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TRUSTS Cases

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.

DECISION
DAVIDE, JR., J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioners urge this Court to reverse the 20 April 1994 decision of the Court of Appeals
(Seventeenth Division) in CA-G.R. CV No. 34936,[1] which affirmed in toto the 26 August
1991 decision of the Regional Trial 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 prayer for a writ of preliminary mandatory injunction filed by private respondents
herein, spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales. The
complaint prayed that private respondents be declared the lawful owners of a parcel of
land and the two-storey residential building standing thereon, and that Morales be
ordered to remove whatever improvements he constructed thereon, vacate the
premises, and pay actual and moral damages, litigation expenses, attorney's fees and
costs of the suit.
On 2 February 1988, Priscila Morales, one of the daughters of late Rosendo Avelino
and Juana Ricaforte, 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 trial court allowed his substitution by his heirs, Roda, Rosalia, Cesar and
Priscila, all surnamed Morales. Thereafter, pre-trial and trial on the merits were had and
the case was submitted for decision on 16 November 1990.
On 26 August 1991 the Trial Court rendered its decision[4] in favor of plaintiffs,
private respondents herein, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the Plaintiffs and against


Defendants-Intervenor:
1. Declaring the Plaintiffs the absolute and rightful owners of the premises in
question;

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 of P1,500.00 of the
premises starting from March 1987, and the amounts of P75,000.00 for
moral damages, P5,000.00 for litigation expenses, and P10,000.00 for
Attorneys fees; and

d. to pay the costs.

The injunction issued in this case is hereby made permanent.

SO ORDERED. [5]

The following is trial courts summary of the evidence for the plaintiffs:

The evidence adduced by the Plaintiffs discloses that the Plaintiffs are the absolute
and exclusive owners of the premises in question having purchased the same from
Celso Avelino, evidenced by a Deed of Absolute Sale (Exh. C), a public
instrument. They later caused the transfer of its tax declaration in the name 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 question


consisting of two adjoining parcels while he was still a bachelor and the City Fiscal of
Calbayog City from Alejandra Mendiola and Celita Bartolome, through a Escritura de
Venta (Exh. B). After the purchase, he caused the transfer of the tax declarations of
the two parcels in his name (Exhs. D & E to G & H) as well as consolidated into one
the two tax declarations in his name (Exh. F). With the knowledge of the Intervenor
and the defendant, (Cross-examination of Morales, t.s.n. pp. 13-14) Celso Avelino
caused the survey of the premises in question, in his name, by the Bureau of Lands
(Exh. J). He also built his residential house therein with Marcial Aragon (now dead)
as his master carpenter who 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 of the couple, to
live there until their deaths. He also declared this residential house in 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 Immigration
Officer 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 a small 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 they were
offered by Celso Avelino to buy the premises in question, they examined the premises
in question and talked with the defendant about that fact, the latter encouraged them to
purchase the premises in question rather than the property going to somebody else
they do not know and that he will vacate the premises as soon as his uncle will notify
him to do so. Thus, they paid the purchase price and Exh. 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 unless he 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 the premises. The
defendant refused.

As the plaintiffs were about to undertake urgent repairs on the dilapidated residential
building, the defendant had already occupied the same, taking in paying 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 are certain
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 still in 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 in the premises in question because they
reside respectively in Brgy. Tarobucan and Brgy. Trinidad (Sabang), both of
Calbayog City with their own residential houses there.

Due to the damages they sustained as a result of the filing of this case, the plaintiffs
are claiming P50,000.00 for mental anguish; monthly rental of the premises in
question of P1,500.00 starting from March 1987; litigation expenses of P5,000.00
and P10,000.00 for Attorney's fees. [6]

The trial courts summary of the evidence for the defendants and intervenor is as
follows:

Defendants-Intervenors testimonial evidence tend to show that the premises is


question (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. Juana died 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 for more than 30 years until his death in
Cebu City.

The premises in question was acquired by Celso Avelino who was entrusted by
Rosendo 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 about it (TSN,
Morales, p. 21). In 1950 Rosendo secured gratuitous license (Exh. 1) and constructed
the two-storey house, having retired as Operator of the Bureau of
Telecommunications, buying lumber from the father of Simplicia Darotel and paying
the wages of Antonio Nartea as a laborer.

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

Priscila Morales was aware that the premises in question was surveyed in the name of
Celso but she did not make any attempt, not even her father, to change the muniment
of title to Rosendo Avelino. Despite the fact that Intervenor has two sons who are
lawyers, no extra-judicial settlement was filed over the premises in question 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 the latter 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 included her
(Intervenors) share and the beauty shop of her son, the defendant.
As a result of this case she is worried and suffered moral damages, lost her health,
lacks sleep and appetite and should be compensated for P80,000.00 and the 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, the defendant 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 and conclusions, 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 although the bedrooms
seemed occupied by lodgers, neither the defendant nor the Intervenor informed the
Court where or in which of the rooms they occupied.

Observing the questioned premises from the outside, it is easily deducible that it has
not been inhabited by a true or genuine owner for a long time because the two-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 to fall and the hollow-
block fence to be straightened out, a portion along Umbria street (West) cut in the
middle with the other half to the south is tilting while the premises 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


with the two residential building standing thereon, located at corner
Umbria St. (on the West) and Rosales Blvd. (on the North), Brgy.
Central, Calbayog City, with an area of 318 sq. meters, presently
covered by Tax Declaration No. 47606 in the name 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 de


Venta (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 said
premises and later occupied the two-storey residential house;

5. Not one of the children or grandchildren of Rosendo Avelino ever


contested the ownership of Celso Avelino of the disputed premises;

6. There has no extra-judicial partition effected on the subject property since


the death 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 has
been declared in his name for taxation purposes and the receipts of the
realty taxes thereon were kept by him, some were either delivered to him
by Aurea or by defendant; and

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

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

One. While Plaintiff's claim of ownership over the premises in question is duly
supported by documentary evidences, such as the Deed of Conveyance (Exhs. B and
C), Tax declarations and payments of the realty taxes on the disputed property, 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-Intervenors claim of ownership is
based merely on testimonial evidence which is self-serving and cannot prevail over
documentary evidence because it is a settled rule in this jurisdiction that testimonial
evidence cannot prevail over documentary evidence.

Two. While Plaintiffs evidence of ownership of the disputed premises is clear,


positive, categorical and credible, Intervenors testimony that the disputed premises
was acquired by his brother (p. 16); that the document of conveyance of the land and
the building (p. 14) is in the name of her brother; that it was surveyed in her brothers
name with her knowledge (pp. 13-14); that during the lifetime of her father the
muniments of title of the premises was never transferred in her fathers name (pp. 10-
11 & 20); that not one of the heirs of Rosendo Avelino ever contested Celso Avelinos
ownership thereof, despite their knowledge (p.21); that no extra-judicial partition or
settlement was instituted by all the female children of Rosendo Avelino, especially by
the Intervenor herself even though two of her children are full-pledge lawyers (p.15);
and the fact that the Intervenor is not even interested to see the document of the
disputed premises (19), very clearly show that her claim is neither positive nor
categorical but is rather unconvincing.

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

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

Five. If the premises in question is really owned in common by the children of


Rosendo and Juana Avelino, why is it that the surviving sisters of the Intervenor did
not join her in this case and intervene to protect their respective interests?

Six. On the witness chair, Intervenors demeanor and manner of testifying show that
she was evasive and shifty and not direct in her answers to simple questions that she
was admonished by the Court not be evasive and be direct or categorical in her
answers; and which rendered her testimony unworthy of full faith and credit.

Seven. That Plaintiffs predecessor-in-interest is the true and absolute owner of the
disputed premises having purchased it from the Mendiolas while he was the City
Fiscal of Calbayog and still a bachelor and later became an Immigration Officer 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 the residential building in his
name, had it surveyed in his name and continuously paid the realty taxes thereon, is
more in conformity with common knowledge, experience and belief because it would
be unnatural for a man to continuously pay realty taxes for a property that does not
belong to him. Thus, our Supreme Court, ruled: Tax receipts are not true evidence of
ownership, but no person in his right mind would continue paying taxes for land
which he thinks does not belong to him. (Ramos vs. Court of Appeals, 112 SCRA
543).

Eight. Intervenors claim of implied trust is untenable because even from the different
cases mentioned in her Memorandum, it is very apparent that in order for implied trust
to exist there must be evidence of an equitable obligation of the trustee to convey,
which circumstance or requisite is absent in this case. What is instead clear from the
evidence is Celso Avelino's absolute ownership of the disputed property, both as to
the land and the residential house (Exh. F) which was sold to the Plaintiffs (Exh. C)
while Intervenors self-serving and unconvincing testimony of co-ownership is not
supported by any piece of credible documentary evidence.
On the contrary, the last part of Art. 1448 of Our New Civil Code bolsters Plaintiffs
ownership over the disputed premises. It expressly provides: x x x . However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably presumed
that there is a gift in favor of the child.(underscoring supplied)

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

Q When your father died, as a co-owner were you not interested to look at the
document so that you can lawfully claim, act as owner of that land?
A We just claim only when my son, Rodolfo was driven by the Plaintiff.
Q In other words what you are saying is that if your son was not dispossessed of the
property in question, you would not claim ownership?
A No, sir.

In her Memorandum, Intervenor raises the issue whether or not the plaintiffs are
entitled to the damages being claimed which were duly supported or proven by direct
evidence.

On this particular issue, the Plaintiffs evidence has established that before the
Plaintiffs paid the purchase price of the premises in question, they talked with the
defendant about the intended sale and the latter even encouraged them to purchase it
and that he will vacate the premises as soon as the payment is made therefore (TSN,
Ortiz, Jr., p. 20, April 4, 1988). Hence, they paid the purchase price 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 the subject premises (Exh. N)
reneged on his words and refused to vacate or demolish his beauty shop inside the
premises in question unless he is paid P35,000.00 for it although it is valued at less
than P5,000.00.

With that unreasonable demand of the defendant, the plaintiffs demanded, orally and
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 dilapidated
residential building and make it as their residence, they found out that the defendant
rather than vacate the premises, had already occupied the said residential building and
admitted lodgers to it (id., p. 24) and claimed ownership thereof, 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, filed the instant case incurring
expenses in the process as they hired the services of a lawyer to protect their interests
from the willful and wrongful acts or omissions of the defendant. [8]

Dissatisfied with the trial courts decision, defendants heirs of Rodolfo Morales and
intervenor Priscila Morales, petitioners herein, appealed to the Court of Appeals, which
docketed the appeal as CA-G.R. CV No. 34936, and in their Appellants Brief they
assigned the following errors:
1. The RTC erred in ruling that Celso Avelino, appellees predecessor-in- interest, was
the true and lawful owner of the house and lot in question.
2. xxx in not ruling that Celso Avelino purchased the house and lot in question as a
mere trustee, under an implied trust, for the benefit of the trustor, his father,
Rosendo Avelino, and the latters heirs.
3. xxx in ruling that the Intervenor is barred by laches from asserting her status as a
beneficiary of the aforesaid implied trust.
4. xxx 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 Juana
Ricaforte Avelino.
5. xxx in declaring appellees the absolute and rightful owners of the house and lot in
question by virtue of the sale of those properties to them by Celso Avelino.
6. xxx in not ruling that appellants are rightful co-owners and possessors of the house
and lot in question in their capacities as heirs of Rosendo Avelino and Juana
Ricaforte Avelino, the true owners of those properties.
7. xxx in ordering defendants to remove the beauty shop on the disputed land instead
of declaring Rodolfo Morales a builder in good faith and providing for the protection
of his rights as such.
8. xxx in ordering appellants to vacate the disputed premises and to pay appellees a
monthly rental, moral damages, litigation expenses, and attorney's fees.
9. xxx in not awarding appellants the damages and costs prayed for in answer with
counterclaim and answer in intervention, considering that the action to dispossess
them of the house and land in question is clearly without legal foundation.[9]
In its decision of 20 April 1994[10] 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
September 1994 for lack of merit, petitioners filed the instant petition wherein they claim
that:
1. Respondent CA erred in adopting the trial courts reasoning that it would be
unnatural for a man to continuously pay realty taxes for a property that does not
belong to him on the basis of a misreading and misapplication of Ramos v. Court of
Appeals, 112 SCRA 543 (1982). Respondent CA also erred in concluding that the
payment of realty taxes is conclusive evidence of ownership, which conclusion
ignores this Honorable Court's rulings in Ferrer-Lopez v. Court of Appeals, 150
SCRA 393 (1987), De Guzman v. Court of Appeals, 148 SCRA 75 (1987), and heirs
of Celso Amarante v. Court of Appeals, 185 SCRA 585 (1990).
2. xxx in relying on Conception Peralta's alleged Confirmation (Exhibit O) in ruling that
Celso Avelino (and later the respondents) had exclusive and absolute ownership of
the disputed property.Exhibit O was not identified by the purported affiant at the trial,
and was therefore plainly hearsay. Respondent CA erred in admitting Exhibit O in
evidence over the objection of the petitioner's counsel.
3. xxx in inferring and surmising that Celso Avelinos alleged exclusive ownership of the
disputed property was affirmed by the inaction of his four sisters.
4. xxx in ruling that the petitioners' testimonial evidence could not prevail over the
respondent'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. xxx in ignoring unrebutted evidence on record that Celso Avelino held title to the
disputed property merely as a trustee for his father, mother, and siblings. In so
doing, respondent CA: (i) ignored decided cases where this Honorable Court found
the existence of trusts on the bases of similar evidence, including the cases of
Valdez v. Olorga, 51 SCRA 71 (1973), De Buencamino, et al. v. De Matias, 16
SCRA 849 (1966), Gayos v. Gayos, 67 SCRA 146 (1975), and Custodio v. Casiano,
9 SCRA 841 (1963); and (ii) refused to apply the clear language of Article 1448 of
the Civil Code.
6. xxx in not ruling that Rodolfo Morales should have at least been regarded as a
builder in good faith who could not be compelled to vacate the disputed property or
to pay a monthly rental unless he was first indemnified for the cost of what he had
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's rulings in
Municipality of Oas 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. xxx 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 2220 of the
Civil Code; and (ii) ignored this Honorable Courts ruling in San Miguel Brewery, Inc.
v. Magno, 21 SCRA 292 (1967).
8. xxx in refusing to rule that the respondents are liable to petitioners for moral
damages, and attorney's fees and costs of litigation. In so doing, respondent CA
ignored unrebutted evidence on record and Articles 2208, 2217, and 2219 of the
Civil Code.
On 13 September 1995, after the filing of private respondents comment on the
petition and petitioners reply thereto, we resolved to deny the petition for failure of
petitioners to sufficiently show that the respondent Court of Appeals committed
reversible error.
Undaunted, petitioners on 17 October 1995 filed a motion for reconsideration of our
resolution of 13 September 1995 based on the following grounds:
1. The Honorable Court erred in not ruling that at the very least, Rodolfo Morales
should have been considered a builder in good faith who could not be compelled to
vacate the disputed property or to pay monthly rental unless he was first indemnified
for the cost of what he had built.
2. xxx in not ruling that the Court of Appeals and the Trial Court gravely misapplied the
law in ruling that there was no implied trust over the premises.
3. xxx in not ruling that the Court of Appeals and the Trial Court gravely misapplied 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 be disciplinarily 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 parties to submit their respective memoranda. Petitioners and private respondents
submitted their memoranda on 4 and 28 October 1996, respectively.
The grant of the motion for reconsideration necessarily limits the issues to the three
grounds postulated in the motion for reconsideration, which we restate as follows:
1. Did Celso Avelino purchase the land in question from the Mendiolas on 8 July 1948
as a mere trustee for his parents and siblings or, simply put, is the property the
former acquired a trust property?
2. Was Rodolfo Morales a builder in good faith?
3. Was there basis for the award of damages, attorneys fees and litigation expenses 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 property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter.[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 personal duties;
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; and
5. 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 or of the parties, while implied trusts come into being by operation of
law,[14] either through implication of an intention to create a trust as a matter of law or
through the imposition of the trust irrespective of, and even contrary to, any such
intention.[15] In turn, implied trusts are either resulting or constructive trusts. Resulting
trusts are based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have been
contemplated by the parties. 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. [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 is
granted to one party but the price is paid by another for the purpose of having the
beneficial interest of the property. The former is the trustee, while the latter is the
beneficiary. However, if the person to whom the title is conveyed is a child, legitimate
or illegitimate, of the one paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of the child.

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
law presumes to have been the intention of the parties in the circumstances that the
person to whom the land was conveyed holds it as trustee for the person who supplied
the purchase 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 a resulting
trust.[19]
There are recognized exceptions to the establishment of an implied resulting
trust. The first is stated in the last part of Article 1448 itself. Thus, where A pays the
purchase money and title is conveyed by absolute deed to As child or to a person to
whom A stands in loco parentis and who makes no express promise, a trust does not
result, the presumption being that a gift was intended. 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 express provision, 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 and received by the courts with extreme caution, and
should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily be fabricated.[23]
In the instant case, petitioners theory is that Rosendo Avelino owned the money for
the purchase of the property and he requested Celso, his son, to buy the property
allegedly in trust for 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 or
illegitimate, of the one paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of the child. (Underscoring
supplied).

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
acts of Celso Avelino indicating, without doubt, that he considered the property he
purchased from the Mendiolas as his exclusive property. He had its tax declaration
transferred in his name, caused the property surveyed for him by the Bureau of Lands,
and faithfully paid the realty taxes. Finally, he sold the property to private respondents.
The theory of implied trust with Celso Avelino as the trustor and his parents
Rosendo Avelino and Juan Ricaforte as trustees is not even alleged, expressly or
impliedly, in the verified Answer of 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 actually possessed by
Rodolfo Morales, defendant herein, and by his parents -- Priscila A. Morales and
Cesar Morales -- and consequently, the ones now in litigation in the above-entitled
case, were originally and exclusively owned and possessed by his grandparents-
Rosendo Avelino and Juana Ricaforte;
B. [S]aid lot, together with an old house then thereon, were (sic) acquired by said
couple -- Rosendo Avelino and Juana Ricaforte -- on July 8, 1948, which they right
away possessed exclusively in the concept of owner;[26]
Priscila, on her part, merely reiterated the foregoing allegations in subparagraphs A and
B of paragraph 2 of her Answer in Intervention.[27]
Rodolfo and Priscila likewise even failed to suggest in their respective Special and
Affirmative Defenses that Celso Avelino held the property in trust despite Rodolfos claim
that:

4. [T]he alleged sale by Celso Avelino alone of the properties in question in


favor of plaintiff Erlinda Ortiz and the alleged TD-47606 in the name of
Erlinda Ortiz, were clandestine, fraudulent, null and void because, first,
said documents cover the entire properties in question of the late
Rosendo Avelino and Juana Ricaforte; second, only Celso Avelino sold
the entire properties, without the knowledge and consent of said Priscila
A. Morales, Trinidad A. Cruz and Concepcion E. Peralta - children and
heirs of said Rosendo Avelino and Juana Ricaforte; and, third, said
documents were also made without the knowledge and consent of
defendant Rodolfo Morales who has prior and legal possession over the
properties in question and who is a builder in good faith of the shop
building thereon. [28]

Not surprisingly, Priscila merely restated these allegations in paragraph 2 of her Special
and Affirmative Defenses. If truly they were convinced that Celso Avelino acquired the
property in trust for his parents, it would have been far easier for them to explicitly state
such fact.[29]
The separate Answers of Rodolfo and Priscila do not likewise allege that Celso
Avelino committed any breach of the trust by having the property declared in his name
and paying the realty taxes thereon and by having the lot surveyed by the Bureau of
Lands which gave it a lot number: Lot 1949.[30] Even more telling is that in the Pre-Trial
Order[31] of the trial court, petitioners did not claim the existence of an implied trust; the
parties merely agreed that the main issues were:

a. Who is the owner of the premises in question?

b. Who is entitled to the possession thereof?

Yet, petitioners now want us to reverse the rulings of the courts below that Celso
Avelino was the absolute and exclusive owner of the property in question, on strength
of, primarily, their implied trust theory. The problem with petitioners is that they entirely
forgot that the trial court and the Court of Appeals did not base their rulings on this
alone. As shown earlier, the trial court pointed out numerous other flaws in petitioners
theory, such as laches. Then, too, the rule is settled that the burden of proving the
existence of a trust is on the party asserting its existence and that such proof must be
clear and satisfactory.[32] As to that, petitioners relied principally on testimonial
evidence. It is, of course, doctrinally entrenched that the evaluation of the testimony of
witnesses by the trial court is received on appeal with the highest respect, because it is
the trial court that has the direct opportunity to observe them on the stand and detect if
they are telling the truth or lying through their teeth. The assessment is accepted as
correct by the appellate court and binds it, absent a clear showing that it was reached
arbitrarily.[33] In this case, petitioners failed to assail, much less overcome, the following
observation of the trial court:

Six. On the witness chair, Intervenors demeanor and manner of testifying show that
she was evasive and shifty and not direct in her answers to simple questions that she
was admonished by the Court not to be evasive and direct and categorical in her
answers; and which rendered her testimony unworthy of full faith and credit. [34]

Likewise fatal to petitioners cause is that Concepcion Peraltas sworn Confirmation


dated 14 May 1987 cannot be considered hearsay evidence due to Concepcions failure
to testify. On the contrary, it is an exception to the hearsay rule under Section 38 of
Rule 130 of the Rules of Court, it having been offered as evidence of an act or
declaration against interest. As declarant Concepcion 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, and would have had a share,
equal to that of each of her co-heirs, in the estate of Rosendo and Juana. However,
Concepcion explicitly declared therein thus:

That my aforenamed brother [Celso Avelino], during the time when he was City
Fiscal of Calbayog City and still a bachelor, out of his own money, bought the parcels
of land located at corner Umbria Street and Rosales Blvd., Brgy. Central, Calbayog
City, from Culets Mendiola de Bartolome and Alejandra Fua Mendiola by 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 of Calbayog, Samar;
Likewise, out of his own money, he constructed a residential building on the lot which
building is made of strong materials.

If indeed the property was merely held in trust by Celso for his parents, Concepcion
would have been entitled to a proportionate part thereof as co-heir. However, by her
Confirmation, Concepcion made a solemn declaration against interest. Petitioners,
realizing that the Confirmation was admissible, attempted to cushion its impact by
offering in evidence as Exhibit 4[35]Concepcions affidavit, dated 16 June 1987, wherein
Concepcion stated:

3. The property in question (particularly the house), however forms part of the state of
our deceased parents, and, therefore, full and complete conveyance of the right, title
and interest in and to such property can only be effected with the agreement 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
estate of her deceased parents. In light of the equivocal nature of Concepcions later
affidavit, the trial court and the Court of Appeals did not then err in giving more weight to
Concepcions earlier Confirmation.
At bottom, the crux of the matter is whether petitioners discharged their burden to
prove the existence of an implied trust. We rule in the negative. Priscilas justification for
her and her sisters failure to assert co-ownership of the property based on the theory of
implied trust is, to say the least, flimsy. In light of their assertion that Celso Avelino did
not have actual possession of the property because he was away from Calbayog
continuously for more than 30 years until he died on October 31, 1987, [36] and the
established fact that the tax declarations of the property were in Celsos name and the
latter paid the realty taxes thereon, there existed no valid and cogent reason why
Priscila and her sisters did not do anything to have their respective shares in the
property conveyed to them after the death of Rosendo Avelino in 1980. Neither is there
any evidence that during his lifetime Rosendo demanded from Celso that the latter
convey the land to the former, which Rosendo could have done after Juanas death on
31 May 1965. This omission was mute and eloquent proof of Rosendos recognition that
Celso was the real buyer of 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 Article 448 of the Civil Code, which provides:

The owner of the land on which anything has been built, sown or planted in good
faith, 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 oblige the
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 land if 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 to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

Clearly, Article 448 applies only when the builder, planter or sower believes he has
the right to so build, plant or sow because he thinks he owns the land or believes
himself to have a claim of title.[37] In the instant case Rodolfo Morales knew from the very
beginning that he was not the owner of the land. He alleged in his answer that the land
was acquired by his grandparents Rosendo Avelino and Juana Ricaforte and he
constructed the shop building in 1979 upon due permission and financial assistance
from his mother, Priscila A. Morales and from his aunts Trinidad A. Cruz and
Concepcion A. Peralta ..., with the knowledge and consent of his uncle Celso Avelino. [38]
Petitioners, however, contend that:

Even assuming the argument that Rodolfo Morales was a builder in bad faith because
he was aware of Celso Avelinos supposed exclusive ownership of the land, still,
however, the unrebutted evidence shows that Celso Avelino consented to Rodolfo
Morales construction of the 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 bad faith on the part of the landowner. In such a
case, the rights of the landowner and the builder shall 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 given are unclear. Second, only Celso Avelino could have
rebutted it; but the testimony was given after Avelinos death, thus forever sealing his
lips. Reason and fairness demand that the attribution of an act to a dead man must be
viewed with utmost caution. Finally, having insisted with all vigor that the land was
acquired by Rosendo Avelino and Juanita Ricaforte, it would be most unlikely that
Rodolfo would have taken the trouble of securing Celsos consent, who had been
continuously away from Calbayog City for more than 30 years, for the construction of
the shop building.
III
We cannot however give our affirmance to the awards of moral damages, attorneys
fees and litigation 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 2219 and 2220 of the same Code.[41] For moral damages to
be recovered, it must be shown that they are 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 and that such injury sprang from
any of the cases stated in Articles 2219 and 2220.[42] Moral damages 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 amusements that will serve to
alleviate the moral sufferings he underwent, by reason of the defendant's culpable
action and must, perforce, be proportionate to the suffering inplicted. [43] In the same vein,
moral damages must be understood to be in concept of grants, not punitive or corrective
in nature, 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
cases enumerated 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 is definitely 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 of the 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 same fate. 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's fees under Article 2208 of the Civil Code demands factual,
legal and equitable justification; its basis cannot be left to speculation and
conjecture.[45] The general rule is that attorney's fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the right to
litigate.[46]
WHEREFORE, premises considered, except as to the award of moral damages,
attorneys fees and litigation expenses which are hereby DELETED, the judgment of the
respondent Court of Appeals is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, and Panganiban, JJ., concur
Francisco, J., On leave.

[1]
Annex A of Petition; Rollo, 9-20. Per Tayao-Jaguros, L., J., with Elbinias, J. and Salas, B., JJ.,
concurring.
[2]
Original Record (OR), Civil Case No. 265, 51.
[3]
OR, 176.
[4]
Annex E of Petition, OR Civil Case No. 265, 459-482; Rollo, 179-202. Per Judge Roberto A. Navidad.
[5]
Id., 482; id., 202.
[6]
OR, 466-469; Rollo, 186-189.
[7]
OR, 474-476; Rollo, 194-196.
[8]
OR, 476-481; Rollo, 196-201.
[9]
OR CA-G.R. No. 34936, 35-36.
[10]
Supra. note 1.
[11]
Rollo, 22.
[12]
4 Arturo M. Tolentino, Commentaries and Jurisprudence On The Civil Code Of The Philippines 669
[1991] (hereinafter 4 TOLENTINO).
[13]
Id.
[14]
Article 1441, Civil Code of the Philippines.
[15]
4 TOLENTINO 673.
[16]
Huang v. Court of Appeals, 236 SCRA 420, 428 [1994]; Vda. de Esconde v. Court of Appeals, 253
SCRA 66, 73-74 [1996].
[17]
76 Am. Jur. 2d Trusts 179 [1992].
[18]
Id.
[19]
76 Am. Jur. 2d Trusts 180.
[20]
4 TOLENTINO 679-680.
[21]
76 Am Jur. 2d Trusts 688 [1992].
[22]
Article 1457, Civil Code.
[23]
Salao v. Salao, 70 SCRA 65, 84 [1976]; Olaco v. Co Cho Chit, 220 SCRA 656, 664-665 [1993]; Ong
Ching Po v. Court of Appeals, 239 SCRA 341, 347 [1994].
[24]
OR, Civil Case No. 265, 35-39.
[25]
Id., 43-46.
[26]
Id., 35.
[27]
Id., 43.
[28]
Id., 37.
[29]
OR, 44-45.
[30]
Exhibit J, OR, 65.
[31]
Id., 275.
[32]
Supra, note 23.
[33]
National Power Corp. v. Court of Appeals, 223 SCRA 649, 655 [1993].
[34]
Page 21 of Decision, OR 479; Rollo, 199.
[35]
OR, 394-395.
[36]
Page 6, Motion for Reconsideration, Rollo, 277.
[37]
Floreza v. Evangelista, 96 SCRA 130, 136 [1980] citing Alburo v. Villanueva, 7 Phil. 277 [1907];
Quemuel v. Olaes, 1 SCRA 1159 [1961]; and Racaza v. Susan Realty, Inc., 18 SCRA 1172
[1966].
[38]
OR, 36.

[39]
Said Article pertinently provides as follows:

Art. 453. If there was bad faith not only on the part of the person who built ... on the land of another, but
also on the part of the owner of such land, the rights of one and the other shall be the same as
though both had acted in good faith.
It is under stood that there is bad faith on the part of the landowner whenever the act was done with his
knowledge and without opposition on his part.
[40]
Rollo, 277.
[41]
These articles provide as follows:
ART. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 25.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may
also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9
of this article, in the order named.
ART. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith.
[42]
Del Mundo v. Court of Appeals, 240 SCRA 348, 357 [1995].
[43]
Grand Union Supermarket, Inc. v. Espino, 94 SCRA 966 [1979]; R & B Surety & Insurance Co.
Inc. v. Intermediate Appellate Court, 129 SCRA 736, 745 [1984]; Prudenciado v. Alliance
Transport System, Inc. 148 SCRA 440, 449 [1987]; Radio Communications of the Phils. Inc. v.
Rodriguez, 182 SCRA 899, 907 [1990].
[44]
Del Mundo v. Court of Appeals, supra. note 42.
[45]
Scott Consultants & Resources Development Corp. Inc. v. Court of Appeals, 242 SCRA 393, 406
[1995].
[46]
Firestone Tire & Rubber Co. of the Phils. v. Ines Chavez, Chaves & Co. Ltd., 18 SCRA 356, 358
[1966]; Philippine Air Lines v. Miano, 242 SCRA 235, 240 [1995].
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 76590 February 26, 1990

HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners,


vs.
COURT OF APPEALS and HEIRS OF MARIA DE LA CRUZ Y GUEVARRA, respondents.

PARAS, J.:

This is a petition for review on certiorari of the June 17, 1986 decision * of the then Intermediate Appellate Court
in AC-G.R. CV No. 05785 reversing the appealed decision of the Regional Trial Court of Angeles City, and the November 12, 1986 resolution
of the same court denying the motion for reconsideration.

Herein petitioners are the heirs (children) of the late Maria de la Cruz y Gutierrez, married to Mateo
del Rosario Lansang, while herein private respondents are the heirs of Maria de la Cruz y Guevarra,
married to Calixto Dimalanta, and Fermin de la Cruz. The controversy involves a 1,980 square
meters portion of Lot 1488.

From 1921 until her death in 1951, Maria de la Cruz y Gutierrez resided in the questioned lot in the
concept of an owner. She declared the lot for tax purposes in her name. Later, she entrusted the
administration of the said lot to her niece Maria de la Cruz y Guevarra. When cadastral proceedings
were held in Porac, in Cadastral Case No. 18, on March 17, 1926, Maria de la Cruz y Gutierrez filed
an answer to the questioned lot. In the said filed answer, over the handwritten name "Maria de la
Cruz y Gutierrez" is a thumbmark presumably affixed by her, Exhibit "2-C"; that in paragraph 7, a
person named therein as Fermin de la Cruz y Gutierrez is stated to have an interest or participation
on the said lot. However, in the space provided in paragraph 8 to be filled up with the personal
circumstances of claimant Maria de la Cruz y Gutierrez, what appears therein is the name Maria de
la Cruz, married to Calixto Dimalanta, instead of Maria de la Cruz y Gutierrez, Exhibit "2-A"; and in
the space provided in paragraph 9, intended for the personal circumstances of other person or
persons who may have an interest on the said lot, the name Fermin de la Cruz, single, appears,
Exhibit "2-B". Accordingly, the trial court rendered a decision adjudicating Lot No. 1488 in favor of
Maria de la Cruz, 26 years old, married to Calixto Dimalanta and Fermin de la Cruz, Single. Finally,
Original Certificate of Title No. 16684 of the Register of Deeds of Pampanga was issued in their
names.

Petitioners, claiming to have learned of the same only on July 1, 1974, on October 1, 1974 (allegedly
barely three months after discovery of the registration, and two years after the death of Maria de la
Cruz y Guevarra who, before she died in 1974, revealed to petitioners Daniel Lansang and Isidro
Lansang that the lot of their mother Maria de la Cruz y Gutierrez had been included in her title), filed
with the then Court of First Instance of Pampanga, Branch IV, presided over by Hon. Cesar V.
Alejandria, a complaint for reconveyance, docketed therein as Civil Case No. 2148. The same was
amended on June 16, 1975.

The main thrust of the complaint is that the claimant of Lot 1488 in Cadastral Case No. 18 was Maria
de la Cruz y Gutierrez and not Maria de la Cruz y Guevarra who by not using her maternal surname
"Guevarra" succeeded in registering Lot 1488 in her name and that of her brother Fermin de la Cruz.
Under the circumstances, it is claimed that Maria de la Cruz married to Calixto Dimalanta and
Fermin de la Cruz hold the property in trust for the petitioners.

In their answer (Rollo, pp. 62-65), private respondents claimed that the land in questi•n is their
exclusive property, having inherited the same from their parents and the OCT No. 16684 was issued
in their names. Moreover, they asserted that petitioners have lost their cause of action by
prescription.

During the pre-trial, the parties stipulated the following facts:

1. That Lot No. 1488 is the lot in question as stated in Paragraph 3 of


the Complaint;

2. That on March 17, 1926, Maria de la Cruz y Gutierrez filed her


Answer over the cadastral lot in question;

3. That Maria de la Cruz y Gutierrez affixed her thumbmark in the


Answer dated March 17, 1926;

4. That by virtue of the Answer over Cadastral lot in question filed by


Maria de la Cruz y Gutierrez on March 17, 1926, OCT No. 16684 was
issued covering the lot in question;

5. That the maternal surname of Maria de la Cruz and Fermin de la


Cruz is Guevarra and not Gutierrez; and

6. That Maria de la Cruz y Guevarra and Fermin de la Cruz y


Guevarra did not file their answer over the lot in question. (p. 3,
Intermediate Appellate Court Decision; p. 46, Rollo)

The issues stated are as follows:

1. Whether or not the handwritings in the Answer of Maria de la Cruz


y Gutierrez were her handwritings;

2. Whether or not the heirs of Maria de la Cruz y Gutierrez are paying


the land taxes of the lot in question proportionately to their respective
shares;

3. Whether or not Lot 1488, the lot in question, is declared in the


name of Maria de la Cruz y Gutierrez;

4. Whether or not during the lifetime of Maria de la Cruz y Gutierrez


up to the time of her death, she was in actual possession of the lot in
question; and

5. If there was fraud in securing OCT No. 16684 in the name of Maria
de la Cruz, married to Calixto Dimalanta, and Fermin de la Cruz,
single. (pp. 3-4, Intermediate Appellate Court Decision; pp. 4647,
Rollo)
After trial, the trial court, in a decision dated November 17, 1983 (ibid., pp. 34-42), ruled in favor of
the petitioners. The decretal portion of the said decision, reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs;

(a) ordering the above-named defendants to reconvey to the plaintiffs


a portion of 1,980 square meters of Lot No. 1488 covered by Original
Certificate of Title No. 16684 of the Register of Deeds of Pampanga,
by executing a deed of reconveyance and registering the same with
the said Office at their own expense;

(b) ordering the parties to cause the survey and division of Lot No.
1844 into two equal parts in order that two separate titles, one for the
plaintiffs and the other for the defendants can be issued by the
Register of Deeds of Pampanga in their favor and one-half of the
expenses therefore to be shouldered by the plaintiffs, and the other
half by the defendant;

(c) ordering that the land to be adjudicated to the plaintiffs should


include the portion where the existing house of the late Maria de la
Cruz y Gutierrez is situated;

(d) ordering the plaintiffs and the defendants to pay the


corresponding estate and inheritance taxes if the parcels of land
inherited by them are subject to the payment of the same;

(e) ordering the defendants to pay the costs of suit.

On appeal, considering the action as based on an implied trust, the then Intermediate Appellate
Court in its decision promulgated on June 17, 1986 (Ibid., pp. 44-53) reversed the decision of the
trial court. The dispositive portion reads:

WHEREFORE, the Court is constrained to REVERSE the decision appealed from. A


new one is hereby entered dismissing the complaint.

A Motion for Reconsideration was filed, but the same was denied in a resolution dated November
12, 1986 (Ibid., p. 66). Hence, the instant petition.

Petitioners raised three (3) reasons warranting review, to wit:

RESPONDENT COURT ERRED WHEN IT RULED THAT THE ACTION FOR


RECONVEYANCE FILED BY HEREIN PETITIONERS WITH THE LOWER COURT
HAD ALREADY PRESCRIBED;

II

RESPONDENT COURT ERRED IN RULING THAT PETITIONERS WERE GUILTY


OF LACHES; and
III

RESPONDENT COURT ERRED IN RULING THAT THERE WAS NO EVIDENCE


OF FRAUD COMMITTED BY THE PREDECESSOR-IN-INTEREST OF PRIVATE
RESPONDENTS IN SECURING TITLE TO THE LOT IN QUESTION.
(pp. 13, 20 and 22, Petition for Review pp. 21, 28, and 30 Rollo)

The instant petition is impressed with merit.

The main issue in this case is whether or not petitioners' action for reconveyance has already
prescribed.

The answer is in the negative.

As aptly argued by petitioners, the Court of Appeals erred when it ruled that their action has already
prescribed; obviously on the wrong premise that the action is one based on implied or constructive
trust. As maintained by petitioners, their action is one based on express trust and not on implied or
constructive trust. Petitioners' predecessor-in-interest, Maria de la Cruz y Gutierrez, was an
unlettered woman, a fact borne out by her affixing her thumbmark in her answer in Cadastral Case
No. 18, Exhibit "2-C". Because of her mental weakness, in a prepared document for her, Exhibit "B-
3", she consented and authorized her niece Maria de la Cruz y Guevarra to administer the lot in
question. Such fact is corroborated by the testimony of Daniel Lansay, the son of Maria de la Cruz y
Gutierrez that Maria de la Cruz y Guevarra was the one entrusted with the paying of land taxes.

Private respondents argue that said Exhibit "B-3" is a portion of the tax declaration (Exhibit "B")
which was prepared by the Office of the Municipal Assessor/Treasurer where the lot in question is
located, and clearly not the written instrument constituting an express trust required under Article
1443 of the Civil Code. This argument of private respondents, is untenable. It has been held that
under the law on Trusts, it is not necessary that the document expressly state and provide for the
express trust, for it may even be created orally, no particular words are required for its creation
(Article 1444, Civil Code). An express trust is created by the direct and positive acts of the parties,
by some writing or deed or will or by words evidencing an intention to create a trust (Sotto v. Teves,
86 SCRA 154 [1978]). No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended (Vda. de Mapa v. Court of Appeals, 154 SCRA 294 [1987]).
Hence, petitioner's action, being one based on express trust, has not yet prescribed. Be it noted that
Article 1443 of the Civil Code which states "No express trusts concerning an immovable or any
interest therein may be proved by parol evidence," refers merely to enforceability, not validity of a
contract between the parties. Otherwise stated, for purposes of validity between the parties, an
express trust concerning an immovable does not have to be in writing. Thus, Article 1443 may be
said to be an extension of the Statute of Frauds. The action to compel the trustee to convey the
property registered in his name for the benefit of the cestui for trust does not prescribe. If at all, it is
only when the trustee repudiates the trust that the period of prescription may run (Enriquez v. Court
of Appeals, 104 SCRA 656 [1981]).

PREMISES CONSIDERED, the June 17, 1986 decision of the Intermediate Appellate Court is
hereby REVERSED and the November 17, 1983 decision of the trial court is hereby REINSTATED,
excpt as to the latter court's finding that this case deals with an implied trust.

SO ORDERED.

Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.


Footnotes

* Special Third Civil Cases Division; penned by Associate Justice Jorge R. Coquia
and concurred in by Associate Justices Floreliana Castro-Bartolome and Leonor Ines
Luciano.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179096 February 06, 2013

JOSEPH GOYANKO, JR., as administrator of the Estate of Joseph Goyanko, Sr., Petitioner,
vs.
UNITED COCONUT PLANTERS BANK, MANGO AVENUE BRANCH, Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by petitioner Joseph Goyanko, Jr., administrator
of the Estate of Joseph Goyanko, Sr., to nullify the decision2 dated February 20, 2007 and the
resolution3 dated July 31, 2007 of the Court of Appeals (CA) in CA-G.R. CV. No. 00257 affirming the
decision4 of the Regional Trial Court of Cebu City, Branch 16(RTC) in Civil Case No. CEB-22277.
The RTC dismissed the petitioner’s complaint for recovery of sum money against United Coconut
Planters Bank, Mango Avenue Branch (UCPB).

The Factual Antecedents

In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos (P2,000,000.00) with
Philippine Asia Lending Investors, Inc. family, represented by the petitioner, and his illegitimate
family presented conflicting claims to PALII for the release of the investment. Pending the
investigation of the conflicting claims, PALII deposited the proceeds of the investment with UCPB on
October 29, 19965 under the name "Phil Asia: ITF (In Trust For) The Heirs of Joseph Goyanko,
Sr." (ACCOUNT). On September 27, 1997, the deposit under the ACCOUNT was P1,509,318.76.

On December 11, 1997, UCPB allowed PALII to withdraw One Million Five Hundred Thousand
Pesos (P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When UCPB refused
the demand to restore the amount withdrawn plus legal interest from December 11, 1997, the
petitioner filed a complaint before the RTC. In its answer to the complaint, UCPB admitted, among
others, the opening of the ACCOUNT under the name "ITF (In Trust For) The Heirs of Joseph
Goyanko, Sr.," (ITF HEIRS) and the withdrawal on December 11, 1997.

The RTC Ruling

In its August 27, 2003 decision, the RTC dismissed the petitioner’s complaint and awarded UCPB
attorney’s fees, litigation expenses and the costs of the suit.6 The RTC did not consider the words
"ITF HEIRS" sufficient to charge UCPB with knowledge of any trust relation between PALII and
Goyanko’s heirs (HEIRS). It concluded that UCPB merely performed its duty as a depository bank in
allowing PALII to withdraw from the ACCOUNT, as the contract of deposit was officially only
between PALII, in its own capacity, and UCPB. The petitioner appealed his case to the CA.

The CA’s Ruling


Before the CA, the petitioner maintained that by opening the ACCOUNT, PALII established a
trust by which it was the "trustee" and the HEIRS are the "trustors-beneficiaries;" thus, UCPB
should be liable for allowing the withdrawal.

The CA partially granted the petitioner’s appeal. It affirmed the August 27, 2003 decision of the RTC,
but deleted the award of attorney’s fees and litigation expenses. The CA held that no express trust
was created between the HEIRS and PALII. For a trust to be established, the law requires, among
others, a competent trustor and trustee and a clear intention to create a trust, which were absent in
this case. Quoting the RTC with approval, the CA noted that the contract of deposit was only
between PALII in its own capacity and UCPB, and the words "ITF HEIRS" were insufficient to
establish the existence of a trust. The CA concluded that as no trust existed, expressly or impliedly,
UCPB is not liable for the amount withdrawn.7

In its July 31, 2007 resolution,8 the CA denied the petitioner’s motion for reconsideration. Hence, the
petitioner’s present recourse.

The Petition

The petitioner argues in his petition that: first, an express trust was created, as clearly shown by
PALII’s March 28, 1996 and November 15, 1996 letters.9 Citing jurisprudence, the petitioner
emphasizes that from the established definition of a trust,10 PALII is clearly the trustor as it created
the trust; UCPB is the trustee as it is the party in whom confidence is reposed as regards the
property for the benefit of another; and the HEIRS are the beneficiaries as they are the persons for
whose benefit the trust is created.11 Also, quoting Development Bank of the Philippines v.
Commission on Audit,12 the petitioner argues that the naming of the cestui que trust is not necessary
as it suffices that they are adequately certain or identifiable.13

Second, UCPB was negligent and in bad faith in allowing the withdrawal and in failing to inquire into
the nature of the ACCOUNT.14 The petitioner maintains that the surrounding facts, the testimony of
UCPB’s witness, and UCPB’s own records showed that: (1) UCPB was aware of the trust relation
between PALII and the HEIRS; and (2) PALII held the ACCOUNT in a trust capacity. Finally, the CA
erred in affirming the RTC’s dismissal of his case for lack of cause of action. The petitioner insists
that since an express trust clearly exists, UCPB, the trustee, should not have allowed the withdrawal.

The Case for UCPB

UCPB posits, in defense, that the ACCOUNT involves an ordinary deposit contract between PALII
and UCPB only, which created a debtor-creditor relationship obligating UCPB to return the proceeds
to the account holder-PALII. Thus, it was not negligent in handling the ACCOUNT when it allowed
the withdrawal. The mere designation of the ACCOUNT as "ITF" is insufficient to establish the
existence of an express trust or charge it with knowledge of the relation between PALII and the
HEIRS.

UCPB also argues that the petitioner changed the theory of his case. Before the CA, the petitioner
argued that the HEIRS are the trustors-beneficiaries, and PALII is the trustee. Here, the petitioner
maintains that PALII is the trustor, UCPB is the trustee, and the HEIRS are the beneficiaries.
Contrary to the petitioner’s assertion, the records failed to show that PALII and UCPB executed a
trust agreement, and PALII’s letters made it clear that PALII, on its own, intended to turn-over the
proceeds of the ACCOUNT to its rightful owners.

The Court’s Ruling


The issue before us is whether UCPB should be held liable for the amount withdrawn because a
trust agreement existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the
ACCOUNT with UCPB.

We rule in the negative.

We first address the procedural issues. We stress the settled rule that a petition for review
on certiorari under Rule 45 of the Rules of Court resolves only questions of law, not questions of
fact.15 A question, to be one of law, must not examine the probative value of the evidence presented
by the parties;16 otherwise, the question is one of fact.17Whether an express trust exists in this case
is a question of fact whose resolution is not proper in a petition under Rule 45. Reinforcing this is the
equally settled rule that factual findings of the lower tribunals are conclusive on the parties and are
not generally reviewable by this Court,18 especially when, as here, the CA affirmed these findings.
The plain reason is that this Court is not a trier of facts.19 While this Court has, at times, permitted
exceptions from the restriction,20 we find that none of these exceptions obtain in the present case.

Second, we find that the petitioner changed the theory of his case. The petitioner argued before the
lower courts that an express trust exists between PALII as the trustee and the HEIRS as the trustor-
beneficiary.21 The petitioner now asserts that the express trust exists between PALII as the trustor
and UCPB as the trustee, with the HEIRS as the beneficiaries.22 At this stage of the case, such
change of theory is simply not allowed as it violates basic rules of fair play, justice and due process.
Our rulings are clear - "a party who deliberately adopts a certain theory upon which the case was
decided by the lower court will not be permitted to change [it] on appeal";23 otherwise, the lower
courts will effectively be deprived of the opportunity to decide the merits of the case fairly.24 Besides,
courts of justice are devoid of jurisdiction to resolve a question not in issue.25 For these reasons, the
petition must fail. Independently of these, the petition must still be denied.

No express trust exists; UCPB exercised the required diligence in handling the ACCOUNT;
petitioner has no cause of action against UCPB

A trust, either express or implied,26 is the fiduciary relationship "x x x between one person having an
equitable ownership of property and another person owning the legal title to such property, the
equitable ownership of the former entitling him to the performance of certain duties and the exercise
of certain powers by the latter."27 Express or direct trusts are created by the direct and positive acts
of the trustor or of the parties.28 No written words are required to create an express trust. This is
clear from Article 1444 of the Civil Code,29 but, the creation of an express trust must be firmly shown;
it cannot be assumed from loose and vague declarations or circumstances capable of other
interpretations.30

In Rizal Surety & Insurance Co. v. CA,31 we laid down the requirements before an express trust will
be recognized:

Basically, these elements include a competent trustor and trustee, an ascertainable trust res,
and sufficiently certain beneficiaries. xxx each of the above elements is required to be
established, and, if any one of them is missing, it is fatal to the trusts (sic). Furthermore,
there must be a present and complete disposition of the trust property, notwithstanding that
the enjoyment in the beneficiary will take place in the future. It is essential, too, that the purpose
be an active one to prevent trust from being executed into a legal estate or interest, and one that is
not in contravention of some prohibition of statute or rule of public policy. There must also be some
power of administration other than a mere duty to perform a contract although the contract is
for a thirdparty beneficiary. A declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and that the court, if called upon
so to do, may enforce, the trust. [emphasis ours]

Under these standards, we hold that no express trust was created. First, while an ascertainable
trust res and sufficiently certain beneficiaries may exist, a competent trustor and trustee do
not. Second, UCPB, as trustee of the ACCOUNT, was never under any equitable duty to deal with
or given any power of administration over it. On the contrary, it was PALII that undertook the duty to
hold the title to the ACCOUNT for the benefit of the HEIRS. Third, PALII, as the trustor, did not have
the right to the beneficial enjoyment of the ACCOUNT. Finally, the terms by which UCPB is to
administer the ACCOUNT was not shown with reasonable certainty. While we agree with the
petitioner that a trust’s beneficiaries need not be particularly identified for a trust to exist, the
intention to create an express trust must first be firmly established, along with the other
elements laid above; absent these, no express trust exists.

