, or by the improper exercise of any sale in mortgage-foreclosure proceedings."

At first blush the Attorney-General's contention seems quite plausible. For want of better termsthe words "trust" and "trustee" are frequently used in a broad and popular sense so as toembrace a large variety of relations. Thus if a person obtains legal title to property by fraud orconcealment, courts of equity will impress upon the title a so-called constructive trust in favor ofthe defrauded party. The use of the word "trust" in this sense is not technically accurate: asPerry says, 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 fraudsas are administered in fraudulent breaches of trusts, and as courts and the profession haveconcurred in calling such frauds constructive trusts, there can be no misapprehension incontinuing the same phraseology, while a change might lead to confusion andmisunderstanding." (Perry on Trusts, 5th ed., sec. 166.)

If this is the kind of constructive trust referred to in section 106, supra , it must be conceded thatthe 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 whichthe right of recovery from the assurance fund in cases of registration through fraud or wrongfulacts is expressly recognized and which, in our opinion, clearly show that the term trust as usedin section 106 must be taken in its technical and more restricted sense. Indeed, if it were to beregarded in its broadest sense, the assurance fund would, under the conditions here prevailing,be of little or no value.

Bouvier defines a trust in its technical sense as "a right of property, real or personal, held by oneparty for the benefit of another." In the present case we have this situation: The plaintiff was aminor at the time of the registration of the land and had no legal guardian. It is true that hermother in whose name the land was registered was the natural guardian of her person, but thatguardianship did not extend to the property of the minor and conferred no right to theadministration of the same (Palet vs. Aldecoa and Co., 15 Phil., 232; Ibañez de Aldecoa vs. Hongkong and Shanghai Banking Corporation, 30 Phil., 228) and the plaintiff, being a minor andunder 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 signification. The mother hadno right of property or administration in her daughter's estate and was nothing but a meretrespasser. The language of the New Jersey Court of Chancery in the case of Henniger vs. Heald (30 Atlantic, 809), is therefore particularly apposite in the present case.

In the case before us the title was acquired by Heald tortuously, or in violation of everywell-settled principle of law. It never was trust property. Strictly speaking, he was not atrustee, any more than a trespasser or other wrongdoer. The wrongdoer who becomespossessed of property under such circumstances has been styled a "trustee;" but this isfor want of a better term, and because he has no title to property, and really holds it forthe true owner. It might as well be said that, where two persons conspire to possessthemselves of the personal property of another when he brings trover for its recovery,they should be styled "trustees," instead of "fort feasors," and should be permitted toclaim the benefit of a lien for care or for provender.

From what has been said it follows that the judgment absolving the Insular Treasurer from thecomplaint must be reversed. We also note from the record that Adela Gasataya died March 1,1923, before the trial of the case and that an administrator of her estate was appointed. It wastherefore error to render judgment against her personally. It may further be noted that themeasure of damages applied by the court below, i. e. the full value of the land, is not strictlyaccurate. The property was subject to a life estate of one-third in favor of Adela Gasataya as thewidow of Domingo Gayondato, the value of which must be deducted from the total value of thefee simple. It may also be observed that the amount demanded in the complaint is only P30,000and that the land was solid to Francisco Rodriguez for but little more than P25,000. We aretherefore of the opinion that the damages awarded should be reduced to P25,000.

The judgment appealed from is reversed, and it is hereby ordered that the defendants DomingoCuachon and the estate of Adela Gasataya jointly and severally pay to the plaintiff the sum ofP25,000, with interest at the rate of 6 per cent per annum from August 18, 1922, the date of thefiling of the complaint, with the costs. It is further ordered that if the execution of this judgment isreturned unsatisfied in whole or in part and the officer returning the execution certifies that theamount upon the execution cannot be collected except by application to the assurance fund andthe court having jurisdiction over the action shall be satisfied as to the truth of such return, saidcourt 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. Thecomplaint will stand dismissed as to Francisco Rodriguez. No costs will be allowed. So ordered.

Avanceña, C. J., Street, Villamor, Johns and Romualdez, JJ., concur.



ii. BENEFICIARY


Manila

EN BANC

G.R. No. L-17809 December 29, 1962

RESURRECCION DE LEON, ET AL., plaintiffs-appellees,vs.EMILIANA MOLO-PECKSON, ET AL., respondents-appellants.

Cornelio R. Magsarili for plaintiffs-appellees.Sycip, Salazar, Luna and Associates for respondents-appellants.

BAUTISTA ANGELO,J .: Resurreccion De Leon, et al. filed on November 13, 1958 before the Court of First Instance ofRizal a complaint seeking to compel Emiliana Molo-Peckson, et al. to convey to the former tenparcel of land located in Pasay City with an area of 1,749 sq. m. upon payment of P1.00 perparcel upon the plea that said lots were willed or donated in 1948 to the latter by their fosterparents Mariano Molo y Legaspi and Juana Juan with the understanding that they should sellthem to the plaintiffs under the terms above-stated.

