You are on page 1of 13

G.R. No. 58010. March 31, 1993.

EMILIA O'LACO and HUCO LUNA, petitioners, vs. VALENTIN CO CHO


CHIT, O LAY KIA and COURT OF APPEALS, respondents.
Sergio L. Guadiz for petitioners.
Norberto J . Quisumbing & Associates for private respondents.

SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; ACTIONS; CONDITION
PRECEDENT TO FILING OF SUIT BETWEEN MEMBERS OF THE SAME
FAMILY; EFFECT OF FAILURE TO COMPLY WITH CONDITION.
Admittedly, the present action is between members of the same
family since petitioner Emilia O'Laco and respondent O Lay Kia are
half-sisters. Consequently, there should be an averment in the
compliant that earnest efforts toward a compromise have been
made, pursuant to Art. 222 of the New Civil Code, or a motion to
dismiss could have been filed under Sec. 1, par. (j), Rule 16 of the
Rules of Court. For, it is well-settled that the attempt to
compromise as well as the inability to succeed is a condition
precedent to the filing of a suit between members of the same
family. Hence, the defect in the complaint is assailable at any stage
of the proceedings, even on appeal, for lack of cause of action.

2. ID.; ID.; AMENDMENT TO COMPLAINT; WHEN PROPER;


AMENDMENT TO CONFORM TO EVIDENCE. Plaintiff may be
allowed to amend his complaint to correct the defect if the
amendment does not actually confer jurisdiction on the court in
which the action is filed, i.e., if the cause of action was originally
within that court's jurisdiction. In such case, the amendment is only
to cure the perceived defect in the complaint, thus may be
allowed. In the case before Us, while respondent-spouses did not
formally amend their complaint, they were nonetheless allowed to
introduce evidence purporting to show that earnest efforts toward

a compromise had been made, that is, respondent O Lay Kia


importuned Emilia O'Laco and pressed her for the transfer of the
title of the Oroquieta property in the name of spouses O Lay Kia
and Valentin Co Cho Chit, just before Emilia's marriage to Hugo
Luna. But, instead of transferring the title as requested, Emilia sold
the property to the Roman Catholic Archbishop of Manila. This
testimony was not objected to by petitioner-spouses. Hence, the
complaint was deemed accordingly amended to conform to the
evidence, pursuant to Sec. 5, Rule 10 of the Rules of Court which
reads "Sec. 5. Amendment to conform to or authorize
presentation of evidence. When issues not raised by the
pleadings are tried by express or implied consent of the parties,
they shall be treated in all respects, as if they had been raised in
the pleadings . . ." Indeed, if the defendant permits evidence to be
introduced without objection and which supplies the necessary
allegations of a defective complaint, then the evidence is deemed
to have the effect of curing the defects of the complaint. The
insufficiency of the allegations in the complaint is deemed ipso
facto rectified.
3. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; EXPRESS
TRUST; DEFINED; IMPLIED TRUST; DEFINED. By definition, trust
relations between parties may either be express or implied.
Express trusts are those which are created by the direct and
positive acts of the parties, by some writing or deed, or will, or by
words evincing an intention to create a trust. Implied trusts are
those which, without being express, are deducible from the nature
of the transaction as matters of intent, or which are superinduced
on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties.

4. ID.; ID.; ID.; IMPLIED TRUSTS; RESULTING TRUST; BASIS


THEREOF; CONSTRUCTIVE TRUST; BASIS THEREOF. Implied trust
may either be resulting or constructive trusts, both coming into
being by operation of law. Resulting trusts are based on the
equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always
to have been contemplated by the parties. They arise from the
nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with

legal title but is obligated in equity to hold his legal title for the
benefit of another. On the other hand, constructive trusts are
created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold.

5. ID.; ID.; ID.; EXPRESS TRUSTS CONCERNING IMMOVABLES NOT


PROVED BY PAROL EVIDENCE; IMPLIED TRUST IN REAL PROPERTY
ESTABLISHED BY PAROL EVIDENCE; PROOF REQUIRED; CASE AT
BAR. Unlike express trusts concerning immovables or any
interest therein which cannot be proved by parol evidence, implied
trusts may be established by oral evidence. However, in order to
establish an implied trust in real property by parol evidence, the
proof should be as fully convincing as if the acts giving rise to the
trust obligation were proven by an authentic document. It cannot
be established upon vague and inconclusive proof. After a thorough
review of the evidence on record, We hold that a resulting trust
was indeed intended by the parties under Art. 1448 of the New
Civil Code which states "Art. 1448. There is an implied trust
when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the
beneficial interest of the property. The former is the trustee, while
the latter is the beneficiary . . ." As stipulated by the parties, the
document of sale, the owner's duplicate copy of the certificate of
title, insurance policies, receipt of initial premium of insurance
coverage and real estate tax receipts were all in the possession of
respondent-spouses which they offered in evidence. As
emphatically asserted by respondent O Lay Kia, the reason why
these documents of ownership remained with her is that the land
in question belonged to her. Indeed, there can be no persuasive
rationalization for the possession of these documents of ownership
by respondent-spouses for seventeen (17) years after the
Oroquieta property was purchased in 1943 than that of precluding
its possible sale, alienation or conveyance by Emilia O'Laco, absent
any machination or fraud. This continued possession of the
documents, together with other corroborating evidence spread on
record, strongly suggests that Emilia O'Laco merely held the
Oroquieta property in trust for respondent-spouses.