Contrary to the petitioner’s contention, PALII’s letters and UCPB’s records established UCPB’s
participation as a mere depositary of the proceeds of the investment. In the March 28, 1996 letter,
PALII manifested its intention to pursue an active role in and up to the turnover of those proceeds to
their rightful owners,32 while in the November 15, 1996 letter, PALII begged the petitioner to trust it
with the safekeeping of the investment proceeds and documents.33 Had it been PALII’s intention to
create a trust in favor of the HEIRS, it would have relinquished any right or claim over the proceeds
in UCPB’s favor as the trustee. As matters stand, PALII never did.

UCPB’s records and the testimony of UCPB’s witness34 likewise lead us to the same conclusion.
While the words "ITF HEIRS" may have created the impression that a trust account was created, a
closer scrutiny reveals that it is an ordinary savings account.35 We give credence to UCPB’s
explanation that the word "ITF" was merely used to distinguish the ACCOUNT from PALII’s other
accounts with UCPB. A trust can be created without using the word "trust" or "trustee," but the mere
use of these words does not automatically reveal an intention to create a trust.36 If at all, these words
showed a trustee-beneficiary relationship between PALII and the HEIRS.

Contrary to the petitioner’s position, UCPB did not become a trustee by the mere opening of the
ACCOUNT. While this may seem to be the case, by reason of the fiduciary nature of the bank’s
1âwphi1

relationship with its depositors,37 this fiduciary relationship does not "convert the contract between
the bank and its depositors from a simple loan to a trust agreement, whether express or implied."38 It
simply means that the bank is obliged to observe "high standards of integrity and performance" in
complying with its obligations under the contract of simple loan.39 Per Article 1980 of the Civil
Code,40 a creditor-debtor relationship exists between the bank and its depositor.41 The savings
deposit agreement is between the bank and the depositor;42 by receiving the deposit, the bank
impliedly agrees to pay upon demand and only upon the depositor’s order.43

Since the records and the petitioner’s own admission showed that the ACCOUNT was opened by
PALII, UCPB’s receipt of the deposit signified that it agreed to pay PALII upon its demand and only
upon its order. Thus, when UCPB allowed PALII to withdraw from the ACCOUNT, it was merely
performing its contractual obligation under their savings deposit agreement. No negligence or bad
faith44 can be imputed to UCPB for this action. As far as UCPB was concerned, PALII is the account
holder and not the HEIRS. As we held in Falton Iron Works Co. v. China Banking Corporation.45 the
bank’s duty is to its creditor-depositor and not to third persons. Third persons, like the HEIRS here,
who may have a right to the money deposited, cannot hold the bank responsible unless there is a
court order or garnishment.46 The petitioner’s recourse is to go before a court of competent
jurisdiction to prove his valid right over the money deposited.
In these lights, we find the third assignment of error mooted. A cause of action requires that there be
a right existing in favor of the plaintiff, the defendant’s obligation to respect that right, and an act or
omission of the defendant in breach of that right.47 We reiterate that UCPB’s obligation was towards
PALII as its creditor-depositor. While the HEIRS may have a valid claim over the proceeds of the
investment, the obligation to turn-over those proceeds lies with PALII. Since no trust exists the
petitioner’s complaint was correctly dismissed and the CA did not commit any reversible error in
affirming the RTC decision. One final note, the burden to prove the existence of an express trust lies
with the petitioner.48 For his failure to discharge this burden, the petition must fail.

WHEREFORE, in view of these considerations, we hereby DENY the petition and AFFIRM the
decision dated February 20, 2007 and the resolution dated July 31, 2007 of the Court of Appeals in
CA-G.R. CV. No. 00257. Costs against the petitioner.

SO ORDERED:

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ


Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it
is hereby certified that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court'’ Division.

MARIA LOURDES P.A. SERENO


Chief Justice
Footnotes

1Dated September 25, 2007 and filed on September 24, 2007 under Rule 45 of the 1997
Rules of Civil Procedure: rollo. pp 24-42.

2Penned by Associate Justice Priscila Baltazar-Padilla, and concurred in by Executive


Justice Arsenio I. Magpale and Associate Justice Romeo F. Barza: id. at 9-17.

3 Id at 19-20.

4 Dated August 27, 2008 per the CA decision: id at 9.

5 The amount deposited was P1,485,685.09 per the CA decision dated February 20, 2007.
Per the attached copy of UCPB’s record pertaining to the ACCOUNT, and UCPB’s comment,
the ACCOUNT was opened on May 31, 1996. Also, per UCPB’s comment, the initial deposit
on the ACCOUNT was P173,250.00, with subsequent deposits made in the succeeding
months, the last of which was on October 28, 1996; id. at 60 and 77.

6 From the dispositive portion of the RTC decision, as quoted by the CA; id. at 10.

7 Id. at 15.

8 Supra note 3.

9 Rollo, pp. 33-35, 113-114; copy of the letters at pp. 59 and 61.

10
The petitioner cites the Court’s ruling in Estate of Edward Grimm v. Estate of Charles
Parsons and Patrick C. Parsons, G.R. No. 159810, October 9, 2006, 504 SCRA 67; id. at 36.
The petitioner also cites Galvez v. Court of Appeals, 485 SCRA 346; id. at 115-116.

11 Rollo, pp. 34-36, 115-116.

12 G.R. No. 144516, February 11, 2004, 422 SCRA 459.

13 Rollo, pp. 35, 116-117.

14 Id. at 36-40, 119-123.

15Andrada v. Pilhino Sales Corporation, G.R. No. 156448, February 23, 2011, 644 SCRA 1,
8-9; Philippine Commercial International Bank v. Balmaceda, G.R. No. 158143, September
21, 2011, 658 SCRA 33, 42-43; Lorzano v. Tabayag, Jr., G.R. No. 189647, February 6,
2012, 665 SCRA 38, 46-47; and Republic v. De Guzman, G.R. No. 175021, June 15, 2011,
652 SCRA 101, 113.

16Lorzano v. Tabayag, Jr. supra note 15, at 46-47; Republic v. De Guzman, supra note 15,
at 113. See also Heirs of Pacencia Racaza, etc. v. Spouses Florencio Abay-abay, et al.,
G.R. No. 198402, June 13, 2012.

17Lorzano v. Tabayag, Jr., supra note 15, at 46-47; Republic v. De Guzman, supra note 15,
at 113.
18 See Heirs of Pacencia Racaza, etc. v. Spouses Florencio Abay-abay, supra note 16.

19 Id.

20 Among the recognized exceptions to the restriction are:

(a) When the findings are grounded entirely on speculation, surmises, or conjectures;

(b) When the inference made is manifestly mistaken, absurd, or impossible;

(c) When there is grave abuse of discretion;

(d) When the judgment is based on a misapprehension of facts;

(e) When the findings of facts are conflicting;

(f) When in making its findings, the CA went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee;

(g) When the CA’s findings are contrary to those by the trial court;

(h) When the findings are conclusions without specific citation of specific evidence on
which they are based;

(i) When the facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent;

(j) When the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or

(k) When the CA manifestly overlooked certain relevant facts not disputed by the
parties which, if properly considered, would justify a different conclusion.

21 See rollo, pp. 12-13.

22 Id. at 34-36, 115-116.

23 Morla v. Belmonte, G.R. No. 171146, December 7, 2011, 661 SCRA 717, 727.

24 Peña v. Tolentino, G.R. Nos. 155227-28, February 9, 2011, 642 SCRA 310, 323.

25 Id. at 324.

Estate of Margarita D. Cabacungan v. Laigo, G.R. No. 175073, August 15, 2011, 655
26

SCRA 366, 376. See also Philippine National Bank v. Aznar, G.R. Nos. 171805 and 172021,
May 30, 2011, 649 SCRA 214, 230; and Torbela v. Rosario, G.R. Nos. 140528 and 140553,
December 7, 2011, 661 SCRA 633, 661.

Estate of Margarita D. Cabacungan v. Laigo, supra, at 376. See also Philippine National
27

Bank v. Aznar, supra; Torbela v. Rosario, supra; and Metropolitan Bank & Trust Company,
Inc. v. Board of Trustees of Riverside Mills Corporation Provident and Retirement Fund, G.R.
No. 176959, September 8, 2010, 630 SCRA 350, 357.

28 Torbela v. Rosario, supra note 26; and PNB v. Aznar, supra note 26.

29Art. 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.

30 Philippine National Bank v. Aznar, supra note 26, at 230.

31329 Phil. 789, 805-806, citing Mindanao Development Authority v. Court of Appeals, No. L-
49087, April 5, 1982, 113 SCRA 429, 436-437.

32
Rollo, p. 59. The letter stated: "In the meantime, the monthly interest that will accrue to
said investments will be, at the instance of our client, deposited in a bank under the
account name, ‘Heirs of Joseph Goyanko, Sr., x x x x.

x x x our client will be constrained to bring an action before the court for
interpleader to compel the claimants to interplead and litigate their several claims
among themselves.’ (emphasis ours)

33Id. at 61. To quote PALII: "Since the money is intact and safe in the bank ready for turn-
over to the righteous owner, so with all the documents of the investment in our
possession, we would like to request your goodself to please trust us for its
safekeeping." (emphasis ours)

34Id. at 62-64. UCPB’s witness testified that the ACCOUNT was owned by PALII and that he
was not personally aware of any trust relation between PALII and the HEIRS since he was
not yet the bank’s branch manager at that time.

35Id. at 60. In the copy of the UCPB’s record, UCPB Form No. 4-1118, under the heading
"TYPE OF ACCOUNT," the option "Savings Account" bears a check mark. Also, on the
reverse side, under the heading "TYPE OF ACCT." "Savings Acct." was written. Also the
ACCOUNT’s authorized signatory was only Crisanto Pescadero, PALII’s general manager.

36 See Torbela v. Rosario, supra note 26, at 661.

37See BPI Family Bank v. Franco, G.R. No. 123498, November 23, 2007, 538 SCRA 184,
198.

Consolidated Bank and Trust Corporation v. Court of Appeals, G.R. No. 138569,
38

September 11, 2003, 457 Phil. 688, 707.

39 Id. at 705.

40 Article 1980 of the Civil Code provides:

Art. 1980. Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.
(emphasis ours)
41See Central Bank of the Philippines v. Citytrust Banking Corporation, G.R. No. 141835,
February 4, 2009, 578 SCRA 27, 32, quoting Consolidated Bank and Trust Corporation v.
Court of Appeals, supra note 38 at, 574-575; Lucman v. Malawi, 540 Phil. 289, 300 (2006);
and Allied Banking Corporation v. Lim Sio Wan, G.R. No. 133179, March 27, 2008, 549
SCRA 504, 515. See Samsung Construction Co. Phils., Inc. v. FEBTC, 480 Phil. 39, 49
(2004).

42 Consolidated Bank and Trust Corporation v. Court of Appeals, supra note 38, at 705.

43Samsung Construction Co. Phils., Inc. v. FEBTC, supra note 41, at 49; and Central Bank
of the Philippines v. Citytrust Banking Corporation, supra note 41, at 32.

44 Article 1173. Civil Code of the Philippines provides:"Negligence consists in the omission of
that diligence which is required by the nature of the obligation, and corresponds with the
circumstances of the persons, of the time and of the place." Bad faith implies a conscious or
intentional design to do a wrongful act for a dishonest purpose or moral obliquity. (Arenas v.
CA, G.R. No. 126466, January 14, 1999, 345 SCRA 617)

45 55 Phil. 208; 216-217 (1930).

46 Ibid.

NAI Rathschild & Sons (Australia) Limited v. Lepanto Consolidated Mining Company, G.R.
47

No. 175799, November 28, 2011, 664 SCRA 328 338-339; and Manalo v. PAIC Savings
Bank, 493 Phil. 854, 859, 2005).

Section 2 of the Rules of Court provides:

SEC. 2. Cause of action defined – "A cause of action is the act or omission by which
a party violates a right of another.

48Cañezo v. Rojas, G.R. No. 448788, November 23, 2007, 538 SCRA 242, 253; and Duran
v. Court of Appeals. 522 Phil. 399, 407 (2006).
Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

MARIA TORBELA, represented G.R. No. 140528


by her heirs, namely: EULOGIO
TOSINO, husband and children:
CLARO, MAXIMINO,
CORNELIO, OLIVIA and
CALIXTA, all surnamed
TOSINO, APOLONIA TOSINO
VDA. DE RAMIREZ and JULITA
TOSINO DEAN; PEDRO
TORBELA, represented by his
heirs, namely: JOSE and
DIONISIO, both surnamed
TORBELA; EUFROSINA
TORBELA ROSARIO,
represented by her heirs, namely:
ESTEBAN T. ROSARIO,
MANUEL T. ROSARIO,
ROMULO T. ROSARIO and
ANDREA ROSARIO-HADUCA;
LEONILA TORBELA TAMIN;
FERNANDO TORBELA,
represented by his heirs, namely:
SERGIO T. TORBELA,
EUTROPIA T. VELASCO,
PILAR T. ZULUETA, CANDIDO
T. TORBELA, FLORENTINA T.
TORBELA and PANTALEON T.
TORBELA; DOLORES
TORBELA TABLADA;
LEONORA TORBELA
AGUSTIN, represented by her
heirs, namely: PATRICIO,
SEGUNDO, CONSUELO and
FELIX, all surnamed AGUSTIN;
and SEVERINA TORBELA
ILDEFONSO,
Petitioners,

- versus -

SPOUSES ANDRES
T. ROSARIOand LENA DUQUE-
ROSARIO and BANCO
FILIPINO SAVINGS AND
MORTGAGE BANK,
Respondents.
x-----------------------x G.R. No. 140553
LENA DUQUE-ROSARIO,
Petitioner, Present:

CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
- versus - BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

Promulgated:
BANCO FILIPINO SAVINGS
AND MORTGAGE BANK, December 7, 2011
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO-DE CASTRO, J.:


Presently before the Court are two consolidated Petitions for Review
on Certiorari under Rule 45 of the Rules of Court, both assailing the
Decision[1] dated June 29, 1999 and Resolution[2] dated October 22, 1999 of the
Court of Appeals in CA-G.R. CV No. 39770.

The petitioners in G.R. No. 140528 are siblings Maria Torbela,[3] Pedro
Torbela,[4] Eufrosina Torbela Rosario,[5] Leonila Torbela Tamin, Fernando
Torbela,[6] Dolores Torbela Tablada, Leonora Torbela Agustin,[7] and Severina
Torbela Ildefonso (Torbela siblings).

The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario), who


was married to, but now legally separated from, Dr. Andres T. Rosario (Dr.
Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the nephew of
the other Torbela siblings.

The controversy began with a parcel of land, with an area of 374 square meters,
located in Urdaneta City, Pangasinan (Lot No. 356-A). It was originally part of a
larger parcel of land, known as Lot No. 356 of the Cadastral Survey of Urdaneta,
measuring 749 square meters, and covered by Original Certificate of Title (OCT)
No. 16676,[8] in the name of Valeriano Semilla (Valeriano), married to Potenciana
Acosta. Under unexplained circumstances, Valeriano gave Lot No. 356-A to his
sister Marta Semilla, married to Eugenio Torbela (spouses Torbela). Upon the
deaths of the spouses Torbela, Lot No. 356-A was adjudicated in equal shares
among their children, the Torbela siblings, by virtue of a Deed of Extrajudicial
Partition[9] dated December 3, 1962.

On December 12, 1964, the Torbela siblings executed a Deed of Absolute


Quitclaim[10] over Lot No. 356-A in favor of Dr. Rosario. According to the said
Deed, the Torbela siblings for and in consideration of the sum of NINE PESOS
(P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T. Rosario,
that undivided portion of THREE HUNDRED SEVENTY-FOUR square meters of
that parcel of land embraced in Original Certificate of Title No. 16676 of the land
records of Pangasinan x x x.[11] Four days later, on December 16, 1964, OCT No.
16676 in Valerianos name was partially cancelled as to Lot No. 356-A and TCT
No. 52751[12] was issued in Dr. Rosarios name covering the said property.
Another Deed of Absolute Quitclaim[13] was subsequently executed on December
28, 1964, this time by Dr. Rosario, acknowledging that he only borrowed Lot No.
356-A from the Torbela siblings and was already returning the same to the latter
for P1.00. The Deed stated:

That for and in consideration of the sum of one peso (P1.00), Philippine
Currency and the fact that I only borrowed the above described parcel of
land from MARIA TORBELA, married to Eulogio Tosino, EUFROSINA
TORBELA, married to Pedro Rosario, PEDRO TORBELA, married to Petra
Pagador, LEONILA TORBELA, married to Fortunato Tamen, FERNANDO
TORBELA, married to Victoriana Tablada, DOLORES TORBELA, widow,
LEONORA TORBELA, married to Matias Agustin and SEVERINA TORBELA,
married to Jorge Ildefonso, x x x by these presents do hereby cede, transfer and
convey by way of this ABSOLUTE QUITCLAIM unto the said Maria, Eufrosina,
Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all surnamed Torbela
the parcel of land described above.[14] (Emphasis ours.)

The aforequoted Deed was notarized, but was not immediately annotated on TCT
No. 52751.

Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the
Development Bank of the Philippines (DBP) on February 21, 1965 in the sum
of P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The mortgage
was annotated on TCT No. 52751 on September 21, 1965 as Entry No.
243537.[15] Dr. Rosario used the proceeds of the loan for the construction of
improvements on Lot No. 356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse


Claim,[16] on behalf of the Torbela siblings. Cornelio deposed in said Affidavit:

3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the


former owners by virtue of a Deed of Absolute Quitclaim which he executed
before Notary Public Banaga, and entered in his Notarial Registry as Dec. No. 43;
Page No. 9; Book No. I; Series of 1964;

4. That it is the desire of the parties, my aforestated kins, to register


ownership over the above-described property or to perfect their title over the same
but their Deed could not be registered because the registered owner now,
ANDRES T. ROSARIO mortgaged the property with the DEVELOPMENT
BANK OF THE PHILIPPINES, on September 21, 1965, and for which reason,
the Title is still impounded and held by the said bank;

5. That pending payment of the obligation with the DEVELOPMENT BANK OF


THE PHILIPPINES or redemption of the Title from said bank, I, CORNELIO T.
TOSINO, in behalf of my mother MARIA TORBELA-TOSINO, and my Aunts
EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES
TORBELA, LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-
ILDEFONSO, and my Uncles PEDRO TORBELA and FERNANDO, also
surnamed TORBELA, I request the Register of Deeds of Pangasinan to annotate
their adverse claim at the back of Transfer Certificate of Title No. 52751, based
on the annexed document, Deed of Absolute Quitclaim by ANDRES T.
ROSARIO, dated December 28, 1964, marked as Annex A and made a part of
this Affidavit, and it is also requested that the DEVELOPMENT BANK OF THE
PHILIPPINES be informed accordingly.[17]

The very next day, on May 17, 1967, the Torbela siblings had Cornelios
Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of
Absolute Quitclaim dated December 28, 1964 annotated on TCT No. 52751
as Entry Nos. 274471[18] and 274472,[19] respectively.

The construction of a four-storey building on Lot No. 356-A was eventually


completed. The building was initially used as a hospital, but was later converted to
a commercial building. Part of the building was leased to PT&T; and the rest to
Mrs. Andrea Rosario-Haduca, Dr. Rosarios sister, who operated the Rose Inn Hotel
and Restaurant.

Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197 on
TCT No. 52751[20] dated March 6, 1981, the mortgage appearing under Entry No.
243537 was cancelled per the Cancellation and Discharge of Mortgage executed by
DBP in favor of Dr. Rosario and ratified before a notary public on July 11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine
National Bank (PNB) sometime in 1979-1981. Records do not reveal though the
original amount of the loan from PNB, but the loan agreement was amended
on March 5, 1981 and the loan amount was increased to P450,000.00. The loan
was secured by mortgages constituted on the following properties: (1) Lot No. 356-
A, covered by TCT No. 52751 in Dr. Rosarios name; (2) Lot No. 4489, with an
area of 1,862 square meters, located in Dagupan City, Pangasinan, covered by TCT
No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of 1,001 square meters,
located in Nancayasan, Urdaneta, Pangasinan, covered by TCT No. 104189.[21] The
amended loan agreement and mortgage on Lot No. 356-A was annotated on TCT
No. 52751 on March 6, 1981 as Entry No. 520099.[22]

Five days later, on March 11, 1981, another annotation, Entry No.
520469,[23] was made on TCT No. 52751, canceling the adverse claim on Lot No.
356-A under Entry Nos. 274471-274472, on the basis of the Cancellation and
Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry No.
520469 consisted of both stamped and handwritten portions, and exactly reads:

Entry No. 520469. Cancellation of Adverse Claim executed by Andres Rosario in


favor of same. The incumbrance/mortgage appearing under Entry No. 274471-
72 is now cancelled as per Cancellation and Discharge of Mortgage Ratified
before Notary Public Mauro G. Meris on March 5, 1981: Doc. No. 215; Page
No. 44; Book No. 1; Series Of 1981.
Lingayen, Pangasinan, 3-11, 19981

[Signed: Pedro dela Cruz]


Register of Deeds [24]

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses


Rosario), acquired a third loan in the amount of P1,200,000.00 from Banco
Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the
spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489, and
Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated on TCT
No. 52751 as Entry No. 533283[25] on December 18, 1981. Since the construction
of a two-storey commercial building on Lot No. 5-F-8-C-2-B-2-A was still
incomplete, the loan value thereof as collateral was deducted from the approved
loan amount. Thus, the spouses Rosario could only avail of the maximum loan
amount of P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosarios loan from PNB, the
mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No.
533478[26] on TCT No. 52751 dated December 23, 1981.
On February 13, 1986, the Torbela siblings filed before the Regional Trial Court
(RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership and
possession of Lot No. 356-A, plus damages, against the spouses Rosario, which
was docketed as Civil Case No. U-4359. On the same day, Entry Nos. 593493 and
593494 were made on TCT No. 52751 that read as follows:

Entry No. 593494 Complaint Civil Case No. U-4359 (For: Recovery of
Ownership and Possession and Damages. (Sup. Paper).
Entry No. 593493 Notice of Lis Pendens The parcel of land described in this title
is subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney
dated February 13, 1986. Filed to TCT No. 52751
February 13, 1986-1986 February 13 3:30 p.m.

(SGD.) PACIFICO M. BRAGANZA


Register of Deeds[27]

The spouses Rosario afterwards failed to pay their loan from Banco Filipino. As
of April 2, 1987, the spouses Rosarios outstanding principal obligation and penalty
charges amounted to P743,296.82 and P151,524.00, respectively.[28]

Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A,


Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2,
1987, Banco Filipino was the lone bidder for the three foreclosed properties for the
price of P1,372,387.04. The Certificate of Sale[29] dated April 2, 1987, in favor of
Banco Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No.
610623.[30]

On December 9, 1987, the Torbela siblings filed before the RTC their
Amended Complaint,[31] impleading Banco Filipino as additional defendant in
Civil Case No. U-4359 and praying that the spouses Rosario be ordered to redeem
Lot No. 356-A from Banco Filipino.

The spouses Rosario instituted before the RTC on March 4, 1988 a case for
annulment of extrajudicial foreclosure and damages, with prayer for a writ of
preliminary injunction and temporary restraining order, against Banco Filipino, the
Provincial Ex Officio Sheriff and his Deputy, and the Register of Deeds of
Pangasinan. The case was docketed as Civil Case No. U-4667. Another notice
of lis pendens was annotated on TCT No. 52751 on March 10, 1988 as Entry No.
627059, viz:

Entry No. 627059 Lis Pendens Dr. Andres T. Rosario and Lena Duque Rosario,
Plaintiff versus Banco Filipino, et. al. Civil Case No. U-4667 or Annulment of
ExtraJudicial Foreclosure of Real Estate Mortgage The parcel of land described in
this title is subject to Notice of Lis Pendens subscribed and sworn to before
Notary Public Mauro G. Meris, as Doc. No. 21; Page No. 5; Book 111; S-
1988. March 7, 1988-1988 March 10, 1:00 p.m.

(SGD.) RUFINO M. MORENO, SR.


Register of Deeds[32]

The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on October
17, 1990, the RTC issued an Order[33] dismissing without prejudice Civil Case No.
U-4667 due to the spouses Rosarios failure to prosecute.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco
Filipino, but their efforts were unsuccessful. Upon the expiration of the one-year
redemption period in April 1988, the Certificate of Final Sale[34] and Affidavit of
Consolidation[35] covering all three foreclosed properties were executed on May 24,
1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of Banco
Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT No.
165813 for Lot No. 356-A .[36]

The Torbela siblings thereafter filed before the RTC on August 29, 1988 a
Complaint[37] for annulment of the Certificate of Final Sale dated May 24, 1988,
judicial cancelation of TCT No. 165813, and damages, against Banco Filipino,
the Ex Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which
was docketed as Civil Case No. U-4733.

On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a
Petition for the issuance of a writ of possession. In said Petition, docketed as Pet.
Case No. U-822, Banco Filipino prayed that a writ of possession be issued in its
favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements
thereon, and the spouses Rosario and other persons presently in possession of said
properties be directed to abide by said writ.

The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case
No. U-822. The Decision[38] on these three cases was promulgated on January 15,
1992, the dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1. Declaring the real estate mortgage over Lot 356-A covered by


TCT 52751 executed by Spouses Andres Rosario in favor of Banco Filipino, legal
and valid;

2. Declaring the sheriffs sale dated April 2, 1987 over Lot 356-A
covered by TCT 52751 and subsequent final Deed of Sale dated May 14, 1988
over Lot 356-A covered by TCT No. 52751 legal and valid;

3. Declaring Banco Filipino the owner of Lot 356-A covered by


TCT No. 52751 (now TCT 165813);

4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A


together with the improvements thereon (Rose Inn Building). The Branch Clerk of
Court is hereby ordered to issue a writ of possession in favor of Banco Filipino;

5. [The Torbela siblings] are hereby ordered to render accounting to


Banco Filipino the rental they received from tenants
of Rose Inn Building from May 14, 1988;

6. [The Torbela siblings] are hereby ordered to pay Banco Filipino


the sum of P20,000.00 as attorneys fees;

7. Banco Filipino is hereby ordered to give [the Torbela siblings] the


right of first refusal over Lot 356-A. The Register of Deeds is hereby ordered to
annotate the right of [the Torbela siblings] at the back of TCT No. 165813 after
payment of the required fees;

8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse


[the Torbela siblings] the market value of Lot 356-A as of December, 1964 minus
payments made by the former;
9. Dismissing the complaint of [the Torbela siblings] against Banco
Filipino, Pedro Habon and Rufino Moreno in Civil Case No. U-4733; and against
Banco Filipino in Civil Case No. U-4359.[39]

The RTC released an Amended Decision[40] dated January 29, 1992, adding
the following paragraph to the dispositive:

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-


2-A of the subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of
Title 104189 of the Registry of Deeds of Pangasinan[.][41]

The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment
before the Court of Appeals. Their appeal was docketed as CA-G.R. CV No.
39770.

In its Decision[42] dated June 29, 1999, the Court of Appeals decreed:

WHEREFORE, foregoing considered, the appealed decision is


hereby AFFIRMED with modification. Items No. 6 and 7 of the appealed
decision are DELETED. Item No. 8 is modified requiring [Dr. Rosario] to pay
[the Torbela siblings] actual damages, in the amount of P1,200,000.00 with 6%
per annum interest from finality of this decision until fully paid. [Dr. Rosario] is
further ORDERED to pay [the Torbela siblings] the amount of P300,000.00 as
moral damages; P200,000.00 as exemplary damages and P100,000.00 as attorneys
fees.

Costs against [Dr. Rosario].[43]

The Court of Appeals, in a Resolution[44] dated October 22, 1999, denied the
separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review in
G.R. No. 140528, with the following assignment of errors:

First Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


NOT FINDING THAT THE REGISTRATION OF THE DEED OF
ABSOLUTE QUITCLAIM EXECUTED BY [DR. ANDRES T.
ROSARIO] IN FAVOR OF THE [TORBELA SIBLINGS] DATED
DECEMBER 28, 1964 AND THE REGISTRATION OF THE NOTICE
OF ADVERSE CLAIM EXECUTED BY THE [TORBELA SIBLINGS],
SERVE AS THE OPERATIVE ACT TO CONVEY OR AFFECT THE
LAND AND IMPROVEMENTS THEREOF IN SO FAR AS THIRD
PERSONS ARE CONCERNED.

Second Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


FINDING THAT THE SUBJECT PROPERTY COVERED BY T.C.T.
NO. 52751 IS CLEAN AND FREE, DESPITE OF THE ANNOTATION
OF ENCUMBRANCES OF THE NOTICE OF ADVERSE CLAIM AND
THE DEED OF ABSOLUTE QUITCLAIM APPEARING AT THE
BACK THEREOF AS ENTRY NOS. 274471 AND 274472,
RESPECTIVELY.

Third Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


FINDING THAT THE NOTICE OF ADVERSE CLAIM OF THE
[TORBELA SIBLINGS] UNDER ENTRY NO. 274471 WAS VALIDLY
CANCELLED BY THE REGISTER OF DEEDS, IN THE ABSENCE OF
A PETITION DULY FILED IN COURT FOR ITS CANCELLATION.

Fourth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


FINDING THAT RESPONDENT BANCO FILIPINO SAVINGS AND
MORTGAGE BANK IS A MORTGAGEE IN GOOD FAITH.

Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


NOT FINDING THAT THE FILING OF A CIVIL CASE NO. U-4359
ON DECEMBER 9, 1987, IMPLEADING RESPONDENT BANCO
FILIPINO AS ADDITIONAL PARTY DEFENDANT, TOLL OR
SUSPEND THE RUNNING OF THE ONE YEAR PERIOD OF
REDEMPTION.

Sixth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


NOT FINDING THAT THE OWNERSHIP OVER THE SUBJECT
PROPERTY WAS PREMATURELY CONSOLIDATED IN FAVOR OF
RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE
BANK.

Seventh Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN


FINDING THAT THE SUBJECT PROPERTY IS AT LEAST
WORTH P1,200,000.00.[45]

The Torbela siblings ask of this Court:

WHEREFORE, in the light of the foregoing considerations, the [Torbela


siblings] most respectfully pray that the questioned DECISION promulgated on
June 29, 1999 (Annex A, Petition) and the RESOLUTION dated October 22,
1999 (Annex B, Petition) be REVERSED and SET ASIDE, and/or further
MODIFIED in favor of the [Torbela siblings], and another DECISION issue
ordering, among other reliefs, the respondent Banco Filipino to reconvey back Lot
No. 356-A, covered by T.C.T. No. 52751, in favor of the [Torbela siblings] who
are the actual owners of the same.

The [Torbela siblings] likewise pray for such other reliefs and further
remedies as may be deemed just and equitable under the premises.[46]

Duque-Rosario, now legally separated from Dr. Rosario, avers in her


Petition for Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-
B-2-A were registered in her name, and she was unlawfully deprived of ownership
of said properties because of the following errors of the Court of Appeals:

A
THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT FINDING
THAT THE PERIOD TO REDEEM THE PROPERTY HAS NOT
COMMENCED, HENCE, THE CERTIFICATE OF SALE, THE
CONSOLIDATION OF OWNERSHIP BY [BANCO FILIPINO], ARE NULL
AND VOID.

THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE


THAT THE FILING OF THE COMPLAINT BEFORE THE COURT A QUO
BY THE [TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED.[47]
Duque-Rosario prays that the appealed decision of the Court of Appeals be
reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be
freed from all obligations and encumbrances and returned to her.

Review of findings of fact by the RTC and


the Court of Appeals warranted.

A disquisition of the issues raised and/or errors assigned in the Petitions at


bar unavoidably requires a re-evaluation of the facts and evidence presented by the
parties in the court a quo.

In Republic v. Heirs of Julia Ramos,[48] the Court summed up the rules


governing the power of review of the Court:

Ordinarily, this Court will not review, much less reverse, the factual findings of
the Court of Appeals, especially where such findings coincide with those of the trial
court. The findings of facts of the Court of Appeals are, as a general rule, conclusive and
binding upon this Court, since this Court is not a trier of facts and does not routinely
undertake the re-examination of the evidence presented by the contending parties during
the trial of the case.

The above rule, however, is subject to a number of exceptions, such as (1) when
the inference made is manifestly mistaken, absurd or impossible; (2) when there is grave
abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises,
or conjectures; (4) when the judgment of the Court of Appeals is based on
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the same
is contrary to the admissions of both parties; (7) when the findings of the Court of
Appeals are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties
and which, if properly considered, would justify a different conclusion; and (10) when
the findings of fact of the Court of Appeals are premised on the absence of evidence and
are contradicted by the evidence on record.[49]

As the succeeding discussion will bear out, the first, fourth, and ninth exceptions
are extant in these case.
Barangay conciliation was not a pre-
requisite to the institution of Civil Case No.
U-4359.

Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela
siblings for recovery of ownership and possession of Lot No. 356-A, plus damages,
should have been dismissed by the RTC because of the failure of the Torbela
siblings to comply with the prior requirement of submitting the dispute
to barangay conciliation.

The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986, when
Presidential Decree No. 1508, Establishing a System of Amicably Settling
Disputes at the Barangay Level, was still in effect.[50] Pertinent provisions of said
issuance read:
Section 2. Subject matters for amicable settlement. The Lupon of each
barangay shall have authority to bring together the parties actually residing in
the same city or municipalityfor amicable settlement of all disputes except:
1. Where one party is the government, or any subdivision or
instrumentality thereof;
2. Where one party is a public officer or employee, and the dispute relates
to the performance of his official functions;
3. Offenses punishable by imprisonment exceeding 30 days, or a fine
exceeding P200.00;
4. Offenses where there is no private offended party;
5. Such other classes of disputes which the Prime Minister may in the
interest of justice determine upon recommendation of the Minister
of Justice and the Minister of Local Government.
Section 3. Venue. Disputes between or among persons actually residing in
the same barangay shall be brought for amicable settlement before the Lupon of
said barangay. Those involving actual residents of different barangays within the
same city or municipality shall be brought in the barangay where the respondent
or any of the respondents actually resides, at the election of the complainant.
However, all disputes which involved real property or any interest therein
shall be brought in the barangay where the real property or any part thereof
is situated.
The Lupon shall have no authority over disputes:
1. involving parties who actually reside in barangays of different cities
or municipalities, except where such barangays adjoin each
other; and
2. involving real property located in different municipalities.
xxxx
Section 6. Conciliation, pre-condition to filing of complaint. No
complaint, petition, action or proceeding involving any matter within the authority
of the Lupon as provided in Section 2 hereof shall be filed or instituted in court or
any other government office for adjudication unless there has been a
confrontation of the parties before the Lupon Chairman or the Pangkat and no
conciliation or settlement has been reached as certified by the Lupon Secretary or
the Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or unless the
settlement has been repudiated. x x x. (Emphases supplied.)

The Court gave the following elucidation on the jurisdiction of the Lupong
Tagapayapa in Tavora v. Hon. Veloso[51]:

The foregoing provisions are quite clear. Section 2 specifies the conditions
under which the Lupon of a barangay shall have authority to bring together the
disputants for amicable settlement of their dispute: The parties must be actually
residing in the same city or municipality. At the same time, Section 3 while
reiterating that the disputants must be actually residing in the same barangay or in
different barangays within the same city or municipality unequivocably declares
that the Lupon shall have no authority over disputes involving parties who
actually reside in barangays of different cities or municipalities, except where
such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion, the Lupon shall


have no jurisdiction over disputes where the parties are not actual residents
of the same city or municipality, except where the barangays in which they
actually reside adjoin each other.
It is true that immediately after specifying the barangay whose Lupon
shall take cognizance of a given dispute, Sec. 3 of PD 1508 adds:

"However, all disputes which involve real property or any


interest therein shall be brought in the barangay where the real
property or any part thereof is situated."

Actually, however, this added sentence is just an ordinary proviso and


should operate as such.

The operation of a proviso, as a rule, should be limited to its normal


function, which is to restrict or vary the operation of the principal clause, rather
than expand its scope, in the absence of a clear indication to the contrary.

The natural and appropriate office of a proviso is . . . to


except something from the enacting clause; to limit, restrict, or
qualify the statute in whole or in part; or to exclude from the scope
of the statute that which otherwise would be within its terms. (73
Am Jur 2d 467.)
Therefore, the quoted proviso should simply be deemed to restrict or vary
the rule on venue prescribed in the principal clauses of the first paragraph of
Section 3, thus: Although venue is generally determined by the residence of
the parties, disputes involving real property shall be brought in the barangay
where the real property or any part thereof is situated, notwithstanding that
the parties reside elsewhere within the same city/municipality.[52] (Emphases
supplied.)

The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses
Rosario) do not reside in the same barangay, or in different barangays within the
same city or municipality, or in different barangays of different cities or
municipalities but are adjoining each other. Some of them reside outside
Pangasinan and even outside of the country altogether. The Torbela siblings reside
separately in Barangay Macalong, Urdaneta, Pangasinan; Barangay Consolacion,
Urdaneta, Pangasinan; Pangil, Laguna; Chicago, United States of America;
and Canada. The spouses Rosario are residents of Calle Garcia, Poblacion,
Urdaneta, Pangasinan. Resultantly, the Lupon had no jurisdiction over the dispute
and barangay conciliation was not a pre-condition for the filing of Civil Case No.
U-4359.

The Court now looks into the merits of Civil Case No. U-4359.

There was an express trust between the


Torbela siblings and Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-
A from their parents, the Torbela spouses, who, in turn, acquired the same from the
first registered owner of Lot No. 356-A, Valeriano.

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim


on December 12, 1964 in which they transferred and conveyed Lot No. 356-A to
Dr. Rosario for the consideration of P9.00. However, the Torbela siblings
explained that they only executed the Deed as an accommodation so that Dr.
Rosario could have Lot No. 356-A registered in his name and use said property to
secure a loan from DBP, the proceeds of which would be used for building a
hospital on Lot No. 356-A a claim supported by testimonial and documentary
evidence, and borne out by the sequence of events immediately following the
execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No.
52751, covering Lot No. 356-A, was already issued in Dr. Rosarios
name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute
Quitclaim, in which he expressly acknowledged that he only borrowed Lot No.
356-A and was transferring and conveying the same back to the Torbela siblings
for the consideration of P1.00. On February 21, 1965, Dr. Rosarios loan in the
amount of P70,200.00, secured by a mortgage on Lot No. 356-A, was approved by
DBP. Soon thereafter, construction of a hospital building started on Lot No. 356-A.

Among the notable evidence presented by the Torbela siblings is the


testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent
personal interest in the present case. Atty. Alcantara, when she was still a boarder
at the house of Eufrosina Torbela Rosario (Dr. Rosarios mother), was consulted by
the Torbela siblings as regards the extrajudicial partition of Lot No. 356-A. She
also witnessed the execution of the two Deeds of Absolute Quitclaim by the
Torbela siblings and Dr. Rosario.

In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to
prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of
Appeals,[53] the Court made a clear distinction between title and the certificate of
title:

The certificate referred to is that document issued by the Register of Deeds known
as the Transfer Certificate of Title (TCT). By title, the law refers to ownership
which is represented by that document. Petitioner apparently confuses certificate
with title. Placing a parcel of land under the mantle of the Torrens system does
not mean that ownership thereof can no longer be disputed. Ownership is different
from a certificate of title. The TCT is only the best proof of ownership of a piece
of land. Besides, the certificate cannot always be considered as conclusive
evidence of ownership. Mere issuance of the certificate of title in the name of
any person does not foreclose the possibility that the real property may be
under co-ownership with persons not named in the certificate or that the
registrant may only be a trustee or that other parties may have acquired
interest subsequent to the issuance of the certificate of title. To repeat,
registration is not the equivalent of title, but is only the best evidence
thereof. Title as a concept of ownership should not be confused with the
certificate of title as evidence of such ownership although both are
interchangeably used. x x x.[54] (Emphases supplied.)

Registration does not vest title; it is merely the evidence of such title. Land
registration laws do not give the holder any better title than what he actually
has.[55]Consequently, Dr. Rosario must still prove herein his acquisition of title to
Lot No. 356-A, apart from his submission of TCT No. 52751 in his name.

Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela
siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court
though observes that Dr. Rosarios testimony on the execution and existence of the
verbal agreement with the Torbela siblings lacks significant details (such as the
names of the parties present, dates, places, etc.) and is not corroborated by
independent evidence.

In addition, Dr. Rosario acknowledged the execution of the two Deeds of


Absolute Quitclaim dated December 12, 1964 and December 28, 1964, even
affirming his own signature on the latter Deed. The Parol Evidence Rule provides
that when the terms of the agreement have been reduced into writing, it is
considered as containing all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms other than the
contents of the written agreement.[56] Dr. Rosario may not modify, explain, or add
to the terms in the two written Deeds of Absolute Quitclaim since he did not put in
issue in his pleadings (1) an intrinsic ambiguity, mistake, or imperfection in the
Deeds; (2) failure of the Deeds to express the true intent and the agreement of the
parties thereto; (3) the validity of the Deeds; or (4) the existence of other terms
agreed to by the Torbela siblings and Dr. Rosario after the execution of the
Deeds.[57]
Even if the Court considers Dr. Rosarios testimony on his alleged verbal
agreement with the Torbela siblings, the Court finds the same unsatisfactory. Dr.
Rosario averred that the two Deeds were executed only because he was planning to
secure loan from the Development Bank of the Philippines and Philippine National
Bank and the bank needed absolute quitclaim[.][58] While Dr. Rosarios explanation
makes sense for the first Deed of Absolute Quitclaim dated December 12, 1964
executed by the Torbela siblings (which transferred Lot No. 356-A to Dr. Rosario
for P9.00.00), the same could not be said for the second Deed of Absolute
Quitclaim dated December 28, 1964 executed by Dr. Rosario.In fact, Dr. Rosarios
Deed of Absolute Quitclaim (in which he admitted that he only borrowed Lot No.
356-A and was transferring the same to the Torbela siblings for P1.00.00) would
actually work against the approval of Dr. Rosarios loan by the banks. Since Dr.
Rosarios Deed of Absolute Quitclaim dated December 28, 1964 is a declaration
against his self-interest, it must be taken as favoring the truthfulness of the contents
of said Deed.[59]

It can also be said that Dr. Rosario is estopped from claiming or asserting
ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim
dated December 28, 1964. Dr. Rosario's admission in the said Deed that he merely
borrowed Lot No. 356-A is deemed conclusive upon him. Under Article 1431 of
the Civil Code, [t]hrough estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against
the person relying thereon.[60] That admission cannot now be denied by Dr. Rosario
as against the Torbela siblings, the latter having relied upon his representation.

Considering the foregoing, the Court agrees with the RTC and the Court of
Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela
siblings.

Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the trustee to
deal with the property for the benefit of the beneficiary. Trust relations between
parties may either be express or implied. An express trust is created by the
intention of the trustor or of the parties, while an implied trust comes into being by
operation of law.[61]

Express trusts are created by direct and positive acts of the parties, by some
writing or deed, or will, or by words either expressly or impliedly evincing an
intention to create a trust. Under Article 1444 of the Civil Code, [n]o particular
words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended.[62] It is possible to create a trust without using the word
trust or trustee. Conversely, the mere fact that these words are used does not
necessarily indicate an intention to create a trust. The question in each case is
whether the trustor manifested an intention to create the kind of relationship which
to lawyers is known as trust. It is immaterial whether or not he knows that the
relationship which he intends to create is called a trust, and whether or not he
knows the precise characteristics of the relationship which is called a trust.[63]

In Tamayo v. Callejo,[64] the Court recognized that a trust may have a


constructive or implied nature in the beginning, but the registered owners
subsequent express acknowledgement in a public document of a previous sale of
the property to another party, had the effect of imparting to the aforementioned
trust the nature of an express trust.The same situation exists in this case. When Dr.
Rosario was able to register Lot No. 356-A in his name under TCT No. 52751
on December 16, 1964, an implied trust was initially established between him and
the Torbela siblings under Article 1451 of the Civil Code, which provides:

ART. 1451. When land passes by succession to any person and he causes
the legal title to be put in the name of another, a trust is established by implication
of law for the benefit of the true owner.

Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28,


1964, containing his express admission that he only borrowed Lot No. 356-A from
the Torbela siblings, eventually transformed the nature of the trust to an express
one. The express trust continued despite Dr. Rosario stating in his Deed of
Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela
siblings as Lot No. 356-A remained registered in Dr. Rosarios name under TCT
No. 52751 and Dr. Rosario kept possession of said property, together with the
improvements thereon.

The right of the Torbela siblings to recover


Lot No. 356-A has not yet prescribed.
The Court extensively discussed the prescriptive period for express trusts in
the Heirs of Maximo Labanon v. Heirs of Constancio Labanon,[65] to wit:

On the issue of prescription, we had the opportunity to rule in Bueno v.


Reyes that unrepudiated written express trusts are imprescriptible:
While there are some decisions which hold that an action
upon a trust is imprescriptible, without distinguishing between
express and implied trusts, the better rule, as laid down by this
Court in other decisions, is that prescription does supervene where
the trust is merely an implied one. The reason has been expressed
by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs.
Magdangal, 4 SCRA 84, 88, as follows:

Under Section 40 of the old Code of Civil


Procedure, all actions for recovery of real property
prescribed in 10 years, excepting only actions based
on continuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held
in the case of Diaz v. Gorricho, L-11229, March 29,
1958, however, the continuing or subsisting trusts
contemplated in section 38 of the Code of Civil
Procedure referred only to express unrepudiated
trusts, and did not include constructive trusts (that
are imposed by law) where no fiduciary relation
exists and the trustee does not recognize the trust at
all.

This principle was amplified in Escay v. Court of Appeals this way:


Express trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz,
et al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil
Procedure).

In the more recent case of Secuya v. De Selma, we again ruled that the
prescriptive period for the enforcement of an express trust of ten (10) years starts
upon the repudiation of the trust by the trustee.[66]

To apply the 10-year prescriptive period, which would bar a beneficiarys


action to recover in an express trust, the repudiation of the trust must be proven by
clear and convincing evidence and made known to the beneficiary. [67] The express
trust disables the trustee from acquiring for his own benefit the property committed
to his management or custody, at least while he does not openly repudiate the trust,
and makes such repudiation known to the beneficiary or cestui que trust. For this
reason, the old Code of Civil Procedure (Act 190) declared that the rules on
adverse possession do not apply to continuing and subsisting (i.e., unrepudiated)
trusts. In an express trust, the delay of the beneficiary is directly attributable to the
trustee who undertakes to hold the property for the former, or who is linked to the
beneficiary by confidential or fiduciary relations. The trustee's possession is,
therefore, not adverse to the beneficiary, until and unless the latter is made aware
that the trust has been repudiated.[68]

Dr. Rosario argues that he is deemed to have repudiated the trust on December 16,
1964, when he registered Lot No. 356-A in his name under TCT No. 52751, so
when on February 13, 1986, the Torbela siblings instituted before the RTC Civil
Case No. U-4359, for the recovery of ownership and possession of Lot No. 356-A
from the spouses Rosario, over 21 years had passed. Civil Case No. U-4359 was
already barred by prescription, as well as laches.

The Court already rejected a similar argument in Ringor v. Ringor[69] for the
following reasons:

A trustee who obtains a Torrens title over a property held in trust for him by
another cannot repudiate the trust by relying on the registration. A Torrens
Certificate of Title in Joses name did not vest ownership of the land upon him.
The Torrens system does not create or vest title. It only confirms and records title
already existing and vested. It does not protect a usurper from the true
owner. The Torrens system was not intended to foment betrayal in the
performance of a trust. It does not permit one to enrich himself at the expense of
another. Where one does not have a rightful claim to the property,
the Torrens system of registration can confirm or record nothing. Petitioners
cannot rely on the registration of the lands in Joses name nor in the name of the
Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For Jose could not
repudiate a trust by relying on a Torrens title he held in trust for his co-heirs. The
beneficiaries are entitled to enforce the trust, notwithstanding the irrevocability of
the Torrens title. The intended trust must be sustained.[70] (Emphasis supplied.)