Defendants, in their answer, disclaimed any legal obligation on their part to sell the aboveproperties to the plaintiffs for the nominal consideration of P1.00 per lot alleging that if theyexecuted the document on which the complaint is predicated it was on the mistaken assumptionthat their foster parents had requested them that they executed on August 9, 1956 a documentrevoking said donation which was acknowledged before Notary Public Leoncio C. Jimenez.

No testimonial evidence was presented by either party. Instead, both agreed to submit the caseupon the presentation of their respective exhibits which were all admitted by the trial court.

After trial on the merits, the court a quo rendered on September 21, 1960 a decision wherein itheld that, under the facts established by the evidence, trust has been constituted by the latespouses Mariano Molo and Juana Juan over the ten parcels of land in question in favor plaintiffsas beneficiaries and, as a consequence concluded:

Considering all the foregoing, the Court orders:

1. The defendants, jointly and severally to free the said ten (10) parcels of land from themortgage lien in favor of the Rehabilitation Finance Corporation (now Development Bankof the Philippines) and Claro Cortez, and thereafter to sign and execute in favor of theplaintiffs a deed of absolute sale of the said properties for and in consideration of TEN(P10.00) PESOS already deposited in Court after all conditions imposed in Exhibit Ahave been complied with;



2. That in the event the defendants shall refuse to execute and perform the above, theyare ordered, jointly and severally, to pay the plaintiffs the value of said ten (10) parcels ofland in question, the amount to be assessed by the City of Pasay City as the fair marketvalue of the same, upon orders of the Court to assess said value;

3. The defendants jointly and severally to pay the plaintiffs' Attorney's fees in the amountof P3,000.00, as defendants acted in gross and evident bad faith in refusing to satisfythe plaintiffs' plainly valid, just and demandable claim, under Article 2208 sub-paragraph5 of the New Civil Code;

4. The defendants to render an accounting of the fruits of said ten (10) parcels of landfrom the time plaintiffs demanded the conveyance of said parcels of land on August 11,1956 as per Exhibits B and C, in accordance with the provisions of Article 1164, NewCivil Code which provides that the creditor has a right to the fruit of the thing from thetime the obligation to deliver it arises; and

5. The defendants to pay the costs.

Defendants took the present appeal.

On January 24, 1941, Mariano Molo y Legaspi died leaving a will wherein he bequeathed hisentire estate to his wife, Juana Juan. This will was probated in the Court of First Instance ofPasay City, Rizal, which was affirmed by the Supreme Court on November 26, 1956 (G.R. No.L-8774). On May 11, 1948, Juana Juan in turn executed a will naming therein many deviseesand legatees, one of whom is Guillermo San Rafael, mother of the plaintiffs and defendant PilarPerez Nable. On June 7, 1948, however, Juana Juan executed a donation inter vivos in favor ofEmiliana Molo-Peckson and Pilar Perez Nable of almost all of her entire property leaving onlyabout P16,000.00 worth of property for the devisees mentioned in the will. Among the propertiesconveyed to the donees are the ten parcels of land subject of the present action. Juana Juandied on May 28, 1950.

On December 5, 1950, Emiliana Molo-Peckson and Pilar Perez Nable executed a documentwhich they called "MUTUAL AGREEMENT" the pertinent provisions of which are:

That the above named parties hereby mutually agree by these presents . . . that thefollowing lots should be sold at ONE (1) PESO each to the following persons andorganization:

x x x x x x x x x

TO — JUSTA DE LEON and RESURRECCION DE LEON, several parcels of land

located at Calle Tolentino (South of Tenorio and Kapitan Magtibay), Pasay City, shareand share alike or half and half of TEN (10) LOTS described in:

Transfer Certificate of Title No. 28157 — and allocated as follows:

(a) To JUSTA DE LEON Five (5) Lots.

(b) To RESURRECCION DE LEON, the remaining Five (5) Lots.



That this agreement is made in conformity with the verbal wish of the late Don MarianoMolo y Legaspi and the late Dona Juana Francisco Juan y Molo. These obligations wererepeatedly told to Emiliana Molo Peckson, before their death and that same should befulfilled after their death.