6. ID.; ID.; ID.; CONSTRUCTIVE TRUST SUBJECT TO PRESCRIPTION;


RESULTING
TRUST
IMPRESCRIPTIBLE;
RESULTING
TRUST
CONVERTED TO CONSTRUCTIVE TRUST BY REPUDIATION;
REQUISITES;
PRESCRIPTIVE
PERIOD
FOR
ACTION
FOR
RECONVEYANCE BASED ON CONSTRUCTIVE TRUST. As
differentiated from constructive trusts, where the settled rule is
that prescription may supervene, in resulting trust, the rule of
imprescriptibility may apply for as long as the trustee has not
repudiated the trust. Once the resulting trust is repudiated,
however, it is converted into a constructive trust and is subject to
prescription. A resulting trust is repudiated if the following
requisites concur: (a) the trustee has performed unequivocal acts
of repudiation amounting to an ouster of the cestui qui trust; (b)
such positive acts of repudiation have been made known to the
cestui qui trust; and, (c) the evidence thereon is clear and
convincing. In Tale v. Court of Appeals the Court categorically ruled
that an action for reconveyance based on an implied or
constructive trust must perforce prescribe in ten (10) years, and
not otherwise, thereby modifying previous decisions holding that
the prescriptive period was four (4) years. So long as the trustee
recognizes the trust, the beneficiary may rely upon the recognition,
and ordinarily will not be in fault for omitting to bring an action to
enforce his rights. There is no running of the prescriptive period if
the trustee expressly recognizes the resulting trust. Since the
complaint for breach of trust was filed by respondent-spouses two
(2) months after acquiring knowledge of the sale, the action
therefore has not yet prescribed.

DECISION
BELLOSILLO, J p:
History is replete with cases of erstwhile close family relations put
asunder by property disputes. This is one of them. It involves halfsisters each claiming ownership over a parcel of land. While
petitioner Emilia O'Laco asserts that she merely left the certificate
of title covering the property with private respondent O Lay Kia for
safekeeping, the latter who is the former's older sister insists that

the title was in her possession because she and her husband
bought the property from their conjugal funds. To be resolved
therefore is the issue of whether a resulting trust was intended by
them in the acquisition of the property. The trial court declared that
there was no trust relation of any sort between the sisters. 1 The
Court of Appeals ruled otherwise. 2 Hence, the instant petition for
review on certiorari of the decision of the appellate court together
with its resolution denying reconsideration. 3
It appears that on 31 May 1943, the Philippine Sugar Estate
Development Company, Ltd., sold a parcel of land, Lot No. 5, Block
No. 10, Plan Psu-10038, situated at Oroquieta St., Sta. Cruz, Manila,
with the Deed of Absolute Sale naming Emilia O'Laco as vendee;
thereafter, Transfer Certificate of Title No. 66456 was issued in her
name.
On 17 May 1960, private respondent-spouses Valentin Co Cho Chit
and O Lay Wa learned from the newspapers that Emilia O'Laco sold
the same property to the Roman Catholic Archbishop of Manila for
P230,000.00, with assumption of the real estate mortgage
constituted thereon. 4

On 22 June 1960, respondent-spouses Valentin Co Cho Chit and O


Lay Kia sued petitioner-spouses Emilia O'Laco and Hugo Luna to
recover the purchase price of the land before the then Court of
First Instance of Rizal, respondent-spouses asserting that petitioner
Emilia O'Laco knew that they were the real vendees of the
Oroquieta property sold in 1943 by Philippine Sugar Estate
Development Company, Ltd., and that the legal title thereto was
merely placed in her name. They contend that Emilia O'Laco
breached the trust when she sold the land to the Roman Catholic
Archbishop of Manila. Meanwhile, they asked the trial court to
garnish all the amounts still due and payable to petitioner-spouses
arising from the sale, which was granted on 30 June 1960. 5

Petitioner-spouses deny the existence of any form of trust relation.


They aver that Emilia O'Laco actually bought the property with her
own money; that she left the Deed of Absolute Sale and the

corresponding
title
with
respondent-spouses
merely
for
safekeeping; that when she asked for the return of the documents
evidencing her ownership, respondent-spouses told her that these
were misplaced or lost; and, that in view of the loss, she filed a
petition for issuance of a new title, and on 18 August 1944 the then
Court of First Instance of Manila granted her petition.
On 20 September 1976, finding no trust relation between the
parties, the trial court dismissed the complaint together with the
counterclaim. Petitioners and respondents appealed.

On 9 April 1981, the Court of Appeals set aside the decision of the
trial court thus
". . . We set aside the decision of the lower court dated September
20, 1976 and the order of January 5, 1977 and another one is
hereby entered ordering the defendants-appellees to pay plaintiffsappellants jointly and severally the sum of P230,000.00
representing the value of the property subject of the sale with
assumption of mortgage to the Roman Catholic Archbishop of
Manila with legal interest from the filing of the complaint until fully
paid, the sum of P10,000.00 as attorney's fees, plus costs."