In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose


Labiste,[71] the Court refused to apply prescription and laches and reiterated that:

[P]rescription and laches will run only from the time the express trust is
repudiated. The Court has held that for acquisitive prescription to bar the action of
the beneficiary against the trustee in an express trust for the recovery of the
property held in trust it must be shown that: (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b)
such positive acts of repudiation have been made known to the cestui que trust,
and (c) the evidence thereon is clear and conclusive. Respondents cannot rely on
the fact that the Torrenstitle was issued in the name of Epifanio and the
other heirs of Jose. It has been held that a trustee who obtains a Torrens title
over property held in trust by him for another cannot repudiate the trust by
relying on the registration. The rule requires a clear repudiation of the trust duly
communicated to the beneficiary. The only act that can be construed as
repudiation was when respondents filed the petition for reconstitution in October
1993. And since petitioners filed their complaint in January 1995, their cause of
action has not yet prescribed, laches cannot be attributed to them.[72] (Emphasis
supplied.)

It is clear that under the foregoing jurisprudence, the registration of Lot No.
356-A by Dr. Rosario in his name under TCT No. 52751 on December 16, 1964 is
not the repudiation that would have caused the 10-year prescriptive period for the
enforcement of an express trust to run.
The Court of Appeals held that Dr. Rosario repudiated the express trust
when he acquired another loan from PNB and constituted a second mortgage on
Lot No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965,
was without the knowledge and/or consent of the Torbela siblings.

The Court only concurs in part with the Court of Appeals on this matter.

For repudiation of an express trust to be effective, the unequivocal act of


repudiation had to be made known to the Torbela siblings as the cestuis que
trust and must be proven by clear and conclusive evidence. A scrutiny of TCT No.
52751 reveals the following inscription:

Entry No. 520099

Amendment of the mortgage in favor of PNB inscribed under Entry


No. 490658 in the sense that the consideration thereof has been increased to
PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only (P450,000.00)
and to secure any and all negotiations with PNB, whether contracted before,
during or after the date of this instrument, acknowledged before Notary Public
of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41, Book No. 11, Series
of 1985.

Date of Instrument March 5, 1981


Date of Inscription March 6, 1981[73]

Although according to Entry No. 520099, the original loan and mortgage
agreement of Lot No. 356-A between Dr. Rosario and PNB was previously
inscribed as Entry No. 490658, Entry No. 490658 does not actually appear on TCT
No. 52751 and, thus, it cannot be used as the reckoning date for the start of the
prescriptive period.

The Torbela siblings can only be charged with knowledge of the mortgage
of Lot No. 356-A to PNB on March 6, 1981 when the amended loan and mortgage
agreement was registered on TCT No. 52751 as Entry No. 520099. Entry No.
520099 is constructive notice to the whole world[74] that Lot No. 356-A was
mortgaged by Dr. Rosario to PNB as security for a loan, the amount of which was
increased to P450,000.00. Hence, Dr. Rosario is deemed to have effectively
repudiated the express trust between him and the Torbela siblings on March 6,
1981, on which day, the prescriptive period for the enforcement of the express trust
by the Torbela siblings began to run.

From March 6, 1981, when the amended loan and mortgage agreement was
registered on TCT No. 52751, to February 13, 1986, when the Torbela siblings
instituted before the RTC Civil Case No. U-4359 against the spouses Rosario, only
about five years had passed. The Torbela siblings were able to institute Civil Case
No. U-4359 well before the lapse of the 10-year prescriptive period for the
enforcement of their express trust with Dr. Rosario.

Civil Case No. U-4359 is likewise not barred by laches. Laches means the
failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to
assert it. As the Court explained in the preceding paragraphs, the Torbela siblings
instituted Civil Case No. U-4359 five years after Dr. Rosarios repudiation of the
express trust, still within the 10-year prescriptive period for enforcement of such
trusts. This does not constitute an unreasonable delay in asserting one's right. A
delay within the prescriptive period is sanctioned by law and is not considered to
be a delay that would bar relief. Laches apply only in the absence of a statutory
prescriptive period.[75]

Banco Filipino is not a mortgagee and


buyer in good faith.
Having determined that the Torbela siblings are the true owners and Dr.
Rosario merely the trustee of Lot No. 356-A, the Court is next faced with the issue
of whether or not the Torbela siblings may still recover Lot No. 356-A considering
that Dr. Rosario had already mortgaged Lot No. 356-A to Banco Filipino, and
upon Dr. Rosarios default on his loan obligations, Banco Filipino foreclosed the
mortgage, acquired Lot No. 356-A as the highest bidder at the foreclosure sale, and
consolidated title in its name under TCT No. 165813. The resolution of this issue
depends on the answer to the question of whether or not Banco Filipino was a
mortgagee in good faith.

Under Article 2085 of the Civil Code, one of the essential requisites of the
contract of mortgage is that the mortgagor should be the absolute owner of the
property to be mortgaged; otherwise, the mortgage is considered null and
void. However, an exception to this rule is the doctrine of mortgagee in good
faith. Under this doctrine, even if the mortgagor is not the owner of the mortgaged
property, the mortgage contract and any foreclosure sale arising therefrom are
given effect by reason of public policy. This principle is based on the rule that all
persons dealing with property covered by a Torrens Certificate of Title, as buyers
or mortgagees, are not required to go beyond what appears on the face of the
title. This is the same rule that underlies the principle of innocent purchasers for
value. The prevailing jurisprudence is that a mortgagee has a right to rely in good
faith on the certificate of title of the mortgagor to the property given as security
and in the absence of any sign that might arouse suspicion, has no obligation to
undertake further investigation. Hence, even if the mortgagor is not the rightful
owner of, or does not have a valid title to, the mortgaged property, the mortgagee
in good faith is, nonetheless, entitled to protection.[76]

On one hand, the Torbela siblings aver that Banco Filipino is not a
mortgagee in good faith because as early as May 17, 1967, they had already
annotated Cornelios Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of
Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos.
274471-274472, respectively.

On the other hand, Banco Filipino asseverates that it is a mortgagee in good


faith because per Section 70 of Presidential Decree No. 1529, otherwise known as
the Property Registration Decree, the notice of adverse claim, registered on May
17, 1967 by the Torbela siblings under Entry Nos. 274471-274472 on TCT No.
52751, already lapsed after 30 days or on June 16, 1967. Additionally, there was an
express cancellation of Entry Nos. 274471-274472 by Entry No. 520469
dated March 11, 1981. So when Banco Filipino approved Dr. Rosarios loan
for P1,200,000.00 and constituted a mortgage on Lot No. 356-A (together with two
other properties) on December 8, 1981, the only other encumbrance on TCT No.
52751 was Entry No. 520099 dated March 6, 1981, i.e., the amended loan and
mortgage agreement between Dr. Rosario and PNB (which was eventually
cancelled after it was paid off with part of the proceeds from Dr. Rosarios loan
from Banco Filipino). Hence, Banco Filipino was not aware that the Torbela
siblings adverse claim on Lot No. 356-A still subsisted.

The Court finds that Banco Filipino is not a mortgagee in good faith. Entry
Nos. 274471-274472 were not validly cancelled, and the improper cancellation
should have been apparent to Banco Filipino and aroused suspicion in said bank of
some defect in Dr. Rosarios title.

The purpose of annotating the adverse claim on the title of the disputed land
is to apprise third persons that there is a controversy over the ownership of the land
and to preserve and protect the right of the adverse claimant during the pendency
of the controversy. It is a notice to third persons that any transaction regarding the
disputed land is subject to the outcome of the dispute.[77]

Adverse claims were previously governed by Section 110 of Act No. 496,
otherwise known as the Land Registration Act, quoted in full below:

ADVERSE CLAIM

SEC. 110. Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration, may,
if no other provision is made in this Act for registering the same, make a
statement in writing setting forth fully his alleged right or interest, and how or
under whom acquired, and a reference to the volume and page of the certificate of
title of the registered owner, and a description of the land in which the right or
interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimants
residence, and designate a place at which all notices may be served upon
him. This statement shall be entitled to registration as an adverse claim, and the
court, upon a petition of any party in interest, shall grant a speedy hearing upon
the question of the validity of such adverse claim and shall enter such decree
therein as justice and equity may require. If the claim is adjudged to be invalid,
the registration shall be cancelled. If in any case the court after notice and hearing
shall find that a claim thus registered was frivolous or vexatious, it may tax the
adverse claimant double or treble costs in its discretion.

Construing the aforequoted provision, the Court stressed in Ty Sin Tei v. Lee
Dy Piao[78] that [t]he validity or efficaciousness of the [adverse] claim x x x may
only be determined by the Court upon petition by an interested party, in which
event, the Court shall order the immediate hearing thereof and make the proper
adjudication as justice and equity may warrant. And it is ONLY when such claim is
found unmeritorious that the registration thereof may be cancelled. The Court
likewise pointed out in the same case that while a notice of lis pendens may be
cancelled in a number of ways, the same is not true in a registered adverse claim,
for it may be cancelled only in one instance, i.e., after the claim is adjudged invalid
or unmeritorious by the Court x x x; and if any of the registrations should be
considered unnecessary or superfluous, it would be the notice of lis pendens and
not the annotation of the adverse claim which is more permanent and cannot be
cancelled without adequate hearing and proper disposition of the claim.

With the enactment of the Property Registration Decree on June 11, 1978,
Section 70 thereof now applies to adverse claims:

SEC. 70. Adverse claim. Whoever claims any part or interest in registered
land adverse to the registered owner, arising subsequent to the date of the original
registrations, may, if no other provision is made in this Decree for registering the
same, make a statement in writing setting forth fully his alleged right, or interest,
and how or under whom acquired, a reference to the number of the certificate of
title of the registered owner, the name of the registered owner, and a description
of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse
claimants residence, and a place at which all notices may be served upon
him. This statement shall be entitled to registration as an adverse claim on the
certificate of title. The adverse claim shall be effective for a period of thirty
days from the date of registration. After the lapse of said period, the
annotation of adverse claim may be cancelled upon filing of a verified
petition therefor by the party in interest: Provided, however, that after
cancellation, no second adverse claim based on the same ground shall be
registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file
a petition in the Court of First Instance where the land is situated for the
cancellation of the adverse claim, and the court shall grant a speedy hearing
upon the question of the validity of such adverse claim, and shall render
judgment as may be just and equitable. If the adverse claim is adjudged to be
invalid, the registration thereof shall be ordered cancelled. If, in any case, the
court, after notice and hearing, shall find that the adverse claim thus registered
was frivolous, it may fine the claimant in an amount not less than one thousand
pesos nor more than five thousand pesos, in its discretion. Before the lapse of
thirty days, the claimant may withdraw his adverse claim by filing with the
Register of Deeds a sworn petition to that effect. (Emphases supplied.)

In Sajonas v. Court of Appeals,[79]the Court squarely interpreted Section 70


of the Property Registration Decree, particularly, the new 30-day period not
previously found in Section 110 of the Land Registration Act, thus:

In construing the law aforesaid, care should be taken that every part
thereof be given effect and a construction that could render a provision
inoperative should be avoided, and inconsistent provisions should be reconciled
whenever possible as parts of a harmonious whole. For taken in solitude, a word
or phrase might easily convey a meaning quite different from the one actually
intended and evident when a word or phrase is considered with those with which
it is associated. In ascertaining the period of effectivity of an inscription of
adverse claim, we must read the law in its entirety. Sentence three, paragraph two
of Section 70 of P.D. 1529 provides:

The adverse claim shall be effective for a period of thirty


days from the date of registration.

At first blush, the provision in question would seem to restrict the


effectivity of the adverse claim to thirty days. But the above provision cannot and
should not be treated separately, but should be read in relation to the sentence
following, which reads:

After the lapse of said period, the annotation of adverse


claim may be cancelled upon filing of a verified petition therefor
by the party in interest.

If the rationale of the law was for the adverse claim to ipso facto lose force
and effect after the lapse of thirty days, then it would not have been necessary to
include the foregoing caveat to clarify and complete the rule. For then, no adverse
claim need be cancelled. If it has been automatically terminated by mere lapse of
time, the law would not have required the party in interest to do a useless act.

A statute's clauses and phrases must not be taken separately, but in its
relation to the statute's totality. Each statute must, in fact, be construed as to
harmonize it with the pre-existing body of laws. Unless clearly repugnant,
provisions of statutes must be reconciled. The printed pages of the published Act,
its history, origin, and its purposes may be examined by the courts in their
construction. x x x.

xxxx

Construing the provision as a whole would reconcile the apparent


inconsistency between the portions of the law such that the provision on
cancellation of adverse claim by verified petition would serve to qualify the
provision on the effectivity period. The law, taken together, simply means that
the cancellation of the adverse claim is still necessary to render it ineffective,
otherwise, the inscription will remain annotated and shall continue as a lien
upon the property. For if the adverse claim has already ceased to be effective
upon the lapse of said period, its cancellation is no longer necessary and the
process of cancellation would be a useless ceremony.

It should be noted that the law employs the phrase "may be cancelled,"
which obviously indicates, as inherent in its decision making power, that the court
may or may not order the cancellation of an adverse claim, notwithstanding such
provision limiting the effectivity of an adverse claim for thirty days from the date
of registration. The court cannot be bound by such period as it would be
inconsistent with the very authority vested in it. A fortiori, the limitation on the
period of effectivity is immaterial in determining the validity or invalidity of an
adverse claim which is the principal issue to be decided in the court hearing. It
will therefore depend upon the evidence at a proper hearing for the court to
determine whether it will order the cancellation of the adverse claim or not.

To interpret the effectivity period of the adverse claim as absolute and


without qualification limited to thirty days defeats the very purpose for which the
statute provides for the remedy of an inscription of adverse claim, as the
annotation of an adverse claim is a measure designed to protect the interest of a
person over a piece of real property where the registration of such interest or right
is not otherwise provided for by the Land Registration Act or Act 496 (now P.D.
1529 or the Property Registration Decree), and serves as a warning to third parties
dealing with said property that someone is claiming an interest or the same or a
better right than the registered owner thereof.

The reason why the law provides for a hearing where the validity of
the adverse claim is to be threshed out is to afford the adverse claimant an
opportunity to be heard, providing a venue where the propriety of his
claimed interest can be established or revoked, all for the purpose of
determining at last the existence of any encumbrance on the title arising from
such adverse claim. This is in line with the provision immediately following:

Provided, however, that after cancellation, no second


adverse claim shall be registered by the same claimant.

Should the adverse claimant fail to sustain his interest in the property, the
adverse claimant will be precluded from registering a second adverse claim based
on the same ground.

It was held that validity or efficaciousness of the claim may only be


determined by the Court upon petition by an interested party, in which event, the
Court shall order the immediate hearing thereof and make the proper adjudication
as justice and equity may warrant. And it is only when such claim is found
unmeritorious that the registration of the adverse claim may be cancelled, thereby
protecting the interest of the adverse claimant and giving notice and warning to
third parties.[80] (Emphases supplied.)

Whether under Section 110 of the Land Registration Act or Section 70 of the
Property Registration Decree, notice of adverse claim can only be cancelled after a
party in interest files a petition for cancellation before the RTC wherein the
property is located, and the RTC conducts a hearing and determines the said claim
to be invalid or unmeritorious.

No petition for cancellation has been filed and no hearing has been
conducted herein to determine the validity or merit of the adverse claim of the
Torbela siblings. Entry No. 520469 cancelled the adverse claim of the Torbela
siblings, annotated as Entry Nos. 274471-774472, upon the presentation by Dr.
Rosario of a mere Cancellation and Discharge of Mortgage.

Regardless of whether or not the Register of Deeds should have inscribed


Entry No. 520469 on TCT No. 52751, Banco Filipino could not invoke said
inscription in support of its claim of good faith. There were several things amiss in
Entry No. 520469 which should have already aroused suspicions in Banco Filipino,
and compelled the bank to look beyond TCT No. 52751 and inquire into Dr.
Rosarios title. First, Entry No. 520469 does not mention any court order as basis
for the cancellation of the adverse claim. Second, the adverse claim was not a
mortgage which could be cancelled with Dr. Rosarios Cancellation and Discharge
of Mortgage. And third, the adverse claim was against Dr. Rosario, yet it was
cancelled based on a document also executed by Dr. Rosario.

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to


facts which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the
vendor or mortgagor. His mere refusal to believe that such defect exists, or his
willful closing of his eyes to the possibility of the existence of a defect in the
vendor's or mortgagor's title, will not make him an innocent purchaser or
mortgagee for value, if it afterwards develops that the title was in fact defective,
and it appears that he had such notice of the defects as would have led to its
discovery had he acted with the measure of precaution which may be required of a
prudent man in a like situation.[81]

While the defective cancellation of Entry Nos. 274471-274472 by Entry No.


520469 might not be evident to a private individual, the same should have been
apparent to Banco Filipino. Banco Filipino is not an ordinary mortgagee, but is a
mortgagee-bank, whose business is impressed with public interest. In fact, in one
case, [82] the Court explicitly declared that the rule that persons dealing with
registered lands can rely solely on the certificate of title does not apply to banks. In
another case,[83] the Court adjudged that unlike private individuals, a bank is
expected to exercise greater care and prudence in its dealings, including those
involving registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. The ascertainment of the status
or condition of a property offered to it as security for a loan must be a standard and
indispensable part of its operations.

Banco Filipino cannot be deemed a mortgagee in good faith, much less a


purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence, the right
of the Torbela siblings over Lot No. 356-A is superior over that of Banco Filipino;
and as the true owners of Lot No. 356-A, the Torbela siblings are entitled to a
reconveyance of said property even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due diligence
requirement was not the result of a dishonest purpose, some moral obliquity, or
breach of a known duty for some interest or ill will that partakes of fraud that
would justify damages.[84]

Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no
more need to address issues concerning redemption, annulment of the foreclosure
sale and certificate of sale (subject matter of Civil Case No. U-4733), or issuance
of a writ of possession in favor of Banco Filipino (subject matter of Pet. Case No.
U-822) insofar as Lot No. 356-A is concerned. Such would only be
superfluous. Banco Filipino, however, is not left without any recourse should the
foreclosure and sale of the two other mortgaged properties be insufficient to cover
Dr. Rosarios loan, for the bank may still bring a proper suit against Dr. Rosario to
collect the unpaid balance.

The rules on accession shall govern the


improvements on Lot No. 356-A and the
rents thereof.

The accessory follows the principal. The right of accession is recognized under
Article 440 of the Civil Code which states that [t]he ownership of property gives
the right by accession to everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or artificially.

There is no question that Dr. Rosario is the builder of the improvements on


Lot No. 356-A. The Torbela siblings themselves alleged that they allowed Dr.
Rosario to register Lot No. 356-A in his name so he could obtain a loan from DBP,
using said parcel of land as security; and with the proceeds of the loan, Dr. Rosario
had a building constructed on Lot No. 356-A, initially used as a hospital, and then
later for other commercial purposes. Dr. Rosario supervised the construction of the
building, which began in 1965; fully liquidated the loan from DBP; and maintained
and administered the building, as well as collected the rental income therefrom,
until the Torbela siblings instituted Civil Case No. U-4359 before the RTC
on February 13, 1986.

When it comes to the improvements on Lot No. 356-A, both the Torbela
siblings (as landowners) and Dr. Rosario (as builder) are deemed in bad faith. The
Torbela siblings were aware of the construction of a building by Dr. Rosario
on Lot No. 356-A, while Dr. Rosario proceeded with the said construction despite
his knowledge that Lot No. 356-A belonged to the Torbela siblings. This is the
case contemplated under Article 453 of the Civil Code, which reads:

ART. 453. If there was bad faith, not only on the part of the person who
built, planted or sowed on the land of another, but also on the part of the owner of
such land, the rights of one and the other shall be the same as though both
had acted in good faith.

It is understood that there is bad faith on the part of the landowner


whenever the act was done with his knowledge and without opposition on his
part. (Emphasis supplied.)

When both the landowner and the builder are in good faith, the following rules
govern:

ART. 448. The owner of the land on which anything has been built, sown
or planted in good faith, 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 oblige the 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 land if 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 to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court shall
fix the terms thereof.

ART. 546. Necessary expenses shall be refunded to every possessor; but


only the possessor in good faith may retain the thing until he has been reimbursed
therefor.

Useful expenses shall be refunded only to the possessor in good faith with
the same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof.

ART. 548. Expenses for pure luxury or mere pleasure shall not be
refunded to the possessor in good faith; but he may remove the ornaments with
which he has embellished the principal thing if it suffers no injury thereby, and if
his successor in the possession does not prefer to refund the amount expended.
Whatever is built, planted, or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the land. Where,
however, the planter, builder, or sower has acted in good faith, a conflict of rights
arises between the owners and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of the land. In view of the
impracticability of creating what Manresa calls a state of "forced co-ownership,"
the law has provided a just and equitable solution by giving the owner of the land
the option to acquire the improvements after payment of the proper indemnity or to
oblige the builder or planter to pay for the land and the sower to pay the proper
rent. It is the owner of the land who is allowed to exercise the option because his
right is older and because, by the principle of accession, he is entitled to the
ownership of the accessory thing.[85]

The landowner has to make a choice between appropriating the building by paying
the proper indemnity or obliging the builder to pay the price of the land. But even
as the option lies with the landowner, the grant to him, nevertheless, is
preclusive. He must choose one. He cannot, for instance, compel the owner of the
building to remove the building from the land without first exercising either
option. It is only if the owner chooses to sell his land, and the builder or planter
fails to purchase it where its value is not more than the value of the improvements,
that the owner may remove the improvements from the land. The owner is entitled
to such remotion only when, after having chosen to sell his land, the other party
fails to pay for the same.[86]

This case then must be remanded to the RTC for the determination of
matters necessary for the proper application of Article 448, in relation to Article
546, of the Civil Code. Such matters include the option that the Torbela siblings
will choose; the amount of indemnity that they will pay if they decide to
appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if
they prefer to sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot No.
356-A to Dr. Rosario but the value of the land is considerably more than the
improvements. The determination made by the Court of Appeals in its Decision
dated June 29, 1999 that the current value of Lot No. 356-A is P1,200,000.00 is not
supported by any evidence on record.
Should the Torbela siblings choose to appropriate the improvements on Lot No.
356-A, the following ruling of the Court in Pecson v. Court of Appeals[87] is
relevant in the determination of the amount of indemnity under Article 546 of the
Civil Code:

Article 546 does not specifically state how the value of the useful
improvements should be determined. The respondent court and the private
respondents espouse the belief that the cost of construction of the apartment
building in 1965, and not its current market value, is sufficient reimbursement for
necessary and useful improvements made by the petitioner. This position is,
however, not in consonance with previous rulings of this Court in similar cases.
In Javier vs. Concepcion, Jr., this Court pegged the value of the useful
improvements consisting of various fruits, bamboos, a house and camarin made of
strong material based on the market value of the said
improvements. In Sarmiento vs. Agana, despite the finding that the useful
improvement, a residential house, was built in 1967 at a cost of between eight
thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00), the landowner
was ordered to reimburse the builder in the amount of forty thousand pesos
(P40,000.00), the value of the house at the time of the trial. In the same way,
the landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice


between the parties involved. In this regard, this Court had long ago stated
in Rivera vs. Roman Catholic Archbishop of Manila that the said provision was
formulated in trying to adjust the rights of the owner and possessor in good faith
of a piece of land, to administer complete justice to both of them in such a way as
neither one nor the other may enrich himself of that which does not belong to
him. Guided by this precept, it is therefore the current market value of the
improvements which should be made the basis of reimbursement. A contrary
ruling would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment building
for a measly amount. Consequently, the parties should therefore be allowed to
adduce evidence on the present market value of the apartment building upon
which the trial court should base its finding as to the amount of reimbursement to
be paid by the landowner.[88] (Emphases supplied.)

Still following the rules of accession, civil fruits, such as rents, belong to the owner
of the building.[89] Thus, Dr. Rosario has a right to the rents of the improvements
on Lot No. 356-A and is under no obligation to render an accounting of the same to
anyone. In fact, it is the Torbela siblings who are required to account for the rents
they had collected from the lessees of the commercial building and turn over any
balance to Dr. Rosario. Dr. Rosarios right to the rents of the improvements on Lot
No. 356-A shall continue until the Torbela siblings have chosen their option under
Article 448 of the Civil Code. And in case the Torbela siblings decide to
appropriate the improvements, Dr. Rosario shall have the right to retain said
improvements, as well as the rents thereof, until the indemnity for the same has
been paid.[90]

Dr. Rosario is liable for damages to the


Torbela siblings.

The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings P300,000.00
as moral damages; P200,000.00 as exemplary damages; and P100,000.00 as
attorneys fees.
Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully aware that he
only held Lot No. 356-A in trust for the Torbela siblings, he mortgaged said
property to PNB and Banco Filipino absent the consent of the Torbela siblings, and
caused the irregular cancellation of the Torbela siblings adverse claim on TCT No.
52751. Irrefragably, Dr. Rosarios betrayal had caused the Torbela siblings (which
included Dr. Rosarios own mother, Eufrosina Torbela Rosario) mental anguish,
serious anxiety, and wounded feelings.Resultantly, the award of moral damages is
justified, but the amount thereof is reduced to P200,000.00.

In addition to the moral damages, exemplary damages may also be imposed given
that Dr. Rosarios wrongful acts were accompanied by bad faith. However, judicial
discretion granted to the courts in the assessment of damages must always be
exercised with balanced restraint and measured objectivity. The circumstances of
the case call for a reduction of the award of exemplary damages to P100,000.00.

As regards attorney's fees, they may be awarded when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. Because of Dr. Rosarios acts, the Torbela siblings
were constrained to institute several cases against Dr. Rosario and his spouse,
Duque-Rosario, as well as Banco Filipino, which had lasted for more than 25
years. Consequently, the Torbela siblings are entitled to an award of attorney's fees
and the amount of P100,000.00 may beconsidered rational, fair, and reasonable.
Banco Filipino is entitled to a writ of
possession for Lot No. 5-F-8-C-2-B-2-A.

The Court emphasizes that Pet. Case No. U-822, instituted by Banco
Filipino for the issuance of a writ of possession before the RTC of Urdaneta,
included only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the
third property mortgaged to secure Dr. Rosarios loan from Banco Filipino, is
located in Dagupan City, Pangasinan, and the petition for issuance of a writ of
possession for the same should be separately filed with the RTC of Dagupan
City). Since the Court has already granted herein the reconveyance of Lot No. 356-
A from Banco Filipino to the Torbela siblings, the writ of possession now pertains
only to Lot No. 5-F-8-C-2-B-2-A.

To recall, the Court of Appeals affirmed the issuance by the RTC of a writ
of possession in favor of Banco Filipino. Dr. Rosario no longer appealed from said
judgment of the appellate court. Already legally separated from Dr. Rosario,
Duque-Rosario alone challenges the writ of possession before this Court through
her Petition in G.R. No. 140553.

Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had


been registered in her name under TCT No. 104189. Yet, without a copy of TCT
No. 104189 on record, the Court cannot give much credence to Duque-Rosarios
claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of
whether Lot No. 5-F-8-C-2-B-2-A was the paraphernal property of Duque-Rosario
or the conjugal property of the spouses Rosario would not alter the outcome of
Duque-Rosarios Petition.

The following facts are undisputed: Banco Filipino extrajudicially foreclosed the
mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other properties
after Dr. Rosario defaulted on the payment of his loan; Banco Filipino was the
highest bidder for all three properties at the foreclosure sale on April 2, 1987; the
Certificate of Sale dated April 2, 1987 was registered in April 1987; and based on
the Certificate of Final Sale dated May 24, 1988 and Affidavit of Consolidation
dated May 25, 1988, the Register of Deeds cancelled TCT No. 104189 and issued
TCT No. 165812 in the name of Banco Filipino for Lot No. 5-F-8-C-2-B-2-A on
June 7, 1988.
The Court has consistently ruled that the one-year redemption period should be
counted not from the date of foreclosure sale, but from the time the certificate of
sale is registered with the Registry of Deeds.[91] No copy of TCT No. 104189 can
be found in the records of this case, but the fact of annotation of the Certificate of
Sale thereon was admitted by the parties, only differing on the date it was
made: April 14, 1987 according to Banco Filipino and April 15, 1987 as
maintained by Duque-Rosario. Even if the Court concedes that the Certificate of
Sale was annotated on TCT No. 104189 on the later date, April 15, 1987, the one-
year redemption period already expired on April 14, 1988.[92] The Certificate of
Final Sale and Affidavit of Consolidation were executed more than a month
thereafter, on May 24, 1988 and May 25, 1988, respectively, and were clearly not
premature.
It is true that the rule on redemption is liberally construed in favor of the
original owner of the property. The policy of the law is to aid rather than to defeat
him in the exercise of his right of redemption.[93] However, the liberal
interpretation of the rule on redemption is inapplicable herein as neither Duque-
Rosario nor Dr. Rosario had made any attempt to redeem Lot No. 5-F-8-C-2-B-2-
A. Duque-Rosario could only rely on the efforts of the Torbela siblings at
redemption, which were unsuccessful. While the Torbela siblings made several
offers to redeem Lot No. 356-A, as well as the two other properties mortgaged by
Dr. Rosario, they did not make any valid tender of the redemption price to effect a
valid redemption. The general rule in redemption is that it is not sufficient that a
person offering to redeem manifests his desire to do so. The statement of intention
must be accompanied by an actual and simultaneous tender of payment. The
redemption price should either be fully offered in legal tender or else validly
consigned in court. Only by such means can the auction winner be assured that the
offer to redeem is being made in good faith.[94] In case of disagreement over the
redemption price, the redemptioner may preserve his right of redemption through
judicial action, which in every case, must be filed within the one-year period of
redemption. The filing of the court action to enforce redemption, being equivalent
to a formal offer to redeem, would have the effect of preserving his redemptive
rights and freezing the expiration of the one-year period.[95] But no such action was
instituted by the Torbela siblings or either of the spouses Rosario.
Duque-Rosario also cannot bar the issuance of the writ of possession over
Lot No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency of
Civil Case No. U-4359, the Torbela siblings action for recovery of ownership and
possession and damages, which supposedly tolled the period for redemption of the
foreclosed properties.Without belaboring the issue of Civil Case No. U-4359
suspending the redemption period, the Court simply points out to Duque-Rosario
that Civil Case No. U-4359 involved Lot No. 356-A only, and the legal
consequences of the institution, pendency, and resolution of Civil Case No. U-
4359 apply to Lot No. 356-A alone.

Equally unpersuasive is Duque-Rosarios argument that the writ of


possession over Lot No. 5-F-8-C-2-B-2-A should not be issued given the defects in
the conduct of the foreclosure sale (i.e., lack of personal notice to Duque-Rosario)
and consolidation of title (i.e., failure to provide Duque-Rosario with copies of the
Certificate of Final Sale).

The right of the purchaser to the possession of the foreclosed property


becomes absolute upon the expiration of the redemption period. The basis of this
right to possession is the purchaser's ownership of the property. After the
consolidation of title in the buyer's name for failure of the mortgagor to redeem,
the writ of possession becomes a matter of right and its issuance to a purchaser in
an extrajudicial foreclosure is merely a ministerial function.[96]

The judge with whom an application for a writ of possession is filed need
not look into the validity of the mortgage or the manner of its foreclosure. Any
question regarding the validity of the mortgage or its foreclosure cannot be a legal
ground for the refusal to issue a writ of possession. Regardless of whether or not
there is a pending suit for the annulment of the mortgage or the foreclosure itself,
the purchaser is entitled to a writ of possession, without prejudice, of course, to the
eventual outcome of the pending annulment case. The issuance of a writ of
possession in favor of the purchaser in a foreclosure sale is a ministerial act and
does not entail the exercise of discretion.[97]

WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in


G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in
G.R. No. 140553 is DENIED for lack of merit. The Decision dated June 29,
1999 of the Court of Appeals in CA-G.R. CV No. 39770, which affirmed with
modification the Amended Decision dated January 29, 1992 of the RTC in Civil
Case Nos. U-4359 and U-4733 and Pet. Case No. U-822, is AFFIRMED WITH
MODIFICATIONS, to now read as follows:

(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela
siblings;

(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No.


165813 in the name of Banco Filipino and to issue a new certificate of title in the
name of the Torbela siblings for Lot No. 356-A;

(3) The case is REMANDED to the RTC for further proceedings to


determine the facts essential to the proper application of Articles 448 and 546 of
the Civil Code, particularly: (a) the present fair market value of Lot No. 356-A; (b)
the present fair market value of the improvements thereon; (c) the option of the
Torbela siblings to appropriate the improvements on Lot No. 356-A or require Dr.
Rosario to purchase Lot No. 356-A; and (d) in the event that the Torbela siblings
choose to require Dr. Rosario to purchase Lot No. 356-A but the value thereof is
considerably more than the improvements, then the reasonable rent of Lot No. 356-
A to be paid by Dr. Rosario to the Torbela siblings;

(4) The Torbela siblings are DIRECTED to submit an accounting of the


rents of the improvements on Lot No. 356-A which they had received and to turn
over any balance thereof to Dr. Rosario;

(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as


moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys
fees; and
(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-2-B-
2-A, covered by TCT No. 165812. The RTC Branch Clerk of Court
is ORDERED to issue a writ of possession for the said property in favor of Banco
Filipino.

SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO


Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.


Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

[1]
Rollo (G.R. No. 140528), pp. 39-57; rollo (G.R. No. 140553), pp. 16-34; penned by Associate Justice Eugenio S.
Labitoria with Associate Justices Mariano M. Umali and Edgardo P. Cruz, concurring.
[2]
Id. at 58-59; id. at 35-36.
[3]
Represented by her heirs: Eulogio Tosino, Claro Tosino, Maximino Tosino, Cornelio Tosino, Olivia Tosino,
Calixta Tosino, Apolonia Tosino vda. de Ramirez, and Julita Tosino Dean.
[4]
Represented by his heirs: Jose Torbela and Dionisio Torbela.
[5]
Represented by her heirs: Esteban Rosario, Manuel Rosario, and Andrea Rosario-Haduca.
[6]
Represented by Sergio Torbela, Eutropia Velasco, Pilar Zulueta, Candido Torbela, Florentina Torbela, and
Pantaleon Torbela.
[7]
Represented by her heirs: Patricio Agustin, Segundo Agustin, Consuelo Agustin, and Felix Agustin.
[8]
Records, Folder of Exhibits, pp. 1047-1050.
[9]
Id. at 1051-1054.
[10]
Id. at 1055-1056.
[11]
Id. at 1055.
[12]
Id. at 1057-1060.
[13]
Id. at 1061.
[14]
Id.
[15]
Id. at 1058.
[16]
Id. at 1062-1063.
[17]
Id.
[18]
Id. at 1058, 1059-A.
[19]
Id.
[20]
Id. at 1059-A.
[21]
No copies of TCT Nos. 24832 and 104189 can be found in the case records.
[22]
Records, Folder of Exhibits, p. 1059-A.
[23]
Id. at 1060.
[24]
Id.
[25]
Id.
[26]
Id.
[27]
Id.
[28]
Records, pp. 489-492.
[29]
Id. at 476-477.
[30]
Records, Folder of Exhibits, p. 1060.
[31]
Records, pp. 180-188. The Torbela siblings would eventually file a Second Amended Complaint in Civil Case
No. U-4359 on July 29, 1991 (id. at 391-403).
[32]
Records, Folder of Exhibits, p. 1060A.
[33]
CA rollo, p. 169.
[34]
Records, pp. 478-479.
[35]
Id. at 480.
[36]
Records, Folder of Exhibits, p. 1064.
[37]
Records, pp. 536-547. The Torbela siblings would subsequently file an Amended Complaint in Civil Case No.
U-4733 on July 29, 1991.
[38]
CA rollo, pp. 138-148; penned by Judge Modesto C. Juanson.
[39]
Id. at 148.
[40]
Id. at 149-150.
[41]
Id. at 149.
[42]
Id. at 195-213; penned by Associate Justice Eugenio S. Labitoria with Associate Justices Mariano M. Umali and
Edgardo P. Cruz, concurring.
[43]
Id. at 212.
[44]
Id. at 253-254.
[45]
Rollo (G.R. No. 140528), pp. 21-22, 31, and 33.
[46]
Id. at 35.
[47]
Rollo (G.R. No. 140553), p. 10.
[48]
G.R. No. 169481, February 22, 2010, 613 SCRA 314.
[49]
Id. at 324-325.
[50]
This was repealed by Republic Act No. 7160, otherwise known as the Local Government Code of 1991, which
took effect on January 1, 1992.
[51]
202 Phil. 943 (1982).
[52]
Id. at 947-948.
[53]
354 Phil. 556 (1998).
[54]
Id. at 561-562.
[55]
Heirs of Rosa Dumaliang v. Serban, G.R. No. 155133, February 21, 2007, 516 SCRA 343, 357-358.
[56]
Rules of Court, Rule 130, Section 9.
[57]
Id.
[58]
TSN, September 25, 1991, p. 21.
[59]
Declaro v. Court of Appeals, 399 Phil. 616, 623 (2000).
[60]
Spouses Gomez v. Duyan, 493 Phil. 819, 828 (2005).
[61]
Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, G.R. No. 162033, May 8, 2009, 587 SCRA 417, 425.
[62]
Id.
[63]
Heirs of Maximo Labanon v. Heirs of Constancio Labanon, G.R. No. 160711, August 14, 2007, 530 SCRA 97,
107.
[64]
150-B Phil. 31, 37-38 (1972).
[65]
Supra note 63.
[66]
Id. at 108-109.
[67]
Secuya v. De Selma, 383 Phil. 126, 137 (2000).
[68]
Diaz v. Gorricho and Aguado, 103 Phil. 261, 266 (1958).
[69]
G.R. No. 147863, August 13, 2004, 436 SCRA 484.
[70]
Id. at 500-501.
[71]
Supra note 61.
[72]
Id. at 426.
[73]
CA rollo, p. 105.
[74]
Section 52 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, reads:
SEC. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed
or entered in the office of the Register of Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time of such registering, filing, or
entering.
[75]
De Castro v. Court of Appeals, 434 Phil. 53, 68 (2002).
[76]
Llanto v. Alzona, 490 Phil. 696, 703 (2005).
[77]
Arrazola v. Bernas, 175 Phil. 452, 456-457 (1978).
[78]
103 Phil. 858, 867 (1958).
[79]
327 Phil. 689 (1996).
[80]
Id. at 708-712.
[81]
Crisostomo v. Court of Appeals, 274 Phil. 1134, 1142-1143 (1991).
[82]
Philippine Trust Company v. Court of Appeals, G.R. No. 150318, November 22, 2010, 635 SCRA 518, 530.
[83]
Cruz v. Bancom Finance Corporation, 429 Phil. 225, 239 (2002).
[84]
Metropolitan Bank and Trust Co. v. Pascual, G.R. No. 163744, February 29, 2008, 547 SCRA 246, 261.
[85]
Bernardo v. Bataclan, 66 Phil. 598, 602 (1938).
[86]
Briones v. Spouses Macabagdal, G.R. No. 150666, August 3, 2010, 626 SCRA 300, 307-308.
[87]
314 Phil. 313 (1995).
[88]
Id. at 323-325.
[89]
Article 441(3) of the Civil Code provides that To the owner belongs x x x (t)he civil fruits. Article 442 of the
same Code describes civil fruits as the rents of buildings, the price of leases of lands and other property and
the amount of perpetual or life annuities or other similar income.
[90]
Id.
[91]
Metropolitan Bank and Trust Company v. Tan, G.R. No. 178449, October 17, 2008, 569 SCRA 814, 831.
[92]
The year 1988 was a leap-year.
[93]
Ysmael v. Court of Appeals, 376 Phil. 323, 334 (1999).
[94]
BPI Family Savings Bank Inc. v. Sps. Veloso, 479 Phil. 627, 634 (2004).
[95]
Banco Filipino Savings & Mortgage Bank v. Court of Appeals, 501 Phil. 372, 384 (2005).
[96]
Sarrosa v. Dizon, G.R. No. 183027, July 26, 2010, 625 SCRA 556, 564-565.
[97]
Fernandez v. Espinoza, G.R. No. 156421, April 14, 2008, 551 SCRA 136, 150.
FIRST DIVISION

FELOMINA[1] ABELLANA, G.R. No. 160488


Petitioner,
Present:
Davide, Jr., C.J. (Chairman),
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
SPOUSES ROMEO PONCE and
LUCILA PONCE and the REGISTER Promulgated:
OF DEEDS of BUTUAN CITY,
Respondents. September 3, 2004

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari assailing the June 16, 2003 decision[2] of
the Court of Appeals in CA-G.R. CV No. 69213, which reversed and set aside the
August 28, 2000 decision[3] of the Regional Trial Court of Butuan City, Branch 2,
in Civil Case No. 4270.

The facts as testified to by petitioner Felomina Abellana are as follows:


On July 15, 1981, Felomina, a spinster, pharmacist and aunt of private
respondent Lucila Ponce, purchased from the late Estela Caldoza-Pacres a
44,297[4] square meter agricultural lot[5] with the intention of giving said lot to her
niece, Lucila. Thus, in the deed of sale,[6] the latter was designated as the buyer of
Lot 3, Pcs-10-000198, covered by Original Certificate of Title No. P-27,
Homestead Patent No. V-1551 and located at Los Angeles, Butuan City.[7] The
total consideration of the sale was P16,500.00, but only P4,500.00 was stated in the
deed upon the request of the seller.[8]

Subsequently, Felomina applied for the issuance of title in the name of her
niece. On April 28, 1992, Transfer Certificate of Title (TCT) No. 2874[9] over the
subject lot was issued in the name of Lucila.[10] Said title, however, remained in the
possession of Felomina who developed the lot through Juanario Torreon[11] and
paid real property taxes thereon.[12]

The relationship between Felomina and respondent spouses Romeo and Lucila
Ponce, however, turned sour. The latter allegedly became disrespectful and
ungrateful to the point of hurling her insults and even attempting to hurt her
physically. Hence, Felomina filed the instant case for revocation of implied trust to
recover legal title over the property.[13]

Private respondent spouses Lucila, also a pharmacist, and Romeo, a marine


engineer, on the other hand, claimed that the purchase price of the lot was only
P4,500.00 and that it was them who paid the same. The payment and signing of the
deed of sale allegedly took place in the office of Atty. Teodoro Emboy in the
presence of the seller and her siblings namely, Aquilino Caldoza and the late Lilia
Caldoza.[14]

A year later, Juanario approached Lucila and volunteered to till the lot, to which
she agreed.[15] In 1987, the spouses consented to Felominas proposal to develop
and lease the lot. They, however, shouldered the real property taxes on the lot,
which was paid through Felomina. In 1990, the spouses demanded rental from
Felomina but she refused to pay because her agricultural endeavor was allegedly
not profitable.[16]
When Lucila learned that a certificate of title in her name had already been issued,
she confronted Felomina who claimed that she already gave her the title. Thinking
that she might have misplaced the title, Lucila executed an affidavit of loss which
led to the issuance of another certificate of title in her name.[17]

On August 28, 2000, the trial court rendered a decision holding that an implied
trust existed between Felomina and Lucila, such that the latter is merely holding
the lot for the benefit of the former. It thus ordered the conveyance of the subject
lot in favor of Felomina. The dispositive portion thereof, reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered declaring,


directing and ordering that:

a) An implied trust was created with plaintiff as trustor and private


defendant Lucila A. Ponce married to private defendant Engr.
Romeo D. Ponce as trustee pursuant to Article 1448 of the New
Civil Code;
b) The implied trust, having been created without the consent of the
trustee and without any condition, is revoked;
c) The private defendants, who are spouses, execute the necessary deed of
conveyance in favor of the plaintiff of the land, covered by and
embraced in TCT NO. T-2874, in controversy and in the event
private defendants refuse to execute the deed of conveyance, the
public defendant City Register of Deeds of Butuan to cancel TCT
No. T-2874 and issue a new one in lieu thereof in the name of the
plaintiff;
d) The private defendants spouses to pay jointly and severally plaintiff the
sum of PhP25,000.00 as attorneys fees and PhP4,000.00 as
expenses of litigation;
e) The dismissal of the counterclaim of private defendants spouses[;] and
f) The private defendants to pay the costs.

SO ORDERED.[18]

Private respondent spouses appealed to the Court of Appeals which set aside the
decision of the trial court ruling that Felomina failed to prove the existence of an
implied trust and upheld respondent spouses ownership over the litigated lot. The
appellate court further held that even assuming that Felomina paid the purchase
price of the lot, the situation falls within the exception stated in Article 1448 of the
Civil Code which raises a disputable presumption that the property was purchased
by Felomina as a gift to Lucila whom she considered as her own daughter. The
decretal portion thereof, states

WHEREFORE, premises considered, the appealed decision of the Regional Trial


Court, Branch 2, Butuan City, in Civil Case No. 4270, is hereby REVERSED
AND SET ASIDE. A new one is heretofore rendered dismissing the complaint
below of plaintiff-appellee, F[e]lomina Abellana.
SO ORDERED.[19]

Felomina filed a motion for reconsideration but the same was denied.[20] Hence, the
instant petition.

The issue before us is: Who, as between Felomina and respondent spouses, is the
lawful owner of the controverted lot? To resolve this issue, it is necessary to
determine who paid the purchase price of the lot.

After a thorough examination of the records and transcript of stenographic notes,


we find that it was Felomina and not Lucila who truly purchased the questioned lot
from Estela.The positive and consistent testimony of Felomina alone, that she was
the real vendee of the lot, is credible to debunk the contrary claim of respondent
spouses. Indeed, the lone testimony of a witness, if credible, is sufficient as in the
present case.[21] Moreover, Aquilino Caldoza, brother of the vendor and one of the
witnesses[22] to the deed of sale, categorically declared that Felomina was the buyer
and the one who paid the purchase price to her sister, Estela.[23]

Then too, Juanario, who was allegedly hired by Lucila to develop the lot,
vehemently denied that he approached and convinced Lucila to let him till the
land. According to Juanario, he had never spoken to Lucila about the lot and it was
Felomina who recruited him to be the caretaker of the litigated property.[24]

The fact that it was Felomina who bought the lot was further bolstered by her
possession of the following documents from the time of their issuance up to the
present, to wit: (1) the transfer certificate of title[25] and tax declaration in the name
of Lucila;[26] (2) the receipts of real property taxes in the name of Felomina
Abellana for the years 1982-1984, 1992-1994 and 1995;[27] and (3) the survey plan
of the lot.[28]
Having determined that it was Felomina who paid the purchase price of the subject
lot, the next question to resolve is the nature of the transaction between her and
Lucila.

It appears that Felomina, being of advanced age[29] with no family of her own, used
to purchase properties and afterwards give them to her nieces. In fact, aside from
the lot she bought for Lucila (marked as Exhibit R-2), she also purchased 2 lots,
one from Aquilino Caldoza (marked as Exhibit R-1) and the other from Domiciano
Caldoza (marked as Exhibit R-3), which she gave to Zaida Bascones (sister of
Lucila), thus:

Q I am showing to you again Exhibit R, according to you[,] you bought Exhibits


R-1, R-2 and R-3, do you remember that?
A Yes sir.

xxxxxxxxx

Q Aquilin[o] Caldoza conveyed this land in Exhibit R-1 to you?


A Yes, sir.

Q Is this now titled in your name?


A No. I was planning to give this land to my nieces. One of which [was] already
given to Mrs. [Lucila] Ponce.

Q I am talking only about this lot in Exhibit R-1[.]


A Not in my name.

Q In whose name was this lot in Exhibit R-1 now?


A In the name of Zaida Bascones.

Q Who prepared the deed of sale?


A At the start it was in the name of Rudy [Torreon].[30] Because Rudy [Torreon]
knew that there is some trouble already about that lot he made a deed of
sale to the name of Zaida Bascones, which I planned to give that land to
her (sic).

Q As regards Exhibit R-1, you bought it actually?


A Yes, sir.

Q But the original deed of sale was in the name of Rudolfo [Torreon]?
A Yes, sir.

Q And later on Rudolfo [Torreon] again transferred it to Zaida Bascones?


A Yes, sir.[31]

Likewise, in the case of Lucila, though it was Felomina who paid for the lot, she
had Lucila designated in the deed as the vendee thereof and had the title of the lot
issued in Lucilas name. It is clear therefore that Felomina donated the land to
Lucila. This is evident from her declarations, viz:
Witness

A In 1981 there was a riceland offered so I told her that I will buy that land
and I will give to her later (sic), because since 1981 up to 1992 Mrs.
Lucila Ponce has no job.

Q Where is the land located?


A In Los Angeles, Butuan City.

Q Who was the owner of this land?


A The owner of that land is Mrs. Estela Caldoza-Pacr[e]s.
The husband is Pacr[e]s.

xxxxxxxxx

Q What did you do with this land belonging to Mrs. Estela-Caldoza- Pacr[e]s?
A I paid the lot, then worked the lot, since at the start of my buying the lot until
now (sic).