On August 9, 1956, however, the same defendants, assisted by their husbands, executedanother document in which they revoked the so-called mutual agreement mentioned above, andanother relating to the same subject matter, stating therein that the parties, "after matured andthorough study, realized that the above-mentioned public instruments . . . do not represent theirtrue and correct interpretation of the verbal wishes of the late spouses Don Mariano Molo yLegaspi and Dona Juana Francisco Juan y Molo." But after the execution of this document, thatis, on August 11, 1956, the beneficiary Resurreccion de Leon and Justa de Leon, thru theircounsel demanded the conveyance to them of the ten parcels of land for the consideration ofP1.00 per parcel as stated in the document of December 5, 1950. And having the defendantsrefused to do so, said beneficiaries consigned on July 8, 1957 the amount of P10.00 as theconsideration of the ten parcels of land. lawphil.net

In this appeal, appellants assign the following errors:

I

THE LOWER COURT ERRED IN HOLDING THAT THE SPOUSES, MARIANO MOLO AND JUANA JUAN, CONSTITUTED A TRUST OVER THE PROPERTIES INQUESTION PETITION WITH PLAINTIFFS-APPELLEES AS BENEFICIARIES.

II

THE LOWER COURT ERRED IN APPLYING ARTICLE 1440, 1441, 1449, 1453 AND1457 OF THE NEW CIVIL CODE TO THE CASE AT BAR.

III

THE LOWER COURT ERRED IN HOLDING PLAINTIFFS-APPELLEES' EXHIBIT "A"TO BE A DECLARATION AGAINST INTEREST AND AN ADMISSION BYDEFENDANTS-APPELLANTS.

IV

THE LOWER COURT ERRED IN HOLDING THAT DEFENDANTS-APPELLANTS HADNO RIGHT TO REVOKE EXHIBIT "A".

V

THE LOWER COURT ERRED, IN ORDERING APPELLANTS TO RENDER AN ACCOUNTING OF THE FRUIT OF THE PROPERTIES IN QUESTION.

VI



THE LOWER COURT ERRED IN ORDERING APPELLANTS TO FREE THEPROPERTIES FROM THE MORTGAGE LIENS IN FAVOR OF THE DEVELOPMENTBANK OF THE PHILIPPINES AND CLARO CORTEZ.

VII

THE LOWER COURT ERRED IN AWARDING ATTORNEY'S FEES TO THE APPELLEES.

VIII

THE LOWER COURT ERRED IN NOT DISMISSING THE COMPLAINT.

There is no merit in the claim that the document executed on December 5, 1950 does notrepresent the true and correct interpretation by appellants of the verbal wish of their fosterparents relative to the conveyance for a nominal consideration to appellees of the ten parcels ofland in question considering the circumstances obtaining in the present case. To begin with, this

document was executed by appellants on December 5, 1950, or about two years and sixmonths from the time they acquired title to the lands by virtue of the donation inter vivos executed in their favor by their foster mother Juana Juan and six months after the death of thedonor. There is nobody who could cajole them to execute it, nor is there any force that couldcorce them to make the declaration therein expressed, except the constraining mandat of theirconscience to comply with "the obligations repeatedly told to Emiliana Molo Peckson," one ofappellants, before their death, epitomized inthe "verbal wish of the late Don Mariano Molo yLegaspi and the late Doña Juana Francisco Juan y Molo" to convey after their death said tenparcelsof land at P1.00 a parcel to appellees. In fact, the acknowledgement appended to thedocument they subscribed states that it was "their own free act andvoluntary deed." 1awphi1.net

Indeed, it is to be supposed that appellants understood and comprehended the legal import of

said documents when they executed it more so when bothof them had studied in reputablecenters of learning, one being a pharmacist and the other a member of the bar. Moreover, theyhave more than ample time — the six months intervening betwen the death of the donor and theexecution of the document — to ponder not only wish of their predecessors-in-interest but alsoon the propriety of putting in writing the mandate they have received. It is, therefore, reasonableto presume that that document represents the real wish of appellants' predecessors-in-interestand that the only thing to be determinedis its real import and legal implications.

That the document represents a recognition of pre-existing trust or a declaration of an expresstrust impressed on the ten parcels of land in question is evident. A declaration of trust has beendefined as an act by which a person acknowledges that the property, title to which he holds, isheld by him for the use of another (Griffith v. Maxfield, 51 S.W. 832, 66Ark. 513, 521). This is

precisely the nature of the will of the donor: to convey the titles of the lands to appellants withthe duty to hold them intrust for the appellees. Appellants oblingly complied with this dutybyexecuting the document under consideration.

True it is that to establish a trust the proof must be clear, satisfactory and convincing. It cannotrest on vague, uncertain evidence, or on a loose,equivocal or indefinite declaration ( In reTuttle's Estate, 200 A. 921, 132 Pa. Super 356); but here the document in question clearly andunequivocallydeclares the existence of the trust even if the same was executed subsequent tothe death of the trustor, Juana Juan, for it has been held that the right creating or declaring a



trust need not be contemporaneous or inter-parties (Stephenson v. Stephenson, 171 S.W. 2d265, 351 Mo. 8; In re Corbin's Trust Orhp., 57 York Leg. Rec. 201). It was even held that anexpress trust maybe declared by a writing made after the legal estate has been vested in thetrustee (Kurtz v. Robinson, Tex. Civ. App. 256 S.W. 2d 1003). The contention, therefore, ofappellants that the will and the donation executed by their predecessors-in-interest wereabsolute for it did not contain a hint that the lots in question will be held in trust by them does notmerit weight because the fact that an express trust was created by a deed which was absoluteon its face may be shown by a writing separate from the deed itself (Mugan v. Wheeler, 145S.W. 462, 241 Mo. 376).