On 7 August 1981, the Court of Appeals denied reconsideration of


its decision, prompting petitioners to come to this Court for relief.
Petitioners contend that the present action should have been
dismissed. They argue that the complaint fails to allege that
earnest efforts toward a compromise were exerted considering that
the suit is between members of the same family, and no trust
relation exists between them. Even assuming ex argumenti that
there is such a relation, petitioners further argue, respondents are
already barred by laches.
We are not persuaded. Admittedly, the present action is between
members of the same family since petitioner Emilia O'Laco and
respondent O Lay Kia are half-sisters. Consequently, there should

be an averment in the complaint that earnest efforts toward a


compromise have been made, pursuant to Art. 222 of the New Civil
Code, 6 or a motion to dismiss could have been filed under Sec. 1,
par. (j), Rule 16, of the Rules of Court. 7 For, it is well-settled that
the attempt to compromise as well as the inability to succeed is a
condition precedent to the filing of a suit between members of the
same family. 8 Hence, the defect in the complaint is assailable at
any stage of the proceedings, even on appeal, for lack of cause of
action. 9

But, plaintiff may be allowed to amend his complaint to correct the


defect if the amendment does not actually confer jurisdiction on
the court in which the action is filed, i.e., if the cause of action was
originally within that court's jurisdiction. 10 In such case, the
amendment is only to cure the perceived defect in the complaint,
thus may be allowed.

In the case before Us, while respondent-spouses did not formally


amend their complaint, they were nonetheless allowed to introduce
evidence purporting to show that earnest efforts toward a
compromise had been made, that is, respondent O Lay Kia
importuned Emilia O'Laco and pressed her for the transfer of the
title of the Oroquieta property in the name of spouses O Lay Kia
and Valentin Co Cho Chit, just before Emilia's marriage to Hugo
Luna. 11 But, instead of transferring the title as requested, Emilia
sold the property to the Roman Catholic Archbishop of Manila. This
testimony was not objected to by petitioner-spouses. Hence, the
complaint was deemed accordingly amended to conform to the
evidence, 12 pursuant to Sec. 5, Rule 10 of the Rules of Court
which reads
"SECTION 5. Amendment to conform to or authorize presentation
of evidence. When issues not raised by the pleadings are tried
by express or implied consent of the parties, they shall be treated
in all respects, as, if they had been raised in the pleadings . . ."
(emphasis supplied).

Indeed, if the defendant permits evidence to be introduced without


objection and which supplies the necessary allegations of a
defective complaint, then the evidence is deemed to have the
effect of curing the defects of the complaint. 13 The insufficiency
of the allegations in the complaint is deemed ipso facto rectified.
14
But the more crucial issue before Us is whether there is a trust
relation between the parties in contemplation of law.
We find that there is. By definition, trust relations between parties
may either be express or implied. 15 Express trusts are those
which are created by the direct and positive acts of the parties, by
some writing or deed, or will, or by words evincing an intention to
create a trust. 16 Implied trusts are those which, without being
express, are deducible from the nature of the transaction as
matters of intent, or which are superinduced on the transaction by
operation of law as matters of equity, independently of the
particular intention of the parties.17 Implied trusts may either be
resulting or constructive trusts, both coming into being by
operation of law. 18
Resulting trusts are based on the equitable doctrine that valuable
consideration and not legal title determines the equitable title or
interest 19 and are presumed always to have been contemplated
by the parties. They arise from the nature or circumstances of the
consideration involved in a transaction whereby one person
thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. 20 On the other
hand, constructive trusts are created by the construction of equity
in order to satisfy the demands of justice 21 and prevent unjust
enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity and good
conscience, to hold. 22
Specific examples of resulting trusts may be found in the Civil
Code, particularly Arts. 1448, 1449, 1451,1452 and 1453, 23 while
constructive trusts are illustrated in Arts. 1450, 1454, 1455 and
1456. 24

Unlike express trusts concerning immovables or any interest


therein which cannot be proved by parol evidence, 25 implied
trusts may be established by oral evidence. 26 However, in order
to establish an implied trust in real property by parol evidence, the
proof should be as fully convincing as if the acts giving rise to the
trust obligation were proven by an authentic document. 27 It
cannot be established upon vague and inconclusive proof. 28

After a thorough review of the evidence on record, We hold that a


resulting trust was indeed intended by the parties under Art. 1448
of the New Civil Code which states
"ARTICLE 1448. There is an implied trust when property is sold, and
the legal estate is granted to one party but the price is paid by
another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the
beneficiary . . ." (emphasis supplied).

First. As stipulated by the parties, the document of sale, the


owner's duplicate copy of the certificate of title, insurance policies,
receipt of initial premium of insurance coverage and real estate tax
receipts ware all in the possession of respondent spouses which
they offered in evidence. As emphatically asserted by respondent
O Lay Kia, the reason why these documents of ownership remained
with her is that the land in question belonged to her. 29

Indeed, there can be no persuasive rationalization for the


possession of these documents of ownership by respondentspouses for seventeen (17) years after the Oroquieta property was
purchased in 1943 than that of precluding its possible sale,
alienation or conveyance by Emilia O'Laco, absent any machination
or fraud. This continued possession of the documents, together
with other corroborating evidence spread on record, strongly
suggests that Emilia O'Laco merely held the Oroquieta property in
trust for respondent-spouses.