Q You said that you told Lucila Ponce that you would give the land to her
later on, what did you do in connection with this intention of yours to
give the land to her?
A So I put the name of the title in her name in good faith (sic).

Q You mean to tell the court that when you purchased this land located at Los
Angeles, Butuan City, the instrument of sale or the deed of sale was in the
name of Lucila Ponce?
A Yes, sir.[32]

xxxxxxxxx

Q Did you not ask your adviser Rudolfo [Torreon] whether it was wise for you to
place the property in the name of Lucila Ponce when you are the one who
is the owner?
A Because we have really the intention to give it to her.[33]
Generally, contracts are obligatory in whatever form they may have been entered
into, provided all the essential requisites for their validity are present. When,
however, the law requires that a contract be in some form in order that it may be
valid, that requirement is absolute and indispensable. Its non-observance renders
the contract void and of no effect.[34] Thus, under Article 749 of the Civil Code
Article 749. In order that the donation of an immovable property may be valid, it
must be made in a public document, specifying therein the property donated and
the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the lifetime of the
donor.

If the acceptance is made in a separate instrument, the donor shall be notified


thereof in an authentic form, and this step shall be noted in both instruments.
In the instant case, what transpired between Felomina and Lucila was a donation of
an immovable property which was not embodied in a public instrument as required
by the foregoing article. Being an oral donation, the transaction was
void.[35] Moreover, even if Felomina enjoyed the fruits of the land with the
intention of giving effect to the donation after her demise, the conveyance is still a
void donation mortis causa, for non-compliance with the formalities of a
will.[36] No valid title passed regardless of the intention of Felomina to donate the
property to Lucila, because the naked intent to convey without the required
solemnities does not suffice for gratuitous alienations, even as between the
parties inter se.[37] At any rate, Felomina now seeks to recover title over the
property because of the alleged ingratitude of the respondent spouses.

Unlike ordinary contracts (which are perfected by the concurrence of the requisites
of consent, object and cause pursuant to Article 1318[38] of the Civil Code), solemn
contracts like donations are perfected only upon compliance with the legal
formalities under Articles 748[39] and 749.[40] Otherwise stated, absent the
solemnity requirements for validity, the mere intention of the parties does not give
rise to a contract. The oral donation in the case at bar is therefore legally inexistent
and an action for the declaration of the inexistence of a contract does not
prescribe.[41] Hence, Felomina can still recover title from Lucila.
Article 1448[42] of the Civil Code on implied trust finds no application in the
instant case. The concept of implied trusts is that from the facts and circumstances
of a given case, the existence of a trust relationship is inferred in order to effect the
presumed intention of the parties.[43] Thus, one of the recognized exceptions to the
establishment of an implied trust is where a contrary intention is proved, [44] as in
the present case. From the testimony of Felomina herself, she wanted to give the
lot to Lucila as a gift. To her mind, the execution of a deed with Lucila as the
buyer and the subsequent issuance of title in the latters name were the acts that
would effectuate her generosity. In so carrying out what she conceived, Felomina
evidently displayed her unequivocal intention to transfer ownership of the lot to
Lucila and not merely to constitute her as a trustee thereof. It was only when their
relationship soured that she sought to revoke the donation on the theory of implied
trust, though as previously discussed, there is nothing to revoke because the
donation was never perfected.

In declaring Lucila as the owner of the disputed lot, the Court of Appeals
applied, among others, the second sentence of Article 1448 which states
x x x However, if the person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the
child.

Said presumption also arises where the property is given to a person to


whom the person paying the price stands in loco parentis or as a substitute
parent.[45]

The abovecited provision, however, is also not applicable here because, first,
it was not established that Felomina stood as a substitute parent of Lucila; and
second, even assuming that she did, the donation is still void because the transfer
and acceptance was not embodied in a public instrument. We note that said
provision merely raised a presumption that the conveyance was a gift but nothing
therein exempts the parties from complying with the formalities of a
donation. Dispensation of such solemnities would give rise to anomalous situations
where the formalities of a donation and a will in donations inter vivos, and
donations mortis causa, respectively, would be done away with when the transfer
of the property is made in favor of a child or one to whom the donor stands in loco
parentis. Such a scenario is clearly repugnant to the mandatory nature of the law
on donation.

While Felomina sought to recover the litigated lot on the ground of implied
trust and not on the invalidity of donation, the Court is clothed with ample
authority to address the latter issue in order to arrive at a just decision that
completely disposes of the controversy.[46] Since rules of procedure are mere tools
designed to facilitate the attainment of justice, they must be applied in a way that
equitably and completely resolve the rights and obligations of the parties.[47]

As to the trial courts award of attorneys fees and litigation expenses, the same
should be deleted for lack of basis. Aside from the allegations in the complaint, no
evidence was presented in support of said claims. The trial court made these
awards in the dispositive portion of its decision without stating any justification
therefor in the ratio decidendi. Their deletion is therefore proper.[48]

Finally, in deciding in favor of Felomina, the trial court ordered respondent


spouses to execute a deed of sale over the subject lot in favor of Felomina in order
to effect the transfer of title to the latter. The proper remedy, however, is provided
under Section 10 (a), Rule 39 of the Revised Rules of Civil Procedure which
provides that x x x [i]f real or personal property is situated within the Philippines,
the court in lieu of directing a conveyance thereof may by an order divest the title
of any party and vest it in others, which shall have the force and effect of a
conveyance executed in due form of law.

WHEREFORE, in view of all the foregoing, the petition is GRANTED and the
June 16, 2003 decision of the Court of Appeals in CA-G.R. CV No. 69213
is REVERSED and SET ASIDE. The August 28, 2000 decision of the Regional
Trial Court of Butuan City, Branch 2, in Civil Case No. 4270,
is REINSTATED with the following MODIFICATIONS:
(1) Declaring petitioner Felomina Abellana as the absolute
owner of Lot 3, Pcs-10-000198;

(2) Ordering the Register of Deeds of Butuan City to cancel


TCT No. T-2874 in the name of respondent Lucila Ponce and to issue
a new one in the name of petitioner Felomina Abellana; and
(3) Deleting the awards of attorneys fees and litigation expenses
for lack of basis.

No pronouncement as to costs.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR.


Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO


Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
HILARIO G. DAVIDE, JR.
Chief Justice

[1]
Also spelled as Filomena in some parts of the records.
[2]
Penned by Associate Justice Rodrigo V. Cosico and concurred in by Associate Justices Juan
Q. Enriquez, Jr. and Hakim S. Abdulwahid (Rollo, p. 28).
[3]
Penned by Judge Rosarito F. Dabalos (Rollo, p. 59).
[4]
In the Deed of Sale, the area of the lot is 44,298 (See Exhibit A, Records, p. 7), while in the
Transfer Certificate of Title, the lot area is 44,297 square meters (Records, p. 392).
[5]
Particularly described as follows:
A PARCEL OF LAND (Lot 3, Pcs-10-000198, being a portion of Lot 564 and 565, Cad-
121, Butuan-Cabadbaran Public Land Subdivision), situated in the Barrio of Los Angeles,
Municipality of Cabadbaran, Province of Agusan del Norte, Island of Mindanao. Bounded on the
NE., along line 1-2, by Lot 2, of the Consolidation Subdivision plan Pcs-10-000198, on the SE.,
along line 2-3, by Lot 566, Butuan-Cabadbaran Cad. 121, on the SW., along line 3-4, by Lot 4,
of the Consolidation Subdivision plan Pcs-10-000198, on the NW., along line 4-1, by Lot 563,
Butuan-Cabadbaran Cad. 121. (Transfer Certificate of Title, Exhibit B, Rollo, p. 392)
[6]
Exhibit A, Records, p. 7.
[7]
TSN, 7 November 1995, pp. 69-70; 27 November 1995, pp. 188-191.
[8]
TSN, 28 November 1995, pp. 284-285.
[9]
Exhibit B, Rollo, p. 392.
[10]
TSN, 7 November 1995, pp. 75-76; 28 November 1995, p. 298.
[11]
TSN, 7 November 1995, pp. 75-79.
[12]
TSN, 7 November 1995, pp. 85-86.
[13]
TSN, 27 November 1995, pp. 150-160.
[14]
TSN, 26 July 1996, p. 503; 4 November 1996, pp. 542-544; 28 November 1996, pp. 589-592.
[15]
TSN, 26 July 1996, pp. 506-508.
[16]
TSN, 26 July, 1996, pp. 509-510.
[17]
TSN, 26 July 1996, pp. 510-512.
[18]
Rollo, pp. 113-114.
[19]
Rollo, p. 37.
[20]
Resolution dated October 2, 2003 (Rollo, p. 51).
[21]
Nazareno v. Court of Appeals, G.R. No. 138842, 18 October 2000, 343 SCRA 637, 652.
[22]
The other witness was the late Lilia Caldoza, sister of the seller.
[23]
TSN, 29 November 1995, pp. 237-240.
[24]
TSN, 18 September 1997, pp. 709-712.
[25]
Exhibit B, Records, p. 392.
[26]
Exhibit Q, Records, p. 407.
[27]
Exhibits N-P, Records, pp. 404-406.
[28]
Exhibit R, Records, p. 408.
[29]
She was 76 years old when she testified on November 7, 1995.
[30]
Son of Juanario Torreon and interchangeably referred to as Rudy and Rudolfo in the
transcript of stenographic notes.
[31]
TSN, 27 November 1995, pp. 180-181.
[32]
TSN, 7 November 1995, pp. 69-70 (Emphasis supplied).
[33]
TSN, 27 November 1995, p. 188 (Emphasis supplied).
[34]
Dauden-Hernaez v. De los Angeles, G.R. No. L-27010, 30 April 1969, 27 SCRA 1276, 1281-
1282; Vitug, Compendium of Civil Law and Jurisprudence, 1993 edition, pp. 549-550.
[35]
Bagnas v. Court of Appeals, G.R. No. 38498, 10 August 1989, 176 SCRA 159, 167; Pershing
Tan Queto v. Court of Appeals, G.R. No. L-35648, 27 February 1987, 148 SCRA 54, 57-58.
[36]
Pershing Tan Queto v. Court of Appeals, supra.
[37]
Concurring Opinion of Justice Reyes, J.B.L. in Armentia v. Patriarca, 125 Phil. 382, 395
(1966).
[38]
Article 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
[39]
Article 748. The donation of a movable may be made orally or in writing.
An oral donation requires the simultaneous delivery of the thing or of the document representing
the right donated.
If the value of the personal property donated exceeds five thousand pesos, the donation and the
acceptance shall be made in writing. Otherwise, the donation shall be void.
[40]
Vitug, Compendium of Civil Law and Jurisprudence, 1993 edition, p. 536.
[41]
Felix Gochan and Sons Realty Corporation v. Heirs of Raymundo Baba, G.R. No. 138945, 19
August 2003, 409 SCRA 306, 314.
[42]
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the
sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the
child.
[43]
Padilla v. Court of Appeals, 152 Phil. 548, 561 (1973); Morales v. Court of Appeals, G.R.
No. 117228, 19 June 1997, 274 SCRA 282, 299.
[44]
Morales v. Court of Appeals, supra.
[45]
Morales, supra.
[46]
Diamonon v. Department of Labor and Employment, 384 Phil. 15, 22-23 (2000).
[47]
Cometa v. Court of Appeals, G.R. No. 141855, 6 February 2001, 351 SCRA 294, 307.
[48]
Siguan v. Lim, 376 Phil. 840, 856 (1999).
THIRD DIVISION

MARIA B. CHING, G.R. No. 165879


Petitioner,
Present:

QUISUMBING, J., Chairman


-versus- CARPIO,
CARPIO MORALES, and
TINGA,*
JOSEPH C. GOYANKO, JR.,
VELASCO, JR., JJ.
EVELYN GOYANKO, JERRY
GOYANKO, IMELDA
Promulgated:
GOYANKO, JULIUS
GOYANKO, MARY ELLEN
November 10, 2006
GOYANKO AND JESS
GOYANKO,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - x

DECISION

CARPIO MORALES, J.:

On December 30, 1947, Joseph Goyanko (Goyanko) and Epifania dela Cruz
(Epifania) were married.[1] Out of the union were born respondents Joseph, Jr.,
Evelyn, Jerry, Imelda, Julius, Mary Ellen and Jess, all surnamed Goyanko.

Respondents claim that in 1961, their parents acquired a 661 square meter property
located at 29 F. Cabahug St., Cebu City but that as they (the parents) were Chinese
citizens at the time, the property was registered in the name of their aunt, Sulpicia
Ventura (Sulpicia).
On May 1, 1993, Sulpicia executed a deed of sale [2] over the property in favor of
respondents father Goyanko. In turn, Goyanko executed on October 12, 1993 a
deed of sale[3]over the property in favor of his common-law-wife-herein petitioner
Maria B. Ching. Transfer Certificate of Title (TCT) No. 138405 was thus issued in
petitioners name.

After Goyankos death on March 11, 1996, respondents discovered that ownership
of the property had already been transferred in the name of
petitioner. Respondents thereupon had the purported signature of their father in the
deed of sale verified by the Philippine National Police Crime Laboratory which
found the same to be a forgery.[4]

Respondents thus filed with the Regional Trial Court of Cebu City a complaint for
recovery of property and damages against petitioner, praying for the nullification
of the deed of sale and of TCT No. 138405 and the issuance of a new one in favor
of their father Goyanko.

In defense, petitioner claimed that she is the actual owner of the property as
it was she who provided its purchase price. To disprove that Goyankos signature in
the questioned deed of sale is a forgery, she presented as witness the notary public
who testified that Goyanko appeared and signed the document in his presence.

By Decision of October 16, 1998,[5] the trial court dismissed the complaint
against petitioner, the pertinent portions of which decision read:

There is no valid and sufficient ground to declare the sale as null and void,
fictitious and simulated. The signature on the questioned Deed of Sale is genuine.
The testimony of Atty. Salvador Barrameda who declared in court that Joseph
Goyanko, Sr. and Maria Ching together with their witnesses appeared before him
for notarization of Deed of Sale in question is more reliable than the conflicting
testimonies of the two document examiners. Defendant Maria Ching asserted that
the Deed of Sale executed by Joseph Goyanko, Sr. in her favor is valid and
genuine. The signature of Joseph Goyanko, Sr. in the questioned Deed of
Absolute Sale is genuine as it was duly executed and signed by Joseph Goyanko,
Sr. himself.

The parcel of lands known as Lot No. 6 which is sought to be recovered in this
case could never be considered as the conjugal property of the original Spouses
Joseph C. Goyanko and Epifania dela Cruz or the exclusive capital property of
the husband. The acquisition of the said property by defendant Maria Ching is
well-elicited from the aforementioned testimonial and documentary evidence
presented by the defendant. Although for a time being the property passed
through Joseph Goyanko, Sr. as a buyer yet his ownership was only temporary
and transitory for the reason that it was subsequently sold to herein defendant
Maria Ching. Maria Ching claimed that it was even her money which was used
by Joseph Goyanko, Sr. in the purchase of the land and so it was eventually sold
to her. In her testimony, defendant Ching justified her financial capability to buy
the land for herself. The transaction undertaken was from the original owner
Sulpicia Ventura to Joseph Goyanko, Sr. and then from Joesph Goyanko, Sr. to
herein defendant Maria Ching.

The land subject of the litigation is already registered in the name of defendant
Maria Ching under TCT No. 138405. By virtue of the Deed of Sale executed in
favor of Maria Ching, Transfer Certificate of Title No. 138405 was issued in her
favor. In recognition of the proverbial virtuality of a Torrens title, it has been
repeatedly held that, unless bad faith can be established on the part of the person
appearing as owner on the certificate of title, there is no other owner than that in
whose favor it has been issued. A Torrens title is not subject to collateral attack. It
is a well-known doctrine that a Torrens title, as a rule, is irrevocable and
indefeasible, and the duty of the court is to see to it that this title is maintained
and respected unless challenged in a direct proceedings [sic].[6] (Citations
omitted; underscoring supplied)

Before the Court of Appeals where respondents appealed, they argued that the trial
court erred:

1. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale


of the subject property between Joseph, Sr. and the defendant-appellee,
despite the proliferation in the records and admissions by both parties that
defendant-appellee was the mistress or common-law wife of Joseph, Sr..

2. . . . when it dismissed the complaint a quo . . . , in effect, sustaining the sale


of the subject property between Joseph, Sr. and the defendant-appellee,
despite the fact that the marriage of Joseph, Sr. and Epifania was then still
subsisting thereby rendering the subject property as conjugal property of
Joseph, Sr. and Epifania.

3. . . . in dismissing the complaint a quo . . . , in effect, sustaining the validity of


the sale of the subject property between Joseph, Sr. and the defendant-
appellee, despite the clear findings of forgery and the non-credible testimony
of notary public.[7]
By Decision dated October 21, 2003,[8] the appellate court reversed that of the
trial court and declared null and void the questioned deed of sale and TCT No.
138405. Held the appellate court:

. . . The subject property having been acquired during the existence of a valid
marriage between Joseph Sr. and Epifania dela Cruz-Goyanko, is presumed to
belong to the conjugal partnership. Moreover, while this presumption in favor of
conjugality is rebuttable with clear and convincing proof to the contrary, we find
no evidence on record to conclude otherwise. The record shows that while Joseph
Sr. and his wife Epifania have been estranged for years and that he and
defendant-appellant Maria Ching, have in fact been living together as common-
law husband and wife, there has never been a judicial decree declaring the
dissolution of his marriage to Epifania nor their conjugal partnership. It is
therefore undeniable that the 661-square meter property located at No. 29 F.
Cabahug Street, Cebu City belongs to the conjugal partnership.

Even if we were to assume that the subject property was not conjugal, still we
cannot sustain the validity of the sale of the property by Joseph, Sr. to defendant-
appellant Maria Ching, there being overwhelming evidence on records that they
have been living together as common-law husband and wife. On this score, Art.
1352 of the Civil Code provides:

Art. 1352. Contracts without cause, or with unlawful cause, produce no effect
whatsoever. The cause is unlawful if it is contrary to law, morals, good customs,
public order or public policy.

We therefore find that the contract of sale in favor of the defendant-appellant


Maria Ching was null and void for being contrary to morals and public policy.
The purported sale, having been made by Joseph Sr. in favor of his concubine,
undermines the stability of the family, a basic social institution which public
policy vigilantly protects. Furthermore, the law emphatically prohibits spouses
from selling property to each other, subject to certain exceptions. And this is so
because transfers or conveyances between spouses, if allowed during the
marriage
would destroy the system of conjugal partnership, a basic policy in civil law. The
prohibition was designed to prevent the exercise of undue influence by one
spouse over the other and is likewise applicable even to common-law
relationships otherwise, the condition of those who incurred guilt would turn out
to be better than those in legal union.[9] (Underscoring supplied)

Hence, the present petition, petitioners arguing that the appellate court gravely
erred in:
I.
. . . APPLYING THE STATE POLICY ON PROHIBITION AGAINST
CONVEYANCES AND TRANSFERS OF PROPERTIES BETWEEN
LEGITIMATE AND COMMON LAW SPOUSES ON THE SUBJECT
PROPERTY, THE SAME BEING FOUND BY THE COURT A QUO, AS THE
EXCLUSIVE PROPERTY OF PETITIONER, AND THAT THE SAME WAS
NEVER PART OF THE CONJUGAL PROPERTY OF THE MARRIAGE
BETWEEN RESPONDENTS MOTHER EPIFANIA GOYANKO AND
PETITIONERS COMMON LAW HUSBAND, JOSEPH GOYANKO, SR., NOR
THE EXCLUSIVE OR CAPITAL PROPERTY OF THE LATTER AT
ANYTIME BEFORE THE SAME WAS VALIDLY ACQUIRED BY
PETITIONER.

II.
. . . NOT FINDING THAT A JURIDICAL RELATION OF TRUST AS
PROVIDED FOR UNDER ARTICLES 1448 AND 1450 OF THE NEW CIVIL
CODE CAN VALIDLY EXIST BETWEEN COMMON LAW SPOUSES.

III.
. . . NOT FINDING THAT A CONVEYANCE OVER A PROPERTY MADE
BY A TRUSTEE, WHO BECAME AS SUCH IN CONTEMPLATION OF
LAW, AND WHO HAPPENS TO BE A COMMON LAW HUSBAND OF THE
BENEFICIARY, IS NOT A VIOLATION OF A STATE POLICY ON
PROHIBITION AGAINST CONVEYANCES AND TRANSFERS OF
PROPERTIES BETWEEN LEGITIMATE AND COMMON LAW SPOUSES.

IV.
. . . ALLOWING RESPONDENTS TO ABANDON THEIR ORIGINAL
THEORY OF THEIR CASE DURING APPEAL.[10]

The pertinent provisions of the Civil Code which apply to the present case read:

ART. 1352. Contracts without cause, or with unlawful cause, produce no effect
whatever. The cause is unlawful if it is contrary to law, morals, good customs,
public order or public policy.

ART. 1409. The following contracts are inexistent and void from the beginning:

(1) Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the
transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal
object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.

ARTICLE 1490. The husband and wife cannot sell property to each other,
except:
(1) When a separation of property was agreed upon in the marriage
settlements; or
(2) When there has been a judicial separation of property under Article
191. (Underscoring supplied)

The proscription against sale of property between spouses applies even to


common law relationships. So this Court ruled in Calimlim-Canullas v. Hon.
Fortun, etc., et al.:[11]

Anent the second issue, we find that the contract of sale was null and void for
being contrary to morals and public policy. The sale was made by a husband in
favor of a concubine after he had abandoned his family and left the conjugal
home where his wife and children lived and from whence they derived their
support. The sale was subversive of the stability of the family, a basic social
institution which public policy cherishes and protects.

Article 1409 of the Civil Code states inter alia that: contracts whose cause,
object, or purposes is contrary to law, morals, good customs, public order, or
public policy are void and inexistent from the very beginning.

Article 1352 also provides that: Contracts without cause, or with unlawful cause,
produce no effect whatsoever. The cause is unlawful if it is contrary to law,
morals, good customs, public order, or public policy.

Additionally, the law emphatically prohibits the spouses from


selling property to each other subject to certain exceptions. Similarly,
donations between spouses during marriage are prohibited. And this is so
because if transfers or conveyances between spouses were allowed during
marriage, that would destroy the system of conjugal partnership, a basic policy in
civil law. It was also designed to prevent the exercise of undue influence by one
spouse over the other, as well as to protect the institution of marriage, which is
the cornerstone of family law. The prohibitions apply to a couple living as
husband and wife without benefit of marriage, otherwise, the condition of
those who incurred guilt would turn out to be better than those in legal
union. Those provisions are dictated by public interest and their criterion must be
imposed upon the will of the parties. . . .[12] (Italics in the original; emphasis and
underscoring supplied)

As the conveyance in question was made by Goyangko in favor of his common-


law-wife-herein petitioner, it was null and void.

Petitioners argument that a trust relationship was created between Goyanko


as trustee and her as beneficiary as provided in Articles 1448 and 1450 of the Civil
Code which read:

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. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the
child.

ARTICLE 1450. If the price of a sale of property is loaned or paid by one person
for the benefit of another and the conveyance is made to the lender or payor to
secure the payment of the debt, a trust arises by operation of law in favor of the
person to whom the money is loaned or for whom it is paid. The latter may
redeem the property and compel a conveyance thereof to him.

does not persuade.

For petitioners testimony that it was she who provided the purchase price is
uncorroborated. That she may have been considered the breadwinner of the family
and that there was proof that she earned a living do not conclusively clinch her
claim.

As to the change of theory by respondents from forgery of their fathers signature in


the deed of sale to sale contrary to public policy, it too does not
persuade. Generally, a party in a litigation is not permitted to freely and
substantially change the theory of his case so as not to put the other party to undue
disadvantage by not accurately and timely apprising him of what he is up
against,[13] and to ensure that the latter is given the opportunity during trial to refute
all allegations against him by presenting evidence to the contrary. In the present
case, petitioner cannot be said to have been put to undue disadvantage and to have
been denied the chance to refute all the allegations against her. For the nullification
of the sale is anchored on its illegality per se, it being violative of the above-cited
Articles 1352, 1409 and 1490 of the Civil Code.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED

CONCHITA CARPIO MORALES


Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairman
ANTONIO T. CARPIO

Associate Justice

DANTE O. TINGA

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division


Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer
of the Courts Division.

ARTEMIO V. PANGANIBAN

Chief Justice

*
On Leave.
[1]
Records, p. 119.
[2]
Id. at 122.
[3]
Id. at 40.
[4]
Id. at 42.
[5]
Id. at 331-346.
[6]
Id. at 345-346.
[7]
CA rollo, p. 18.
[8]
Penned by Justice Delilah Vidallon-Magtolis with the concurrence of Justices Jose L. Sabio, Jr. and Hakim S.
Abdulwahid, id. at 342-346.
[9]
Id. at 345-346.
[10]
Rollo, pp. 35-36.
[11]
214 Phil. 593 (1984).
[12]
Id. at 598-599.
[13]
Olympia Housing, Inc. v. Panasiatic Travel Corp., 443 Phil. 385, 399-400 (2003).
THIRD DIVISION

[G.R. No. 149844. October 13, 2004]

MIGUEL CUENCO, Substituted by MARIETTA C.


CUYEGKENG, petitioner, vs. CONCEPCION CUENCO Vda. DE
MANGUERRA, respondent.

DECISION
PANGANIBAN, J.:

Inasmuch as the facts indubitably and eloquently show an implied trust in favor of
respondent, the Court of Appeals did not err in affirming the Decision of the Regional
Trial Court ordering petitioner to convey the subject property to her. That Decision
satisfied the demands of justice and prevented unjust enrichment.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, challenging
the August 22, 2001 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 54852.
The assailed Decision disposed as follows:

WHEREFORE, the decision appealed from is AFFIRMED. [3]

On the other hand, the Regional Trial Court (RTC) Decision affirmed by the CA
disposed as follows:

WHEREFORE, considering that this action is essentially one for reconveyance or


enforcement of a trust, judgment is hereby rendered ordering the substituted defendant
Marietta Cuenco Cuyegkeng to reconvey or transfer, in a duly registrable public
instrument, Lot No 903-A-6 under TCT No. 113781 of the Registry of Deeds of Cebu
City, of the Banilad Estate with an area of 834 square meters, in favor of plaintiff
Concepcion Cuenco Vda. De Manguerra; or should the substituted defendant, for one
reason or another, fail to execute the necessary instrument once the decision becomes
final, the Clerk of Court of this Court (RTC) is hereby instructed, in accordance with
the Rules of Court, to prepare and execute the appropriate and requisite conveyance
and instrument in favor of herein plaintiff which, in either case, shall be registered
with the Office of the Register of Deeds of Cebu City.
Without costs in this instance. [4]

The Facts

The facts were summarized by the appellate court as follows:

On September 19, 1970, the [respondent] filed the initiatory complaint herein for
specific performance against her uncle [Petitioner] Miguel Cuenco which averred,
inter alia that her father, the late Don Mariano Jesus Cuenco (who became Senator)
and said [petitioner] formed the Cuenco and Cuenco Law Offices; that on or around
August 4, 1931, the Cuenco and Cuenco Law Offices served as lawyers in two (2)
cases entitled Valeriano Solon versus Zoilo Solon (Civil Case 9037) and Valeriano
Solon versus Apolonia Solon (Civil Case 9040) involving a dispute among relatives
over ownership of lot 903 of the Banilad Estate which is near the Cebu Provincial
Capitol; that records of said cases indicate the name of the [petitioner] alone as
counsel of record, but in truth and in fact, the real lawyer behind the success of said
cases was the influential Don Mariano Jesus Cuenco; that after winning said cases, the
awardees of Lot 903 subdivided said lot into three (3) parts as follows:

Lot 903-A: 5,000 [square meters]: Mariano Cuencos attorneys


fees
Lot 903-B: 5,000 [square meters]: Miguel Cuencos attorneys fees
Lot 903-C: 54,000 [square meters]: Solons retention

That at the time of distribution of said three (3) lots in Cebu, Mariano Jesus Cuenco
was actively practicing law in Manila, and so he entrusted his share (Lot 903-A) to his
brother law partner (the [petitioner]); that on September 10, 1938, the [petitioner] was
able to obtain in his own name a title for Lot 903-A (Transfer Certificate of Title
[TCT] RT-6999 [T-21108]); that he was under the obligation to hold the title in trust
for his brother Marianos children by first marriage; that sometime in 1947, the Cuenco
family was anticipating Marianos second marriage, and so on February 1, 1947, they
partitioned Lot 903-A into six (6) sub-lots (Lots 903-A-1 to 903-A-6) to correspond to
the six (6) children of Marianos first marriage (Teresita, Manuel, Lourdes, Carmen,
Consuelo, and Concepcion); that the [petitioner] did not object nor oppose the
partition plan; that on June 4, 1947, the [petitioner] executed four (4) deeds of
donation in favor of Marianos four (4) children: Teresita, Manuel, Lourdes, and
Carmen, pursuant to the partition plan (per notary documents 183, 184, 185, 186,
Book III, Series 1947 of Cebu City Notary Public Candido Vasquez); that on June 24,
1947, the [petitioner] executed the fifth deed of donation in favor of Marianos fifth
child Consuelo (per notary document 214, Book III, Series 1947 of Cebu City Notary
Public Candido Vasquez) (Exhibits 2 to 5); that said five (5) deeds of donation left out
Marianos sixth child Concepcion who later became the [respondent] in this case; that
in 1949, [respondent] occupied and fenced a portion of Lot 903-A-6 for taxation
purposes (Exhibit F, Exhibit 6); that she also paid the taxes thereon (Exhibit G); that
her father died on February 25, 1964 with a Last Will and Testament; that the
pertinent portion of her fathers Last Will and Testament bequeaths the lot.

near the Cebu provincial capitol, which were my attorneys fees from my clients,
Victoria Rallos and Zoilo Solon, respectively have already long been disposed of, and
distributed by me, through my brother, Miguel, to all my said children in the first
marriage;

That on June 3, 1966, the [petitioner] wrote a letter petitioning the Register of Deeds
of Cebu to transfer Lot 903-A-6 to his name on the ground that Lot 903-A-6 is a
portion of Lot 903-A; that on April 6, 1967, the [respondent] requested the Register of
Deeds to annotate an affidavit of adverse claim against the [petitioners] TCT RT-6999
(T-21108) which covers Lot 903-A; that on June 3, 1967, the Register of Deeds issued
TCT 35275 covering Lot 903-A-6 in the name of the [petitioner] but carrying the
earlier annotation of adverse claim; that in 1969, the [petitioner] tore down the wire
fence which the [respondent] constructed on Lot 903-A-6 which compelled the latter
to institute the instant complaint dated August 20, 1970 on September 19, 1970.

On December 5, 1970, the answer with counterclaim dated December 3, 1970 of


[petitioner] Miguel Cuenco was filed where he alleged that he was the absolute owner
of Lot 903-A-6; that this lot was a portion of Lot 903-A which in turn was part of Lot
903 which was the subject matter of litigation; that he was alone in defending the
cases involving Lot 903 without the participation of his brother Mariano Cuenco; that
he donated five (5) of the six (6) portions of Lot 903-A to the five (5) children of his
brother Mariano out of gratitude for the love and care they exhibited to him (Miguel)
during the time of his long sickness; that he did not give or donate any portion of the
lot to the [respondent] because she never visited him nor took care of him during his
long sickness; that he became critically ill on February 11, 1946 and was confined at
the Singians Clinic in Manila and then transferred to Cebu where he nearly died in
1946; that his wife Fara Remia Ledesma Cuenco had an operation on January 1951
and was confined at the University of Santo Tomas Hospital and John Hopkins
Hospital in the United States; that two of his children died at the University of Santo
Tomas Hospital in 1951 and 1952; and that his wife was blind for many months due to
malignant hypertension but [respondent] never remembered her nor did she
commiserate with him and his wife in their long period of sorrow.

[Petitioner] Miguel Cuenco took the witness stand as early as September 13, 1974.
His self-conducted direct examination lasted until 1985, the last one on November 22,
1985. Unfortunately, he died before he was able to submit himself for cross-
[5]
examination and so his testimony had to be stricken off the record. His only surviving
daughter, Marietta Cuyegkeng, stood as the substitute [petitioner] in this case. She
testified that she purchased Lot 903-A-6 (the property subject matter of this case)
from her late father sometime in 1990 and constructed a house thereon in the same
year; that she became aware of this case because her late father used to commute to
Cebu City to attend to this case; and that Lot 903-A-6 is in her name per Transfer
Certificate of Title #113781 of the Registry of Deeds for Cebu. [6]

Ruling of the Court of Appeals

The CA found respondents action not barred by res judicata, because there was no
identity of causes of action between the Petition for cancellation of adverse claim in
L.R.C. Records 5988 and the Complaint for specific performance to resolve the issue of
ownership in Civil Case No. R-11891.
The appellate court further found no reason to disturb the findings of the trial court
that respondent has the legal right of ownership over lot 903-A-6. The CA ruled that the
subject land is part of the attorneys fees of Don Mariano Cuenco, predecessor-in-
interest of [Respondent] Concepcion Cuenco vda. de Manguerra and [petitioner] merely
holds such property in trust for [her], his title there[to] notwithstanding.
Finally, the CA held that the right of action of respondent has not yet prescribed as
she was in possession of the lot in dispute and the prescriptive period to file the case
commences to run only from the time she acquired knowledge of an adverse claim over
[her] possession.
Hence, this Petition.[7]

The Issues

In her Memorandum, petitioner raises the following issues for our consideration:
I.

On question of law, the Court of Appeals failed to consider facts of substance and
significance which, if considered, will show that the preponderance of evidence is
in favor of the petitioner.

II.

On question of law, the Court of Appeals failed to appreciate the proposition that,
contrary to the position taken by the trial court, no constructive or implied trust
exists between the parties, and neither is the action one for reconveyance based
upon a constructive or implied trust.

III.

On question of law, the Court of Appeals erred in not finding that even where
implied trust is admitted to exist the respondents action for relief is barred by
laches and prescription.

IV.

On question of law, the trial court and the appellate court erred in expunging from
the records the testimony of Miguel Cuenco. [8]

This Courts Ruling

The Petition has no merit.


First Issue:
Evaluation of Evidence

Petitioner asks us to appreciate and weigh the evidence offered in support of the
finding that Lot 903-A-6 constituted a part of Mariano Cuencos share in the attorneys
fees. In other words, she seeks to involve us in a reevaluation of the veracity and
probative value of the evidence submitted to the lower court. What she wants us to do is
contrary to the dictates of Rule 45 that only questions of law may be raised and
resolved in a petition for review. Absent any whimsical or capricious exercise of
judgment, and unless the lack of any basis for the conclusions made by the lower courts
be amply demonstrated, the Supreme Court will not disturb such factual findings.[9]
As a rule, findings of fact of the Court of Appeals affirming those of the trial court are
binding and conclusive. Normally, such factual findings are not disturbed by this Court,
to which only questions of law may be raised in an appeal by certiorari. [10] This Court has
consistently ruled that these questions must involve no examination of the probative
value of the evidence presented by the litigants or any of them. [11] Emphasizing the
difference between the two types of question, it has explained that there is a question of
law in a given case when the doubt or difference arises as to what the law is pertaining
to a certain state of facts, and there is a question of fact when the doubt arises as the
truth or the falsity of alleged facts.[12]
Indeed, after going over the records of the present case, we are not inclined to
disturb the factual findings of the trial and the appellate courts, just because of the
insistent claim of petitioner. His witnesses allegedly testified that Civil Case No. 9040
involving Lot 903 had not been handled by Mariano for defendants therein -- Apolonia
Solon, Zoilo Solon, et al. It has sufficiently been proven, however, that these defendants
were represented by the Cuenco and Cuenco Law Office, composed of Partners
Mariano Cuenco and Miguel Cuenco.
Given as attorneys fees was one hectare of Lot 903, of which two five-thousand
square meter portions were identified as Lot 903-A and Lot 903-B. That only Miguel
handled Civil Case No. 9040 does not mean that he alone is entitled to the attorneys
fees in the said cases. When a client employs the services of a law firm, he does not
employ the services of the lawyer who is assigned to personally handle the case.
Rather, he employs the entire law firm.[13] Being a partner in the law firm, Mariano -- like
Miguel -- was likewise entitled[14] to a share in the attorneys fees from the firms clients.
Hence, the lower courts finding that Lot 903-A was a part of Mariano Cuencos attorneys
fees has ample support.
Second Issue:
Implied Trust

Petitioner then contends that no constructive or implied trust exists between the
parties.
A trust is a legal relationship between one having an equitable ownership in a
property and another having legal title to it.[15]
Trust relations between parties may either be express or implied. [16] Express trusts
are created by the direct and positive acts of the parties, indicated through some writing,
deed, will, or words evidencing an intention to create a trust. [17] On the other hand,
implied trusts are those that, 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 a matter of equity, independently of the particular intention of the
parties. Implied trusts may either be resulting or constructive trusts, both coming into
being by operation of law.[18]
Resulting trusts are presumed to have been contemplated by the parties and are
based on the equitable doctrine that valuable consideration, not legal title, determines
the equitable title or interest.[19] These trusts arise from the nature of or the
circumstances involved in a transaction,[20] whereby legal title becomes vested in one
person, who is obligated in equity to hold that title for the benefit of another.
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. [21]
A review of the records shows that indeed there is an implied trust between the
parties.
Although Lot 903-A was titled in Miguels name, the circumstances surrounding the
acquisition and the subsequent partial dispositions of this property eloquently speak of
the intent that the equitable or beneficial ownership of the property should belong to
Mariano and his heirs.
First, Lot 903-A was one half of the one-hectare portion of Lot 903 given as
attorneys fees by a client of the law firm of Partners Miguel and Mariano Cuenco. It
constituted the latters share in the attorneys fees and thus equitably belonged to him, as
correctly found by the CA. That Lot 903-A had been titled in the name of Miguel gave
rise to an implied trust between him and Mariano, specifically, the former holds the
property in trust for the latter. In the present case, it is of no moment that the implied
trust arose from the circumstance -- a share in the attorneys fees -- that does not
categorically fall under Articles 1448 to 1456 of the Civil Code. The cases of implied
trust enumerated therein does not exclude others established by the general law of
trust.[22]
Second, from the time it was titled in his name in 1938, [23] Lot 903-A remained
undivided and untouched[24] by Miguel. Only on February 3, 1947, did Lourdes
Cuenco,[25] upon the instruction of Mariano, have it surveyed and subdivided into six
almost equal portions -- 903-A-1 to 903-A-6. Each portion was specifically allocated to
each of the six children of Mariano with his first wife.[26]
Third, Miguel readily surrendered his Certificate of Title[27] and interposed no
objection[28] to the subdivision and the allocation of the property to Marianos six children,
including Concepcion.
Fourth, Marianos children, including Concepcion,[29] were the ones who shouldered
the expenses incurred for the subdivision of the property.
Fifth, after the subdivision of the property, Marianos children -- including
Concepcion[30] -- took possession of their respective portions thereof.
Sixth, the legal titles to five portions of the property were transferred via
a gratuitous deed of conveyance to Marianos five children, following the allocations
specified in the subdivision plan prepared for Lourdes Cuenco.[31]
With respect to Lot 903-A-6 in particular, the existence of Concepcions equitable
ownership thereof is bolstered, not just by the above circumstances, but also by the fact
that respondent fenced the portion allocated to her and planted trees thereon.[32]
More significantly, she also paid real property taxes on Lot 903-A-6 yearly, from
1956 until 1969[33] -- the year when she was dispossessed of the property. Although tax
declarations or realty tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of owner,
for no one in his right mind would be paying taxes for a property that is not in his actual
or at least constructive possession.[34] Such realty tax payments constitute proof that the
holder has a claim of title over the property.
Tellingly, Miguel started paying real property taxes on Lot 903-A-6 only on April 4,
1964,[35] after the death of Mariano.[36] This fact shows that it was only in that year that he
was emboldened to claim the property as his own and to stop recognizing Marianos,
and subsequently Concepcions, ownership rights over it. It was only by then that the
one who could have easily refuted his claim had already been silenced by death. Such
a situation cannot be permitted to arise, as will be explained below.
Estoppel

From the time Lot 903-A was subdivided and Marianos six children -- including
Concepcion -- took possession as owners of their respective portions, no whimper of
protest from petitioner was heard until 1963. By his acts as well as by his omissions,
Miguel led Mariano and the latters heirs, including Concepcion, to believe that Petitioner
Cuenco respected the ownership rights of respondent over Lot 903-A-6. That Mariano
acted and relied on Miguels tacit recognition of his ownership thereof is evident from his
will, executed in 1963, which states:

I hereby make it known and declare that x x x all properties which my first wife and I
had brought to, or acquired during our marriage, or which I had acquired during the
years I was a widower including jewelry, war damage compensation, and two other
lots also located at Cebu City, one near the South-Western University and the other
near the Cebu provincial capitol, which were my attorneys fees from my clients,
Victoria Rallos and Zoilo Solon, respectively have already long been disposed of,
and distributed by me, through my brother, Miguel, to all my said six children in
the first marriage. (emphasis supplied)
[37]

Indeed, as early as 1947, long before Mariano made his will in 1963, Lot 903-A --
situated along Juana Osmea Extension, Kamputhaw, Cebu City, [38] near the Cebu
Provincial Capitol -- had been subdivided and distributed to his six children in his first
marriage. Having induced him and his heirs to believe that Lot 903-A-6 had already
been distributed to Concepcion as her own, petitioner is estopped from asserting the
contrary and claiming ownership thereof.
The principle of estoppel in pais applies when -- by ones acts, representations,
admissions, or silence when there is a need to speak out -- one, intentionally or through
culpable negligence, induces another to believe certain facts to exist; and the latter
rightfully relies and acts on such belief, so as to be prejudiced if the former is permitted
to deny the existence of those facts.[39]
Third Issue:
Laches

Petitioner claims that respondents action is already barred by laches.


We are not persuaded. Laches is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to it has either
abandoned or declined to assert it.[40] In the present case, respondent has persistently
asserted her right to Lot 903-A-6 against petitioner.
Concepcion was in possession as owner of the property from 1949 to 1969. [41] When
Miguel took steps to have it separately titled in his name, despite the fact that she had
the owners duplicate copy of TCT No. RT-6999 -- the title covering the entire Lot 903-A
-- she had her adverse claim annotated on the title in 1967. When petitioner ousted her
from her possession of the lot by tearing down her wire fence in 1969,[42] she
commenced the present action on September 19, 1970, [43] to protect and assert her
rights to the property. We find that she cannot be held guilty of laches, as she did not
sleep on her rights.
Fourth Issue:
Expunging of Testimony

Petitioner Cuyegkeng questions the expunging of the direct testimony of Miguel


Cuenco. Respondent points out that this issue was not raised before the CA. Neither
had petitioner asked the trial court to reconsider its Order expunging the testimony.
Hence, this issue cannot for the first time be raised at this point of the appeal. Issues,
arguments and errors not adequately and seriously brought below cannot be raised for
the first time on appeal.[44] Basic considerations of due process impel this rule.[45]
WHEREFORE, the Petition is DENIED, and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez and Corona, JJ., concur.
Carpio-Morales, J., on leave.

[1]
Rollo, pp. 9-59.
[2]
Id., pp. 61-80. Eleventh Division. Penned by Justice Presbitero J. Velasco Jr., with the concurrence of
Justices Ruben T. Reyes (chair) and Juan Q. Enriquez Jr. (member).
[3]
Assailed CA Decision, p. 20; rollo, p. 80.
[4]
RTC Decision, p. 5; rollo, p. 86.
[5]
Miguel Cuenco died on June 20, 1990. Certificate of Death; records, Vol. III, p. 1079.
[6]
Assailed Decision, pp. 2-5; rollo, pp. 62-65.
[7]
This case was deemed submitted for resolution on May 23, 2003, when the Court received respondents
Manifestation. On August 11, 2003, this Manifestation was taken up by the Third Division, which
resolved to allow a substitution of parties. Petitioners Memorandum, signed by Atty. Rody P.
Padlan, was filed on September 18, 2002; respondents Memorandum, signed by Atty. Paul
Nicomedes L. Roldan, was received on October 17, 2002.
[8]
Petitioners Memorandum, pp. 14-15; rollo, pp. 251-252.
[9]
Almora v. CA, 309 SCRA 586, 597, July 2, 1999, per Gonzaga-Reyes, J. (citing Taedo v. CA, 252
SCRA 80, 90, January 22, 1996, per Panganiban, J.).
[10]
1 of Rule 45 of the 1997 Rules of Civil Procedure.
[11]
Manila Bay Club Corporation v. CA, 245 SCRA 715, 725, July 11, 1995, per Francisco, J.
[12]
Serna v. CA, 308 SCRA 527, 534, June 18, 1999, per Pardo, J. (citing Reyes v. CA, 258 SCRA 651,
658, July 11, 1996, per Romero, J.).
[13]
Rilloraza, Africa, De Ocampo and Africa v. Eastern Telecommunications Phils., Inc., 309 SCRA 566,
574, July 2, 1999, per Pardo, J.
[14]
Art. 1799 of the Civil Code states: A stipulation which excludes one or more partners from any share in
the profits or losses is void.
[15]
Vda. de Esconde v. CA, 253 SCRA 66, February 1, 1996 (citing Tolentino, Civil Code of the
Philippines, [1991], Vol. IV, p. 669, which in turn cited 54 Am Jur. 21).
[16]
Art. 1441 of the Civil Code.
[17]
Rosario v. CA, 310 SCRA 464, July 19, 1999 (citing Olaco v. Co Cho Chit, 220 SCRA 662, March 31,
1993).
[18]
Id., p. 475, per Gonzaga-Reyes, J. (citing Tigno v. CA, 280 SCRA 271, October 8, 1997; and Policarpio
v. CA, 269 SCRA 344, March 7, 1997).
[19]
Rosario v. CA, supra.
[20]
Vitug, Civil Law Annotated [2003], Vol. III, p. 176.
[21]
Rosario v. CA, supra, p. 475, per Gonzaga-Reyes, J. (citing Morales v. CA, 274 SCRA 282, June 19,
1997; Huang v. CA, 236 SCRA 420, September 13, 1994; Vda. de Esconde v. CA, supra).
[22]
Art. 1447 of the Civil Code.
[23]
TCT No. 21108; records, Vol. I, p. 7.
[24]
The property was overgrown with shrubs. TSN, December 9, 1994, p. 6.
[25]
One of Mariano Cuencos daughters. TSN, December 9, 1994, p. 6.
[26]
Annex D of respondents Memorandum.
[27]
TSN, December 9, 1994, p. 7.
[28]
Id., pp. 27-28.
[29]
Respondents Memorandum, p. 12; rollo, p. 308.
[30]
TSN, December 9, 1994, p. 9.
[31]
Records, Vol. I, p. 6.
[32]
TSN, June 11, 1973, p. 45.
[33]
Exhibit G, Certification dated June 13, 1973.
[34]
Development Bank of the Philippines v. CA, 331 SCRA 267, 293, April 28, 2000, per Mendoza, J.
[35]
Miguel Cuenco paid realty taxes for the years 1945 to 1963 only on April 4, 1964. Exhibit 7,
Certification dated July 31, 1974; records, Vol. III, p. 2065.
[36]
Mariano Cuenco died on February 25, 1964. TSN, June 11, 1973, p. 9.
[37]
Last Will and Testament of M. Jesus Cuenco, pp. 1-2; rollo, pp. 378-379.
[38]
Petitioners Memorandum, p. 6; rollo, p. 243.
[39]
Hanopol v. Shoemart, Incorporated, 390 SCRA 439, October 4, 2002.
[40]
Westmont Bank v. Ong, 375 SCRA 212, January 30, 2002; De Castro v. CA, 384 SCRA 607, July 18,
2002.
[41]
Respondents Memorandum, p. 32; rollo, p. 328.
[42]
Ibid.
[43]
Complaint; records, pp. 1-8.
[44]
Magellan Capital Management Corportion v. Zosa, 355 SCRA 157, March 26, 2001; Magnolia Dairy
Products Corp. v. NLRC, 252 SCRA 483, January 29, 1996.
[45]
City of Cebu v. Heirs of Candido Rubi, 306 SCRA 408, 424, April 29, 1999, per Gonzaga-Reyes, J.
(citing Mendoza v. CA, 274 SCRA 527, June 20, 1997).
THIRD DIVISION

FELIPA DELFIN, GINA G.R. No. 146550


MAALAT, SHIRLEY TAMAYO,
RECIO DAOS, and ROBERTO
DELFIN,
Petitioners, Present:
- versus
QUISUMBING, J.,
PRESENTACION D. BILLONES, Chairman,
ROSARIO D. DEMONARCA CARPIO,
(accompanied by husband Pedro CARPIO MORALES,
and Demonarca), WENEFREDO TINGA, JJ.
DEGALA (representing Pedro Degala),
RAMON DELA CRUZ (representing
his deceased wife Maria Daradar dela Cruz),
TERESITA DALIVA DEVIENTE
(daughter of Esperanza Daradar Daliva),
and JOLLY DATAR (representing his Promulgated:
deceased mother Trinidad D. Datar) and
the COURT OF APPEALS,
Respondents. March 17, 2006

x---------------------------------------------------------------------------------x

DECISION

TINGA, J.:

This treats of the petition for review on certiorari assailing the Decision [1] and
Resolution of the Court of Appeals in CA-G.R. CV No. 54035
entitled Presentacion D. Billones, et al. v. Felipa Delfin, et al., promulgated on 13
October 2000 and 26 December 2000, respectively, which reversed the 27 May
1996 Decision of the Regional Trial Court, Branch 15 of Roxas City.