The fact that the beneficiaries were not notified of the existence of the trust or that the latterhave not been given an opportunity to accept it isof no importance, for it is not essential to theexistence of a valid trustand to the right of the beneficiaries to enforce the same that they hadknowledge thereof the time of its creation (Stoehr v. Miller, 296 F. 414).Neither is it necessarythat the beneficiary should consent to the creation of the trust (Wockwire-Spencer SteelCorporation v. United Spring Mfg. Co.,142 N.E. 758, 247 Mass. 565). In fact it has been heldthat in case of a voluntary trust the assent of the beneficiary is not necessary to render itvalidbecause as a general rule acceptance by the beneficiary is presumed (Article 1446, new CivilCode; Cristobal v. Gomez, 50 Phil. 810).

It is true, as appellants contend, that the alleged declaration of trust was revoked, and havingbeen revoked it cannot be accepted, but the attempted revocation did not have any legal effect.The rule is that in the absence of any reservation of the power to revoke a voluntary trust isirrevocable without the consent of the beneficiary (Allen v. Safe Deposit and Trust Co.ofBaltimore, 7 A. 2d 180, 177 Md. 26). It cannot be revoked by the creatoralone, nor by thetrustee (Fricke v. Weber, C.C.A. Ohio, 145 F. 2d 737;Hughes v. C.I.R., C.C.A. 9, 104 F. 2d 144;Ewing v. Shannahan, 20 S.W. 1065,113 Mo. 188). Here, there is no such reservation.

Appellants contend that the lower court erred in applying the provisions of the new Civil Code ontrust. This is correct. The express trust was constituted during the lifetime of the predecessor-in-interest of appellants,that is, before the effectivity of the new Civil Code, although theinstrumentrecognizing and declaring such trust was executed on December 5, 1950, aftertheeffectivity of said Code. The Civil Code of 1889 and previous laws andauthorities on the matter,therefore, should govern the herein trust under the provisions of Article 2253 of the new Civilcode.

But the Civil Code of 1889 contains no specific provisions on trust as doesthe new Civil Code.Neither does the Code of Civil Procedure of 1901 for thesame merely provides for theproceeding to be followed relative to trustsand trustees (Chapter XVIII). This silence, however,does not mean that thejuridical institution of trust was then unknown in this jurisdiction, fortheprinciples relied upon by the Supreme Court before the effectivity of thenew Civil Code werethose embodied in Anglo-American jurisprudence as derivedfrom the Roman and Civil Lawprinciples (Government v. Abadilla, 46 Phil. 42).And these are the same principles on which wepredicate our ruling heretoforestated and on which we now rely for the validity of trust inquestion.

The trial court ordered appellants to render an accounting of the fruits of the properties inquestion even if appellees did not expressly ask for it intheir prayer for relief. We, however,believe that this is covered by the general prayer "for such other relief just and equitable underthe premises."What is important is to know from what what date the accounting should bemade.



The trial court ordered that the accounting be made from the time appellees demanded theconveyance of the ten parcels of land on August 11, 1956, in accordance with Article 1164 ofthe new Civil Code which provides that the creditor has a right to the fruit of the thing fromthetime the obligation to deliver it arises. But this cannot be done without first submitting proofthat the conditions stated in the mutual agreement hadbeen complied with. And this onlyhappened when the decision of the Supreme Court in G.R. No. L-8774 became final andexecutory. The ruling of the trialcourt in this respect should therefore be modified in the sensethat the accounting should be made from the date of the finality of the said decision.

We find no error in the directive of the trial court that appellants shouldfree the lands in questionfrom the encumbrance that was created thereon by them in favor of the Development Bank ofthe Philippines and one Claro cortez, for as trustees it is their duty to deliver the properties tothe cestui que trust free from all liens and encumbrances.

To recapitulate, we hold: (1) that the document executed on December 5, 1950 creates anexpress trust in favor of appellees; (2) that appellants had no right to revoke it without theconsent of the cestui que trust ; (3) that appellants must render an accounting of the fruits of thelands from the datethe judgement rendered in G.R. No. L-8774 became final and executory; and(4)that appellants should free said lands from all liens and encumbrances.

WHEREFORE, with the modification as above indicated with regard to accounting,we herebyaffirm the decision appealed from, without pronouncement as to costs.

Labrador, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.Padilla and Concepcion, JJ., took no part.



Documents

Trust Compiled Cases