Second. It may be worth to mention that before buying the


Oroquieta property, respondent-spouses purchased another
property situated in Kusang-Loob, Sta. Cruz, Manila, where the
certificate of title was placed in the name of Ambrosio O'Laco,
older brother of Emilia, under similar or identical circumstances.
The testimony of former counsel for respondent-spouses, then
Associate Justice Antonio G. Lucero of the Court of Appeals, is
enlightening
"Q In the same conversation he told you how he would buy the
property (referring to the Oroquieta property), he and his wife?
"A Yes, Sir, he did.
"Q What did he say?
xxx xxx xxx
"A He said he and his wife has (sic) already acquired by purchase a
certain property located at Kusang-Loob, Sta. Cruz, Manila. He told
me he would like to place the Oroquieta Maternity Hospital in case
the negotiation materialize(s) in the name of a sister of his wife
(O'Laco)" (emphasis supplied). 30

On the part of respondent-spouses, they explained that the reason


why they did not place these Oroquieta and Kusang-Loob
properties in their name was that being Chinese nationals at the
time of the purchase they did not want to execute the required
affidavit to the effect that they were allies of the Japanese. 31
Since O Lay Kia took care of Emilia who was still young when her
mother died, 32 respondent-spouses did not hesitate to place the
title of the Oroquieta property in Emilia's name.
Quite significantly, respondent-spouses also instituted an action for
reconveyance against Ambrosio O'Laco when the latter claimed the
Kusang-Loob property as his own. A similar stipulation of facts was
likewise entered, i.e., respondent-spouses had in their possession

documents showing ownership of the Kusang-Loob property which


they offered in evidence. In that case, the decision of the trial
court, now final and executory, declared respondent-spouses as
owners of the Kusang-Loob property and ordered Ambrosio O'Laco
to reconvey it to them. 33

Incidentally, Ambrosio O'Laco thus charged respondent spouses


Valentin Co Cho Cit and O Lay Kia before the Anti-Dummy Board,
docketed as Case No. 2424, for their acquisition of the KusangLoob and Oroquieta properties. 34 He claimed that respondentspouses utilized his name in buying the Kusang-Loob property
while that of petitioner O'Laco was used in the purchase of the
Oroquieta property. In effect, there was an implied admission by
Ambrosio that his sister Emilia, like him, was merely used as a
dummy. However, the Anti-Dummy Board exonerated respondentspouses since the purchases were made in 1943, or during World
War II, when the Anti-Dummy Law was not enforceable.

Third. The circumstances by which Emilia O'Laco obtained a new


title by reason of the alleged loss of the old title then in the
possession of respondent-spouses cast serious doubt on the
veracity of her ownership. The petitions respectively filed by Emilia
O'Laco and Ambrosio O'Laco for the Oroquieta and the KusangLoob properties were both granted on the same day, 18 August
1944, by the then Court of First Instance of Manila. These orders
were recorded in the Primary Entry Book of the Register of Deeds
of Manila at the same time, 2:35 o'clock in the afternoon of 1
September 1944, in consecutive entries, Entries Nos. 246117-18.
35 This coincidence lends credence to the position of respondentspouses that there was in fact a conspiracy between the siblings
Ambrosio and Emilia to defraud and deprive respondents of their
title to the Oroquieta and Kusang-Loob properties.

Fourth. Until the sale of the Oroquieta property to the Roman


Catholic Archbishop of Manila, petitioner Emilia O'Laco actually
recognized the trust. Specifically, when respondent spouses

learned that Emilia was getting married to Hugo, O Lay Kia asked
her to have the title to the property already transferred to her and
her husband Valentin, and Emilia assured her that "would be
arranged (maaayos na)" after her wedding. 36 Her answer was an
express recognition of the trust, otherwise, she would have refused
the request outright. Petitioners never objected to this evidence;
nor did they attempt to controvert it.

Fifth. The trial court itself determined that "Valentin Co Cho Chit
and O Lay Kia had some money with which they could buy the
property." 37 In fact, Valentin was the Chief Mechanic of the
Paniqui Sugar Mills, was engaged in the buy and sell business,
operated a gasoline station, and owned an auto supply store as
well as a ten-door apartment in Caloocan City. 38 In contrast,
Emilia O'Laco failed to convince the Court that she was financially
capable of purchasing the Oroquieta property. In fact, she opened a
bank account only in 1946 and likewise began filing income tax
returns that same year, 39 while the property in question was
bought in 1943. Respondent-spouses even helped Emilia and her
brothers in their expenses and livelihood. Emilia could only give a
vague account on how she raised the money for the purchase of
the property. Her narration of the transaction of sale abounds with
"I don't know" and "I don't remember." 40

Having established a resulting trust between the parties, the next


question is whether prescription has set in.

As differentiated from constructive trusts, where the settled rule is


that prescription may supervene, in resulting trust, the rule of
imprescriptibility may apply for as long as the trustee has not
repudiated the trust. 41 Once the resulting trust is repudiated,
however, it is converted into a constructive trust and is subject to
prescription.
A resulting trust is repudiated if the following requisites concur: (a)
the trustee has performed unequivocal acts of repudiation

amounting to an ouster of the cestui qui trust; (b) such positive


acts of repudiation have been made known to the cestui qui trust;
and, (c) the evidence thereon is clear and convincing. 42

In Tale v. Court of Appeals 43 the Court categorically ruled that an


action for reconveyance based on an implied or constructive trust
must perforce prescribe in ten (10) years, and not otherwise,
thereby modifying previous decisions holding that the prescriptive
period was four (4) years.

After all, so long as the trustee recognizes the trust, the beneficiary
may rely upon the recognition, and ordinarily will not be in fault for
omitting to bring an action to enforce his rights. 44 There is no
running of the prescriptive period if the trustee expressly
recognizes the resulting trust. 45 Since the complaint for breach of
trust was filed by respondent-spouses two (2) months after
acquiring knowledge of the sale, the action therefore has not yet
prescribed.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The
Decision of the Court of Appeals of 9 April 1981, which reversed
the trial court, is AFFIRMED. Costs against petitioners.
SO ORDERED.