The antecedents are as follows:

On 29 July 1960, a Deed of Absolute Sale[2] over Lot No. 213, covered by
RO-5563 (14516) of the Cadastral Survey of Panitan, Capiz, was executed by
Teresa Daos, Esperanza Daradar, Estrella Daradar and Maria Daradar, with the
marital consent of Cipriano Degala, husband of Teresa Daos, in favor of the
spouses Rodolfo Delfin and Felipa Belo (spouses Delfin). The document, so it
appears, bore the signatures of Esperanza and Estrella, as well as the thumb marks
of Teresa, Maria, and Cipriano, and was acknowledged before a notary
public. On 18 November 1980, the spouses Delfin registered the Deed of Absolute
Sale with the Register of Deeds of the Province of Capiz. Thereupon, a new title,
Transfer Certificate of Title (TCT) No. T-17071, was issued in the name of the
spouses Delfin.[3]

Meanwhile, on 26 March 1965, an Extra-Judicial Partition and Absolute Deed of


Sale[4] involving Lot No. 3414 then covered by TCT No. T-16804 was made
between Teresa Daos, Trinidad Degala,
Leopoldo Degala, Presentacion Degala, Rosario Degala and Pedro

Degala, on one part, and the spouses Delfin, on the other. The deed, bearing either
the thumb marks or the signatures of the sellers, was likewise notarized. Said
document was registered by the spouses Delfin on 24 June 1980. Thus, TCT No.
T-16804 covering Lot No. 3414 was cancelled and a new one, TCT No. T-16805,
was issued in the names of the spouses Delfin on 24 June 1980.[5]

The spouses Delfin then consolidated Lots No. 213 and No. 3414 and subdivided
the resulting lot into six (6) smaller lots.[6] Lot No. 1, covered by TCT No. T-
19618, was sold to Roberto Delfin on 21 October 1989; Lot No. 2 covered by TCT
No. T-19619 to Recio Daos on 25 April 1985; Lot No. 3 covered by TCT No. T-
19620 to Gina Maalat on 14 June 1989, and; Lot No. 4 covered by TCT No. T-
19621 to Shirley Tamayo on 11 August 1989. Lot No. 5 remained with the spouses
Delfin, while Lot No. 6 was used as an access road.[7]
On 12 April 1994, herein respondents, claiming to be the heirs of the former
owners of Lots No. 213 and No. 3414, filed an action for annulment,
reconveyance, recovery of ownership and possession
[8] [9]
and damages. According to them, it was only in 1989 when they

discovered that Teresa Daos, sick and in dire need of money, was constrained to
mortgage the one-half (1/2) portion of Lot No. 3414 to the spouses Delfin
for P300.00 sometime in 1965.[10] Taking advantage of her condition, the spouses
Delfin made her sign a document purporting to be a mortgage, but which turned
out to be an extrajudicial partition with deed of absolute sale. As to Lot No. 213,
respondents averred that the Deed of Sale covering the property was fictitious and
the signatures and thumb marks contained therein were all forged because three (3)
of the signatories therein died before the alleged sale in 1960, namely: Estrella
Daradar, who died in 1934, and Esperanza Daradar and Cipriano Degala, who both
died in 1946.[11] As proof thereof, respondents presented certifications[12] on the
deaths of Esperanza Daradar and Cipriano Degala by the Local Civil Registrar of
Panitan, Capiz.

To counter respondents arguments, petitioners alleged that respondents action was


already barred by prescription and laches. Further, they argued that the spouses
Delfin, as well as the subsequent owners of the subject properties, are innocent
purchasers for value and in good faith, whose titles to the lots at the time of the
purchase were all clean and free from liens and encumbrances.[13] The documents

evidencing the conveyance of the properties were personally and unilaterally


executed by the vendors-signatories therein without any intervention from the
spouses Delfin, and duly acknowledged before a notary public, petitioners
averred.[14]
Giving credence to the claims of petitioners, the trial court ruled that respondents
claim of ownership over the subject properties was not established by a
preponderance of evidence. Compared to respondents verbal claims of ownership,
the spouses Delfin were able to prove that they bought the properties from the
original owners, the trial court added. The trial court held that the deeds of sale
being duly executed notarial and public documents, they enjoy the presumption of
regularity which can only be contradicted by clear and convincing evidence. In
addition, respondents claims based on fraud were barred by prescription, having
been filed more than four (4) years from the time the instruments were registered
with the Register of Deeds, and they are estopped from annulling the documents by
reason of laches, the action having been filed 15 years after the deeds were
registered. The trial court also denied respondents claims for damages.[15]

Respondents elevated the case to the Court of Appeals, which reversed the ruling
of the trial court. In its Decision,[16] the Court of Appeals ruled that while an action
for reconveyance based on implied or constructive trust prescribes in ten (10) years
from the date of the issuance of the certificate of title over the property, such
prescriptive period does not apply if the person claiming to be the owner of the
property is in possession thereof, such as respondents in this case.[17] Moreover,
considering that a similar action for reconveyance was filed by respondents as
early as 1989 which was eventually dismissed without prejudice, respondents
action to annul the two (2) deeds on the ground of fraud has not yet prescribed,
according to the Court of Appeals.[18]
The appellate court annulled the Extra-Judicial Partition and Deed of Sale covering
Lot No. 3414. The appellate court noted that: (i) Teresa Daos was a very old and
sickly woman; (ii) she and her children lacked formal education to fully
comprehend the document to which they affixed their signatures and/or thumb
marks; (iii) P300.00 was inadequate consideration for a lot consisting of 1,565
square meters even in 1965; (iv) respondents were allowed to remain in the subject
properties; and (v) the questioned document was registered in the name of the
spouses Delfin 15 years after the alleged date of its execution, when most of the
alleged vendors have already died. These circumstances surrounding the execution
of the said document show that the real intention was merely to secure the loan
of P300.00. Thus, what took place was in fact, an equitable mortgage and not a
sale.[19]
As for Lot No. 213, the Court of Appeals held that the Deed of Absolute Sale
could not have been executed on 9 July 1960. Relying on the certifications of death
presented by respondents, the Court of Appeals ruled that the defense of due
execution cannot prevail over the fact that two (2) of the signatories therein have
already died prior to said date.[20] Roberto Delfin, Recio Daos, Gina Maalat,
and Shirley Tamayo, buyers of the subdivided lot, could not be considered as
purchasers in good faith nor entitled to be protected in their rights because they
were informed by respondents prior to the purchase that they, and not the spouses
Delfin, are the real owners of the lots, the appellate court added.[21]
The Court of Appeals thus ruled:

WHEREFORE, premises considered, the present appeal is hereby


GRANTED. The Decision dated May 27, 1996 of
the Regional Trial Court of Roxas City, Capiz, Branch 15 presided over by Judge
Roger B. Patricio is hereby REVERSED and SET SIDE and a new one entered:

(1) Annulling the Extra-Judicial Partition and Deed of Absolute Sale


dated March 26, 1965 and Deed of Absolute Sale dated July 9, 1960;
(2) Reinstating OCT No. RO-5563 (14516) referring to Lot 213
registered in the names of Teresa Daos (1/2 portion), and the children of Lucia
Daos, namely: Esperanza Daradar, Estrella Daradar and Maria Daradar (1/2 pro-
indiviso) and OCT No. (4650) RO-5529 referring to Lot 3414 registered in the
names of the late spouses Cipriano Degala and Teresa Daos, and canceling the
TCTs issued thereafter;

(3) Ordering plaintiffs-appellants, jointly and severally, to pay


defendant Felipa Belo Delfin the amount of P300.00 within thirty (30) days from
the date of finality of this decision;
(4) Ordering defendants-appellees to free Lots 3414 and 213 from
any and all obligations and encumbrances that may have been attached to both
lots and thereafter to deliver possession of the same to plaintiffs-appellants; and
(5) Ordering defendants-appellees, jointly and severally, to pay
plaintiffs-appellants P10,000.00 as exemplary damages, and [sic] for attorneys
fees and P10,000.00 as litigation expenses.

Costs against defendants-appellees.


SO ORDERED.[22]

In the present petition for review under Rule 45, petitioners claim that the Court of
Appeals erred in finding that respondents retained possession of the subject
properties. Moreover, petitioners posit that respondents allegations of fraud and
forgery confine their action to a four (4)-year prescriptive period which has long
expired. Additionally, they argue that respondents failed to: (i) prove the
inadequacy of the selling price of Lot No. 3414; (ii) prove the frail condition of
Teresa Daos; (iii) show that fraud attended the sale of Lot No. 213; (iv) show that
Roberto Delfin, Recio Daos, Gina Maalat and Shirley Tamayo are not purchasers
in good faith; and (v) overcome the presumption of regularity enjoyed by the
notarized deeds of sale. Petitioners also question the award of exemplary damages
and attorneys fees in favor of respondents.[23] On the other hand, respondents for
the most part merely reiterated the ruling of the Court of Appeals.[24]

The complete resolution of the issues presented before the Court requires a
determination of facts, which this Court, not being a trier of facts, does not
normally exercise in an appeal by certiorari.[25] This rule, however, is subject to
exceptions, such as where the factual findings of the Court of Appeals and the trial
court are conflicting or contradictory,[26] as in the instant case.

When ones property is registered in anothers name without the formers


consent, an implied trust is created by law in favor of the true owner. [27] Implied
trusts are those which, without being expressed, are deducible from the nature of
the transaction by operation of law as matters of equity, independently of the
particular intention of the parties. Meanwhile, constructive trusts are created in
order to satisfy the demands of justice and prevent unjust enrichment. They arise
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.[28] An
action for reconveyance based upon an implied or constructive trust prescribes in
ten (10) years from the registration of the deed or from the issuance of the title,
registration being constructive notice to all persons.[29] However, an action for
reconveyance based on fraud is imprescriptible where the plaintiff is in possession
of the property subject of the acts.[30]
In essence, petitioners insist that respondents failed to prove that fraud attended the
sale of Lots No. 213 and No. 3414. The Court agrees.

A contract or conduct apparently honest and lawful must be treated as such


until it is shown to be otherwise by either positive or circumstantial evidence. [31] A
duly executed contract carries with it the presumption of validity. The party who
impugns its regularity has the burden of proving its simulation.[32] A notarized
document is executed to lend truth to the statements contained therein and to the
authenticity of the signatures. Notarized documents enjoy the presumption of
regularity which can be overturned only by clear and convincing evidence.[33]

As plaintiffs in the action before the trial court, respondents have the burden
to establish their case by a preponderance of evidence, or evidence which is of
greater weight or more convincing than that which is offered in opposition to
it. Hence, parties who have the burden of proof must produce such quantum of
evidence, with plaintiffs having to rely on the strength of their own evidence, not
on the weakness of the defendants.[34]

As regards Lot No. 3414, respondents specifically alleged that the spouses
Delfin tricked the plaintiffs and their late mother into signing a fictitious and
simulated document, and that TCT No. T-16805 was the product of a fictitious and
simulated transaction [that] was obtained through fraud, the same should be
declared null and void.[35]They claimed that the original owners of Lot No. 3414
did not intend to execute a deed of extra-judicial partition and absolute sale but
only a mortgage instrument. However, all that respondents came out with were
bare allegations that the said owners were either old and sickly or illiterate; that the
purported selling price of P300.00 was unconscionable; and that petitioners failed
to eject respondents from the subject land, as respondents were unable to present
any evidence to substantiate their claims, much less the charge of fraud.

Respondents did not present any witness to testify on the execution of the
deed, nor on the condition of the signatories thereto. At best, their witnesses
merely testified as to the identity of the previous owners of the property. Worse,
petitioners Presentacion Degala Billones and Rosario Degala Demonarca, both
signatories to the subject deed, were not presented to testify on the real
circumstances surrounding the assailed transaction. As for the selling price
of P300.00, suffice it to say that respondents did not even present a witness to
testify as to its alleged unconscionability vis-a-vis the prevailing market value of
the property at the time of the sale. Meanwhile, the belated registration of the
document with the Register of Deeds can be explained by the fact that the original
of OCT No. 4650 covering Lot No. 3414 was either lost or destroyed and was
reconstituted only in 1971, while the original copy of the deed of sale was lost by
Felipa Delfin.[36]

Even respondents claim of possession of the subject properties has not been
sufficiently proved. This Court has uniformly held that the one who is in actual
possession of a piece of land claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his
right. His undisturbed possession gives him a continuing right to seek the aid of a
court of equity to ascertain and determine the nature of the adverse claim of a third
party and its effect on his own title, which right can be claimed only by one who is
in possession.[37] Actual possession of land consists in the manifestation of acts of
dominion over it of such a nature as those a party would naturally exercise over his
own property.[38]

Contrary to the appellate courts illation, respondents have not established


possession of the subject properties. Save for the lone testimony of Orlando Buday,
a neighbor, that Rosario Degala Daradar was the only one still residing in the
properties in dispute, no other evidence was presented to show that respondents are
in actual occupation and possession thereof. Not even Rosario herself
testified. Doubts also arise as to the veracity of respondents claim of possession
since respondents themselves averred in their complaint that the spouses Delfin
had immediately taken possession of the subject properties in the same year that
the sale was made, and appropriated the produce found in the subject lots from
then on.[39] Admissions made in the complaint are judicial admissions which are
binding on the party who made them and cannot be contradicted [40] absent any
showing that it was made through palpable mistake. No amount of rationalization
can offset such admission.[41] By their very own admissions, it can be inferred that
respondents or their predecessors-in-interest did not exercise actual occupancy, as
they had ceased to perform acts of dominion over the property upon the sale
thereof.
Fraud may be, and often is, proved by or inferred from circumstances, and
the circumstances proved may in some cases raise a presumption of its existence.
However, while fraud may be proved by circumstances or presumed from them, it
cannot be demonstrated by mere construction, but must be proven in all
cases.[42] Respondents indeed failed to prove that fraud attended the execution of
the Extra-Judicial Partition and Deed of Absolute Sale. Their bare and unsupported
allegations are not enough to overthrow the presumption of the validity of said
agreement or to raise the presumption of fraud.

Considering that respondents failed to establish the existence of fraud in the


spouses Delfins acquisition of Lot No. 3414, it cannot be said that implied or
constructive trust was created between respondents and the spouses Delfin. The
action for reconveyance of Lot No. 3414 must fail. Further, in view of respondents
failure to show their valid title to Lot No. 3414 or even their occupation thereof,
the case cannot prosper even when it is viewed as one for quieting of title.
On the other hand, the Court of Appeals annulled the Deed of Absolute Sale
dated 9 July 1960 covering Lot No. 213 because one of the vendors therein was
already dead,[43] relying on the certifications issued by the Local Civil Registrar. In
assailing this declaration, petitioners once more point out that the Deed of Sale,
being a duly notarized document, should be given full faith and credit. Also, they
argue that the appellate courts conclusion is based on the disputable presumption
that identity of names means identity of persons.

Documents consisting of entries in public records made in the performance


of a duty by a public officer are prima facie evidence of the facts therein
stated.[44] Public documents are (i) the written official acts, or records of the official
acts of the sovereign authority, official bodies and tribunals, and public officers,
whether of the Philippines, or of a foreign country; (ii) documents acknowledged
before a notary public except last wills and testaments; and (iii) public records,
kept in the Philippines, of private documents required by law to be entered
therein.[45] Public documents may be proved by the original copy, an official
publication thereof, or a certified true copy thereof;[46] and when a copy of a
document or record is attested for the purpose of evidence, the attestation by the
officer having legal custody of the record must state that the copy is a correct copy
of the original, or a specific part thereof, as the case may be.[47] A duly-registered
death certificate is considered a public document and the entries found therein are
presumed correct, unless the party who contests its accuracy can produce positive
evidence establishing otherwise.[48] Nevertheless, this presumption is disputable
and is satisfactory only if uncontradicted, and may be overcome by other evidence
to the contrary.

The documents presented by respondents were mere certifications and not


the certified copies or duly authenticated reproductions of the purported death
certificates of Esperanza Daradar

and Cipriano Degala. They are not the public documents referred to by the Rules of
Court, nor even records of public documents; thus, they do not enjoy the
presumption granted by the Rules. Respondents did not even present the local civil
registrar who supposedly issued the certifications to authenticate and identify the
same. Likewise, respondent Jolly Datar who adverted to the certifications did not
testify on how the certifications were obtained, much less his role therein. [49] As a
consequence, the trial court did not admit the certifications as independent pieces
of evidence but merely as part of the testimony of respondent Jolly Datar. [50] A
document or writing which is admitted not as an independent evidence but merely
as part of the testimony of a witness does not constitute proof of the facts related
therein.[51] Clearly then, the certifications cannot be given probative value, and
their contents cannot be deemed to constitute proof of the facts therein stated.

More importantly, the very exhibits of respondents dispel the presumption of


regularity of the issuance of the certifications of death relied upon by the Court of
Appeals. The certifications state that both Esperanza Daradar and Cipriano Degala
died in 1946 at ages 24 and 63, respectively. However, a careful study of the
records of the case shows that in OCT No. RO 5563 (14516),[52] Esperanza Daradar
was already 20 years old in 1929, making her date of birth to be sometime in
1909. This is totally incongruous with her supposed age of 24 years in 1946, which
places the year of her birth in 1922. Likewise, the Court takes note of the Decision
of the Court of Appeals in CA-G.R. CV No. 31739,[53] wherein the appellate court
in its statement of facts found that Esperanza Daradar died on 10 August 1940,
while Estrella Daradar died on 15 June 1943, contrary to the claim of respondents
in this case.[54] The Esperanza Daradar named in the OCT and the one referred to in
the aforesaid Decision could not have been the same Esperanza Daradar in the
Local Civil Registrars certification.

As for the Ciprianos thumb mark on the deed, suffice it to say that his
consent was not in fact needed to perfect the sale. Teresa Daos Degalas share
in Lot 213 was paraphernal property and, under the provisions of the Civil Code
applicable at the time of the sale, she could alienate or dispose of the said property
without the permission or consent of her husband.[55] Thus, with or without such
thumb mark, whether it was forged or not, the Deed of Absolute Sale remains valid
and effectual.

Under the circumstances, therefore, respondents were unable to overthrow the


presumption of validity of the Deed of Absolute Sale. Said deed, as well as the
titles derived as a result thereof must be accorded respect and must remain
undisturbed.

Anent the charge of bad faith on the part of petitioners, the Court takes note of
respondents statement in their Plaintiff-Appellants Brief,[56] to wit:

From the facts and circumstances of this case, Lot 213 and 3414 both of Panitan
Cadastre which were consolidated, into one single lot, per consolidated plan as
appearing at the back of TCT No. T-17071, and after the two lots were
consolidated, and the same was subdivided, into six smaller lots, Lots 1, 4 and 5
thereof still remained in the names of appellees spouses Rodolfo Delfin and
Felipa Belo, while Lots 2 and 3 thereof were transferred by the said spouses
appellees to Recio Daos and Gina Maalat, respectively. These two transferees are
innocent purchasers for value which appellants admit, and this appeal is only an
appeal by appellants against defendant-appellees spouses Rodolfo Delfin and
Felipa Belo, and not against Recio Daos and Gina Maalat.[57] (Emphasis
supplied.)

In effect, contrary to the testimony of respondents witness Myrna Degala-Distura


that her mother warned petitioners against buying the subject lots, [58] respondents
admitted that the only persons they consider to be not innocent purchasers are the
spouses Delfin. However, in view of respondents failure to prove the fraud
attributed to the spouses Delfin, the Court has no choice but to declare all
petitioners to be purchasers for value and in good faith.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals


dated 13 October 2000 is REVERSED and SET ASIDE. The Decision of the
Regional Trial Court dated 27 May 1996 is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

(On Official Leave)


LEONARDO A. QUISUMBING
Associate Justice
Chairman
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate Justice
Acting Chairman

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

ANTONIO T. CARPIO
Associate Justice
Acting Chairman, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairmans Attestation, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice
[1]
Penned by Associate Justice Martin S. Villarama, Jr., concurred in by Associate Justices Romeo J.
Callejo, Sr. and Juan Q. Enriquez, Jr.
[2]
Exhibit G, List of Exhibits for the Plaintiffs-Appellants, p.8.
[3]
Exhibit 1, List of Exhibits for the Defendants-Appellees, p. 1.
[4]
Exhibit B, List of Exhibits for the Plaintiffs-Appellants, pp. 2-3.
[5]
Exhibit 2, List of Exhibits for the Defendants-Appellees, p. 2.
[6]
Rollo, p. 34.
[7]
Id. at 35.
[8]
Id. at 322-331.
[9]
Earlier, or on 14 December 1989, Jolly Datar, one of the respondents, filed a case involving the same
action against the spouses Delfin but this case was dismissed without prejudice because the spouses were no longer
the owners of the properties in question; Complaint dated 11 April 1994, id. at 322-331.
[10]
Cipriano Degala and Teresa Daos co-owned Lot No. 3414.
[11]
Rollo, p. 328.
[12]
Exhibits F and J, List of Exhibit for the Plaintiffs-Appellants, pp. 7 and 11.
[13]
Answer with Counterclaim, rollo, pp. 515-520.
[14]
Id. at 516.
[15]
Decision of the trial court dated 27 May 1996. Records, pp. 235-242.
[16]
Rollo, pp. 11-21
[17]
Id. at 15.
[18]
Id. at 16.
[19]
Id. at 17-18.
[20]
Id. at 19.
[21]
Id.
[22]
Id. at 20.
[23]
Id. at 43-44.
[24]
Comment, id. at 696-715.
[25]
Naguiat v. Court of Appeals, G.R. No. 118375, 3 October 2003, 412 SCRA 591, 595.
[26]
Litonjua v. Fernandez, G.R. No. 148116, 14 April 2004, 427 SCRA 478, 489.
[27]
Austria- Magat v. Court of Appeals, 426 Phil. 263, 278 (2002). Additionally, Art. 1456 of the Civil Code
states: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.
[28]
Policarpio v. Court of Appeals, 336 Phil. 329, 338 (1997).
[29]
Philippine Economic Zone Authority v. Hon. Fernandez, 411 Phil. 107, 119 (2001), citing Ramos v.
Court of Appeals, 302 SCRA 589 (1999), Serna v. Court of Appeals, 308 SCRA 527 (1999).
[30]
Leyson, et al. v. Bontuyan, et al., G.R. No. 156357, 18 February 2005, citing Vda. De Cabrera v. Court
of Appeals, 67 SCRA 339 (1997), and David v. Malay, 318 SCRA 711 (1999).
[31]
Archipelago Management and Marketing Corp. v. Court of Appeals, 359 Phil. 363, 382 (1998) citing De
Roda v. W. A. Lalk and E. Michael & Co., Inc., 48 Phil. 107-108 (1925).
[32]
Ramos v. Heirs of Honorio Ramos, Sr., 431 Phil. 337, 346 (2002).
[33]
Lao v. Villones-Lao, 366 Phil. 49, 58 (1999).
[34]
Montanez v. Mendoza, 441 Phil. 47, 56 (2002).
[35]
Amended Complaint, rollo, pp. 526-527.
[36]
Exhibit A, List of Exhibits for the Plaintiffs-Appellants, p. 1. Felipa Delfin executed an Affidavit of Loss
dated 16 June 1980. It appears also that Lot No. 213 was belatedly registered in the name of the spouses Delfin
because the owners duplicate copy of OCT No. RO-5563 (14516), also a reconstituted title, was lost and the second
owners copy was issued only on 5 September 1980; Exhibit E, List of Exhibits for the Plaintiffs-Appellants, p. 6.
[37]
Arlegui v. Court of Appeals, 428 Phil. 381, 398 (2002).
[38]
Reyes v. Court of Appeals, 374 Phil. 236, 242-243 (1999).
[39]
Complaint, rollo, pp. 511-512.
[40]
Martinez v. Court of Appeals, G.R. No. 131673, 10 September 2004, 438 SCRA 130, 155-156.
[41]
Seastar Marine Services, Inc. v. Bul-an, Jr., G.R. No. 142609, 25 November 2004, 444 SCRA 140, 153.
[42]
Archipelago Management and Marketing Corp. v. Court of Appeals, supra note 31.
[43]
Rollo, p. 9.
[44]
RULES OF COURT, Rule 132, Sec. 23.
[45]
RULES OF COURT, Rule 132, Sec. 19.
[46]
RULES OF COURT, Rule 132, Sec.24: If the record is not kept in the Philippines, there must also be a
certificate that the attesting officer has the custody thereof. If the office in which the record is kept is in a foreign
country, the certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul,
or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which
the record is kept, and authenticated by the seal of his office.

[47]
RULES OF COURT, Rule 132, Sec.25.
[48]
Philippine American Life Insurance Company v. Court of Appeals, 398 Phil. 559, 567 (2000).
[49]
TSN, 2 February 1996, p. 31.
[50]
Records, p. 231.
[51]
F.D. REGALADO, REMEDAL LAW COMPENDIUM, vol. 2, (Eighth Revised ed., 2000), 695,
citing Sheraton-Palace Hotel v. Quijano, [CA] 64 O.G. 9118.
[52]
Exhibit E, List of Exhibits for the Plaintiffs-Appellant, p. 6.

[53]
Trinidad D. Datar, et al. v. Spouses Rodolfo Delfin and Felipa Belo, 13 December 1993, Exhibit B, List
of Exhibits for the Plaintiffs and Defendants, pp. 6-15.
[54]
Id. at 7.
[55]
CIVIL CODE, Art. 140.
[56]
Rollo, pp. 538-564.
[57]
Id. at 557-558.
[58]
TSN, 16 January 1996, p. 5.
Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

ESTATE OF MARGARITA D. G.R. No. 175073


CABACUNGAN, represented by LUZ
LAIGO-ALI, Petitioner, Present:
CARPIO,* J.,
VELASCO, JR., J., Chairperson,
- versus - BRION,**
PERALTA, and
SERENO,*** JJ.
MARILOU LAIGO, PEDRO ROY Promulgated:
LAIGO, STELLA BALAGOT and
SPOUSES MARIO B. CAMPOS AND August 15, 2011
JULIA S. CAMPOS,
Respondents.
x--------------------------------------------------x

DECISION

PERALTA, J.:

This Petition for Review under Rule 45 of the Rules of Court assails
the October 13, 2006 Decision[1] of the Court of Appeals in CA-G.R. CV No.
72371. The assailed decision affirmed the July 2, 2001 judgment[2] rendered by the
Regional Trial Court of La Union, Branch 33 in Civil Case No. 1031-BG a
complaint for annulment of sale of real property, recovery of ownership and
possession, cancellation of tax declarations and damages filed by Margarita
Cabacungan,[3] represented by her daughter, Luz Laigo-Ali against Marilou Laigo
and Pedro Roy Laigo, respondents herein, and against Estella Balagot,[4] and the
spouses Mario and Julia Campos.
The facts follow.

Margarita Cabacungan (Margarita) owned three parcels of unregistered land


in Paringao and in Baccuit, Bauang, La Union, each measuring 4,512 square
meters, 1,986 square meters and 3,454 square meters. The properties were
individually covered by tax declaration all in her name.[5] Sometime in 1968,
Margaritas son, Roberto Laigo, Jr. (Roberto), applied for a non-immigrant visa to
the United States, and to support his application, he allegedly asked Margarita to
transfer the tax declarations of the properties in his name.[6] For said purpose,
Margarita, unknown to her other children, executed an Affidavit of Transfer of
Real Property whereby the subject properties were transferred by donation to
Roberto.[7] Not long after, Robertos visa was issued and he was able to travel to
the U.S. as a tourist and returned in due time. In 1979, he adopted respondents
Pedro Laigo (Pedro) and Marilou Laigo (Marilou),[8] and then he married
respondent Estella Balagot.

In July 1990, Roberto sold the 4,512 sq m property in Baccuit to the spouses
Mario and Julia Campos for P23,000.00.[9] Then in August 1992, he sold the 1,986
sq m and 3,454 sq m lots in Paringao, respectively, to Marilou for P100,000.00 and
to Pedro for P40,000.00.[10] Allegedly, these sales were not known to Margarita
and her other children.[11]
It was only in August 1995, at Robertos wake, that Margarita came to know
of the sales as told by Pedro himself.[12] In February 1996, Margarita, represented
by her daughter, Luz, instituted the instant complaint for the annulment of said
sales and for the recovery of ownership and possession of the subject properties as
well as for the cancellation of Ricardos tax declarations. Margarita admitted having
accommodated Robertos request for the transfer of the properties to his name, but
pointed out that the arrangement was only for the specific purpose of supporting
his U.S. visa application. She emphasized that she never intended to divest herself
of ownership over the subject lands and, hence, Roberto had no right to sell them
to respondents and the Spouses Campos. She likewise alleged that the sales, which
were fictitious and simulated considering the gross inadequacy of the stipulated
price, were fraudulently entered into by Roberto. She imputed bad faith to Pedro,
Marilou and the Spouses Campos as buyers of the lots, as they supposedly knew all
along that Roberto was not the rightful owner of the properties.[13] Hence, she
principally prayed that the sales be annulled; that Robertos tax declarations be
cancelled; and that the subject properties be reconveyed to her.[14]

The Spouses Campos advanced that they were innocent purchasers for value
and in good faith, and had merely relied on Robertos representation that he had the
right to sell the property; and that, hence, they were not bound by whatever
agreement entered by Margarita with her son. They posited that the alleged gross
inadequacy of the price would not invalidate the sale absent a vitiation of consent
or proof of any other agreement. Further, they noted that Margaritas claim was
already barred by prescription and laches owing to her long inaction in recovering
the subject properties. Finally, they believed that inasmuch as Roberto had already
passed away, Margarita must have, instead, directed her claim against his estate.[15]

In much the same way, Marilou and Pedro,[16] who likewise professed
themselves to be buyers in good faith and for value, believed that Margaritas cause
of action had already been barred by laches, and that even assuming the contrary,
the cause of action was nevertheless barred by prescription as the same had
accrued way back in 1968 upon the execution of the affidavit of transfer by virtue
of which an implied trust had been created. In this regard, they emphasized that the
law allowed only a period of ten (10) years within which an action to recover
ownership of real property or to enforce an implied trust thereon may be brought,
but Margarita merely let it pass.[17]

On February 3, 1999, prior to pre-trial, Margarita and the Spouses Campos


amicably entered into a settlement whereby they waived their respective claims
against each other.[18] Margarita died two days later and was forthwith substituted
by her estate.[19] On February 8, 1999, the trial court rendered a Partial
Decision[20] approving the compromise agreement and dismissing the complaint
against the Spouses Campos. Forthwith, trial on the merits ensued with respect to
Pedro and Marilou.

On July 2, 2001, the trial court rendered judgment dismissing the complaint
as follows:

WHEREFORE, in view of the foregoing considerations, the complaint is


DISMISSED.[21]
The trial court ruled that the 1968 Affidavit of Transfer operated as a simple
transfer of the subject properties from Margarita to Roberto. It found no express
trust created between Roberto and Margarita by virtue merely of the said document
as there was no evidence of another document showing Robertos undertaking to
return the subject properties. Interestingly, it concluded that, instead, an implied or
constructive trust was created between the parties, as if affirming that there was
indeed an agreement albeit unwritten to have the properties returned to Margarita
in due time. [22]

Moreover, the trial court surmised how Margarita could have failed to
recover the subject properties from Roberto at any time between 1968, following
the execution of the Affidavit of Transfer, and Robertos return from the United
States shortly thereafter. Finding Margarita guilty of laches by such inaction, the
trial court barred recovery from respondents who were found to have acquired the
properties supposedly in good faith and for value.[23] It also pointed out that
recovery could no longer be pursued in this case because Margarita had likewise
exhausted the ten-year prescriptive period for reconveyance based on an implied
trust which had commenced to run in 1968 upon the execution of the Affidavit of
Transfer.[24] Finally, it emphasized that mere inadequacy of the price as alleged
would not be a sufficient ground to annul the sales in favor of Pedro and Marilou
absent any defect in consent.[25]

Aggrieved, petitioner appealed to the Court of Appeals which, on October


13, 2006, affirmed the trial courts disposition. The appellate court dismissed
petitioners claim that Roberto was merely a trustee of the subject properties as
there was no evidence on record supportive of the allegation that Roberto merely
borrowed the properties from Margarita upon his promise to return the same on his
arrival from the United States. Further, it hypothesized that granting the existence
of an implied trust, still Margaritas action thereunder had already been
circumscribed by laches. [26]

Curiously, while the appellate court had found no implied trust relation in
the transaction between Margarita and Roberto, nevertheless, it held that the ten-
year prescriptive period under Article 1144 of the Civil Code, in relation to an
implied trust created under Article 1456, had already been exhausted by Margarita
because her cause of action had accrued way back in 1968; and that while laches
and prescription as defenses could have availed against Roberto, the same would
be unavailing against Pedro and Marilou because the latter were supposedly buyers
in good faith and for value.[27] It disposed of the appeal, thus:

WHEREFORE, the Appeal is hereby DENIED. The


assailed Decision dated 2 July 2001 of the Regional Trial Court of Bauang, La
Union, Branch 33 is AFFIRMED.

SO ORDERED.[28]

Hence, the instant recourse imputing error to the Court of Appeals in


holding: (a) that the complaint is barred by laches and prescription; (b) that the rule
on innocent purchaser for value applies in this case of sale of unregistered land;
and (c) that there is no evidence to support the finding that there is an implied trust
created between Margarita and her son Roberto.[29]

Petitioner posits that the Court of Appeals should not have haphazardly
applied the doctrine of laches and failed to see that the parties in this case are
bound by familial ties.They assert that laches must not be applied when an
injustice would result from it. Petitioner believes that the existence of such
confidential relationship precludes a finding of unreasonable delay on Margaritas
part in enforcing her claim, especially in the face of Luzs testimony that she and
Margarita had placed trust and confidence in Roberto.Petitioner also refutes the
Court of Appeals finding that there was a donation of the properties to Roberto
when the truth is that the subject properties were all that Margarita possessed and
that she could not have failed to provide for her other children nor for means by
which to support herself. It reiterates that the transfer to Roberto was only an
accommodation so that he could submit proof to support his U.S. visa application.

On the issue of prescription, petitioner advances that it runs from the time
Roberto, as trustee, has repudiated the trust by selling the properties to respondents
in August 15, 1992; that hence, the filing of the instant complaint in 1996 was well
within the prescriptive period. Finally, petitioner states that whether a buyer is in
good or bad faith is a matter that attains relevance in sales of registered land, as
corollary to the rule that a purchaser of unregistered land uninformed of the sellers
defective title acquires no better right than such seller.
Respondents stand by the ruling of the Court of Appeals. In their Comment,
they theorize that if indeed Margarita and Roberto had agreed to have the subject
properties returned following the execution of the Affidavit of Transfer, then there
should have been a written agreement evincing such intention of the parties. They
note that petitioners reliance on the Affidavit of Transfer as well as on the alleged
unwritten agreement for the return of the properties must fail, simply because they
are not even parties to it. Be that as it may, the said document had effectively
transferred the properties to Roberto who, in turn, had acquired the full capacity to
sell them, especially since these properties could well be considered as Robertos
inheritance from Margarita who, on the contrary, did have other existing properties
in her name. Moreover, they believe that the liberal application of the rule on
laches between family members does not apply in the instant case because there is
no fiduciary relationship and privity between them and Margarita.

There is merit in the petition.

To begin with, the rule is that the latitude of judicial review under Rule 45
generally excludes factual and evidentiary reevaluation, and the Court ordinarily
abides by the uniform conclusions of the trial court and the appellate court. Yet, in
the case at bar, while the courts below have both arrived at the dismissal of
petitioners complaint, there still remains unsettled the ostensible incongruence in
their respective factual findings. It thus behooves us to be thorough both in
reviewing the records and in appraising the evidence, especially since an opposite
conclusion is warranted and, as will be shown, justified.

A trust is the legal relationship between one person having an equitable


ownership of property and another person owning the legal title to such property,
the equitable ownership of the former entitling him to the performance of certain
duties and the exercise of certain powers by the latter.[30] Trusts are either express
or implied.[31] Express or direct trusts are created by the direct and positive acts of
the parties, by some writing or deed, or will, or by oral declaration in words
evincing an intention to create a trust.[32]Implied trusts also called trusts by
operation of law, indirect trusts and involuntary trusts arise by legal implication
based on the presumed intention of the parties or on equitable principles
independent of the particular intention of the parties.[33] They are those which,
without being expressed, are deducible from the nature of the transaction as
matters of intent or, independently of the particular intention of the parties, as
being inferred from the transaction by operation of law basically by reason of
equity.[34]

Implied trusts are further classified into constructive trusts and resulting
trusts. Constructive trusts, on the one hand, come about in the main by operation of
law and not by agreement or intention. They arise not by any word or phrase, either
expressly or impliedly, evincing a direct intention to create a trust, but one which
arises in order to satisfy the demands of justice.[35] Also known as trusts ex
maleficio, trusts ex delicto and trusts de son tort, they are construed against one
who by actual or constructive fraud, duress, abuse of confidence, commission of a
wrong or any form of unconscionable conduct, artifice, concealment of
questionable means, or who in any way against equity and good conscience has
obtained or holds the legal right to property which he ought not, in equity and good
conscience, hold and enjoy.[36] They are aptly characterized as fraud-rectifying
trust,[37] imposed by equity to satisfy the demands of justice[38] and to defeat or
prevent the wrongful act of one of the parties.[39] Constructive trusts are illustrated
in Articles 1450, 1454, 1455 and 1456.[40]

On the other hand, resulting trusts arise from the nature or circumstances of
the consideration involved in a transaction whereby one person becomes invested
with legal title but is obligated in equity to hold his title for the benefit of another.
This is based on the equitable doctrine that valuable consideration and not legal
title is determinative of equitable title or interest and is always presumed to have
been contemplated by the parties.[41] Such intent is presumed as it is not expressed
in the instrument or deed of conveyance and is to be found in the nature of their
transaction.[42] Implied trusts of this nature are hence describable as intention-
enforcing trusts.[43] Specific examples of resulting trusts may be found in the Civil
Code, particularly Articles 1448, 1449, 1451, 1452 and 1453.[44]

Articles 1448 to 1456 of the Civil Code enumerate cases of implied trust, but
the list according to Article 1447 is not exclusive of others which may be
established by the general law on trusts so long as the limitations laid down in
Article 1442 are observed,[45] that is, that they be not in conflict with the New Civil
Code, the Code of Commerce, the Rules of Court and special laws.[46]
While resulting trusts generally arise on failure of an express trust or of the
purpose thereof, or on a conveyance to one person upon a consideration from
another (sometimes referred to as a purchase-money resulting trust), they may also
be imposed in other circumstances such that the court, shaping judgment in its
most efficient form and preventing a failure of justice, must decree the existence of
such a trust.[47] A resulting trust, for instance, arises where, there being no fraud or
violation of the trust, the circumstances indicate intent of the parties that legal title
in one be held for the benefit of another.[48] It also arises in some instances where
the underlying transaction is without consideration, such as that contemplated in
Article 1449[49] of the Civil Code. Where property, for example, is gratuitously
conveyed for a particular purpose and that purpose is either fulfilled or frustrated,
the court may affirm the resulting trust in favor of the grantor or
transferor,[50] where the beneficial interest in property was not intended to vest in
the grantee.[51]

Intention although only presumed, implied or supposed by law from the


nature of the transaction or from the facts and circumstances accompanying the
transaction, particularly the source of the consideration is always an element of a
resulting trust[52] and may be inferred from the acts or conduct of the parties rather
than from direct expression of conduct.[53] Certainly, intent as an indispensable
element, is a matter that necessarily lies in the evidence, that is, by evidence, even
circumstantial, of statements made by the parties at or before the time title
passes.[54] Because an implied trust is neither dependent upon an express agreement
nor required to be evidenced by writing,[55]Article 1457[56] of our Civil Code
authorizes the admission of parole evidence to prove their existence. Parole
evidence that is required to establish the existence of an implied trust necessarily
has to be trustworthy and it cannot rest on loose, equivocal or indefinite
declarations.[57]

Thus, contrary to the Court of Appeals finding that there was no evidence on
record showing that an implied trust relation arose between Margarita and Roberto,
we find that petitioner before the trial court, had actually adduced evidence to
prove the intention of Margarita to transfer to Roberto only the legal title to the
properties in question, with attendant expectation that Roberto would return the
same to her on accomplishment of that specific purpose for which the transaction
was entered into. The evidence of course is not documentary, but rather
testimonial.

We recall that the complaint before the trial court alleged that the 1968
Affidavit of Transfer was executed merely to accommodate Robertos request to
have the properties in his name and thereby produce proof of ownership of certain
real properties in the Philippines to support his U.S. visa application. The
agreement, the complaint further stated, was for Margarita to transfer the tax
declarations of the subject properties to Roberto for the said purpose and without
the intention to divest her of the rights of ownership and dominion. [58] Margarita,
however, died before trial on the merits ensued;[59] yet the allegation was
substantiated by the open-court statements of her daughter, Luz, and of her niece,
Hilaria Costales (Hilaria), a disinterested witness.

In her testimony, Luz, who affirmed under oath her own presence at the
execution of the Affidavit of Transfer, described the circumstances under which
Margarita and Roberto entered into the agreement. She narrated that Roberto had
wanted to travel to the U.S and to show the embassy proof of his financial
capacity, he asked to borrow from Margarita the properties involved but upon the
condition that he would give them back to her upon his arrival from the United
States. She admitted that Robertos commitment to return the properties was not put
in writing because they placed trust and confidence in him, and that while she had
spent most of her time in Mindanao since she married in 1956, she would
sometimes come to La Union to see her mother but she never really knew whether
at one point or another her mother had demanded the return of the properties from
Roberto.[60] She further asserted that even after Robertos arrival from the United
States, it was Margarita who paid off the taxes on the subject properties and that it
was only when her health started to deteriorate that Roberto had taken up those
obligations.[61] Hilarias testimony ran along the same line. Like Luz, she was
admittedly present at the execution of the Affidavit of Transfer which took place at
the house she shared with Jacinto Costales, the notarizing officer who was her own
brother. She told that Roberto at the time had wanted to travel to the U.S. but did
not have properties in the Philippines which he could use to back up his visa
application; as accommodation, Margarita lent him the tax declarations covering
the properties but with the understanding that upon his return he would give them
back to Margarita. She professed familiarity with the properties involved because
one of them was actually sitting close to her own property.[62]
While indeed at one point at the stand both of Luzs and Hilarias presence at
the execution of the affidavit had been put to test in subtle interjections by
respondents counsel to the effect that their names and signatures did not appear in
the Affidavit of Transfer as witnesses, this, to our mind, is of no moment inasmuch
as they had not been called to testify on the fact of, or on the contents of, the
Affidavit of Transfer or its due execution. Rather, their testimony was offered to
prove the circumstances surrounding its execution the circumstances from which
could be derived the unwritten understanding between Roberto and Margarita that
by their act, no absolute transfer of ownership would be effected.Besides, it would
be highly unlikely for Margarita to institute the instant complaint if it were indeed
her intention to vest in Roberto, by virtue of the Affidavit of Transfer, absolute
ownership over the covered properties.

It is deducible from the foregoing that the inscription of Robertos name in


the Affidavit of Transfer as Margaritas transferee is not for the purpose of
transferring ownership to him but only to enable him to hold the property in trust
for Margarita. Indeed, in the face of the credible and straightforward testimony of
the two witnesses, Luz and Hilaria, the probative value of the ownership record
forms in the names of respondents, together with the testimony of their witness
from the municipal assessors office who authenticated said forms, are utterly
minimal to show Robertos ownership. It suffices to say that respondents did not
bother to offer evidence that would directly refute the statements made by Luz and
Hilaria in open court on the circumstances underlying the 1968 Affidavit of
Transfer.

As a trustee of a resulting trust, therefore, Roberto, like the trustee of an


express passive trust, is merely a depositary of legal title having no duties as to the
management, control or disposition of the property except to make a conveyance
when called upon by the cestui que trust.[63] Hence, the sales he entered into with
respondents are a wrongful conversion of the trust property and a breach of the
trust. The question is: May respondents now be compelled to reconvey the subject
properties to petitioner? We rule in the affirmative.
Respondents posit that petitioners claim may never be enforced against them
as they had purchased the properties from Roberto for value and in good
faith. They also claim that, at any rate, petitioners cause of action has accrued way
back in 1968 upon the execution of the Affidavit of Transfer and, hence, with the
28 long years that since passed, petitioners claim had long become stale not only
on account of laches, but also under the rules on extinctive prescription governing
a resulting trust. We do not agree.

First, fundamental is the rule in land registration law that the issue of
whether the buyer of realty is in good or bad faith is relevant only where the
subject of the sale is registered land and the purchase was made from the registered
owner whose title to the land is clean, in which case the purchaser who relies on
the clean title of the registered owner is protected if he is a purchaser in good faith
and for value.[64] Since the properties in question are unregistered lands,
respondents purchased the same at their own peril.Their claim of having bought the
properties in good faith, i.e., without notice that there is some other person with a
right to or interest therein, would not protect them should it turn out, as it in fact
did in this case, that their seller, Roberto, had no right to sell them.

Second, the invocation of the rules on limitation of actions relative to a


resulting trust is not on point because the resulting trust relation between Margarita
and Roberto had been extinguished by the latters death. A trust, it is said,
terminates upon the death of the trustee, particularly where the trust is personal to
him.[65] Besides, prescription and laches, in respect of this resulting trust relation,
hardly can impair petitioners cause of action. On the one hand, in accordance with
Article 1144[66] of the Civil Code, an action for reconveyance to enforce an implied
trust in ones favor prescribes in ten (10) years from the time the right of action
accrues, as it is based upon an obligation created by law.[67] It sets in from the time
the trustee performs unequivocal acts of repudiation amounting to an ouster of
the cestui que trust which are made known to the latter.[68] In this case, it was the
1992 sale of the properties to respondents that comprised the act of repudiation
which, however, was made known to Margarita only in 1995 but nevertheless
impelled her to institute the action in 1996 still well within the prescriptive
period. Hardly can be considered as act of repudiation Robertos open court
declaration which he made in the 1979 adoption proceedings involving
respondents to the effect that he owned the subject properties,[69] nor even the fact
that he in 1977 had entered into a lease contract on one of the disputed properties
which contract had been subject of a 1996 decision of the Court of
Appeals.[70] These do not suffice to constitute unequivocal acts in repudiation of
the trust.

On the other hand, laches, being rooted in equity, is not always to be applied
strictly in a way that would obliterate an otherwise valid claim especially between
blood relatives. The existence of a confidential relationship based upon
consanguinity is an important circumstance for consideration; hence, the doctrine
is not to be applied mechanically as between near relatives.[71] Adaza v. Court of
Appeals[72] held that the relationship between the parties therein, who were
siblings, was sufficient to explain and excuse what would otherwise have been a
long delay in enforcing the claim and the delay in such situation should not be as
strictly construed as where the parties are complete strangers vis-a-vis each other;
thus, reliance by one party upon his blood relationship with the other and the trust
and confidence normally connoted in our culture by that relationship should not be
taken against him. Too, Sotto v. Teves[73] ruled that the doctrine of laches is not
strictly applied between near relatives, and the fact that the parties are connected
by ties of blood or marriage tends to excuse an otherwise unreasonable delay.