Neither the registration of the Oroquieta property in the name of


petitioner Emilia O'Laco nor the issuance of a new Torrens title in
1944 in her name in lieu of the alleged loss of the original may be
made the basis for the commencement of the prescriptive period.
For, the issuance of the Torrens title in the name of Emilia O'Laco
could not be considered adverse, much less fraudulent. Precisely,
although the property was bought by respondent-spouses, the
legal title was placed in the name of Emilia O'Laco. The transfer of
the Torrens title in her name was only in consonance with the deed
of sale in her favor. Consequently, there was no cause for any
alarm on the part of respondent-spouses. As late as 1959, or just
before she got married, Emilia continued to recognize the
ownership of respondent-spouses over the Oroquieta property.
Thus, until that point, respondent-spouses were not aware of any
act of Emilia which would convey to them the idea that she was
repudiating the resulting trust. The second requisite is therefore
absent. Hence, prescription did not begin to run until the sale of
the Oroquieta property, which was clearly an act of repudiation.

But immediately after Emilia sold the Oroquieta property which is


obviously a disavowal of the resulting trust, respondent-spouses
instituted the present suit for breach of trust. Correspondingly,
laches cannot lie against them.

Cruz , Grio-Aquino and Quiason, JJ ., concur.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 106251 November 19, 1993


CHIAO LIONG TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON MANUEL T.
MURO, Presiding Judge, RTC of Manila, Branch 54 and TAN
BAN YONG, respondents.
Joaquin M. Arao for petitioner.
Macavinta & Sta. Ana Law Offices for private respondent.

NOCON, J.:
Petitioner seeks in this petition the reversal of the Court of Appeals'
decision dated May 15, 1992 in CA-G.R. CV No. 29982 affirming the
unfavorable decision of the trial court 1 in his suit for replevin and
damages.

Petitioner Chiao Liong Tan claims to be the owner of a motor


vehicle, particularly described as Isuzu Elf van, 1976 Model with
Motor No. 44999-2 and Chassis No. 9646780 which he purchased in
March, 1987. As owner thereof, petitioner says he has been in
possession, enjoyment and utilization of the said motor vehicle
until it was taken from him by his older brother, Tan Ban Yong, the
private respondent herein.

Petitioner relies principally on the fact that the Isuzu Elf van is
registered in his name under Certificate of Registration No.
1501909. He claims in his testimony before the trial court that the
said vehicle was purchased from Balintawak Isuzu Motor Center for
a price of over P100,000.00; that he sent his brother to pay for the
van and the receipt for payment was placed in his (petitioner's)
name because it was his money that was used to pay for the
vehicle; that he allowed his brother to use the van because the
latter was working for his company, the CLT Industries; and that his
brother later refused to return the van to him and appropriated the
same for himself.

petitioner to look for a vehicle and gave him the amount of


P5,000.00 to be deposited as down payment for an Isuzu Elf Van
which would be available in about a month. After a month, he
himself paid the whole price out of a loan of P140,000.00 which he
obtained from his friend Tan Pit Sin. Inasmuch as the receipt for the
downpayment was placed in the name of petitioner and since he
was still on good terms with him, private respondent allowed the
registration of the vehicle in petitioner's name. It was also their
understanding that he would keep the van for himself because CLT
Industries was not in a position to pay him. Hence, from the time of
the purchase, he had been in possession of the vehicle including
the original registration papers thereof, but allowing petitioner
from time to time to use the van for deliveries of machinery.

Tan Pit Sin who had known private respondent since 1968, not only
because they were classmates but also because of their business
dealings with each other, confirmed that private respondent
borrowed from him P140,000.00 in March, 1987 to buy an Isuzu Elf
van. In fact, he had borrowed said vehicle for a few times.

Gina Lu, an employee of the Balintawak Isuzu Motors, testified that


private respondent paid the balance of the purchase price of the
Isuzu Elf van in the amount of P133,000.00 but the receipt was
issued in the name of Chiao Liong Tan to make the records
consistent because it was the latter who made the deposit of
P5,000.00. Thereafter, the Isuzu Elf van was released to him.

After hearing, the trial court found for private respondent. The
dispositive portion of the decision reads as follows:
On the other hand, private respondent testified that CLT Industries
is a family business that was placed in petitioner's name because
at that time he was then leaving for the United States and
petitioner is the remaining Filipino in the family residing in the
Philippines. When the family business needed a vehicle in 1987 for
use in the delivery of machinery to its customers, he asked