Third, there is a fundamental principle in agency that where certain property


entrusted to an agent and impressed by law with a trust in favor of the principal is
wrongfully diverted, such trust follows the property in the hands of a third person
and the principal is ordinarily entitled to pursue and recover it so long as the
property can be traced and identified, and no superior equities have
intervened. This principle is actually one of trusts, since the wrongful conversion
gives rise to a constructive trust which pursues the property, its product or
proceeds, and permits the beneficiary to recover the property or obtain damages for
the wrongful conversion of the property. Aptly called the trust pursuit rule, it
applies when a constructive or resulting trust has once affixed itself to property in a
certain state or form.[74]

Hence, a trust will follow the property through all changes in its state and
form as long as such property, its products or its proceeds, are capable of
identification, even into the hands of a transferee other than a bona fide purchaser
for value, or restitution will be enforced at the election of the beneficiary through
recourse against the trustee or the transferee personally. This is grounded on the
principle in property law that ownership continues and can be asserted by the true
owner against any withholding of the object to which the ownership pertains,
whether such object of the ownership is found in the hands of an original owner or
a transferee, or in a different form, as long as it can be identified.[75] Accordingly,
the person to whom is made a transfer of trust property constituting a wrongful
conversion of the trust property and a breach of the trust, when not protected as
a bona fide purchaser for value, is himself liable and accountable as a constructive
trustee. The liability attaches at the moment of the transfer of trust property and
continues until there is full restoration to the beneficiary. Thus, the transferee is
charged with, and can be held to the performance of the trust, equally with the
original trustee, and he can be compelled to execute a reconveyance.[76]

This scenario is characteristic of a constructive trust imposed by Article


[77]
1456 of the Civil Code, which impresses upon a person obtaining property
through mistake or fraud the status of an implied trustee for the benefit of the
person from whom the property comes. Petitioner, in laying claim against
respondents who are concededly transferees who professed having validly derived
their ownership from Roberto, is in effect enforcing against respondents a
constructive trust relation that arose by virtue of the wrongful and fraudulent
transfer to them of the subject properties by Roberto.
Aznar Brother Realty Co. v. Aying,[78] citing Buan Vda. de Esconde v. Court of
Appeals,[79] explained this form of implied trust as follows:
A deeper analysis of Article 1456 reveals that it is not a trust in the
technical sense for in a typical trust, confidence is reposed in one person who is
named a trustee for the benefit of another who is called the cestui que trust,
respecting property which is held by the trustee for the benefit of the cestui
que trust. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a beneficiary and a trustee
are linked by confidential or fiduciary relations, in a constructive trust, there is
neither a promise nor any fiduciary relation to speak of and the so-called trustee
neither accepts any trust nor intends holding the property for the beneficiary.

xxxx

x x x [C]onstructive 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.[80]

It is settled that an action for reconveyance based on a constructive implied trust


prescribes in 10 years likewise in accordance with Article 1144 of the Civil
Code. Yet not like in the case of a resulting implied trust and an express trust,
prescription supervenes in a constructive implied trust even if the trustee does not
repudiate the relationship. In other words, repudiation of said trust is not a
condition precedent to the running of the prescriptive period.[81]

As to when the prescriptive period commences to run, Crisostomo v.


Garcia[82] elucidated as follows:
When property is registered in another's name, an implied or constructive
trust is created by law in favor of the true owner. The action for reconveyance of
the title to the rightful owner prescribes in 10 years from the issuance of the
title. An action for reconveyance based on implied or constructive trust prescribes
in ten years from the alleged fraudulent registration or date of issuance of the
certificate of title over the property.

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


obtained by fraud or mistake, giving rise to an implied trust under Art. 1456 of the
Civil Code, is 10 years pursuant to Art. 1144. This ten-year prescriptive period
begins to run from the date the adverse party repudiates the implied trust,
which repudiation takes place when the adverse party registers the land.[83]

From the foregoing, it is clear that an action for reconveyance under a


constructive implied trust in accordance with Article 1456 does not prescribe
unless and until the land is registered or the instrument affecting the same is
inscribed in accordance with law, inasmuch as it is what binds the land and
operates constructive notice to the world.[84]In the present case, however, the lands
involved are concededly unregistered lands; hence, there is no way by which
Margarita, during her lifetime, could be notified of the furtive and fraudulent sales
made in 1992 by Roberto in favor of respondents, except by actual notice from
Pedro himself in August 1995. Hence, it is from that date that prescription began to
toll. The filing of the complaint in February 1996 is well within the prescriptive
period. Finally, such delay of only six (6) months in instituting the present action
hardly suffices to justify a finding of inexcusable delay or to create an inference
that Margarita has allowed her claim to stale by laches.
WHEREFORE, the Petition is GRANTED. The October 13, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 72371, affirming the July 2,
2001 judgment of the Regional Trial Court of La Union, Branch 33 in Civil Case
No. 1031-BG, is REVERSED and SET ASIDE, and a new one is entered (a)
directing the cancellation of the tax declarations covering the subject properties in
the name of Roberto D. Laigo and his transferees; (b) nullifying the deeds of sale
executed by Roberto D. Laigo in favor of respondents Pedro Roy Laigo and
Marilou Laigo; and (c) directing said respondents to execute reconveyance in favor
of petitioner.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

PRESBITERO J. VELASCO, JR. ARTURO D. BRION


Associate Justice Associate Justice
Chairperson

MARIA LOURDES P. A. SERENO


Associate Justice
ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.


Associate Justice
Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

*
Designated as an additional member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1059
dated August 1, 2011.
**
Designated as an additional member in lieu of Associate Justice Jose Catral Mendoza, per Special Order No. 1056
dated July 27, 2011.
***
Designated as an additional member, per Special Order No. 1028 dated June 21, 2011.
[1]
Penned by Associate Justice Japar B. Dimaampao, with Associate Justices Marina L. Buzon and Regalado E.
Maambong, concurring; rollo, pp. 43-54.
[2]
Signed by Judge Rose Mary R. Molina Alim; id. at 173-181.
[3]
Petitioner was later on substituted by the Estate of Margarita D. Cabacungan, represented by Luz Laigo-Ali.
[4]
Estella Balagots name was dropped from the subsequent pleadings filed with the trial court.
[5]
Tax Declaration Nos. 12234 series of 1953, 34668 series of 1967 and 15052 series of 1953, records, pp. 216-218.
[6]
Records, p. 2.
[7]
Id. at 2-3, 8 and 215.
[8]
Id. at 219-221.
[9]
See Deed of Absolute Sale, id. at 9.
[10]
See Deed of Sale of a Residential Land, and Deed of Sale of Portions of Land, id. at 10-11.
[11]
Records, pp. 3-4.
[12]
Id. at 5; TSN, February 9, 2000, pp. 8-9.
[13]
See Compliant, records, pp. 2-5.
[14]
Records, p. 6.
[15]
Records, p. 33.
[16]
These respondents initially submitted a Motion to Dismiss, but the trial court denied the same in its March 10,
1998 Order. See records, pp. 91-98, 116-119.
[17]
See Answer, records, pp. 122-127.
[18]
Records, p. 173.
[19]
Id. at 179-182.
[20]
Id. at 177-178.
[21]
Id. at 288.
[22]
Rollo, p. 178.
[23]
Id. at 178.
[24]
Id. at 179.
[25]
Id. at 181.
[26]
CA rollo, p. 223.
[27]
Id. at 224-225.
[28]
Id. at 226.
[29]
Id. at 28.
[30]
Caezo v. Rojas, G.R. No. 148788, November 23, 2007, 538 SCRA 242, 251; Tigno v. Court of Appeals, G.R. No.
110115, October 8, 1997, 280 SCRA 262, 271-272, citing Morales v. Court of Appeals, 274 SCRA 282 (1997).
[31]
Article 1441, Civil Code of the Philippines states:
ART. 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor or
of the parties. Implied trusts come into being by operation of law.
[32]
Caezo v. Rojas, supra note 30, at 251-252, citing Buan Vda. de Esconde v. Court of Appeals, 323 Phil. 81, 89
(1996); Ringor v. Ringor, G.R. No. 147863, August 13, 2004, 436 SCRA 484, 497.
[33]
Tigno v. Court of Appeals, supra note 30, at 271; 76 Am Jur 2d, 159, p. 191, citing Gifford v. Dennis, 335 SE2d
371; Sorrels v. McNally, 105 So 106; and Emberry Community Church v. Bloomington Dist. Missionary & Church
Extension Soc.,482 NE2d 288.
[34]
See Buan Vda. de Esconde, supra note 32, at 89, citing Philippine National Bank v. Court of Appeals, 217 SCRA
347 (1993); Caezo v. Rojas, supra note 30, at 252;
[35]
Caezo v. Roxas, supra note 30, at 258; citing Heirs of Yap v. Court of Appeals, 371 Phil. 523, 531 (1999).
[36]
Roa, Jr. v. Court of Appeals, G.R. No. L-27294, June 23, 1983, 123 SCRA 3, 15-16.
[37]
76 Am Jur 2d, 163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.
[38]
Roa, Jr. v. Court of Appeals, supra note 36, at 16.
[39]
76 Am Jur 2d, 163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.
[40]
Lopez v. Court of Appeals, G.R. No. 157784, December 16, 2008, 574 SCRA 26.
[41]
Buan Vda. de Esconde, supra note 32, at 89-90.
[42]
Salao v. Salao, G.R. No. L-26699, March 16, 1976, 70 SCRA 65, 81.
[43]
76 Am Jur 2d, 163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.
[44]
Lopez v. Court of Appeals, supra note 40.
[45]
Roa, Jr. v. Court of Appeals, supra note 36, at 15.
[46]
Article 1442 incorporates and adopts a large part of the American law on trusts and thereby the Philippine legal
system will be amplified and will be rendered more suited to a just and equitable solution of many questions. See
The Report of the Code Commission, p. 60.
[47]
76 Am Jur 2d, 166, citing McClure v. Moore, 565 So 2d 8; Western Union Te. Co. v. Shepard, 169 NY 170.
[48]
See 76 Am Jur 2d, 166, note 50 which cites Jones v. Jones, 459 P2d 603 and Re Wilder, 42 BR 6.
[49]
Art. 1449. There is also an implied trust when a donation is made to a person but it appears that although the
legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.
[50]
Rebillard v. Hagedorn, 6 Conn App 355, 505 A2d 731.
[51]
Frame v. Wright, 9 NW2d 364, 147 ALR 1154.
[52]
76 Am Jur 2d, 169, p. 201, citing Smith v. Smith, 196 So 409 and Swon v. Huddleston, 282 SW2d 18.
[53]
American Hotel Management Associates, Inc. v. Jones, 768 F2d 562.
[54]
See 76 Am Jur 2d, 170, p. 203.
[55]
See 76 Am Jur 2d, 166, p. 197.
[56]
Art. 1457. An implied trust may be proved by oral evidence.
[57]
Tigno v. Court of Appeals, supra note 30, at 274; Morales v. Court of Appeals, 274 SCRA 282 (1997); Ong
Ching Po v. Court of Appeals, 239 SCRA 341 (1994); Salao v. Salao, supra note 42, at 83, citing De Leon v. Molo-
Peckson, 116 Phil. 1267 (1962).
[58]
Records, pp. 2-3.
[59]
Id. at 179-180.
[60]
TSN, February 9, 2000, pp. 7, 8, 16, 17.
ATTY. LIBATIQUE:
Q: Madam witness, why do you know this transferors affidavit?
WITNESS:
A: I was present when they signed, sir.
Q: Who signed this?
A: My mother, sir.
Q: And whom?
A: And Roberto Laigo, Jr., sir.
Q: You said you were present, whose signature appears under the name, Roberto Laigo?
A: Roberto Laigo, sir.
Q: Your brother?
A: My brother.
Q: x x x and the signature Margarita Laigo, whose signature is that?
A: My mother.
xxxx
Q: Madam witness, tell the court under what circumstances was that transferors affidavit
executed.
A: What do you mean?
Q: Under what circumstances?
A: He just borrowed it because he was going to the United States, he is going to show and he
wants to use that as evidence that he owns land in the Philippines.
Q: What was the condition of that transfer, since you said you were present?
A: He will return it as soon as he will arrive (sic), and that was agreed upon, sir.
Q: Was Roberto able to go to America?
A: Yes, sir.
Q: And one of the evidence that was used x x x to secure a visa were these 3 tax declarations of
properties?
A: Yes, sir.
Q: You said that (Roberto Laigo) promised to return these properties in the name of Margarita Laigo.
How long did Roberto Laigo stay in America?
A: He did not stay long, sir.
Q: How long?
A: Maybe (3) to (4) months.
Q: And after he has returned from America, did he return the titles of these properties in the name of
your mother?
A: We did not know about it because when we came to know (of) it, it was already sold and my
mother was surprised to know that it was already sold.
Q: When did you come to know (of) it?
A: In 1995 when my brother died.
xxxx
Q: Earlier you said that you were aware of this transferees affidavit x x x
A: Yes, sir.
Q: Did you act as witness in the transferees affidavit?
A: No, I was there only, sir.
Q: So that is the reason why you have no signature x x x as witness?
A: Yes, sir.
xxxx
Q: Also, you said that the reason why this transferees affidavit and the transferors affidavit
were executed was because your brother was going to the United States and he will return this
transferees affidavit when he comes back.
A: Yes, sir.
Q; Was that agreement put in writing?
A: No, sir.
Q: Why was it not put in writing?
A: He was my brother and we trusted him so much.
Q: Why did you not ask that your brother put it in writing so that he will not forget it?
A: Because of the trust we had with (sic) him, he was my brother and we trusted him.
Q: So you admit that there is no document in writing to show that that agreement was the
actual agreement?
A: None, sir. (Emphasis supplied.)
[61]
TSN, February 9, 2000, pp. 12-17.
[62]
TSN, March 23, 2000, pp. 3-7.
Q: Do you know Margarita Laigo Cabacungan?
A: Yes, sir. I know her. She is the sister of my mother, Clara.
Q: Do you know how many children does she have (sic)?
A: There are three children namely: Luz Laigo, Roberto Laigo, and Paulina Laigo.
Q: Do you know the properties that are subjects of this case?
A: Yes, I know.
Q: Where are these properties located?
A: At Paringao and Baccuit.
Q: These properties in Paringao, where are these properties in relation to the Cresta Ola and the Mark
Theresa Apartments? Are these properties near those sites?
A: Yes sir, they are very near each other.
Q: Now, do you know the subject properties, one of which is west of the national road and corner part
of Cresta Del Mar?
A: Yes, I know it.
Q: Why do you know it?
A: Because the Cresta Del Mar and ours is the Cresta Ola, they are very near each other.
Q: What about the property east of the national road near the Mark Theresa Apartment, x x x where is
this property?
A: It is east of the road x x x South of the Mark Theresa Apartment.
xxxx
Q: You said that these properties were owned by Margarita Laigo Cabacungan. Do you know how
these properties were transferred to Roberto Laigo, Jr.?
A: I know it.
Q: Why do you know?
A: Because the papers were made by my brother, Jacinto Costales, in our house.
Q: When you say Jacinto Costales, is this the same person who was once a judge of Bagulin Trial
Court?
A: Oh, yes!
Q: Where is he now?
A: He is already dead.
xxxx
Q: Now, will you tell the court why was this document (sic) executed by Margarita Laigo and
Roberto Laigo.
A: When Roberto Laigo wanted to go to America, he has no properties in his name. That is why
his mother lent him that document to show that he has properties in the Philippines, but after
he goes to America those properties will go back to his mother.
xxxx
Q: How far is your house to that of Margarita Cabacungan?
Atty. Libatique: Your Honor, for the record, that is about from the town hall to that place four (4)
kilometers x x x I think that would be the approximate distance.
xxxx
Q: At the time (Jacinto Costales) was a judge and he executed this affidavit sometime in 1968,
where were you if you still remember?
A: I was in the house of my brother (Jacinto).
Q: You [were] staying in just one house?
A: Yes, sir.
Q: And you said you were a witness to the execution of this transferees affidavit?
A: Yes, sir.
Q: If you were a witness, do you remember if you signed a document which will show that you
were a witness?
A: No, sir.
Q:You did not sign?
A: No. sir.
xxxx
Q: Earlier you said that you know for a fact that there was an agreement that Margarita Laigo
signed this in favor of Roberto Laigo because Roberto Laigo at that time (was) going to
the United States, and Roberto Laigo will be using this Transferees Affidavit?
A: Yes, sir.
Q: Do you know, madam witness, if that was reduced into writing?
xxxx
A: That is a verbal agreement.
Q: How did you come to know that?
A: I was in the house.
Q: In the house of Margarita Laigo?
A: Yes, sir, because she is my auntie
Q: Are you still staying there full time in the house of Margarita Laigo?
A: Sometimes only.
xxxx
Q: So that means that sometimes, you were not there. It could be that Mrs. Laigo told Roberto Laigo
that that was (his) property already.
A: No, it cannot be because Margarita Laigo has two daughters, Luz Laigo and Paulina Laigo.
Q: So that is your opinion?
A: Yes, sir. (Emphasis supplied.)
[63]
76 Am Jur 2d, 162, citing Hocking v. Hocking, 484 NE2d 406.
[64]
Spouses Rayos v. Reyes, 446 Phil 32, 50 (2003), citing Sales v. Court of Appeals, 211 SCRA 858 (1992); David
v. Bandin, G.R. Nos. L-48322, L-49712, L-49716 and 49687, April 8, 1987, 149 SCRA 140, 150.
[65]
Canezo v. Rojas, supra note 30, at 257.
[66]
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
[67]
Heirs of Maria Vda. de Vega v. Court of Appeals, G.R. No. 93507, July 12, 1991, 199 SCRA 168, 177; Tale v.
Court of Appeals, G.R. No. 101028, April 23, 1992, 208 SCRA 266.
[68]
Pilapil v. Briones, G.R. No. 150175 (Resolution on the Motion for Reconsideration), February 5, 2007, 514
SCRA 197; Canezo v. Rojas, supra note 30, at 252-253; Ramos v. Ramos, 158 Phil. 935 (1974).
[69]
Decision of the Municipal Trial Court of San Fernando, La Union, Branch I in SP. PROC. No. 193, CA rollo, pp.
363-365.
[70]
Decision of the Court of Appeals in CA-G.R. SP No. 36220, id. at 371-378.
[71]
See Adaza v. Court of Appeals, 253 Phil. 364, 376 (1989).
[72]
Id.
[73]
175 Phil. 343 (1978).
[74]
See 76 Am Jur 292, p. 306
[75]
See 76 Am Jur 292, pp. 306-307
[76]
See 76 Am Jur 297, pp. 311-312.
[77]
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person from whom the property comes.
[78]
497 Phil. 788, 799 (2005).
[79]
Supra note 32.
[80]
Aznar Brothers Realty Co. v. Aying, supra note 78, at 799-800.
[81]
Buan Vda. de Esconde v. Court of Appeals, supra note 32; Aznar Brothers Realty Co. v. Aying, id.
[82]
516 Phil. 743 (2006) .
[83]
Id. at 753, citing Austria-Magat v. Court of Appeals, 426 Phil. 263, 278 (2002) (Emphasis supplied.); Pascual v.
Court of Appeals, G.R. No. 115925, August 15, 2003, 409 SCRA 105, 113; Spouses Alfredo v. Spouses Borras, 452
Phil. 178, 204 (2003) ; Vda. de Delgado v. Court of Appeals, 416 Phil. 263, 274 (2001); Villanueva-Mijares v. Court
of Appeals, 386 Phil. 555, 566 (2000).
[84]
Spouses Abrigo v. De Vera, 476 Phil. 641, 653 (2004).
FIRST DIVISION

GILBERT G. GUY, Petitioner, G.R. No. 165849

- versus -

THE COURT OF APPEALS


TH
(8 DIVISION), NORTHERN
ISLANDS CO., INCORPORATED,
SIMNY G. GUY, GERALDINE G.
GUY, GLADYS G. YAO, and EMILIA
TABUGADIR,
Respondents. G.R. No. 170185
x--------------------------x
IGNACIO AND IGNACIO LAW
OFFICES,
Petitioner,

- versus -

THE COURT OF APPEALS


TH
(7 DIVISION), NORTHERN
ISLANDS CO., INCORPORATED, G.R. No. 170186
SIMNY G. GUY, GERALDINE G.
GUY, GLADYS G. YAO, and EMILIA
A. TABUGADIR,
Respondents.
x--------------------------x
SMARTNET PHILIPPINES, Petitioner,

- versus -

THE COURT OF APPEALS


(7THDIVISION), NORTHERN G.R. No. 171066
ISLANDS CO., INCORPORATED,
SIMNY G. GUY, GERALDINE G.
GUY, GLADYS

G. YAO, and EMILIA A.


TABUGADIR,
Respondents.
x--------------------------x
LINCOLN CONTINENTAL
DEVELOPMENT CO., INC., G.R. No. 176650
Petitioner,
Present:
- versus -
NORTHERN ISLANDS CO., PUNO, C.J., Chairperson,
*
INCORPORATED, SIMNY G. GUY, YNARES-SANTIAGO,
GERALDINE G. GUY, GRACE G. SANDOVAL-GUTIERREZ,
CHEU, GLADYS G. YAO, and EMILIA CORONA, and
A. TABUGADIR, AZCUNA, JJ.
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - x Promulgated:
LINCOLN CONTINENTAL
DEVELOPMENT COMPANY, INC., December 10, 2007
Petitioner,

- versus -

NORTHERN ISLANDS CO.,


INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GRACE G.
CHEU, GLADYS G. YAO, and EMILIA
A. TABUGADIR,
Respondents.

x -----------------------------------------------------------------------------------------x

DECISION

SANDOVAL-GUTIERREZ, J.:
Before us are five (5) consolidated cases which stemmed from Civil Case
No. 04-109444 filed with the Regional Trial Court (RTC), Branch 24, Manila,
subsequently re-raffled to Branch 46[1] and eventually to Branch 25.[2]

The instant controversies arose from a family dispute. Gilbert Guy is the son of
Francisco and Simny Guy. Geraldine, Gladys and Grace are his sisters. The family
feud involves the ownership and control of 20,160 shares of stock of Northern
Islands Co., Inc. (Northern Islands) engaged in the manufacture, distribution, and
sales of various home appliances bearing the 3-D trademark.

Simny and her daughters Geraldine, Gladys and Grace, as well


as Northern Islands and Emilia Tabugadir, have been impleaded as respondents in
the above-entitled cases. Northern Islands is a family-owned corporation organized
in 1957 by spouses Francisco and respondent Simny Guy. In November 1986, they
incorporated Lincoln Continental Development Corporation, Inc. (Lincoln
Continental) as a holding company of the 50% shares of stock
of Northern Islands in trust for their three (3) daughters, respondents Geraldine,
Gladys and Grace. Sometime in December 1986, upon instruction of spouses Guy,
Atty. Andres Gatmaitan, president of Lincoln Continental, indorsed in blank Stock
Certificate No. 132 (covering 8,400 shares) and Stock Certificate No. 133
(covering 11,760 shares) and delivered them to Simny.

In 1984, spouses Guy found that their son Gilbert has been disposing of the assets
of their corporations without authority. In order to protect the assets of Northern
Islands, Simny surrendered Stock Certificate Nos. 132 and 133 to Emilia
Tabugadir, an officer of Northern Islands. The 20,160 shares covered by the two
Stock Certificates were then registered in the names of respondent sisters, thus
enabling them to assume an active role in the management of Northern Islands.

On January 27, 2004, during a special meeting of the stockholders of Northern


Islands, Simny was elected President; Grace as Vice-President for Finance;
Geraldine as Corporate Treasurer; and Gladys as Corporate Secretary. Gilbert
retained his position as Executive Vice President. This development started the
warfare between Gilbert and his sisters.

On March 18, 2004, Lincoln Continental filed with the RTC, Branch 24, Manila a
Complaint for Annulment of the Transfer of Shares of Stock against respondents,
docketed as Civil Case No. 04-109444. The complaint basically alleges that
Lincoln Continental owns 20,160 shares of stock of Northern Islands; and that
respondents, in order to oust Gilbert from the management of Northern Islands,
falsely transferred the said shares of stock in respondent sisters names. Lincoln
Continental then prayed for an award of damages and that the management
of Northern Islands be restored to Gilbert. Lincoln also prayed for the issuance of a
temporary restraining order (TRO) and a writ of preliminary mandatory injunction
to prohibit respondents from exercising any right of ownership over the shares.

On June 16, 2004, Lincoln Continental filed a Motion to Inhibit the Presiding
Judge of Branch 24, RTC, Manila on the ground of partiality. In an Order
dated June 22, 2004, the presiding judge granted the motion and inhibited himself
from further hearing Civil Case No. 04-109444. It was then re-raffled to Branch 46
of the same court.

On July 12, 2004, Branch 46 set the continuation of the hearing on Lincoln
Continentals application for a TRO.

On July 13, 2004, respondents filed with the Court of Appeals a Petition
for Certiorari and Mandamus, docketed as CA-G.R. SP No. 85069, raffled off to
the Tenth Division. Respondents alleged that the presiding judge of Branch 24, in
issuing the Order dated June 22, 2004 inhibiting himself from further hearing Civil
Case No. 04-109444, and the presiding judge of Branch 46, in issuing the Order
dated July 12, 2004 setting the continuation of hearing on Lincoln Continentals
application for a TRO, acted with grave abuse of discretion tantamount to lack or
excess of jurisdiction.
Meanwhile, on July 15, 2004, the trial court issued the TRO prayed for by Lincoln
Continental directing respondents to restore to Gilbert the shares of stock under
controversy. In the same Order, the trial court set the hearing of Lincoln
Continentals application for a writ of preliminary injunction on July 19, 20, and 22,
2004.

On July 16, 2004, the Court of Appeals (Tenth Division) issued a TRO enjoining
Branch 46, RTC, Manila from enforcing, maintaining, or giving effect to its Order
of July 12, 2004 setting the hearing of Lincoln Continentals application for a TRO.

Despite the TRO, the trial court proceeded to hear Lincoln Continentals application
for a writ of preliminary injunction. This prompted respondents to file in the same
CA-G.R. SP No. 85069 a Supplemental Petition for Certiorari, Prohibition,
and Mandamus seeking to set aside the Orders of the trial court setting the hearing
and actually hearing Lincoln Continentals application for a writ of preliminary
injunction. They prayed for a TRO and a writ of preliminary injunction to enjoin
the trial court (Branch 46) from further hearing Civil Case No. 04-109444.

On September 17, 2004, the TRO issued by the Court of Appeals (Tenth Division)
in CA-G.R. SP No. 85069 expired.

On September 20, 2004, Gilbert filed a Motion for Leave to Intervene and Motion
to Admit Complaint-in-Intervention in Civil Case No. 04-109444. In its Order
dated October 4, 2004, the trial court granted the motions.

Meantime, on October 13, 2004, the trial court issued the writ of preliminary
mandatory injunction prayed for by Lincoln Continental in Civil Case No. 04-
109444.

On October 20, 2004, the Court of Appeals (Tenth Division) denied respondents
application for injunctive relief since the trial court had already issued a writ of
preliminary injunction in favor of Lincoln Continental. Consequently, on October
22, 2004, respondents filed with the Tenth Division a Motion to Withdraw Petition
and Supplemental Petition in CA-G.R. SP No. 85069.

On October 26, 2004, respondents filed a new Petition for Certiorari with the
Court of Appeals, docketed as CA-G.R. SP No. 87104, raffled off to the Eighth
Division. They prayed that the TRO and writ of preliminary injunction issued by
the RTC, Branch 46, Manila be nullified and that an injunctive relief be issued
restoring to them the management of Northern Islands. They alleged that Gilbert
has been dissipating the assets of the corporation for his personal gain.

On October 28, 2004, the Court of Appeals Eighth Division issued a TRO
enjoining the implementation of the writ of preliminary injunction dated October
13, 2004 issued by the trial court in Civil Case No. 04-109444; and directing
Lincoln Continental to turn over the assets and records of Northern Islands to
respondents.

On November 2, 2004, respondents filed with the appellate court (Eighth Division)
an Urgent Omnibus Motion praying for the issuance of a break-open Order to
implement its TRO.

On November 4, 2004, the Eighth Division issued a Resolution granting


respondents motion. Pursuant to this Resolution, respondents entered
the Northern Islands premises at No. 3 Mercury Avenue, Libis, Quezon City.

On November 18, 2004, Gilbert filed with this Court a petition for certiorari,
docketed as G.R. No. 165849, alleging that the Court of Appeals (Eighth Division),
in granting an injunctive relief in favor of respondents, committed grave abuse of
discretion tantamount to lack or in excess of jurisdiction. The petition also alleges
that respondents resorted to forum shopping.

Meanwhile, on December 16, 2004, Smartnet Philippines, Inc. (Smartnet) filed


with the Metropolitan Trial Court (MeTC), Branch 35, Quezon City a complaint
for forcible entry against respondents, docketed as Civil Case No. 35-33937. The
complaint alleges that in entering the Northern Islands premises, respondents took
possession of the area being occupied by Smartnet and barred its officers and
employees from occupying the same.

Likewise on December 16, 2004, Ignacio and Ignacio Law Offices also filed with
Branch 37, same court, a complaint for forcible entry against respondents,
docketed as Civil Case No. 34106. It alleges that respondents forcibly occupied its
office space when they took over the premises of Northern Islands.

On December 22, 2004, the Eighth Division issued the writ of preliminary
injunction prayed for by respondents in CA-G.R. SP No. 87104.

Subsequently, the presiding judge of the RTC, Branch 46, Manila retired. Civil
Case No. 04-109444 was then re-raffled to Branch 25.

On January 20, 2005, respondents filed with the Eighth Division of the appellate
court a Supplemental Petition for Certiorari with Urgent Motion for a Writ of
Preliminary Injunction to Include Supervening Events. Named as additional
respondents were 3-D Industries, Judge Celso D. Lavia, Presiding Judge, RTC,
Branch 71, Pasig City and Sheriff Cresencio Rabello, Jr. This supplemental
petition alleges that Gilbert, in an attempt to circumvent the injunctive writ issued
by the Eighth Division of the appellate court, filed with the RTC, Branch
71, Pasig City a complaint for replevin on behalf of 3-D Industries, to enable it to
take possession of the assets and records of Northern Islands. The complaint was
docketed as Civil Case No. 70220. On January 18, 2005, the RTC issued the writ
of replevin in favor of 3-D Industries.

On April 15, 2005, respondents filed with the Eighth Division a Second
Supplemental Petition for Certiorari and Prohibition with Urgent Motion for the
Issuance of an Expanded Writ of Preliminary Injunction. Impleaded therein as
additional respondents were Ignacio and Ignacio Law Offices, Smartnet, Judge
Maria Theresa De Guzman, Presiding Judge, MeTC, Branch 35, Quezon City,
Judge Augustus C. Diaz, Presiding Judge, MeTC, Branch 37, Quezon City, Sun
Fire Trading Incorporated, Zolt Corporation, Cellprime Distribution Corporation,
Goodgold Realty and Development Corporation, John Does and John Doe
Corporations. Respondents alleged in the main that the new corporations
impleaded are alter egos of Gilbert; and that the filing of the forcible entry cases
with the MeTC was intended to thwart the execution of the writ of preliminary
injunction dated December 22, 2004 issued by the Court of Appeals (Eighth
Division) in CA-G.R. SP No. 87104.

On April 26, 2005, the Eighth Division issued a Resolution admitting respondents
new pleading. On August 19, 2005, the Eighth Division (now Seventh Division)
rendered its Decision in CA-G.R. SP No. 87104, the dispositive portion of which
reads:

WHEREFORE, premises considered, the petition is hereby GRANTED and the


October 13, 2004 Order and the October 13, 2004 Writ of Preliminary
Mandatory Injunction issued by Branch 46 of the Regional Trial Court of Manila
are hereby REVERSED and SET ASIDE. The December 17, 2004 Order and
Writ of Preliminary Injunction issued by this Court of Appeals are hereby
MADE PERMANENT against all respondents herein.

SO ORDERED.

Meanwhile, in a Decision[3] dated September 19, 2005, the RTC, Branch


25, Manila dismissed the complaint filed by Lincoln Continental and the
complaint-in-intervention of Gilbert in Civil Case No. 04-109444, thus:

WHEREFORE, in view of the foregoing, the Complaint and the Complaint-in-


Intervention are hereby DISMISSED. Plaintiff and plaintiff-intervenor are
hereby ordered to jointly and severally pay defendants the following:

(a) Moral damages in the amount of Php2,000,000.00 each for


defendants Simny Guy, Geraldine Guy, Grace Guy-Cheu and
Gladys Yao;
(b) Moral damages in the amount of Php200,000.00 for defendant
Emilia Tabugadir;
(c) Exemplary damages in the amount of Php2,000,000.00 each for
defendants Simny Guy, Geraldine Guy, Grace Guy-Cheu, and
Gladys Yao;
(d) Exemplary damages in the amount of Php200,000.00 for defendant
Emilia Tabugadir;
(e) Attorneys fees in the amount of Php2,000.000.00; and
(f) Costs of suit.

SO ORDERED.

The trial court held that Civil Case No. 04-109444 is a baseless and an
unwarranted suit among family members; that based on the evidence, Gilbert was
only entrusted to hold the disputed shares of stock in his name for the benefit of the
other family members; and that it was only when Gilbert started to dispose of the
assets of the familys corporations without their knowledge that respondent sisters
caused the registration of the shares in their respective names.

Both Lincoln Continental and Gilbert timely appealed the RTC Decision to
the Court of Appeals, docketed therein as CA-G.R. CV No. 85937.

On September 15, 2005, 3-D Industries, Inc. filed a petition for certiorari,
prohibition, and mandamus with this Court assailing the Decision of the Court of
Appeals in CA-G.R. SP No. 87104 setting aside the writ of preliminary injunction
issued by the RTC, Branch 46. The petition was docketed as G.R. No. 169462 and
raffled off to the Third Division of this Court.

On October 3, 2005, the Third Division of this Court issued a


Resolution[4] dismissing the petition of 3-D Industries in G.R. No. 169462. 3-D
Industries timely filed its motion for reconsideration but this was denied by this
Court in its Resolution[5] dated December 14, 2005.

Meanwhile, on October 10, 2005, Gilbert, petitioner in G.R. No.


165849 for certiorari, filed with this Court a Supplemental Petition for Certiorari,
Prohibition, and Mandamus with Urgent Application for a Writ of Preliminary
Mandatory Injunction challenging the Decision of the Court of Appeals (Seventh
Division), dated August 19, 2005, in CA-G.R. SP No. 87104. This Decision set
aside the Order dated October 13, 2004 of the RTC, Branch 46 granting the writ of
preliminary injunction in favor of Lincoln Continental.

On November 8, 2005, Ignacio and Ignacio Law Offices and Smartnet filed
with this Court their petitions for certiorari, docketed as G.R. Nos. 170185 and
170186, respectively.

On February 27, 2006, Lincoln Continental filed with this Court a petition
for review on certiorari challenging the Decision of the Court of Appeals (Seventh
Division) in CA-G.R. CV No. 85937, docketed as G.R. No. 171066.

On March 20, 2006, we ordered the consolidation of G.R. No.


171066 with G.R. Nos. 165849, 170185, and 170186.

In the meantime, in a Decision dated November 27, 2006 in CA-G.R. CV


No. 85937, the Court of Appeals (Special Second Division) affirmed the Decision
in Civil Case No. 04-109444 of the RTC (Branch 25) dismissing Lincoln
Continentals complaint and Gilberts complaint-in-intervention, thus:

WHEREFORE, the appeals are dismissed and the assailed decision


AFFIRMED with modifications that plaintiff and plaintiff-intervenor are ordered
to pay each of the defendants-appellees Simny Guy, Geraldine Guy, Grace Guy-
Cheu and Gladys Yao moral damages of P500,000.00, exemplary damages
of P100,000.00 and attorneys fees of P500,000.00.

SO ORDERED.

Lincoln Continental and Gilbert filed their respective motions for


reconsideration, but they were denied in a Resolution promulgated on February 12,
2007.
Lincoln Continental then filed with this Court a petition for review on
certiorari assailing the Decision of the Court of Appeals (Former Special Second
Division) in CA-G.R. CV No. 85937. This petition was docketed as G.R. No.
176650 and raffled off to the Third Division of this Court.

In our Resolution dated June 6, 2007, we ordered G.R. No. 176650


consolidated with G.R. Nos. 165849, 170185, 170186, and 171066.

THE ISSUES

In G.R. Nos. 165849 and 171066, petitioners Gilbert and Lincoln


Continental raise the following issues: (1) whether respondents are guilty of forum
shopping; and (2) whether they are entitled to the injunctive relief granted in CA-
G.R. SP No. 87104.

In G.R. Nos. 170185 and 170186, the pivotal issue is whether the Court of
Appeals committed grave abuse of discretion amounting to lack or excess of
jurisdiction in ruling that petitioners Ignacio and Ignacio Law Offices and Smartnet
are also covered by its Resolution granting the writ of preliminary injunction in
favor of respondents.

In G.R. No. 176650, the core issue is whether the Court of Appeals (Special
Second Division) erred in affirming the Decision of the RTC, Branch
25, Manila dated September 19, 2005 dismissing the complaint of Lincoln
Continental and the complaint-in-intervention of Gilbert in Civil Case No. 04-
109444.

THE COURTS RULING

A. G.R. Nos. 165849 and 171066


On the question of forum shopping, petitioners Gilbert and Lincoln Continental
contend that the acts of respondents in filing a petition
for certiorari and mandamus in CA-G.R. SP No. 85069 and withdrawing the same
and their subsequent filing of a petition for certiorari in CA-G.R. SP No. 87104
constitute forum shopping; that respondents withdrew their petition in CA-G.R. SP
No. 85069 after the Tenth Division issued a Resolution dated October 20, 2004
denying their application for a writ of preliminary injunction; that they then filed
an identical petition in CA-G.R. SP No. 87104 seeking the same relief alleged in
their petition in CA-G.R. SP No. 85069; and that by taking cognizance of the
petition in CA-G.R. SP No. 87104, instead of dismissing it outright on the ground
of forum shopping, the Court of Appeals committed grave abuse of discretion
tantamount to lack or excess of jurisdiction.

A party is guilty of forum shopping when he repetitively avails of several judicial


remedies in different courts, simultaneously or successively, all substantially
founded on the same transactions and the same essential facts and circumstances,
and all raising substantially the same issues either pending in, or already resolved
adversely by some other court.[6] It is prohibited by Section 5, Rule 7 of the 1997
Rules of Civil Procedure, as amended, which provides:

SECTION 5. Certification against forum shopping. The plaintiff or principal


party shall certify under oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any other claim involving the same issues in any court, tribunal, or
quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a
complete statement of the present status thereof; and (c) if he should thereafter
learn that the same or similar action has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for
the dismissal of the case without prejudice, unless otherwise provided, upon
motion and hearing. The submission of a false certification or non-compliance
with any of the undertakings therein shall constitute indirect contempt of court,
without prejudice to the corresponding administrative and criminal actions. If the
acts of the party or his counsel clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary dismissal with prejudice and
shall constitute direct contempt, as well as a cause for administrative sanctions.

Forum shopping is condemned because it unnecessarily burdens our courts with


heavy caseloads, unduly taxes the manpower and financial resources of the
judiciary and trifles with and mocks judicial processes, thereby affecting the
efficient administration of justice.[7] The primary evil sought to be proscribed by
the prohibition against forum shopping is, however, the possibility of conflicting
decisions being rendered by the different courts and/or administrative agencies
upon the same issues.[8]

Forum shopping may only exist where the elements of litis pendentia are present or
where a final judgment in one case will amount to res judicata in the other.[9] Litis
pendentiaas a ground for dismissing a civil action is that situation wherein another
action is pending between the same parties for the same cause of action, such that
the second action is unnecessary and vexatious. The elements of litis pendentia are
as follows: (a) identity of parties, or at least such as representing the same interest
in both actions; (b) identity of rights asserted and the relief prayed for, the relief
being founded on the same facts; and (c) the identity of the two cases such that
judgment in one, regardless of which party is successful, would amount to res
judicata in the other.[10] From the foregoing, it is clear that sans litis
pendentia or res judicata, there can be no forum shopping.

While the first element of litis pendentia identity of parties is present in both CA-
G.R. SP No. 85069 and CA-G.R. SP No. 87104, however, the second element,
does not exist.The petitioners in CA-G.R. SP No. 85069 prayed that the following
Orders be set aside:

(1) the Order of inhibition dated June 22, 2004 issued by the
presiding judge of the RTC of Manila, Branch 24; and

(2) the Order dated July 12, 2004 issued by Branch 46 setting
Gilberts application for preliminary injunction for hearing.
In their petition in CA-G.R. SP No. 87104, respondents prayed for the
annulment of the writ of preliminary injunction issued by the RTC, Branch 46 after
the expiration of the TRO issued by the Tenth Division of the Court of
Appeals. Evidently, this relief is not identical with the relief sought by respondents
in CA-G.R. SP No. 85069. Clearly, the second element of litis pendentia the
identity of reliefs sought - is lacking in the two petitions filed by respondents with
the appellate court. Thus, we rule that no grave abuse of discretion amounting to
lack or excess of jurisdiction may be attributed to the Court of Appeals (Eighth
Division) for giving due course to respondents petition in CA-G.R. SP No. 87104.

On the second issue, Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as
amended provides:

SECTION 3. Grounds for issuance of preliminary injunction. A preliminary


injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained of, or
in requiring the performance of an act or acts, either for a limited
period or perpetually;

(b) That the commission, continuance, or non-performance of the


act or acts complained of during the litigation would probably
work injustice to the applicant; or

(c) That a party, court, agency, or a person is doing, threatening, or


is attempting to do, or is procuring or suffering to be done, some
act or acts probably in violation of the rights of the applicant
respecting the subject of the action or proceeding, and tending to
render the judgment ineffectual.

For a party to be entitled to an injunctive writ, he must show that there exists
a right to be protected and that the acts against which the injunction is directed are
violative of this right.[11] In granting the respondents application for injunctive
relief and making the injunction permanent, the Court of Appeals (Seventh
Division) found that they have shown their clear and established right to the
disputed 20,160 shares of stock because: (1) they have physical possession of the
two stock certificates equivalent to the said number of shares; (2) Lincoln
Continental is a mere trustee of the Guy family; and (3) respondents constitute a
majority of the board of directors of Northern Islands, and accordingly have
management and control of the company at the inception of Civil Case No. 94-
109444. The appellate court then ruled that the trial court committed grave abuse
of discretion in issuing a writ of preliminary mandatory injunction in favor of
Guy. The writ actually reduced the membership of Northern Islands board to just
one member - Gilbert Guy. Moreover, he failed to establish by clear and
convincing evidence his ownership of the shares of stock in question. The Court of
Appeals then held there was an urgent necessity to issue an injunctive writ in order
to prevent serious damage to the rights of respondents and Northern Islands.

We thus find no reason to depart from the findings of the Court of


Appeals. Indeed, we cannot discern any taint of grave abuse of discretion on its
part in issuing the assailed writ of preliminary injunction and making the
injunction permanent.

B. G.R. Nos. 170185 & 170186

Ignacio and Ignacio Law Offices and Smartnet, petitioners, claim that the
Court of Appeals never acquired jurisdiction over their respective persons as they
were not served with summons, either by the MeTC or by the appellate court in
CA-G.R. SP No. 87104. Thus, they submit that the Court of Appeals committed
grave abuse of discretion amounting to lack or excess of jurisdiction when it
included them in the coverage of its injunctive writ.

Jurisdiction is the power or capacity given by the law to a court or tribunal to


entertain, hear, and determine certain controversies.[12] Jurisdiction over the subject
matter of a case is conferred by law.

Section 9 (1) of Batas Pambansa Blg. 129,[13] as amended, provides:


SEC. 9. Jurisdiction. The Court of Appeals shall exercise:

(1) Original jurisdiction to issue writs of mandamus,


prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or
processes, whether or not in aid of its appellate jurisdiction.

Rule 46 of the 1997 Rules of Civil Procedure, as amended, governs all


cases originally filed with the Court of Appeals. The following provisions of the
Rule state:

SEC. 2. To what actions applicable. This Rule shall apply to original


actions for certiorari, prohibition, mandamus and quo warranto.

Except as otherwise provided, the actions for annulment of judgment shall


be governed by Rule 47, for certiorari, prohibition, and mandamus by Rule 65,
and for quo warranto by Rule 66.

xxx

SEC. 4. Jurisdiction over person of respondent, how acquired. The court


shall acquire jurisdiction over the person of the respondent by the service on him
of its order or resolution indicating its initial action on the petition or by his
voluntary submission to such jurisdiction.

SEC. 5. Action by the court. The court may dismiss the petition outright
with specific reasons for such dismissal or require the respondent to file a
comment on the same within ten (10) days from notice. Only pleadings required
by the court shall be allowed. All other pleadings and papers may be filed only
with leave of court.

It is thus clear that in cases covered by Rule 46, the Court of Appeals
acquires jurisdiction over the persons of the respondents by the service upon them
of its order or resolution indicating its initial action on the petitions or by their
voluntary submission to such jurisdiction.[14] The reason for this is that, aside from
the fact that no summons or other coercive process is served on respondents, their
response to the petitions will depend on the initial action of the court
thereon. Under Section 5, the court may dismiss the petitions outright, hence, no
reaction is expected from respondents and under the policy adopted by Rule 46,
they are not deemed to have been brought within the courts jurisdiction until after
service on them of the dismissal order or resolution.[15]
Records show that on April 27, 2005, petitioners in these two forcible entry
cases, were served copies of the Resolution of the Court of Appeals (Seventh
Division) dated April 26, 2005 in CA-G.R. SP No. 87104.[16] The Resolution
states:

Private respondents SMARTNET PHILIPPINES, INC., IGNACIO &


IGNACIO LAW OFFICE, SUNFIRE TRADING, INC., ZOLT
CORPORATION, CELLPRIME DISTRIBUTION CORPO., GOODGOLD
REALTY & DEVELOPMENT CORP., are hereby DIRECTED to file
CONSOLIDATED COMMENT on the original Petition for Certiorari, the First
Supplemental Petition for Certiorari, and the Second Supplemental Petition for
Certiorari (not a Motion to Dismiss) within ten (10) days from receipt of a copy of
the original, first and second Petitions for Certiorari.[17]

Pursuant to Rule 46, the Court of Appeals validly acquired jurisdiction over
the persons of Ignacio and Ignacio Law Offices and Smartnet upon being served
with the above Resolution.

But neither of the parties bothered to file the required comment. Their
allegation that they have been deprived of due process is definitely without
merit. We have consistently held that when a party was afforded an opportunity to
participate in the proceedings but failed to do so, he cannot complain of
deprivation of due process for by such failure, he is deemed to have waived or
forfeited his right to be heard without violating the constitutional guarantee.[18]

On the question of whether the Court of Appeals could amend its Resolution
directing the issuance of a writ of preliminary injunction so as to include
petitioners, suffice to state that having acquired jurisdiction over their persons, the
appellate court could do so pursuant to Section 5 (g), Rule 135 of the Revised
Rules of Court, thus:

SEC. 5. Inherent powers of courts. Every court shall have power:

xxx
(g) To amend and control its process and orders so as to make
them conformable to law and justice.

In Villanueva v. CFI of Oriental Mindoro[19] and Eternal Gardens Memorial


Parks Corp. v. Intermediate Appellate Court,[20] we held that under this Rule, a
court has inherent power to amend its judgment so as to make it conformable to the
law applicable, provided that said judgment has not yet acquired finality, as in
these cases.

C. G.R. No. 176650

The fundamental issue is who owns the disputed shares of stock in Northern
Islands.

We remind petitioner Lincoln Continental that what it filed with this Court is
a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended. It is a rule in this jurisdiction that in petitions for review
under Rule 45, only questions or errors of law may be raised.[21] There is a question
of law when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts, or when the issue does not call for an
examination of the probative value of the evidence presented. There is a question
of fact when the doubt arises as to the truth or falsehood of facts or when there is a
need to calibrate the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances, as
well as their relation to each other and to the whole, and the probability of the
situation.[22] Obviously, the issue raised by the instant petition for review
on certiorari, involves a factual matter, hence, is outside the domain of this
Court. However, in the interest of justice and in order to settle this controversy
once and for all, a ruling from this Court is imperative.

One thing is clear. It was established before the trial court, affirmed by
the Court of Appeals, that Lincoln Continental held the disputed shares of
stock of Northern Islands merely in trust for the Guy sisters. In fact, the
evidence proffered by Lincoln Continental itself supports this conclusion. It bears
emphasis that this factual finding by the trial court was affirmed by the Court of
Appeals, being supported by evidence, and is, therefore, final and conclusive upon
this Court.

Article 1440 of the Civil Code provides that:

ART. 1440. A person who establishes a trust is called the trustor; one in
whom confidence is reposed as regards property for the benefit of another person
is known as the trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary.

In the early case of Gayondato v. Treasurer of the Philippine Islands,[23] this


Court defines trust, in its technical sense, as a right of property, real or personal,
held by one party for the benefit of another. Differently stated, a trust is a fiduciary
relationship with respect to property, subjecting the person holding the same to the
obligation of dealing with the property for the benefit of another person.[24]

Both Lincoln Continental and Gilbert claim that the latter holds legal title to
the shares in question. But record shows that there is no evidence to support
their claim.Rather, the evidence on record clearly indicates that the stock
certificates representing the contested shares are in respondents
possession. Significantly, there is no proof to support his allegation that the
transfer of the shares of stock to respondent sisters is fraudulent. As aptly held by
the Court of Appeals, fraud is never presumed but must be established by clear and
convincing evidence.[25] Gilbert failed to discharge this burden. We, agree with the
Court of Appeals that respondent sisters own the shares of stocks, Gilbert being
their mere trustee. Verily, we find no reversible error in the challenged Decision of
the Court of Appeals (Special Second Division) in CA-G.R. CV No. 85937.

WHEREFORE, we DISMISS the petitions in G.R. Nos. 165849, 170185, 170186


and 176650; and DENY the petitions in G.R. Nos. 171066 and 176650. The
Resolutions of the Court of Appeals (Eighth Division), dated October 28,
2004 and November 4, 2004, as well as the Decision dated October 10, 2005 of the
Court of Appeals (Seventh Division) in CA-G.R. SP No. 87104
are AFFIRMED. We likewise AFFIRM IN TOTO the Decision of the Court of
Appeals (Special Second Division), dated November 27, 2006 in CA-G.R. CV No.
85937. Costs against petitioners.

SO ORDERED.

ANGELINA SANDOVAL GUTIERREZ


Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO
Associate Justice

RENATO C. CORONA ADOLFO S. AZCUNA


Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified


that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

*
Designated to sit as additional Member of the First Division under Special Order No. 474 dated October 19,
2007 issued pursuant to Administrative Circular No. 84-2007.
[1]
Due to the inhibition of the presiding judge of Branch 24.
[2]
Due to the retirement of the presiding judge of Branch 46.
[3]
Vol. III, Rollo, G.R. No. 165849, pp. 1381-1399.
[4]
Vol. IV, Rollo, G.R. No. 165489, p. 1901.
[5]
Id., p. 1902.
[6]
Equitable Philippine Commercial International Bank and Buenaventura v. Court of Appeals, G.R. No. 143556,
March 16, 2004, 425 SCRA 544, 550, citing Tantay, Sr. v. Court of Appeals, 357 SCRA 329 (2001).
[7]
Guaranteed Hotels, Inc. v. Baltao, G.R. No. 164338, January 17, 2005, 448 SCRA 738, 744.
[8]
Rudecon Management Corporation v. Singson, G.R. No. 150798, March 31, 2005, 454 SCRA 612, 632,
citing Yupangco Cotton Mills, Inc. v. Court of Appeals, 383 SCRA 451 (2002).
[9]
Lugayan v. Spouses Tizon, G.R. No. 147958, March 31, 2005, 454 SCRA 488, citing Development Bank of the
Philippines v. Pingol Land Transport System Co., Inc., 420 SCRA 652 (2004).
[10]
Arquiza v. Court of Appeals, G.R. No. 160479, June 8, 2005, 459 SCRA 753, 764, citing Panganiban v.
Pilipinas Shell Petroleum Corp., 395 SCRA 624 (2003).
[11]
Rualo v. Pitargue, G.R. No. 140284, January 21, 2005, 449 SCRA 121, 137, citing Searth Commodities Corp. v.
Court of Appeals, 207 SCRA 662 (1992).
[12]
Dela Cruz v. Court of Appeals, G.R. No. 139442. December 6, 2006, 510 SCRA 102, 114, citing People v.
Mariano, 71 SCRA 600 (1976).
[13]
The Judiciary Reorganization Act of 1980.
[14]
FERIA AND NOCHE, II CIVIL PROCEDURE ANNOTATED (2001 Ed.) 216-217. See also HERRERA, VII
REMEDIAL LAW (1997 Ed.) 542.
[15]
REGALADO, I REMEDIAL LAW COMPENDIUM (1997 Ed.) 553.
[16]
Vol. II, Rollo, G.R. No. 170185, pp. 1212-1213.
[17]
Id., p. 1211.
[18]
Bautista v. Court of Appeals, G.R. No. 157219, May 28, 2004, 430 SCRA 353, 357, citing Tiomico v. Court of
Appeals, 304 SCRA 216 (1999).
[19]
G.R. No. 45798, December 15, 1982, 119 SCRA 288.
[20]
G.R. No. 73794, September 19, 1988, 165 SCRA 439.
[21]
Torrecampo v. Alindogan, Sr., G.R. No. 156405, February 28, 2007, 517 SCRA 84, 88.
[22]
Mendoza v. Salinas, G.R. No. 152827, February 6, 2007, 514 SCRA 414, 419, citing Bukidnon Doctors Hospital,
Inc. v. Metropolitan Bank & Trust Co., 463 SCRA 222.
[23]
49 Phil. 244 (1926).
[24]
Development Bank of the Philippines v. Commission on Audit, G.R. No. 144516, February 11, 2004, 422 SCRA
459, 472, citing Tala Realty Services Corp. v. Banco Filipino Savings and Mortgage Bank, 392 SCRA 506
(2002), Huang v. Court of Appeals, 236 SCRA 420 (1994), A. TOLENTINO, IV COMMENTARIES AND
JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES (1991) 669.
[25]
Autencio v. Maara, G.R. No. 152752, January 19, 2005, 449 SCRA 46, 53, citing Cathay Pacific Airways, Ltd. v.
Sps. Vasquez, 399 SCRA (2003), Maestrado v. Court of Appeals, 384 Phil. 418, 327 SCRA 678 (2000), Loyola
v. Court of Appeals, 383 Phil. 171, 326 SCRA 285 (2000).
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

HEIRS OF MAXIMO LABANON, G.R. No. 160711


represented by ALICIA LABANON
CAEDO and the PROVINCIAL Present:
ASSESSOR OF COTABATO,
Petitioners, QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
- versus - TINGA, and
VELASCO, JR., JJ.
HEIRS OF CONSTANCIO Promulgated:
LABANON, represented by
ALBERTO MAKILANG,
Respondents. August 14, 2004
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the recall and
nullification of the May 8, 2003 Decision[1] of the Court of Appeals (CA) in CA-
G.R. CV No. 65617 entitled Heirs of Constancio Labanon represented by Alberto
Makilang v. Heirs of Maximo Labanon represented by Alicia Labanon Caedo and
the Provincial Assessor of Cotabato, which reversed the August 18, 1999
Decision[2] of the Kidapawan City, Cotabato Regional Trial Court (RTC), Branch
17, in Civil Case No. 865. Likewise assailed is the October 13,
2003 Resolution[3] which disregarded petitioners Motion for Reconsideration.

The Facts
The CA culled the facts this way:

During the lifetime of Constancio Labanon, prior to the outbreak of WWII,


he settled upon a piece of alienable and disposable public agricultural land
situated at Brgy. Lanao, Kidapawan, Cotabato x x x. Constancio cultivated
the said lot and introduced permanent improvements that still exist up to the
present. Being of very limited educational attainment, he found it difficult
to file his public land application over said lot. Constancio then asked his
brother, Maximo Labanon who was better educated to file the
corresponding public land application under the express agreement that they
will divide the said lot as soon as it would be feasible for them to do so. The
offer was accepted by Maximo. During the time of the application it was
Constancio who continued to cultivate the said lot in order to comply with
the cultivation requirement set forth under Commonwealth Act 141, as
amended, on Homestead applications. After which, on June 6, 1941, due to
industry of Constancio, Homestead Application No. 244742 (E-128802) of
his brother Maximo was approved with Homestead Patent No. 67512.
Eventually, Original Certificate of Title No. P-14320 was issued by the
Register of Deeds of Cotabato over said lot in favor of Maximo Labanon.

On February 11, 1955, Maximo Labanon executed a document denominated


as Assignment of Rights and Ownership and docketed as Doc. No. 20; Page
No. 49; Book No. V; Series of 1955 of the Notarial Register of Atty.
Florentino Kintanar. The document was executed to safeguard the
ownership and interest of his brother Constancio Labanon. Pertinent portion
of which is reproduced as follows:

That I, MAXIMO LABANON, of legal age, married to Anastacia


Sagarino, and a resident of Kidapawan, Cotabato, for and in
consideration of the expenses incurred by my elder brother
CONSTANCIO LABANON also of legal age, Filipino, widower
and a resident of Kidapawan, Cotabato, for the clearing, cultivation
and improvements on the eastern portion xxx Lot No. 1, Blk. 22,
Pls-59 xxx which expenses have been incurred by my said brother
xxx before the outbreak of the last world war xxx I do hereby
assign transfer and convey my rights to, interests in and ownership
on the said eastern portion of said Lot No. 1, Block 22, Pls-59
ONE HUNDRED (100 M) ALONG THE NATIONAL
HIGHWAY, (DAVAO-COTABATO ROAD) by TWO
HUNDRED FIFTY METERS (250 M) going inside the land to
cover an area of TWO AND ONE HALF HECTARES (25,000
SQ. M.), more or less, adjoining the school site of barrio Lanao,
Kidapawan, Cotabato, to the said CONSTANCIO LABANON, his
heirs and assigns, can freely occupy for his own use and benefit
xxx.
IN WITNESS WHEREFOF, I have hereunto set my hand this
11th day of February 1995 at Kidapawan, Cotabato.

(SGD) MAXIMO LABANON


With my marital consent.

(SGD) ANASTACIA SAGARINO


(Wife) (p.16, rollo)

On April 25, 1962, Maximo Labanon executed a sworn statement


reiterating his desire that his elder brother Constancio, his heirs and assigns
shall own the eastern portion of the Lot, pertinent portion of which reads:

That I am the same and identical person who is a homestead


applicant (HA-224742, E-128802) of a tract of land which is
covered by Homestead Patent No. 67512 dated June 6, 1941,
known as Lot No. 1, Block 22, Pls-59, situated in [B]arrio Lanao,
Municipality of Kidapawan, Province of Cotabato, Philippines, and
containing an area of 5.0000 hectares, more or less;

That I am the same and identical person who executed a deed of


ASSIGNMENT OF RIGHTS AND OWNERSHIP in favor of my
brother Constancio Labanon, now deceased, now for his heirs, for
the eastern half portion of the land above described, and which
deed was duly notarized by notary public Florentino P. Kintanar on
February 11, 1955 at Kidapawan, Cotabato and entered in his
Notarial Register as Doc. No. 20, Page No. 49, Book No. V, Series
of 1955; and

That in order that I and the Heirs of Constancio Labanon will


exercise our respective rights and ownership over the
aforementioned lot, and to give force and effect to said deed of
assignment, I hereby, by these presents, request the Honorable
Director of Lands and the Land Title Commission to issue a
separate title in my favor covering the western half portion of the
aforementioned lot and to the Heirs of Constancio Labanon a title
for the eastern half portion thereof.

IN WITNESS THEREOF, I have hereunto set my hand this


25th day of April, 1962, at Pikit, Cotabato, Philippines. (p. 9,
records)

After the death of Constancio Labanon, his heirs executed an [e]xtra-


judicial settlement of estate with simultaneous sale over the aforesaid
eastern portion of the lot in favor of Alberto Makilang, the husband of
Visitacion Labanon, one of the children of Constancio. Subsequently, the
parcel of land was declared for taxation purposes in the name of Alberto
under TD No. 11593. However, in March 1991, the defendants heirs of
Maximo Labanon namely, Alicia L. Caniedo, Leopoldo Labanon, Roberto
Nieto and Pancho Labanon, caused to be cancelled from the records of the
defendant Provincial Assessor of Cotabato the aforesaid TD No. 11593 and
the latter, without first verifying the legality of the basis for said
cancellation, did cancel the same. x x x Further, after discovering that the
defendant-heirs of Maximo Labanon were taking steps to deprive the heirs
of Constancio Labanon of their ownership over the eastern portion of said
lot, the latter, thru Alberto Makilang, demanded the owners copy of the
certificate of title covering the aforesaid Lot to be surrendered to the
Register of Deeds of Cotabato so that the ownership of the heirs of
Constancio may be fully effected but the defendants refused and still
continue to refuse to honor the trust agreement entered into by the deceased
brothers. x x x[4]

Thus, on November 12, 1991, petitioners filed a complaint[5] for Specific


Performance, Recovery of Ownership, Attorneys Fees and Damages with Writ of
Preliminary Injunction and Prayer for Temporary Restraining Order against
respondents docketed as Civil Case No. 865 before the Kidapawan City
RTC. After hearing, the trial court rendered its August 18, 1999 Decision, the
decretal portion of which reads:

Wherefore, prescinding from the foregoing facts and considerations the


Court finds and so holds that the [defendant-heirs] of Maximo Labanon
represented by Alicia Labanon Caniedo have proved by preponderance of
evidence that they are entitled to the reliefs set forth in their answer and
consequently judgment is hereby rendered as follows:

1. Ordering the dismissal of the complaint against the Heirs of Maximo


Labanon represented by Alicia Labanon Caniedo for lack of merit;

2. Ordering the dismissal of the case against the Provincial Assessor. The
claim of the plaintiff is untenable, because the duties of the Provincial
Assessor are ministerial. Moreover, the presumption of regularity in the
performance of his duty is in his favor;

3. Ordering the plaintiff to pay the defendants the amount of P20,000.00 as


exemplary damages, P10,000.00 for Attorneys Fees, P500.00 per
appearance in Court; and

4. To pay the costs of this suit.

IT IS SO ORDERED.[6]
Aggrieved, respondents elevated the adverse judgment to the CA which issued the
assailed May 8, 2003 Decision in CA-G.R. CV No. 65617, the fallo of which
states:

WHEREFORE, the appeal is hereby GRANTED for being meritorious.


The assailed decision of the Regional Trial Court is
hereby REVERSED and SET ASIDE and a new one is hereby entered as
follows:

1) Recognizing the lawful possession of the plaintiffs-appellants over the


eastern portion of the property in dispute;

2) Declaring the plaintiffs-appellants as owners of the eastern portion of


the property by reason of lawful possession;

3) Ordering the Provincial Assessor to reinstate TD No. 11593 and


declaring TD No. 243-A null and void;

4) Ordering the defendants-appellees to pay the plaintiffs-appellants the


amount of P20,000 as moral damages, P10,000 for attorneys fees,
P500.00 per appearance in Court and

5) To pay the costs of the suit.

SO ORDERED.

The Issues

Surprised by the turn of events, petitioners brought this petition before us


raising the following issues, to wit:

1. Whether or not Original Certificate of Title No. 41320 issued on April


10, 1975 in the name of MAXIMO LABANON be now considered
indefeasible and conclusive; and

2. Whether or not the Trust Agreement allegedly made by Constancio


Labanon and Maximo Labanon prescribed.[7]

The Courts Ruling

The petition must fail.


First Issue

Respondents are not precluded from challenging the validity of


Original Certificate of Title No. P-41320

Petitioners argue that respondents can no longer question Maximo Labanons


ownership of the land after its registration under the principle of indefeasibility of a
Transfer Certificate of Title (TCT).

Such argument is inaccurate.

The principle of indefeasibility of a TCT is embodied in Section 32 of Presidential


Decree No. (PD) 1529, amending the Land Registration Act, which provides:

Section 32. Review of decree of registration; Innocent purchaser for


value. The decree of registration shall not be reopened or revised by reason
of absence, minority, or other disability of any person adversely affected
thereby, nor by any proceeding in any court for reversing judgments,
subject, however, to the right of any person, including the government and
the branches thereof, deprived of land or of any estate or interest therein by
such adjudication or confirmation of title obtained by actual fraud, to file in
the proper Court of First Instance a petition for reopening and review of the
decree of registration not later than one year from and after the date of the
entry of such decree of registration, but in no case shall such petition be
entertained by the court where an innocent purchaser for value has acquired
the land or an interest therein, whose rights may be prejudiced. Whenever
the phrase innocent purchaser for value or an equivalent phrase occurs in
this Decree, it shall be deemed to include an innocent lessee, mortgagee, or
other encumbrancer for value.

Upon the expiration of said period of one year, the decree of


registration and the certificate of title issued shall become incontrovertible.
Any person aggrieved by such decree of registration in any case may pursue
his remedy by action for damages against the applicant or any other persons
responsible for the fraud.

Contrary to petitioners interpretation, the aforequoted legal provision does not


totally deprive a party of any remedy to recover the property fraudulently
registered in the name of another. Section 32 of PD 1529 merely precludes the
reopening of the registration proceedings for titles covered by the Torrens System,
but does not foreclose other remedies for the reconveyance of the property to its
rightful owner. As elaborated in Heirs of Clemente Ermac v. Heirs of Vicente
Ermac:

While it is true that Section 32 of PD 1529 provides that the decree of


registration becomes incontrovertible after a year, it does not altogether
deprive an aggrieved party of a remedy in law. The acceptability of the
Torrens System would be impaired, if it is utilized to perpetuate fraud
against the real owners.[8]

A more succinct explanation is found in Vda. De Recinto v. Inciong, thus:


The mere possession of a certificate of title under the Torrens system does
not necessarily make the possessor a true owner of all the property
described therein for he does not by virtue of said certificate alone become
the owner of the land illegally included. It is evident from the records that
the petitioner owns the portion in question and therefore the area should be
conveyed to her. The remedy of the land owner whose property has been
wrongfully or erroneously registered in another's name is, after one
year from the date of the decree, not to set aside the decree, but,
respecting the decree as incontrovertible and no longer open to review, to
bring an ordinary action in the ordinary court of justice for
reconveyance or, if the property has passed into the hands of an
innocent purchaser for value, for damages.[9] (Emphasis supplied.)

Undeniably, respondents are not precluded from recovering the eastern


portion of Original Certificate of Title (OCT) No. P-14320, with an area subject of
the Assignment of Rights and Ownership previously owned by their father,
Constancio Labanon. The action for Recovery of Ownership before the RTC is
indeed the appropriate remedy.

Second Issue

The trust agreement between Maximo Labanon and Constancio Labanon may
still be enforced
Former Vice-President and Senator Arturo Tolentino, a noted civilist,
explained the nature and import of a trust:

Trust is the legal relationship between one person having an equitable


ownership in property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers by the
latter.[10]

This legal relationship can be distinguished from other relationships of a


fiduciary character, such as deposit, guardianship, and agency, in that the trustee
has legal title to the property.[11] In the case at bench, this is exactly the relationship
established between the parties.

Trusts are classified under the Civil Code as either express or implied. Such
classification determines the prescriptive period for enforcing such trust.

Article 1444 of the New Civil Code on express trust provides that [n]o particular
words are required for the creation of an express trust, it being sufficient that a
trust is clearly intended.

Civil law expert Tolentino further elucidated on the express trust, thus:
No particular form of words or conduct is necessary for the manifestation of
intention to create a trust. It is possible to create a trust without using the
word trust or trustee. Conversely, the mere fact that these words are used
does not necessarily indicate an intention to create a trust. The question in
each case is whether the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial whether or
not he knows that the relationship which he intends to create is called a
trust, and whether or not he knows the precise characteristics of the
relationship which is called a trust.[12]

Correlatively, we ruled in Estate of Edward Miller Grimm v. Estate of


Charles Parsons and Patrick C. Parsons, that:

An express trust is created by the direct and positive acts of the parties, by
some writing or deed or by words evidencing an intention to create a trust;
the use of the word trust is not required or essential to its constitution, it
being sufficient that a trust is clearly intended.[13]

In the instant case, such intention to institute an express trust between


Maximo Labanon as trustee and Constancio Labanon as trustor was contained in
not just one but two written documents, the Assignment of Rights and Ownership
as well as Maximo Labanons April 25, 1962 Sworn Statement. In both documents,
Maximo Labanon recognized Constancio Labanons ownership and possession over
the eastern portion of the property covered by OCT No. P-14320, even as he
recognized himself as the applicant for the Homestead Patent over the land. Thus,
Maximo Labanon maintained the title over the property while acknowledging the
true ownership of Constancio Labanon over the eastern portion of the land. The
existence of an express trust cannot be doubted nor disputed.

On the issue of prescription, we had the opportunity to rule in Bueno v.


Reyes that unrepudiated written express trusts are imprescriptible:

While there are some decisions which hold that an action upon a trust is
imprescriptible, without distinguishing between express and implied trusts,
the better rule, as laid down by this Court in other decisions, is that
prescription does supervene where the trust is merely an implied one. The
reason has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co.,
Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:

Under Section 40 of the old Code of Civil Procedure, all


actions for recovery of real property prescribed in 10 years,
excepting only actions based on continuing or subsisting trusts that
were considered by section 38 as imprescriptible. As held in the
case of Diaz v. Gorricho, L-11229, March 29, 1958, however, the
continuing or subsisting trusts contemplated in section 38 of the
Code of Civil Procedure referred only to express unrepudiated
trusts, and did not include constructive trusts (that are imposed by
law) where no fiduciary relation exists and the trustee does not
recognize the trust at all.[14]

This principle was amplified in Escay v. Court of Appeals this way: Express
trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al. vs.
Carmen Gorricho et al., 54 0.G. p. 8429, Sec. 40, Code of Civil Procedure).[15]
In the more recent case of Secuya v. De Selma, we again ruled that the
prescriptive period for the enforcement of an express trust of ten (10) years starts
upon the repudiation of the trust by the trustee.[16]

In the case at bar, Maximo Labanon never repudiated the express trust
instituted between him and Constancio Labanon. And after Maximo Labanons
death, the trust could no longer be renounced; thus, respondents right to enforce the
trust agreement can no longer be restricted nor prejudiced by prescription.

It must be noted that the Assignment of Rights and Ownership and Maximo
Labanons Sworn Statement were executed after the Homestead Patent was applied
for and eventually granted with the issuance of Homestead Patent No. 67512
on June 6, 1942. Evidently, it was the intent of Maximo Labanon to hold the title
over the land in his name while recognizing Constancio Labanons equitable
ownership and actual possession of the eastern portion of the land covered by OCT
No. P-14320.

In addition, petitioners can no longer question the validity of the positive


declaration of Maximo Labanon in the Assignment of Rights and Ownership in
favor of the late Constancio Labanon, as the agreement was not impugned during
the formers lifetime and the recognition of his brothers rights over the eastern
portion of the lot was further affirmed and confirmed in the subsequent April 25,
1962 Sworn Statement.

Section 31, Rule 130 of the Rules of Court is the repository of the settled precept
that [w]here one derives title to property from another, the act, declaration, or
omission of the latter, while holding the title, in relation to the property, is
evidence against the former. Thus, petitioners have accepted the declaration made
by their predecessor-in-interest, Maximo Labanon, that the eastern portion of the
land covered by OCT No. P-14320 is owned and possessed by and rightfully
belongs to Constancio Labanon and the latters heirs. Petitioners cannot now feign
ignorance of such acknowledgment by their father, Maximo.
Lastly, the heirs of Maximo Labanon are bound to the stipulations embodied
in the Assignment of Rights and Ownership pursuant to Article 1371 of the Civil
Code that contracts take effect between the parties, assigns, and heirs.

Petitioners as heirs of Maximo cannot disarrow the commitment made by


their father with respect to the subject property since they were merely subrogated
to the rights and obligations of their predecessor-in-interest. They simply stepped
into the shoes of their predecessor and must therefore recognize the rights of the
heirs of Constancio over the eastern portion of the lot. As the old adage goes, the
spring cannot rise higher than its source.

WHEREFORE, the petition is DENIED. The May 8, 2003 CA Decision


and October 13, 2003 Resolution in CA-G.R. CV No. 65617 are AFFIRMED with
the modifications that the Kidapawan City, Cotabato RTC, Branch 17 is directed to
have OCT No. P-14320 segregated and subdivided by the Land Management
Bureau into two (2) lots based on the terms of the February 11, 1955 Assignment
of Rights and Ownership executed by Maximo Labanon and Constancio Labanon;
and after approval of the subdivision plan, to order the Register of Deeds of
Kidapawan City, Cotabato to cancel OCT No. P-14320 and issue one title each to
petitioners and respondents based on the said subdivision plan.

Costs against petitioners.

SO ORDERED.

PRESBITERO J. VELASCO, JR.


Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate Justice

DANTE O. TINGA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
[1]
Rollo, pp. 40-49. The Decision was penned by Associate Justice Eloy R. Bello, Jr., with Justices Cancio
C. Garcia (Chairman) and Mariano C. Del Castillo concurring.
[2]
Id. at 25-39.
[3]
Id. at 42-43.
[4]
Id. at 43-45.
[5]
Id. at 25; per August 18, 1999 RTC Decision; cf. November 3, 2003 Petition, id. at 6, where the
complaint is dated November 12, 1999, which should be November 12, 1991 per the RTC Decision.
[6]
Supra note 2, at 39.
[7]
Rollo, p. 15.
[8]
G.R. No. 149679, May 30, 2003, 403 SCRA 291, 297; citations omitted.
[9]
No. L-26083, May 31, 1977, 77 SCRA 196, 201.
[10]
IV A. Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF
THE PHILIPPINES 669 (1995).
[11]
Id. at 670.
[12]
Id. at 675.
[13]
G.R. No. 159810, October 9, 2006, 504 SCRA 67, 81.
[14]
No. L-22587, April 28, 1969, 27 SCRA 1179, 1183; citations omitted.
[15]
No. L-37504, December 18, 1974, 61 SCRA 369, 388; citation omitted.
[16]
G.R. No. 136021, February 22, 2000, 326 SCRA 244, 254.
FIRST DIVISION

ROGELIO, GEORGE, LOLITA, G.R. No. 159494

ROSALINDA, and JOSEPHINE, all

surnamed PASIO, represented by Present:

their father and attorney-in-fact

JOSE PASIO, PUNO, C.J., Chairperson,

Petitioners, CARPIO,

AUSTRIA-MARTINEZ,*

CORONA, and

- versus - LEONARDO-DE CASTRO, JJ.

DR. TEOFILO EDUARDO F.

MONTERROYO, substituted by

ROMUALDO MONTERROYO,

MARIA TERESA MONTERROYO, Promulgated:

and STEPHEN MONTERROYO,

Respondents. July 31, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review[1] assailing the 31 January 2003
Decision[2] and the 5 August 2003 Resolution[3] of the Court of Appeals in CA-G.R.
CV No. 63199.The Court of Appeals affirmed the Decision[4] dated 2 February
1999 of the Regional Trial Court of Iligan City, Branch 6 (trial court), in Civil Case
No. 06-3060.

The Antecedent Facts

This case originated from an action for recovery of possession and damages, with
prayer for the issuance of a temporary restraining order or writ of preliminary
mandatory injunction, filed by Rogelio, George, Lolita, Rosalinda and Josephine,
all surnamed Pasio, represented by their father and attorney-in-fact Jose Pasio
(petitioners) against Dr. Teofilo Eduardo F. Monterroyo (Dr. Monterroyo), later
substituted by his heirs Romualdo, Maria Teresa and Stephen, all surnamed
Monterroyo (respondents).

Cad. Lot No. 2139 of Cad. 292, Iligan Cadastre (Lot No. 2139), with an area of
19,979 square meters, located at Panul-iran, Abuno, Iligan City, was part of a 24-
hectare land occupied, cultivated and cleared by Laureano Pasio (Laureano) in
1933. The 24-hectare land formed part of the public domain which was later
declared alienable and disposable.On 18 February 1935, Laureano filed a
homestead application over the entire 24-hectare land under Homestead
Application No. 205845.[5] On 22 April 1940, the Bureau of Forestry wrote
Laureano and informed him that the tract of land covered by his application was
not needed for forest purposes.[6] On 11 September 1941, the Director of Lands
issued an Order[7] approving Laureanos homestead application and stating that
Homestead Entry No. 154651 was recorded in his name for the land applied for by
him.

Laureano died on 24 March 1950. On 15 April 1952, the Director of Lands issued
an Order[8] for the issuance of a homestead patent in favor of Laureano, married
to Graciana Herbito[9] (Graciana). Laureanos heirs did not receive the order and
consequently, the land was not registered under Laureanos name or under that of
his heirs. In 1953, the property was covered by Tax Declaration No. 11102[10] in
the name of Laureano with Graciana[11] as administrator.

Between 1949 and 1954, a Cadastral Survey was conducted in Iligan City. The
surveyor found that a small creek divided the 24-hectare parcel of land into two
portions, identified as Lot No. 2138 and Lot No. 2139.

Petitioners claimed that Laureanos heirs, headed by his son Jose, continuously
possessed and cultivated both lots. On 16 October 1962, Joses co-heirs executed
a Deed of Quitclaim renouncing their rights and interest over the land in favor of
Jose. Jose secured a title in his name for Lot No. 2138. Later, Jose
alienated Lot No. 2139 in favor of his children (petitioners in this case) who, on 8
January 1994, simultaneously filed applications for grant of Free Patent Titles over
their respective shares of Lot No. 2139 before the Land Management Bureau of
the Department of Environment and Natural Resources (DENR). On 22 August
1994, the DENR granted petitioners applications and issued Original Certificate of
Title (OCT) No. P-1322 (a.f.) in favor of Rogelio Pasio, OCT No. P-1318 (a.f.) in
favor of George Pasio, OCT No. P-1317 (a.f.) in favor of Lolita Pasio, OCT No. P-
1321 (a.f.) in favor of Josephine Pasio, and OCT No. P-1319 (a.f.) in favor of
Rosalinda Pasio. Petitioners alleged that their possession of Lot No. 2139 was
interrupted on 3 January 1993 when respondents forcibly took possession of the
property.
Respondents alleged that they had been in open, continuous, exclusive and
notorious possession of Lot No. 2139, by themselves and through their
predecessors-in-interest, since 10 July 1949. They alleged that on 10 July 1949,
Rufo Larumbe (Larumbe) sold Lot No. 2139 to Petra Teves (Petra). On 27 February
1984, Petra executed a deed of sale over Lot No. 2139 in favor of Vicente Teves
(Vicente). On 20 February 1985, Vicente executed a pacto de retro sale over the
land in favor of Arturo Teves (Arturo). In 1992, Arturo sold Lot No. 2139 in favor of
respondents father, Dr. Monterroyo, by virtue of an oral contract. On 5 January
1995, Arturo executed a Deed of Confirmation of Absolute Sale of Unregistered
Land in favor of Dr. Monterroyos heirs.

Respondents alleged that Jose was not the owner of Lot No. 2139 and as such, he
could not sell the land to his children. They alleged that petitioners OCTs were
null and void for having been procured in violation of the Public Land Act. They
further alleged that the Land Management Bureau had no authority to issue the
free patent titles because Lot No. 2139 was a private land.
The Ruling of the Trial Court

In its 2 February 1999 Decision, the trial court ruled, as follows:

WHEREFORE, judgment is rendered in favor of all the defendants and against the
plaintiffs:

1. Dismissing the complaint;


2. Declaring Lot No. 2139, Iligan Cadastre 292, located at Panul-iran, Abuno,
Iligan City to have acquired the character of a private land over which the
Land Management Bureau has been divested of jurisdiction;

3. Declaring the defendants to be the owners and possessors of the said lot;

4. Declaring OCT Nos. P-1322 (a.f.) of Rogelio Pasio, P-1318 (a.f.) of George
Pasio, P-1317 (a.f.) of Lolita Pasio, P-1321 (a.f.) of Josephine Pasio and P-
1319 (a.f.) of Rosalinda Pasio to be null and void for having been procured by
fraud and for having been issued by the Land Management Bureau which has
been divested of jurisdiction over said lot;

5. Declaring the defendants to be entitled to the sum of P6,000.00 deposited


with the Office of the Clerk of Court under O.R. No. 1487777;

6. Dismissing the defendants counterclaim for attorneys fees.

Costs against the plaintiffs.

SO ORDERED.[12]

The trial court ruled that as of January 1994, Lot No. 2139 had already acquired
the character of a private land by operation of law. Since Lot No. 2139 had
already ceased to be a public land, the Land Management Bureau had no power
or authority to dispose of it by issuing free patent titles.

The trial court ruled that respondents counterclaim stands on the same footing as
an independent action. Thus, it could not be considered a collateral attack on
petitioners titles.The trial court further ruled that respondents filed their
counterclaim within one year from the grant of petitioners titles, which was the
reglementary period for impugning a title.

The trial court ruled that the order for the issuance of a patent in favor of
Laureano lapsed and became functus officio when it was not registered with the
Director of Deeds. The trial court ruled that while Laureano was the original
claimant of the entire 24 hectares, he ceded the right to possession over half of
the property, denominated as Lot No. 2139, to Larumbe sometime in 1947. The
trial court found that Laureano offered to sell half of the land to his tenant Gavino
Quinaquin (Gavino) but he did not have money. Later, Gavino learned from
Larumbe that he (Larumbe) acquired half of the land from Laureano. Gavino then
started delivering the owners share of the harvest to Larumbe. Laureano never
contested Gavinos action nor did he demand that Gavino deliver to him the
owners share of the harvest and not to Larumbe. When Lot No. 2139 was sold,
Gavino and his successors delivered the owners share of the harvest to Petra,
Vicente, Arturo, Dr. Monterroyo, and Dindo Monterroyo, successively. The trial
court also found that the other tenants had never given any share of the harvest
to Jose. The trial court ruled that petitioners had failed to present convincing
evidence that they and their predecessors-in-interest were in possession of Lot
No. 2139 from 1947 to 1994 when they filed their application for free patent. The
trial court ruled that petitioners committed actual fraud when they
misrepresented in their free patent applications that they were in possession of
the property continuously and publicly.

Petitioners appealed from the trial courts Decision.

The Ruling of the Court of Appeals

In its 31 January 2003 Decision, the Court of Appeals affirmed the trial courts
Decision.
The Court of Appeals ruled that the trial court did not err in allowing respondents
counterclaim despite the non-appearance of Dr. Monterroyo, the original
defendant, at the barangay conciliation proceedings. The Court of Appeals ruled
that petitioners themselves did not personally appear. They were represented by
their attorney-in-fact although they were all of legal age, which was a violation of
the Katarungang Pambarangay proceedings requiring the personal appearance of
the parties. Hence, the Court of Appeals ruled that there was never a valid
conciliation proceeding. However, while this would have been a ground for the
dismissal of the complaint, the issue was deemed waived because respondents
did not raise it in their answer before the trial court.

The Court of Appeals ruled that the validity of petitioners titles could be attacked
in a counterclaim. The Court of Appeals ruled that respondents counterclaim was
a compulsory counterclaim.

The Court of Appeals sustained the trial courts ruling that the Land Management
Bureau had been divested of jurisdiction to grant the patent because the land
already acquired the character of a private land. While the homestead patent was
issued in favor of Laureano, the issuance of patent order became functus
officio when it was not registered. The Court of Appeals further sustained the trial
courts finding that respondents were in physical, open, public, adverse and
continuous possession of Lot No. 2139 in the concept of owner for at least 30
years prior to petitioners application for free patent titles over the land.

Petitioners filed a motion for reconsideration.

In its 5 August 2003 Resolution, the Court of Appeals denied petitioners motion
for reconsideration.
Hence, the petition before this Court.

The Issue

Petitioners raised the sole issue of whether the Court of Appeals erred in
sustaining the trial courts Decision declaring respondents as the rightful owners
and possessors of Lot No. 2139.[13]

The Ruling of this Court

The petition has no merit.

Land Management Bureau Had No Jurisdiction

To Issue Free Patent Titles

In Director of Lands v. IAC,[14] the Court ruled:

[A]lienable public land held by a possessor, continuously or through his predecessors-in-


interest, openly, continuously and exclusively for the prescribed statutory period (30
years under The Public Land Act, as amended) is converted to private property by the
mere lapse or completion of the period, ipso jure.[15]
In Magistrado v. Esplana,[16] the Court ruled that so long as there is a clear
showing of open, continuous, exclusive and notorious possession, and hence, a
registrable possession, by present or previous occupants, by any proof that would
be competent and admissible, the property must be considered to be private.

In this case, the trial court found that the preponderance of evidence favors
respondents as the possessors of Lot No. 2139 for over 30 years, by themselves
and through their predecessors-in-interest. The question of who between
petitioners and respondents had prior possession of the property is a factual
question whose resolution is the function of the lower courts.[17] When the factual
findings of both the trial court and the Court of Appeals are supported by
substantial evidence, they are conclusive and binding on the parties and are not
reviewable by this Court.[18] While the rule is subject to exceptions, no exception
exists in this case.

Respondents were able to present the original Deed of Absolute Sale, dated 10
July 1949, executed by Larumbe in favor of Petra.[19] Respondents also presented
the succeeding Deeds of Sale showing the transfer of Lot No. 2139 from Petra to
Vicente[20] and from Vicente to Arturo[21] and the Deed of Confirmation of
Absolute Sale of Unregistered Real Property executed by Arturo in favor of
respondents.[22] Respondents also presented a certification[23] executed by P/Sr.
Superintendent Julmunier Akbar Jubail, City Director of Iligan City Police
Command and verified from the Log Book records by Senior Police Officer Betty
Dalongenes Mab-Abo confirming that Andres Quinaquin made a report that Jose,
Rogelio and Luciana Pasio, Lucino Pelarion and Nando Avilo forcibly took his
copra. This belied petitioners allegation that they were in possession of Lot No.
2139 and respondents forcibly took possession of the property only in January
1993.
Considering that petitioners application for free patent titles was filed only on 8
January 1994, when Lot No. 2139 had already become private land ipso jure, the
Land Management Bureau had no jurisdiction to entertain petitioners application.

Non-Registration of Homestead Patent Rendered it

Functus Officio

Once a homestead patent granted in accordance with law is registered, the


certificate of title issued by virtue of the patent has the force and effect of a
Torrens title issued under the land registration law.[24] In this case, the issuance of
a homestead patent in 1952 in favor of Laureano was not registered. Section 103
of Presidential Decree No. 1529[25]mandates the registration of patents, and
registration is the operative act to convey the land to the patentee, thus:

Sec. 103. x x x x. The deed, grant, patent or instrument of conveyance from the
Government to the grantee shall not take effect as a conveyance or bind the land but
shall operate only as a contract between the Government and the grantee and as
evidence of authority to the Register of Deeds to make registration. It is the act of
registration that shall be the operative act to affect and convey the land, and in all
cases under this Decree, registration shall be made in the office of the Register of Deeds
of the province or city where the land lies. The fees for registration shall be paid by the
grantee. After due registration and issuance of the certificate of title, such land shall be
deemed to be registered land to all intents and purposes under this Decree. (Emphasis
supplied)

Further, in this case, Laureano already conveyed Lot No. 2139 to Larumbe in 1947
before the approval of his homestead application. In fact, Larumbe already sold
the land to Petra in 1949, three years before the issuance of the homestead
patent in favor of Laureano. The trial court found that since 1947, the tenants of
Lot No. 2139 had been delivering the owners share of the harvest, successively, to
Larumbe, Petra, Vicente and Arturo Teves, Dr. Monterroyo and Dindo
Monterroyo. The trial court found no instance when the owners share of the
harvest was delivered to Jose Pasio.
Hence, we sustain the trial court that the non-registration of Laureanos
homestead patent had rendered it functus officio.

A Counterclaim is Not a Collateral Attack on the Title

It is already settled that a counterclaim is considered an original complaint and as


such, the attack on the title in a case originally for recovery of possession cannot
be considered as a collateral attack on the title.[26] Development Bank of the
Philippines v. Court of Appeals[27] is similar to the case before us insofar as
petitioner in that case filed an action for recovery of possession against
respondent who, in turn, filed a counterclaim claiming ownership of the land. In
that case, the Court ruled:

Nor is there any obstacle to the determination of the validity of TCT No. 10101. It is true
that the indefeasibility of torrens title cannot be collaterally attacked. In the instant
case, the original complaint is for recovery of possession filed by petitioner against
private respondent, not an original action filed by the latter to question the validity of
TCT No. 10101 on which petitioner bases its right. To rule on the issue of validity in a
case for recovery of possession is tantamount to a collateral attack. However, it should
not [b]e overlooked that private respondent filed a counterclaim against petitioner,
claiming ownership over the land and seeking damages. Hence, we could rule on the
question of the validity of TCT No. 10101 for the counterclaim can be considered a
direct attack on the same. A counterclaim is considered a complaint, only this time, it is
the original defendant who becomes the plaintiff... It stands on the same footing and is
to be tested by the same rules as if it were an independent action. x x x.[28]

As such, we sustain both the trial court and the Court of Appeals on this issue.

Principle of Constructive Trust Applies

Under the principle of constructive trust, registration of property by one person in


his name, whether by mistake or fraud, the real owner being another person,
impresses upon the title so acquired the character of a constructive trust for the
real owner, which would justify an action for reconveyance.[29] In the action for
reconveyance, the decree of registration is respected as incontrovertible but what
is sought instead is the transfer of the property wrongfully or erroneously
registered in anothers name to its rightful owner or to one with a better
right.[30] If the registration of the land is fraudulent, the person in whose name the
land is registered holds it as a mere trustee, and the real owner is entitled to file
an action for reconveyance of the property.[31]

In the case before us, respondents were able to establish that they have a better
right to Lot No. 2139 since they had long been in possession of the property in the
concept of owners, by themselves and through their predecessors-in-
interest. Hence, despite the irrevocability of the Torrens titles issued in their
names and even if they are already the registered owners under the Torrens
system, petitioners may still be compelled under the law to reconvey the property
to respondents.[32]

WHEREFORE, we DENY the petition. We AFFIRM the 31 January 2003 Decision


and the 5 August 2003 Resolution of the Court of Appeals in CA-G.R. CV No.
63199.Costs against petitioners.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice
WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ RENATO C. CORONA


Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO


Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

*
As replacement of Justice Adolfo S. Azcuna who is on official leave per Special Order No. 510.
[1]
Under Rule 45 of the 1997 Rules of Civil Procedure.
[2]
Rollo, pp. 42-60. Penned by Associate Justice Edgardo F. Sundiam with Associate Justices Ruben T. Reyes and
Remedios Salazar-Fernando, concurring.
[3]
Id. at 40.
[4]
Id. at 61-85. Penned by Judge Valerio M. Salazar.
[5]
Records, Vol. 1, p. 141.
[6]
Id. at 145. Signed by Doroteo Soriano, Chief of Division of Forest Engineering.
[7]
Id. at 142.
[8]
Id. at 146.
[9]
Referred to as Graciana Herbeto in the trial courts Decision.
[10]
Records, Vol. 1, p. 150.
[11]
Casiana in the Declaration of Real Property.
[12]
Rollo, pp. 84-85.
[13]
Id. at 366.
[14]
230 Phil. 590 (1986).
[15]
Id. at 605.
[16]
G.R. No. 54191, 8 May 1990, 185 SCRA 104.
[17]
De Guzman v. Court of Appeals, 442 Phil. 534 (2002).
[18]
Id.
[19]
Records, Vol. 1, pp. 280-281.
[20]
Id. at 282-283.
[21]
Id. at 284-285.
[22]
Records, Vol. 2, pp. 314-315.
[23]
Id. at 311.
[24]
Heirs of Santioque v. Heirs of Calma, G.R. No. 160832, 27 October 2006, 505 SCRA 665.
[25]
Formerly Section 122 of the Land Registration Law.
[26]
Sarmiento v. Court of Appeals, G.R. No. 152627, 16 September 2005, 470 SCRA 99.
[27]
387 Phil. 283 (2000).
[28]
Id. at 300.
[29]
Heirs of Tabia v. Court of Appeals, G.R. Nos. 129377 & 129399, 22 February 2007, 516 SCRA 431.
[30]
Id.
[31]
Mendizabel v. Apao, G.R. No. 143185, 20 February 2006, 482 SCRA 587.
[32]
Id.
FIRST DIVISION

G.R. No. 115925 August 15, 2003

SPOUSES RICARDO PASCUAL and CONSOLACION SIOSON, petitioners,


vs.
COURT OF APPEALS and REMEDIOS S. EUGENIO-GINO, respondents.

CARPIO, J.:

The Case

This is a petition for review of the Decision1 dated 31 January 1994 of the Court of Appeals ordering
the Register of Deeds of Metro Manila, District III, to place TCT No. (232252) 1321 in the name of
respondent Remedios S. Eugenio-Gino. The Decision ordered the Register of Deeds to cancel the
names of petitioners Ricardo Pascual and Consolacion Sioson ("petitioners") in TCT No. (232252)
1321. The Decision also directed petitioners to pay respondent moral and exemplary damages and
attorney’s fees.

The Facts

Petitioner Consolacion Sioson ("CONSOLACION") and respondent Remedios S. Eugenio-Gino


("REMEDIOS") are the niece and granddaughter, respectively, of the late Canuto Sioson
("CANUTO"). CANUTO and 11 other individuals, including his sister Catalina Sioson ("CATALINA")
and his brother Victoriano Sioson ("VICTORIANO"), were co-owners of a parcel of land in Tanza,
Navotas, Metro Manila. The property, known as Lot 2 of Plan Psu 13245, had an area of 9,347
square meters and was covered by Original Certificate of Title No. 4207 issued by the Register of
Deeds of Rizal. CATALINA, CANUTO, and VICTORIANO each owned an aliquot 10/70 share or
1,335 square meters of Lot 2.2

On 20 November 1951, CANUTO had Lot 2 surveyed and subdivided into eight lots (Lot Nos. 2-A to
2-H) through Subdivision Plan Psd 34713 which the Director of Lands approved on 30 May 1952.
Lot No. 2-A, with an area of 670 square meters, and Lot No. 2-E, with an area of 2,000 square
meters, were placed under CANUTO’s name. Three other individuals took the remaining lots.3

On 26 September 1956, CANUTO and CONSOLACION executed a Kasulatan ng Bilihang


Tuluyan4("KASULATAN"). Under the KASULATAN, CANUTO sold his 10/70 share in Lot 2 in favor
of CONSOLACION for P2,250.00. The KASULATAN, notarized by Notary Public Jose T. de los
Santos of Navotas, provides:

Na ako, CANUTO SIOSON, mamamayang Pilipino, may katampatang gulang, kasal kay
Raymunda San Diego, at naninirahan sa Tanza, Navotas, Rizal, sa bisa at pamamagitan ng
kasulatang ito ay nagpapatunay at nagpapatibay:

1. Na ako ang lubos at tunay na may-ari ng 10/70 bahaging hindi hati (10/70 porcion
pro-indiviso) ng isang lagay na lupa (Lote No. 2, Plano Psu-13245), na nasa sa
nayon ng Tanza, Municipio ng Navotas, Provincia ng Rizal, at ang descripcion o
pagkakakilanlan ng nasabing lote ay nakasaad sa Certificado Original, de Titulo No.
4207 ng Oficina ng Registrador de Titulos ng Rizal, gaya ng sumusunod:

xxxx
2. Na dahil at alang-alang sa halagang Dalawang Libo Dalawang Daan at
Limampung Piso (P2,250.00), salaping Pilipino, na sa akin ay ibinayad ni
CONSOLACION SIOSON, kasal kay Ricardo S. Pascual, may sapat na gulang,
mamamayang Pilipino, at naninirahan sa Dampalit, Malabon, Rizal at ang
pagkakatanggap ng nasabing halaga ay aking inaamin at pinatutunayan, ay aking
ipinagbili, inilipat at isinalin, sa pamamagitan ng bilihang tuluyan at walang pasubali a
favor [sic] sa nasabing si CONSOLACION SIOSON, sa kanyang tagapagmana at
mapaglilipatan ang lahat ng aking titulo, karapatan at kaparti na binubuo ng 10/70
bahaging hindi hati (10/70 porcion pro-indiviso) ng loteng descrito or tinutukoy sa
itaas nito. (Emphasis supplied)

CONSOLACION immediately took possession of Lot Nos. 2-A and 2-E. She later declared
the land for taxation purposes and paid the corresponding real estate taxes.5

On 23 October 1968, the surviving children of CANUTO, namely, Felicidad and Beatriz, executed a
joint affidavit6("JOINT AFFIDAVIT") affirming the KASULATAN in favor of CONSOLACION. They
also attested that the lots their father had sold to CONSOLACION were Lot Nos. 2-A and 2-E of
Subdivision Plan Psd 34713. The JOINT AFFIDAVIT reads:

KAMING sina FELICIDAD SIOSON at BEATRIZ SIOSON, pawang mga Pilipino, kapuwa
may sapat na gulang at naninirahan, ang una sa Tanza, Navotas at ang ikalawa sa
Concepcion, Malabon, lalawigan ng Rizal, sa ilalim ng isang ganap na panunumpa alinsunod
sa batas, ay malayang nagsasalaysay ng mga sumusunod:

Na kami ang mga buhay na anak na naiwan ni CANUTO SIOSON na nagmamay-ari


ng 10/70 bahaging hindi hati (10/70 porcion pro-indiviso) ng isang lagay na lupa
(Lote No. 2, plano Psu-13245), na nasa Nayon ng Tanza, Navotas, Rizal, at ang mga
palatandaan nito ay nasasaad sa Certificado Original de Titulo No. 4207 ng
Tanggapan ng Registrador de Titulos ng Rizal;

Na sa lubos naming kaalaman, ay ipinagbili ng aming Ama na si Canuto Sioson ang


kaniyang buong bahagi na 10/70 sa nasabing Lote No. 2, kay CONSOLACION
SIOSON, may-bahay ni Ricardo S. Pascual, na taga Dampalit, Malabon, Rizal, sa
halagang P2,250.00, salaping pilipino, noong ika 16 [sic] ng Septiembre, 1956, sa
pamamagitan ng isang KASULATAN NG BILIHANG TULUYAN na pinagtibay sa
harap ng Notario Publico Jose T. de los Santos nang pechang nabanggit, sa
Navotas, Rizal, (Doc. No. 194, Page No. 84; Book No. IV; Series of 1956);

Na ang nasabing lupa na ipinagbili ng aming Ama kay Consolacion Sioson ni


Pascual, ay nakikilala ngayong mga Lote No. 2-A at Lote 2-E ng Plano de
Subdivision Psd-34713; na pinagtibay ng Assistant Director of Lands noong Mayo
30, 1952;

Na aming ngayong pinatitibayan ang pagka-pagbili ng bahagi ng aming Ama kay


Consolacion Sioson ni Pascual ng ngayo’y nakikilalang Lote No. 2-A at Lote No. 2-E
ng Plano de Subdivision Psd-34713. (Emphasis supplied)

On 28 October 1968, CONSOLACION registered the KASULATAN and the JOINT AFFIDAVIT with
the Office of the Register of Deeds of Rizal ("Register of Deeds"). Based on these documents, the
Register of Deeds issued to CONSOLACION Transfer Certificate of Title No. (232252) 1321
covering Lot Nos. 2-A and 2-E of Subdivision Plan Psd 34713 with a total area of 2,670 square
meters.
On 4 February 1988, REMEDIOS filed a complaint against CONSOLACION and her spouse Ricardo
Pascual in the Regional Trial Court of Malabon, Branch 165, for "Annulment or Cancellation of
Transfer Certificate [of Title] and Damages." REMEDIOS claimed that she is the owner of Lot Nos.
2-A and 2-E because CATALINA devised these lots to her in CATALINA’s last will and
testament7 ("LAST WILL") dated 29 May 1964. REMEDIOS added that CONSOLACION obtained
title to these lots through fraudulent means since the area covered by TCT (232252) 1321 is twice
the size of CANUTO’s share in Lot 2. REMEDIOS prayed for the cancellation of CONSOLACION’s
title, the issuance of another title in her name, and the payment to her of damages.