WHEREFORE, judgment is hereby rendered declaring


defendant Tan Ban Yong to be the owner of and entitled to
the possession of the vehicle described in par. 2 of the
Complaint, and the plaintiff is hereby ordered to deliver
possession thereof to the said defendant or in the alternative
if such delivery cannot be made, to the sum of P138,000.00

as the value of the vehicle taking into account the


depreciation of the vehicle but offset by the inflation rate; in
either alternative, plaintiff is also ordered to pay to said
defendant consequential damages of P20,000.00 for the
latter having been deprived of the possession and use of the
vehicle and to pay the costs. All amounts adjudged herein,
except costs, shall bear interest at the legal rate from the
date of this decision, until delivery of the vehicle or the
alternative payment of the value thereof as well as payment
of consequential damages is paid; the interest applies to the
value of the vehicle if return thereof is delayed. No cost. 2
Finding no merit in the appeal, the respondent Court of Appeals
affirmed the decision of the trial court. Undaunted by his
successive failures, petitioner comes to us and raised the following
error allegedly committed by the respondent Court of Appeals, to
wit:
1. . . . in finding the testimonies of private respondent's
witnesses credible;
2. . . . in disregarding the Certificate of Registration of the
subject motor vehicle as proof of ownership by the
petitioner-appellant. 3
Since the Court of Appeals merely affirmed the trial court's
assessment of the credibility of the witnesses that testified before
it, petitioner is in effect questioning the factual findings of said
court and its appraisal of their testimony which this Court cannot
review, its jurisdiction being limited to questions of law. The
considerable weight given to the findings of the trial court is not
without any reason. It had the opportunity to observe the
demeanor of witnesses which is usually not reflected in the
transcript of records. The profundity of the conclusions thus
reached is just the result of such observance. When the Court of
Appeals affirmed said findings, it goes to show that no
misapprehension of facts was committed as said Court has the
power to scrutinize said factual findings under existing rules of
procedure.

In concluding that the testimonies of Tan Ban Yong, Tan Pit Sin and
Gina Lu cast doubt on the petitioner's ownership of the motor
vehicle in question, both the trial court and the Court of Appeals
attached significance to their respective interlocking accounts on
how the motor vehicle was acquired, complete with the financing
source and mode of repayment. Respondent Tan Ban Yong's
declaration that he borrowed P140,000.00 from Tan Pit Sin and paid
the balance of the purchase price of the motor vehicle himself to
Gina Lu of the Balintawak Isuzu Motors, is corroborated by the
above-mentioned persons themselves. Tan Pit Sin not only
confirmed the loan but also stated that the same was paid in three
(3) months; P50,000.00 on the first payment; another P50,000.00
on the second payment and P40,000.00 on the last payment. 4
Gina Lu, who testified at the instance of petitioner, declared that
the downpayment of P5,000.00 was paid by petitioner and so the
receipt for the same was issued in his name but the balance of
P133,000.00 was paid by private respondent and to make the
record consistent, she issued the receipt in the name of petitioner
again.

In contrast to the clear and categorical averments of private


respondent and the witnesses in this case negating petitioner's
ownership of the motor vehicle in question, petitioner's averments
before the trial court and this Court are not only disparate but
conflicting. In his testimony below, petitioner averred that he used
his own money to purchase the motor vehicle by paying the sum of
P100,000.00, 5 which testimony is negated by his admission on
page 5 of his petition 6 before this Court that private respondent
borrowed money from Tan Pit Sin with which to purchase the
subject motor vehicle. Then, in his pleading before the court below,
particularly in his reply to the answer of private respondent,
petitioner alleged that the motor vehicle was intended for his
exclusive use and not to service the family business. 7 And yet , in
his petition before this Court, he claimed that the subject motor
vehicle was purchased for CLT Industries, which he solely owned
and accordingly, registered in the latter's name. 8 On top of these
entangled averments, petitioner did not have in his possession the
Certificate of Registration of the motor vehicle and the official
receipt of payment for the same, thereby lending credence to the
claim of private respondent who has possession thereof, that he
owns the subject motor vehicle.

A certificate of registration of a motor vehicle in one's name indeed


creates a strong presumption of ownership. For all practical
purposes, the person in whose favor it has been issued is virtually
the owner thereof unless proved otherwise. In other words, such
presumption is rebuttable by competent proof.

The New Civil Code recognizes cases of implied trust other than
those enumerated therein. 9 Thus, although no specific provision
could be cited to apply to the parties herein, it is undeniable that
an implied trust was created when the certificate of registration of
the motor vehicle was placed in the name of the petitioner
although the price thereof was not paid by him but by private
respondent. The principle that a trustee who puts a certificate of
registration in his name cannot repudiate the trust by relying on
the registration is one of the well-known limitations upon a title. A
trust, which derives its strength from the confidence one reposes
on another especially between brothers, does not lose that
character simply because of what appears in a legal document.

Even under the Torrens System of land registration, this Court in


some instances did away with the irrevocability or indefeasibility of
a certificate of title to prevent injustice against the rightful owner
of the property. 10

It is true that the judgment 11 in a replevin suit must only resolve in


whom is the right of possession. Primarily, the action of replevin is
possessory in character and determined nothing more than the
right of possession. However, when the title to the property is
distinctly put in issue by the defendant's plea and by reason of the
policy to settle in one action all the conflicting claims of the parties
to the possession of the property in controversy, the question of
ownership may be resolved in the same proceeding.

Procedure-wise, the Court observes that the action by petitioner as


plaintiff in the trial court was only one for Replevin and Damages.
Since replevin is only a provisional remedy where the replevin
plaintiff claims immediate delivery of personal property pending
the judgment of the trial court in a principal case, 12 the petitioner
should have filed in the trial court as a main case an action to
recover possession of the Isuzu Elf van which was in the possession
of the private respondent. Logically, the basis of petitioner's cause
of action should have been his ownership of said van.In the State
of California, from whose Code of Procedure 13 we copied our rule
on replevin, their old replevin rule which allowed the immediate
delivery of the chattel at the commencement of the action upon
application with bond by the replevin plaintiff had already been
struck down as early as July 1, 1971 in the case of Blair v. Pitchess.
14
As in fact, on June 12, 1972 when the United States Supreme
Court struck down as unconstitutional the Florida and Pennsylvania
replevin statutes in Fuentes v. Shevin, 15 most of the states, on
their own, changed their replevin statutes to include a mandatory
preliminary hearing before the writ could be issued, similar to our
mandatory preliminary hearing before the writ of preliminary
injunction can be issued.

If that had been the case in this jurisdiction, then the trial judge
would have discovered right away at the preliminary hearing that
private respondent should have immediately staked his claim of
ownership and that would have created serious doubts about
petitioner's claim of ownership. Most likely, the writ would not have
been issued and the complaint would have been dismissed motu
proprio by the trial court upon the discovery that the petitioner did
not have a principal case therein. As it is, the complaint proceeded
its course to the detriment of private respondent.

Finally, although a "replevin" action is primarily one for the


possession of personality, yet it is sufficiently flexible to authorize a
settlement of all equities between the parties, arising from or
growing out of the main controversy. 17 Thus, in an action for

replevin where the defendant is adjudged entitled to possession,


he need not go to another forum to procure relief for the return of
the replevied property or secure a judgment for the value of the
property in case the adjudged return thereof could not be had.
Appropriately, the trial court rendered an alternative judgment.

WHEREFORE, the questioned decision being in accordance with the


law, the instant petition for review is hereby DENIED for lack of
merit.
SO ORDERED.
Narvasa, C.J., Padilla and Regalado, JJ., concur. Puno, J., took no
part.

Republic of the Philippines


SUPREME COURT
Manila FIRST DIVISION

This case concerns a rather large tract of land, with an area of


225,322 square meters, situated in Hinigaran, Negros Occidental.
The land, known as Lot 818, was originally owned, at least as far as
this case is concerned, by two co-owners in equal shares: (1)
Maximo Juanico, married to Rosa Gegato, and (2) Matilde Geolingo,
married to Dionisio Mongcal. Their co-ownership was so set out in
their certificate of title, TCT No. 30009. 2

Maximo Juanico died on May 21, 1942, survived by his wife, the
aforenamed Rosa Gegato, and three (3) minor children:
Presentacion, Resurreccion, and Catalina. 3
The other co-owner, Matilde Geolingo, and her husband, Dionisio
Mongcal, also died; and their only child, Loreto Mongcal, executed
an affidavit adjudicating to herself, as sole heir, her mother's onehalf (1/2) share in Lot 818. 4 That share she sold on December 14,
1951 to Rosa Gicano. In virtue thereof, TCT No. 30009 of the
original co-owners was cancelled and a new one, TCT No. 8878,
was issued in the names of (1) Maximo Juanico, married to Rosa
Gegato (1/2 share) and (2) Rosa Gicano, married to Gorgonio
Geollegue (1/2 share). 5

G.R. No. L-63575 January 20, 1988


ROSA GICANO and NENITA GEOLLEGUE, petitioners,
vs.
ROSA GEGATO, RESURRECCION GEGATO and CATALINA
GEGATO, respondents.

NARVASA, J.:
An action to recover an immovable from a defendant allegedly
holding it under a constructive trust prescribes in ten (10) years,
counted from the issuance of title to said defendant: so we have
ruled in a number of cases; 1 and so We rule in this case.

On August 23, 1952, a document was executed which gave rise to


the controversy at bar. That document purported to be a Deed of
Sale, or more properly, a deed of dacion en pago de deuda,
intended to satisfy a debt of P2,333.33 of the late Maximo Juanico
to Rosa Gicano by the conveyance, according to the express terms
of the document, of said Maximo Juanico's one-half (1/2) share in
Lot 818. It was signed by Rosa Gegato and her second husband,
Raymundo Pundon. The latter took part in the transaction as
judicial guardian of two (2) of Rosa's surviving minor children,
Resurreccion and Catalina the third, Presentacion, having earlier
died without issue. It was acknowledged by them before Notary
Public Vicente T. Remitio. The sale was registered, TCT No. 8878
was cancelled, and on September 8, 1952 the Register of Deeds
issued TCT No. 10189, covering the entirety of Lot 818, solely in
the name of Rosa Gicano, married to Gorgonio Geollegue. 6

Twenty-three (23) years afterwards, or on February 13, 1976, Rosa


Gegato and her daughters, Resurreccion and Catalina, brought an
action in the Court of First Instance of Negros Occidental against
Rosa Gicano and her husband, Gorgonio Geollegue, to compel the
latter to reconvey Lot No. 818 to them and/or pay damages. 7 Rosa
Gegato and her daughters alleged that it had never been their
intention to transfer the entire one-half (1/2) share in Lot No. 818
to Rosa Gicano in payment of Maximo Juanico's debt in the sum of
P2,333.33, but only one-third of the share of the minors in said
undivided half of the property; that they were deceived into
believing that it was only this one-third interest which was really
being conveyed by the Deed of Sale of August 23, 1952, and it was
on that understanding that Rosa Gegato and her minor children's
judicial guardian, Raymundo Pundon, had signed the deed, both of
them being unable to read and write English; that they discovered
the fraud perpetrated on them only in 1975, when they hired a
surveyor to partition the property and the latter informed them
that title to Lot No. 818 had long since issued solely in the name of
Nenita Geollegue, who had purchased it from her mother, Rosa
Gegato Geollegue and had in due course obtained title in her
name, TCT 31543, on June 23, 1964; and that on October 17, 1974,
said Nenita Geollegue had mortgaged the lot to the Philippine
Commercial and Industrial Bank as security for a loan of
P156,000.00. 8

Rosa Gicano and her co-defendants filed a motion to dismiss the


complaint alleging as grounds therefor, plaintiffs' lack of cause of
action, laches, estoppel, and prescription. 9 The Trial court denied
the motion in so far as it was based on the first ground, lack of
cause of action. 10 It deferred resolution thereon as regards the
other grounds until after trial on the merits. 11 Subsequently,
however, after considering the pre-trial briefs and memoranda
submitted by the parties in connection with the pre-trial, and
without scheduling the case for trial on the merits any longer, the
Trial Court promulgated an Order dismissing the complaint on the
ground of prescription and laches. 12 It opined that the action,
being one for reconveyance predicated on an implied trust,
prescribed in 10 years, commencing from the date that the initial
document of transfer was registered and title issued; and since 23

years had already elapsed on the day of the institution of the


action at bar, reckoned from the registration of the deed of sale
and issuance of title, the suit was time-barred.

The Trial Court's Order was however reversed by the Court of


Appeals, on an appeal taken by Rosa Gegato, et al., and the case
was remanded with instructions that a full dress trial on the merits
be conducted. In its Decision promulgated on May 26, 1982, 13 the
Appellate Court declared that the outright dismissal of complaint
on the ground of prescription was premature and violative of due
process because it denied the parties the opportunity to prove
their claims and defenses. It also held that the action was not in
truth time-barred. The Appellate Court's reasoning does not
however appear persuasive. It said that absent any proof to the
contrary, the one-half (1/2) share of the deceased Maximo Juanico
in Lot 818, originally owned in common by him with Matilde
Geolingo, must be presumed to be conjugal in character; hence,
only one-half (1/2) of said half constituted the estate of Maximo
Juanico upon his death, the other half pertaining in ownership to
his widow, Rosa Gegato, as her conjugal share; hence, Rosa
Gegato's conjugal share could not have been meant to be included
in the Deed of Sale of August 23, 1952, there being nothing in its
language in fact to show this, and that deed was valid only in so far
as concerned the transfer of 1/3 of her children's inheritance, but
void as regards the remaining 2/3 for lack of cause or object in
accordance with Article 1409 of the Civil Code, the action to
declare its illegality being imprescriptible under Article 1410 of the
same Code.

But the action instituted by the plaintiffs Rosa Gegato, et al. was
not one to declare the deed of sale of August 23, 1952 void ab
initio, for lack of cause or object in accordance with Article 1409 of
the Civil Code, which is really imprescriptible, but to annul it on
account of fraud, on the theory of constructive trust, which
prescribes in ten (10) years. In the case at bar, Rosa Gegato and
her minor children by her deceased husband, Maximo Juanico (said
children being represented by their judicial guardian, Ramundo
Pundon) had executed a deed of sale and acknowledged it before a
notary public which, upon its face, transferred the entirety of

Maximo Juanico's right, share and interest in Lot 181 to Rosa


Gicano. Now, if it be true that they were deceived into executing
that deed of sale by Rosa Gicano, who taking advantage of their
ignorance had made them believe that the deed conveyed only 1/3
of the children's share in their inheritance from their father, they
certainly had the right to sue Rosa Gicano, and after presenting
evidence of the fraud perpetrated upon them, recover so much of
the property as they had never intended to transfer, and recover
the damages thereby suffered by them. But they certainly did not
have all the time in the world to bring that suit. They had to do it
within ten (10) years from the issuance to Rosa Gicano of title to
the property on the strength of the supposedly fraudulent deed of
sale. 14 They did not file their action within this statutory period.
They filed it only after twenty-three (23) years. When filed, their
action had already been extinguished by prescription. They had
slept on their rights. Time eroded their right of action and
ultimately erased it, as a sand castle on a shore is slowly and
inexorably obliterated by the rising tide.

Their action was therefore correctly dismissed, even without a trial


on the merits being first had. We have ruled that trial courts have
authority and discretion to dismiss an action on the ground of
prescription when the parties' pleadings or other facts on record
show it to be indeed time-barred; (Francisco v. Robles, Feb. 15,
1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28,
1961; Cordova v. Cordova, Jan. 14, 1958; Convets,, Inc. v. NDC,

Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408);
and it may do so on the basis of a motion to dismiss, 15 or an
answer which sets up such ground as an affirmative defense; 16 or
even if the ground is alleged after judgment on the merits, as in a
motion for reconsideration; 17 or even if the defense has not been
asserted at all, as where no statement thereof is found in the
pleadings, 18 or where a defendant has been declared in default. 19
What is essential only, to repeat, is that the facts demonstrating
the lapse of the prescriptive period, be otherwise sufficiently and
satisfactorily apparent on the record: either in the averments of the
plaintiffs complaint, or otherwise established by the evidence.
WHEREFORE, the Decision of the Court of Appeals promulgated on
May 26, 1982 is REVERSED, and the Order of the Trial Court dated
October 29, 1976 dismissing the action for reconveyance and
damages instituted by respondents Rosa Gegato, et al. on the
ground of prescription is REINSTATED and AFFIRMED as being in
accord with the relevant facts and the law. Costs against
respondents.

Teehankee, C.J., Cruz, Paras * and Gancayco, JJ., concur.