Petitioners sought to dismiss the complaint on the ground of prescription. Petitioners claimed that
the basis of the action is fraud, and REMEDIOS should have filed the action within four years from
the registration of CONSOLACION’s title on 28 October 1968 and not some 19 years later on 4
February 1988. REMEDIOS opposed the motion, claiming that she became aware of
CONSOLACION’s adverse title only in February 1987. CONSOLACION maintained that she had
timely filed her complaint within the four-year prescriptive on 4 February 1988.

In its order of 28 April 1988, the trial court denied petitioners’ motion to dismiss. The trial court held
that the reckoning of the prescriptive period for filing REMEDIOS’ complaint is evidentiary in nature
and must await the presentation of the parties’ evidence during the trial. During the pre-trial stage,
REMEDIOS clarified that she was claiming only CATALINA’s 10/70 share in Lot 2, or 1,335 square
meters, which constitute ½ of the area of Lot Nos. 2-A and 2-E.8 The trial of the case then ensued.

The Ruling of the Trial Court

On 26 November 1990, the trial court rendered judgment dismissing the case and ordering
REMEDIOS to pay petitioners P10,000 as attorney’s fees and the cost of suit. The trial court held
that the action filed by REMEDIOS is based on fraud, covered by the four-year prescriptive period.
The trial court also held that REMEDIOS knew of petitioners’ adverse title on 19 November 1982
when REMEDIOS testified against petitioners in an ejectment suit petitioners had filed against their
tenants in Lot Nos. 2-A and 2-E. Thus, the complaint of REMEDIOS had already prescribed when
she filed it on 4 February 1988.

The trial court further ruled that REMEDIOS has no right of action against petitioners because
CATALINA’s LAST WILL from which REMEDIOS claims to derive her title has not been admitted to
probate. Under Article 838 of the Civil Code, no will passes real or personal property unless it is
allowed in probate in accordance with the Rules of Court. The dispositive portion of the trial court’s
decision provides:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against plaintiff,
ordering:

1. The dismissal of this case;

2. The plaintiff to pay the defendants the sum of Ten Thousand (P10,000.00) Pesos
as and for attorney’s fees; and

3. The plaintiff to pay the costs of suit.9

REMEDIOS appealed to the Court of Appeals.

The Ruling of the Court of Appeals


On 31 January 1994, the Court of Appeals rendered judgment reversing the decision of the trial
court. The appellate court held that what REMEDIOS filed was a suit to enforce an implied trust
allegedly created in her favor when CONSOLACION fraudulently registered her title over Lot Nos. 2-
A and 2-E. Consequently, the prescriptive period for filing the complaint is ten years, not four. The
Court of Appeals counted this ten-year period from 19 November 1982. Thus, when REMEDIOS
filed her complaint on 4 February 1988, the ten-year prescriptive period had not yet expired.

The appellate court held that CATALINA’s unprobated LAST WILL does not preclude REMEDIOS
from seeking reconveyance of Lot Nos. 2-A and 2-E as the LAST WILL may subsequently be
admitted to probate. The dispositive portion of the appellate court’s ruling provides:

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The Registry of
Deeds of Rizal or Metro Manila, District III, is ordered to place Transfer Certificate of Title No.
(232252) 1321 under the name of Remedios S. Eugenio-Gino as executor of the will of
Catalina Sioson and cancel the names of the Spouses Ricardo Pascual and Consolacion
Sioson inscribed over said title as owners of the covered lot. Defendants-appellees spouses
Ricardo Pascual and Consolacion Sioson are ordered to pay plaintiff-appellant Remedios S.
Eugenio-Gino moral damages in the amount of P50,000.00, exemplary damages
of P20,000[.00] and attorney’s fees of P20,000.00 and P500.00 per appearance.10

Petitioners sought reconsideration of the ruling. However, the Court of Appeals denied their motion
in its order dated 15 June 1994.

Hence, this petition.

The Issues

Petitioners allege the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT’S


CAUSE OF ACTION IS NOT BARRED BY PRESCRIPTION WHICH FINDING IS
MANIFESTLY CONTRARY TO LAW AND THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT.

II. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PRIVATE RESPONDENT
DOES NOT HAVE ANY TITLE AND HAS UTTERLY FAILED TO PROVE ANY TITLE TO
THE LOTS INVOLVED IN THIS CASE, AND IN ORDERING THE CANCELLATION OF THE
CERTIFICATE OF TITLE OF PETITIONERS.

III. THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION


AMOUNTING TO LACK OF JURISDICTION AND IN GROSS VIOLATION OF THE RULES
OF COURT IN ORDERING THE ENTIRE PROPERTY COVERED BY TRANSFER
CERTIFICATE OF TITLE NO. (232252) 1321 TO BE PLACED IN THE NAME OF PRIVATE
RESPONDENT, BECAUSE THE CLAIM OF PRIVATE RESPONDENT IS LIMITED ONLY
TO ONE-HALF (1/2) PORTION OF THE PROPERTY, AND THE OTHER HALF THEREOF
UNQUESTIONABLY BELONGS TO PETITIONERS.

IV. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS ACTED


FRAUDULENTLY AND IN BAD FAITH IN SECURING THEIR CERTIFICATE OF TITLE TO
THE PROPERTY INVOLVED IN THIS CASE, AND IN ORDERING PETITIONERS TO PAY
PRIVATE RESPONDENTS MORAL DAMAGES, EXEMPLARY DAMAGES AND
ATTORNEY’S FEES.11
The pivotal questions are: (1) whether prescription bars the action filed by REMEDIOS, and (2)
whether REMEDIOS is a real party-in-interest.

The Ruling of the Court

The petition has merit.

The Action is Barred by Prescription

The trial court held that the action filed by REMEDIOS is one based on fraud. REMEDIOS’ action
seeks to recover real property that petitioners allegedly acquired through fraud. Consequently, the
trial court held that the action prescribes in four years counted from REMEDIOS’ actual discovery of
petitioners’ adverse title. The trial court concluded that REMEDIOS belatedly filed her suit on 4
February 1988 because she actually knew of petitioners’ adverse title since 19 November 1982.

On the other hand, the Court of Appeals held that what REMEDIOS filed was a suit to enforce an
implied trust. REMEDIOS had ten years counted from actual notice of the breach of trust, that is, the
assertion of adverse title, within which to bring her action. The appellate court held that REMEDIOS
seasonably filed her complaint on 4 February 1988 because she allegedly discovered petitioners’
adverse title only on 19 November 1982.

What REMEDIOS filed was an action to enforce an implied trust but the same is already barred by
prescription.

Prescriptive Period is 10 Years Counted

From Registration of Adverse Title

The four-year prescriptive period relied upon by the trial court applies only if the fraud does not give
rise to an implied trust, and the action is to annul a voidable contract under Article 139012 of the Civil
Code. In such a case, the four-year prescriptive period under Article 139113 begins to run from the
time of discovery of the mistake, violence, intimidation, undue influence or fraud.

In the present case, REMEDIOS does not seek to annul the KASULATAN. REMEDIOS does not
assail the KASULATAN as a voidable contract. In fact, REMEDIOS admits the validity of the sale of
1,335 square meters of land under the KASULATAN. However, REMEDIOS alleges that the excess
area of 1,335 meters is not part of the sale under the KASULATAN. REMEDIOS seeks the removal
of this excess area from TCT No. (232252) 1321 that was issued to CONSOLACION. Consequently,
REMEDIOS’ action is for "Annulment or Cancellation of Transfer Certificate [of Title] and
Damages."14

REMEDIOS’ action is based on an implied trust under Article 1456 since she claims that the
inclusion of the additional 1,335 square meters in TCT No. (232252) 1321 was without basis. In
effect, REMEDIOS asserts that CONSOLACION acquired the additional 1,335 square meters
through mistake or fraud and thus CONSOLACION should be considered a trustee of an implied
trust for the benefit of the rightful owner of the property. Clearly, the applicable prescriptive period is
ten years under Article 1144 and not four years under Articles 1389 and 1391.

It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake,
giving rise to an implied trust under Article 145615 of the Civil Code, is ten years pursuant to Article
1144.16 This ten-year prescriptive period begins to run from the date the adverse party repudiates the
implied trust, which repudiation takes place when the adverse party registers the land.17

REMEDIOS filed her complaint on 4 February 1988 or more than 19 years after CONSOLACION
registered her title over Lot Nos. 2-A and 2-E on 28 October 1968. Unquestionably, REMEDIOS filed
the complaint late thus warranting its dismissal. As the Court recently declared in Spouses Alfredo v.
Spouses Borras,18 —

Following Caro,19 we have consistently held that an action for reconveyance based on an implied
trust prescribes in ten years. We went further by specifying the reference point of the ten-year
prescriptive period as the date of the registration of the deed or the issuance of the title.

The Court of Appeals’ Reckoning of

Prescriptive Period from Actual Notice

of Adverse Title Not Justified

In holding that the action filed by REMEDIOS has not prescribed, the Court of Appeals invoked this
Court’s ruling in Adille v. Court of Appeals.20 In Adille, the Court reckoned the ten-year prescriptive
period for enforcing implied trusts not from registration of the adverse title but from actual notice of
the adverse title by the cestui que trust. However, the Court, in justifying its deviation from the
general rule, explained:

[W]hile actions to enforce a constructive trust prescribes (sic) in ten years, reckoned from the date of
the registration of the property, we x x x are not prepared to count the period from such date in this
case. We note the petitioner’s sub rosa efforts to get hold of the property exclusively for himself
beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement
that he is "the only heir and child of his mother Feliza["] with the consequence that he was able to
secure title in his name also. (Emphasis supplied)

Such commission of specific fraudulent conduct is absent in the present case. Other than asserting
that petitioners are guilty of fraud because they secured title to Lot Nos. 2-A and 2-E with an area
twice bigger than what CANUTO allegedly sold to CONSOLACION, REMEDIOS did not present any
other proof of petitioners’ fraudulent conduct akin to Adille.

CONSOLACION obtained title to Lot Nos. 2-A and 2-E through the KASULATAN executed by
CANUTO and the JOINT AFFIDAVIT executed by his surviving children, one of whom, Felicidad, is
the mother of REMEDIOS. The KASULATAN referred to the sale of CANUTO’s 10/70 share in Lot 2
without specifying the area of the lot sold. The JOINT AFFIDAVIT referred to the "Plano de
Subdivision Psd-34713" without also specifying the area of the lot sold. However, Subdivision Plan
Psd 34713, as certified by the Assistant Director of Lands on 30 May 1952, showed an area of 2,670
square meters in the name of CANUTO. Based on these documents, the Register of Deeds issued
TCT No. (232252) 1321 to CONSOLACION covering an area of 2,670 square meters.

REMEDIOS does not assail the KASULATAN or the JOINT AFFIDAVIT as fictitious or forged.
REMEDIOS even admits the authenticity of Subdivision Plan Psd 34713 as certified by the Assistant
Director of Lands.21 Moreover, REMEDIOS has not contested petitioners’ claim that CANUTO
doubled his share in Lot 2 by acquiring VICTORIANO’s share.22
Plainly, the increase in the area sold from 1,335 square meters to 2,670 square meters is a glaring
mistake. There is, however, no proof whatsoever that this increase in area was the result of fraud.
Allegations of fraud in actions to enforce implied trusts must be proved by clear and convincing
evidence.23 Adille, which is anchored on fraud,24cannot apply to the present case.

At any rate, even if we apply Adille to this case, prescription still bars REMEDIOS’ complaint. As
executrix of CATALINA’s LAST WILL, REMEDIOS submitted to the then Court of First Instance of
Caloocan in Special Proceedings Case No. C-208 the inventory of all the property comprising
CATALINA’s estate, which included Lot Nos. 2-A and 2-E. In a motion dated 7 November 1977,
CONSOLACION sought the exclusion of these lots from the inventory, invoking her title over them.
REMEDIOS was served a copy of the motion on 8 November 1977 against which she filed an
opposition. Nevertheless, the trial court overruled REMEDIOS’ objection. In its order of 3 January
1978, the trial court granted CONSOLACION’s motion and ordered the exclusion of Lot Nos. 2-A
and 2-E from the estate of CATALINA. REMEDIOS did not appeal from this ruling.

REMEDIOS thus had actual notice of petitioners’ adverse title on 8 November 1977. Even if, for the
sake of argument, the ten-year prescriptive period begins to run upon actual notice of the adverse
title, still REMEDIOS’ right to file this suit has prescribed. REMEDIOS had until 11 November 1987
within which to file her complaint. When she did so on 4 February 1988, the prescriptive period had
already lapsed.

Respondent is Not a Real Party-in-Interest

Not only does prescription bar REMEDIOS’ complaint. REMEDIOS is also not a real party-in-interest
who can file the complaint, as the trial court correctly ruled.

The 1997 Rules of Civil Procedure require that every action must be prosecuted or defended in the
name of the real party-in-interest who is the party who stands to benefit or suffer from the judgment
in the suit.25 If one who is not a real party-in-interest brings the action, the suit is dismissible for lack
of cause of action.26

REMEDIOS anchored her claim over Lot Nos. 2-A and 2-E (or over its one-half portion) on the
devise of these lots to her under CATALINA’s LAST WILL. However, the trial court found that the
probate court did not issue any order admitting the LAST WILL to probate. REMEDIOS does not
contest this finding. Indeed, during the trial, REMEDIOS admitted that Special Proceedings Case
No. C-208 is still pending.27

Article 838 of the Civil Code states that "[N]o will shall pass either real or personal property unless it
is proved and allowed in accordance with the Rules of Court." This Court has interpreted this
provision to mean, "until admitted to probate, [a will] has no effect whatever and no right can be
claimed thereunder."28 REMEDIOS anchors her right in filing this suit on her being a devisee of
CATALINA’s LAST WILL. However, since the probate court has not admitted CATALINA’s LAST
WILL, REMEDIOS has not acquired any right under the LAST WILL. REMEDIOS is thus without any
cause of action either to seek reconveyance of Lot Nos. 2-A and 2-E or to enforce an implied trust
over these lots.

The appellate court tried to go around this deficiency by ordering the reconveyance of Lot Nos. 2-A
and 2-E to REMEDIOS in her capacity as executrix of CATALINA’s LAST WILL. This is inappropriate
because REMEDIOS sued petitioners not in such capacity but as the alleged owner of the disputed
lots. Thus, REMEDIOS alleged in her complaint:
3. The plaintiff is a niece and compulsory heir of the late CATALINA SIOSON who died single and
without any child of her own and who, during her lifetime, was the owner of those two (2) parcels of
land located at Tanza, Navotas, Rizal (now Metro Manila), formerly covered by Original Certificate of
Title No. 4207 of the Registry of Deeds for the Province of Rizal, x x x.

4. The plaintiff, aside from being the compulsory heir of the deceased CATALINA SIOSON, has sole
and exclusive claim of ownership over the above-mentioned two (2) parcels of land by virtue of a will
or "Huling Habilin at Pagpapasiya" executed by Catalina Sioson on May 19, 1964 before Notary
Public Efren Y. Angeles at Navotas, Rizal, in which document the deceased Catalina Sioson
specifically and exclusively bequeathed to the plaintiff the above-mentioned Lots 2-A and 2-E of
Psd-34713 approved by the Bureau of Lands on May 30, 1952. Copy of the "Huling Habilin at
Pagpapasiya" consisting of four (4) pages is hereto attached and forms an integral part hereof as
Annex "A;"

5. Sometime on or about February, 1987, plaintiff discovered that the above-mentioned Lots 2-A and
2-E of subdivision plan Psd-34713 are now registered or titled in the name of the defendants under
Transfer Certificate of Title No. (232252) 1321 of the Registry of Deeds of Rizal, now Metro-Manila
District III. Copy of the title is hereto attached and forms an integral part hereof as Annex "B;"

6. Upon further inquiry and investigation, plaintiff discovered that the defendants were able to obtain
title in their name of the said parcels of land by virtue of a "Kasulatan ng Bilihang Tuluyan" allegedly
executed by Canuto Sioson on September 26, 1956 before Notary Public Jose [T.] de los Santos of
Navotas, Metro-Manila. Copy of the said document is hereto attached and forms an integral part
hereof as Annex "C;"

7. The plaintiff also discovered that although x x x the original sale did not specify the parcels of land
sold by Canuto Sioson, the defendants submitted an alleged Affidavit executed by Felicidad Sioson
and Beatriz Sioson identifying the lots sold by Canuto Sioson to the defendants as Lots 2-A and 2-E
of subdivision plan Psd-34713. Copy of the Affidavit dated October 3, 1968 on the basis of which the
present Transfer Certificate of Title No. (232252) 1321 was issued to the defendants is hereto
attached and forms an integral part hereof as Annex "D;"

8. The defendants are clearly guilty of fraud in presenting the aforementioned Affidavit (Annex "D") to
the Register of Deeds as the basis of their claim to Lots 2-A and 2-E in view of the fact that the
parcels sold to them by Canuto Sioson, assuming there was such a sale, were different parcels of
land, Lots 2-A and 2-E being the properties of the late Catalina Sioson who bequeathed the same to
the plaintiff.

xxxx

12. Because of the defendants’ fraudulent actuations on this matter, plaintiff suffered and continious
[sic] to suffer moral damages arising from anxiety, shock and wounded feelings. Defendants should
also be assessed exemplary damages by way of a lesson to deter them from again committing the
fraudulent acts, or acts of similar nature, by virtue of which they were able to obtain title to the
parcels of land involved in this case x x x.29 (Emphasis supplied)

Indeed, all throughout the proceedings below and even in her Comment to this petition, REMEDIOS
continued to pursue her claim as the alleged owner of one-half of the disputed lots.

Other Matters Raised in the Petition


The Court deems it unnecessary to pass upon the other errors petitioners assigned concerning the
award of damages and attorneys fees to REMEDIOS. Such award assumes that REMEDIOS is a
real party-in-interest and that she timely filed her complaint. As earlier shown, this is not the case.

WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals dated 31 January
1994 and its Resolution dated 15 June 1994 are SET ASIDE. The complaint filed by respondent
Remedios Eugenio-Gino, dated 2 February 1988 is DISMISSED.

SO ORDERED.

Davide, Jr., C.J., Vitug, Ynares-Santiago and Azcuna, JJ., concur.

Footnotes

1Penned by Justice Corona Ibay-Somera, with Justices Nathanael P. De Pano, Jr., and
Asaali S. Isnani concurring.

2 OCT No. 4207 indicates the sharing of the co-owners as follows:

Simeon Sioson --------------- 10/70


Victoriano Sioson --------------- 10/70
Catalina Sioson --------------- 10/70
Fermina Sioson --------------- 10/70
Canuto Sioson --------------- 10/70
Calixto Sioson --------------- 5/70
Felipe Sioson --------------- 5/70
Marciana Gabriel --------------- 2/70
Isabelo Gabriel --------------- 2/70
Margarito Gabriel --------------- 2/70
Susana Gabriel --------------- 2/70
Emilio Gabriel --------------- 2/70

3 Subdivision Plan Psd 34713 Lot 2 subdivided the remaining portion of Lot 2 as follows:

Fermina Sioson ----------- Lot 2-D, 670 sq. meters


Lot 2-H, 2003 sq. meters
Calixto Sioson ----------- Lot 2-F, 500 sq. meters
Esteban Sioson ----------- Lot 2-G, 2,499 sq. meters
Lot 2-C, 837 sq. meters

4 Exhibit "7" for Petitioners.

5 Exhibit "9" for Petitioners.


6 Exhibit "8" for Petitioners.

7 Huling Habilin at Pagpapasiya, Exhibit "A" for Respondent.

8 Records, p. 70.

9 Rollo, p. 71.

10 Ibid., p. 45.

11 Ibid., p. 11.

12Article 1390 of the Civil Code provides: "The following contracts are voidable or annullable,
even though there may have been no damage to the contracting parties:

(1) x x x

(2) Those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud.

x x x."

13Article 1391 of the Civil Code provides: "The action for annulment shall be brought within
four years. This period shall begin: x x x In case of mistake or fraud, from the time of the
discovery of the same."

14 Records, p. 1.

15Article 1456 of the Civil Code provides: "If property is acquired through mistake or fraud,
the person obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes."

16Article 1144 of the Civil Code provides: "The following actions must be brought within ten
years from the time the right of action accrues:

(1) x x x

(2) Upon an obligation created by law;

(3) x x x."

17Spouses Alfredo v. Spouses Borras, G.R. No. 144225, 17 June 2003; Vda. de
Delgado v. Court of Appeals, 416 Phil. 263 (2001); Villanueva-Mijares v. Court of Appeals,
386 Phil. 555 (2000); David v. Malay, 376 Phil. 825 (1999); Heirs of Joaquin Teves v. Court
of Appeals, 375 Phil. 96 (1999); Lebrilla v. Intermediate Appellate Court, G.R No. 72623, 18
December 1989, 180 SCRA 188; Villagonzalo v. Intermediate Appellate Court, G.R No. L-
71110, 22 November 1988, 167 SCRA 535; Carantes v. Court of Appeals, G.R No. L-33360,
25 April 1977, 76 SCRA 514.

18 G.R. No. 144225, 17 June 2003.


19 Caro v. Court of Appeals, G.R. No. 76148, 20 December 1989, 180 SCRA 401.

20 G.R. No. L-44546, 29 January 1988, 157 SCRA 455.

21 Rollo, pp. 169-170.

22 Rollo, pp. 9, 20.

23 Jaramil v. Court of Appeals, G.R. No. L-31858, 31 August 1977, 78 SCRA 420.

24 Samonte v. Court of Appeals, 413 Phil. 487 (2001).

25 Rule 3, Sec. 2.

26 Sustiguer v. Tamayo, G.R No. 29341, 21 August 1989, 176 SCRA 579.

27 TSN, 17 March 1989, p. 15 (Remedios Eugenio-Gino).

28 Cañiza v. Court of Appeals, G.R. No. 110427, 24 February 1997, 68 SCRA 640.

29 Records, pp.1-3.
SECOND DIVISION

SPS. FELIPE and JOSEFA PARINGIT, G.R. No. 181844


Petitioner,
Present:
CARPIO, J., Chairperson,
- versus - NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
MARCIANA PARINGIT BAJIT,
ADOLIO PARINGIT and Promulgated:
ROSARIO PARINGIT ORDOO,
Respondents. September 29, 2010

x --------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:

This case is about the existence of an implied trust in a transaction where a


property was bought by one sibling supposedly for the benefit of all. The other
siblings now want to recover their share in the property by reimbursing their
brother for their share in the purchase price.

The Facts and the Case

During their lifetime, spouses Julian and Aurelia Paringit leased a lot on Norma
Street, Sampaloc, Manila (the lot) from Terocel Realty, Inc. (Terocel
Realty).[1] They built their home there and raised five children, namely, Florencio,
Felipe, Marciana, Adolio, and Rosario.[2] Aurelia died on November 6, 1972.[3]
For having occupied the lot for years, Terocel Realty offered to sell it to Julian but
he did not have enough money at that time to meet the payment deadline. Julian
sought the help of his children so he can buy the property but only his son Felipe
and wife Josefa had the financial resources he needed at that time.[4] To bring about
the purchase, on January 16, 1984 Julian executed a deed of assignment of
leasehold right in favor of Felipe and his wife that would enable them to acquire
the lot.[5] On January 30, 1984 the latter bought the same from Terocel Realty
for P55,500.00 to be paid in installments.[6] On April 12, 1984 Felipe and his wife
paid the last installment and the realty company executed a Deed of Absolute Sale
in their favor and turned over the title to them.[7]

On February 25, 1985, due to issues among Julians children regarding the
ownership of the lot, Julian executed an affidavit clarifying the nature of Felipe
and his wifes purchase of the lot. He claimed that it was bought for the benefit of
all his children.[8] He said in his affidavit:

3. That recently, the Terocel Realty, Inc., owners of the subdivision lots in
Sampaloc, gave a limited period to actual occupants like us within which to
purchase the lands occupied and as I had no funds at that time, I asked all
my children and their respective spouses to contribute money with which to
purchase the lot and thereafter to divide the lot among themselves but only
my son Felipe Paringit and his wife Josefa answered my plea and so, in order
that they could purchase the land, I assigned to my son and his wife my right
to the whole property and with this assignment, the couple purchased the
parcel of land from the Terocel Realty, Inc. for the sum of Fifty Five
Thousand Five Hundred Pesos (P55,500.00) Philippine currency on April 12,
1984 as shown in the Deed of Absolute sale executed by the Terocel Realty,
Inc. bearing Registry No. 273, Page 56, Book XV, Series of 1984, of Notary
Public of Manila, Atty. Albino B. Achas plus the sum of P4,500.00 expenses
or a total of Sixty Thousand (P60,000.00);
xxxx
5. That to set the records straight, and to effect peace and understanding
among my children and their respective families, I, as father and head of the
family, hereby declare:

xxxx

c) That my conjugal share in the above described property is one half or 75


sq. m. and the other half or 75 sq. m. belongs to my deceased wife;

d) That I waive my share in the estate of my deceased wife and as she has no
will regarding the said estate, the same must be divided equally among my
five children at 15 sq. m. each; but each of them should reimburse their
brother Felipe and his wife, Josefa the proportional amount advanced by
them as I also will reimburse him the sum of P30,000.00 or one half of the
amount that the couple advanced.

e) That if any of my children claims or needs a bigger area than 15 sq. m.,
he/she should amicably talk with or negotiate with any other brother or sister
for transfer or assignment of such area as they agree.[9]

Expressing their concurrence with what their father said in his affidavit, Felipes
siblings, namely, Marciana, Rosario, and Adolio (collectively, Marciana, et al)
signed the same.Josefa, Felipes wife, also signed the affidavit for Felipe who was
in Saudi Arabia.[10] Only Florencio, among the siblings, did not sign.

On January 23, 1987 Felipe and his wife registered their purchase of the
lot,[11] resulting in the issuance of Transfer Certificate of Title 172313 in their
names.[12] Despite the title, however, the spouses moved to another house on the
same street in 1988.[13] Marciana, et al, on the other hand, continued to occupy the
lot with their families without paying rent.[14] This was the situation when their
father Julian died on December 21, 1994.

On December 18, 1995 Felipe and his wife sent a demand letter to Marciana, et
al asking them to pay rental arrearages for occupying the property from March
1990 to December 1995 at the rate of P2,400.00 a month,
totaling P168,000.00.[15] Marciana, et al refused to pay or reply to the letter,
believing that they had the right to occupy the house and lot, it being their
inheritance from their parents. On March 11, 1996 Felipe and his wife filed an
ejectment suit against them.[16] The suit prospered, resulting in the ejectment of
Marciana, et al and their families from the property.[17] Shortly after, Felipe and his
wife moved into the same.[18]

To vindicate what they regarded as their right to the lot and the house, on July 24,
1996 Marciana, et al filed the present action against Felipe and his wife for
annulment of title and reconveyance of property before the Regional Trial Court
(RTC) of Manila, Branch 39.[19]
In his answer, Felipe denied knowledge of the agreement among the siblings that
the property would devolve to them all.[20] Josefa, his wife, claimed that she signed
the affidavit only because Marciana, et al were going to get mad at her had she
refused.[21] She also claimed that she signed the document only to prove having
received it.[22]

For their part, Marciana, et al insisted that the agreement was that Felipe and his
wife would acquire the lot for the benefit of all the siblings. They even tried to
reimburse the spouses for their shares in the lots price.[23] In fact, Adolio offered to
pay P32,000.00 for his 30 square meter-portion of the lot but Felipe and his wife
did not accept it. The other siblings tried to pay for their shares of the purchase
price, too, but the spouses already avoided them.[24] Marciana, et al denied
pressuring Josefa into signing the document in question. They claimed that it was
in fact Josefa who caused the drafting of the affidavit.[25]

On July 21, 2004 the RTC rendered a decision, finding the evidence of
Marciana, et al insufficient to prove by preponderance of evidence that Felipe and
his wife bought the subject lot for all of the siblings. Not satisfied with that
decision, Marciana, et al appealed to the Court of Appeals (CA).

On August 29, 2007 the CA rendered judgment[26] reversing the decision of the
RTC and ordering Felipe and his wife to reconvey to Marciana, et al their
proportionate share in the lot upon reimbursement of what the spouses paid to
acquire it plus legal interest. Felipe and his wife filed a motion for reconsideration
of the decision but the CA denied it on February 21, 2008,[27] prompting them to
come to this Court on a petition for review.

The Issues Presented

This case presents the following issues:

1. Whether or not the CA erred in finding that Felipe and his wife purchased the
subject lot under an implied trust for the benefit of all the children of Julian; and

2. Whether or not the CA erred in failing to hold that Marciana, et als right
of action was barred by prescription or laches.
The Courts Rulings

The CA found that Felipe and his wifes purchase of the lot falls under the rubric of
the implied trust provided in Article 1450 of the Civil Code.[28] Implied trust under
Article 1450 presupposes a situation where a person, using his own funds, buys
property on behalf of another, who in the meantime may not have the funds to
purchase it. Title to the property is for the time being placed in the name of the
trustee, the person who pays for it, until he is reimbursed by the beneficiary, the
person for whom the trustee bought the land. It is only after the beneficiary
reimburses the trustee of the purchase price that the former can compel conveyance
of the property from the latter.[29]

Felipe and his wife claim 1) that they did not lend money to Marciana, et al for the
purchase of the lot; 2) that they did not buy it for the benefit of the siblings; and 3)
that the conveyance of the lot was not to secure the payment of any supposed
loan. Felipe and his wife insist that they had no agreement with Marciana, et
al regarding the spouses purchase of the lot for the benefit of all of Julians
children.

But the circumstances of this case are actually what implied trust is
about. Although no express agreement covered Felipe and his wifes purchase of
the lot for the siblings and their father, it came about by operation of law and is
protected by it. The nature of the transaction established the implied trust and this
in turn gave rise to the rights and obligations provided by law. Implied trust is a
rule of equity, independent of the particular intention of the parties.[30]

Here, the evidence shows that Felipe and his wife bought the lot for the
benefit of Julian and his children, rather than for themselves. Thus:

First. There is no question that the house originally belonged to Julian and Aurelia
who built it. When Aurelia died, Julian and his children inherited her conjugal
share of the house. When Terocel Realty, therefore, granted its long time tenants
on Norma Street the right to acquire the lots on which their house stood, that right
technically belonged to Julian and all his children. If Julian really intended to sell
the entire house and assign the right to acquire the lot to Felipe and his wife, he
would have arranged for Felipes other siblings to give their conformity as co-
owners to such sale. And if Felipe and his wife intended to buy the lot for
themselves, they would have, knowing that Felipes siblings co-owned the same,
taken steps to secure their conformity to the purchase. These did not happen.

Second. Julian said in his affidavit that Felipe and his wife bought the lot from
Terocel Realty on his behalf and on behalf of his other children. Felipe and his
wife advanced the payment because Julian and his other children did not then have
the money needed to meet the realty companys deadline for the purchase. Julian
added that his other children were to reimburse Felipe for the money he advanced
for them.

Notably, Felipe, acting through his wife, countersigned Julians affidavit the
way his siblings did. The document expressly acknowledged the parties intention
to establish an implied trust between Felipe and his wife, as trustees, and Julian
and the other children as trustors. Josefa, Felipes wife, of course claims that she
signed the document only to show that she received a copy of it. But her signature
did not indicate that fact. She signed the document in the manner of the others.

Third. If Felipe and his wife really believed that the assignment of the house and
the right to buy the lot were what their transactions with Julian were and if the
spouses also believed that they became absolute owners of the same when they
paid for the lot and had the title to it transferred in their name in 1987, then their
moving out of the house in 1988 and letting Marciana, et al continue to occupy the
house did not make sense. They would make sense only if, as Marciana, et al and
their deceased father claimed, Felipe and his wife actually acquired the lot only in
trust for Julian and all the children.

Fourth. Felipe and his wife demanded rent from Marciana, et al only on December
18, 1995, a year following Julians death on December 21, 1994. This shows that
from 1984 when they bought the lot to December 18, 1995, when they made their
demand on the occupants to leave, or for over 10 years, Felipe and his wife
respected the right of the siblings to reside on the property. This is incompatible
with their claim that they bought the house and lot for themselves back in
1984. Until they filed the suit, they did nothing to assert their supposed ownership
of the house and lot.
Felipe and his wife also claim that Marciana, et als action to recover their portions
of the house and lot had already prescribed. True, an implied trust prescribes
within 10 years from the time the right of action accrues.[31] But when did the right
of action based on the implied trust accrue in this case? A right of action implies
the existence of a cause of action and a cause of action has three elements: a) the
existence of a right in plaintiffs favor; b) defendants obligation to respect such
right; and c) defendants act or omission that violates the plaintiffs right. Only when
the last element occurs or takes place can it be said in law that a cause of action has
arisen.[32]

In an implied trust, the beneficiarys cause of action arises when the trustee
repudiates the trust, not when the trust was created as Felipe and his wife would
have it.[33] The spouses of course registered the lot in their names in January 1987
but they could not be said to have repudiated the implied trust by that
registration. Their purchase of the land and registration of its title in their names
are not incompatible with implied trust. It was understood that they did this for the
benefit of Julian and all the children.

At any rate, even assuming that Felipe and his wifes registration of the lot in
their names in January 1987 constituted a hostile act or a violation of the implied
trust, Marciana, et al had 10 years or until January of 1997 within which to bring
their action. Here, they filed such action in July 1996 well within the period
allowed them.

Felipe and his wife also claim that Marciana, et als action was barred by
laches. But there is no basis for such claim. Laches has been defined as the failure
or neglect, for an unreasonable and unexplained length of time, to do that which,
by exercising due diligence could or should have been done earlier.[34]

Here, Marciana, et al had no reason to file an earlier suit against Felipe and
his wife since the latter had not bothered them despite their purchase of the lot in
their names on January 30, 1984. Only about 12 years later or on December 18,
1995 when they wrote their demand letter did the spouses take an adverse attitude
against Marciana, et al. The latter filed their action to annul Felipe and his wifes
title and have the same transferred to their names not too long later on July 24,
1996.

Finally, the CA ordered Marciana, et al to reimburse Felipe and his wife the
individual siblings proportionate share in the P55,500.00 that the spouses paid the
realty company.But, according to Julians affidavit, concurred in by Felipe, his
wife, and Marciana, et al, the total acquisition cost of the lot was P60,000.00
(purchase price of P55,500.00 plus additional expenses of P4,500.00). Thus,
respondents should reimburse petitioners their proportionate contribution in the
total acquisition cost of P60,000.00.

WHEREFORE, the Court DENIES the petition, and AFFIRMS the decision of
the Court of Appeals in CA-G.R. CV 84792 with the MODIFICATION that
respondents Marciana Paringit Bajit, Adolio Paringit, and Rosario Paringit Ordoo
reimburse petitioners Felipe and Josefa Paringit of their corresponding share in the
purchase price plus expenses advanced by petitioners amounting
to P60,000.00 with legal interest from April 12, 1984 until fully paid.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA


Associate Justice Associate Justice
JOSE CATRAL MENDOZA
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

[1]
TSN, March 7, 1997, p. 7.
[2]
Records, p. 1.
[3]
Id. at 7.
[4]
TSN, March 7, 1997, p. 8.
[5]
Records, p. 8.
[6]
Deed of Sale, id. at 9.
[7]
TSN, January 11, 2001, p. 14; records, p. 280.
[8]
TSN, March 7, 1997, p. 12.
[9]
Records, pp. 12-13.
[10]
TSN, September 30, 1997, p. 21; TSN, November 11, 1997, pp. 7-8; records p. 14.
[11]
TSN, January 11, 2001, p. 15.
[12]
Records, p. 10.
[13]
TSN, April 25, 1997, p. 3.
[14]
Id. at 13.
[15]
Records, p. 291.
[16]
TSN, September 12, 1997 p. 16; TSN, September 30, 1997, p. 21.
[17]
TSN, November 11, 1997, p. 10; TSN, March 7, 1997, p. 5.
[18]
TSN, April 25, 1997, p. 3.
[19]
Records, p. 1.
[20]
TSN, February 17, 2003, pp. 10-11; TSN, November 27, 2003 pp. 5-6.
[21]
TSN, July 14, 2003, p. 6.
[22]
TSN, September 22, 2003, p. 6.
[23]
TSN, April 25, 1997, p. 14.
[24]
TSN, November 12, 1999, pp. 15-22.
[25]
TSN, November 27, 2003, pp. 4-5.
[26]
Rollo, pp. 16-26.
[27]
Id. at 28.
[28]
If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is
made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the
person whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a
conveyance thereof to him.
[29]
Nakpil v. Intermediate Appellate Court, G.R. No. 74449, August 20, 1993, 225 SCRA 456, 464.
[30]
Id.
[31]
CIVIL CODE, Art. 1144.
[32]
Espaol v. The Chairman & Members of the Board of Administrators, Philippine Veterans Administration, 221
Phil. 667, 670 (1985).
[33]
Nakpil v. Intermediate Appellate Court, supra note 29, at 465-466.
[34]
Heirs of Anacleto B. Nieto v. Municipality of Meycauayan, Bulacan, G.R. No. 150654, December 13, 2007, 540
SCRA 100, 106.
THIRD DIVISION

September 16, 2015

G.R. No. 173186

ANICETO UY, Petitioner,


vs.
COURT OF APPEALS, MINDANAO STATION, CAGAYAN DE ORO CITY, CARMENCITA
NAVAL-SAI, REP. BY HER ATTORNEY-INFACT RODOLFO FLORENTINO, Respondents.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court assailing the
Decision2dated January 26, 2006 of the Court of Appeals, Mindanao Station, Cagayan de Oro City in
CA-G.R. CV No. 70648, and its Resolution3 dated May 18, 2006 denying petitioner's motion for
reconsideration.

The Facts

In 1979, private respondent Carmencita Naval-Sai (Naval-Sai) acquired ownership of a parcel of


land described as Lot No. 54-B (LRC) Psd 39172 and covered by Transfer Certificate of Title (TCT)
No. T-19586 from herbrother. The land was later subdivided, with the corresponding titles issued in
Naval-Sai's name in the Register of Deeds of North Cotabato.4 Two of these subdivided lots, Lots
No. 54-B-8 (LRC) Psd 173106 and No. 54-B-9 (LRC) Psd 173106, covered by TCTs No. T-58334
and No. T-58335,5 respectively, are the subject of this case.

Subsequently, Naval-Sai sold Lot No. 54-B-76(LRC) Psd 173106 to a certain Bobby Adil on
installment, onthe condition that the absolute deed of sale will be executed only upon full payment.
Adil failed to pay the amortization, forcing him to sell his unfinished building on the property to
spouses Francisco and Louella Omandac.7

Meanwhile, Naval-Sai borrowed money from a certain Grace Ng. As security, Naval-Sai delivered to
Ng TCTs No. T-58334 and No.T-58335 covering Lots No. 54-B-8 and No. 54-B-9, respectively. Ng,
on the other hand, borrowed money from petitioner and also delivered to the latter the two titles to
guarantee payment of the loan.8

Sometime thereafter, Naval-Sai learned that petitioner filed a case for recovery of possession (Civil
Case No. 1007) against Francisco Omandac. Branch 17 of the Regional Trial Court (RTC) in
Kidapawan City ruled in favor of petitioner.9 Naval-Sai filed a motion for new trial before the Court of
Appeals, arguing that her signature in the purported deed of sale presented in the case between her
and petitioner was a forgery. Civil Case No. 1007, however, became final and executory in
2001.10 The spouses Omandac were ejected from the property and petitioner gained possession of
the same.11

In July 1999, Naval-Sai filed a Complaint for Annulment of Deed with Damages12 before the same
Branch 17 of the RTC in Kidapawan City against petitioner. The subject of the complaint was the
deed of sale allegedly executed between Naval-Sai and petitioner involving Lots No. 54-B-8 and No.
54-B-9. Naval-Sai prayed that the deed of sale be declared null and void ab initiobecause the
alleged sale between her and petitioner was a forgery. Naval-Sai argued that she never sold the lots
and that her signature in the purported deed of sale is spurious.

Naval-Sai filed an Amended Complaint13 dated July 29, 1999. She asserted that the subject TCTs
were already cancelled by virtue of the deed of sale. TCT No. T-62446 was issued in lieu of TCT No.
T-58334 and TCT No. T-62447 replaced TCT No. T-58335. Hence, the Amended Complaint added
as a relief the declaration of TCTs No. T-62446 and No.T-62447, which were registered in the name
of petitioner, as null and void abinitio.Unlike the original complaint, however, the Amended
Complaint was not signed by Naval-Sai, but by her counsel.

In his Answer with Counterclaim14 dated October 4, 1999, petitioner specifically denied that the two
TCTs were delivered to him by Ng as a guaranty for payment of her loan. Petitioner claimed that he
and Naval-Sai entered into a valid contract of sale in 1981 and that the lots were sold for value. The
corresponding TCTs were issued in his name shortly thereafter and since then, he had been in
complete control of the properties. When Francisco Omandac constructed a house in one of the
properties, petitioner filed Civil Case No. 1007.

Petitioner also raised special and affirmative defenses of, among others, non-compliance with the
requisite certification of non-forum shopping and prescription. He asserted that jurisdiction has never
been acquired over the parties and the subject matter because the certification against forum
shopping in the Amended Complaint was defective, for having been merely signed by Naval-Sai's
counsel. He further claimed that the action for annulment of deed of sale is already barred by the
statute of limitations and that Naval-Sai is guilty of estoppel and laches.

The RTC dismissed the complaint on the grounds of prescription and a defective certification against
forum shopping. The dispositive portion of its order reads:

WHEREFORE, finding the defendant’s defense meritorious, this Court hereby orders the dismissal
of the instant complaint without prejudice to the prosecution in the same action of the counterclaim
pleaded in the answer pursuant to Section 6 Rule 16 of the Rules of Court.

Let the hearing on the counterclaim be set on March 30, 2001.

SO ORDERED.15

The RTC found the action for annulment of deed of sale to be a collateral attack on the titles, which
is prohibited by law under the principle of indefeasibility of title after the lapse of one year from
registration. The RTC explained that Naval-Sai’s complaint was not only for the annulment of deed
of sale but, ultimately, for the cancellation of the titles in the name of petitioner, thus:

It is true that an action to set aside a contract which is void [abinitio] does not prescribe. However, a
closer glance on the substance of the plaintiff’s claim would reveal that its ultimate thrust is to have
the Transfer Certificate of Title Nos. T-62446 and T-62447 cancelled. This is evidenced by the
plaintiff’s prayer asking for the declaration of TCT Nos. T-62446 and TCT No. 62447 registered in
the name of the defendant as null and void [ab initio] in addition to her prayer for the declaration of
nullity of the subject deed of sale. x xx

Under the Land Registration Act, a title is valid and effective until annulled or reviewed in a direct
proceeding and not in a collateral one, which review must be made within one year from the
issuance of the title. After the lapse of such period, the title would be conclusive against the whole
world including the government. In other words, the title, after the lapse of one year from registration
become[s] indefeasible.16
On the issue of non-compliance with the required certification on non-forum shopping, the RTC
noted that Naval-Sai did not explain why she failed to comply with the Rules. The RTC cited the
case of Five Star Bus Company, Inc. v. Court of Appeals17where we, faced with the similar issue of
whether or not to dismiss a petition on the ground that the certification was signed by counsel, ruled
that there was non-compliance with the Supreme Court Revised Circular No. 28-9118 and that
substantial compliance cannot be applied.19

The Court of Appeals set aside the order of the RTC in the now assailed Decision20dated January 26,
2006.The Court of Appeals ruled that there was substantial compliance with the requirement of
verification and certification of non-forum shopping. It noted that the original complaint has a proper
verification and certification of non-forum shopping signed by Naval-Sai herself. What was signed by
Naval-Sai’s counsel was the amended complaint dated July 29, 1999. Its verification and certification
carries the statement "x xxthat this [a]mended [c]omplaint should be taken and read together with
the original complaint; x xx"21 which the Court of Appeals found to be a "cautionary move" tantamount
to substantial compliance.22The Court of Appeals further explained that the rule on certification
against forum shopping was complied with in the original complaint because although an amended
complaint supersedes the pleading that it amends, it is not an initiatory pleading contemplated under
the Rules of Court.23

On the issue of whether the action is a collateral attack in relation to prescription, the Court of
Appeals ruled that it is neither a direct nor a collateral attack. According to the Court of Appeals, the
action is a direct attack when the object of an action is to annul or set aside the judgment in the
registration proceeding. On the other hand, a collateral attack is when, in an action to obtain a
different relief, an attack on the judgment or registration proceeding is nevertheless made as an
incident thereof.

Here, however, Naval-Sai is seeking a relief for an annulment of the deed of sale, which is not an
attack on the judgment or registration proceeding pursuant to which the titles were decreed. It does
not seek to set aside the judgment of registration of titles nor does it seek to nullify the title by
challenging the judgment or proceeding that decreed its issuance. The action is in reality one for
reconveyance, which is imprescriptible when based on a void contract. Thus:

A perusal of the records of the case shows that the caption of appellant’s Complaint before the RTC
is annulment of deed. However considering that the ultimate relief sought is for the appellee to
"return" the subject property to him, it is in reality an action for reconveyance. In De Guzman [v.]
Court of Appeals, the Court held that, "the essence of an action for reconveyance is that the decree
of registration is respected as incontrovertible but what is sought instead is the transfer of the
property which has been wrongfully or erroneously registered in another person’s name, to its
rightful owner or to one with a better right."

xxx

An action for reconveyance on the ground that the certificate of title was obtained by means of a
fictitious or forged deed of sale is virtually an action for the declaration of the nullity of the forged
deed, hence, it does not prescribe. x xx24

However, the Court of Appeals emphasized that despite its discussion on the prescriptibility of the
action, it has not made a finding that the deed of sale is indeed fictitious or forged because it is for
the RTC to rule on after evidence has been presented and evaluated. Thus, the relevant dispositive
portion of the Court of Appeals' decision reads:
WHEREFORE, premises considered, the petition is GRANTED. The assailed Order of dismissal
dated 30 March 2001 is hereby SET ASIDE and deemed of no effect.

Let this case be remanded to the lower court for further proceedings.

SO ORDERED.25

Petitioner filed a Motion for Reconsideration26 onMarch 3, 2006, which was denied by the Court of
Appeals in its Resolution27 dated May 18, 2006.

Hence, this petition, which raises the following issues:

I.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS SUBSTANTIAL
COMPLIANCE WITH THE REQUIREMENTS ON CERTIFICATION FOR NON-FORUM SHOPPING.

II.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ACTION HAS PRESCRIBED
AND/OR THE PRIVATE RESPONDENT IS GUILTY OF INACTION, LACHES OR ESTOPPEL.

Our Ruling

There was substantial compliance with the requirements on certification against forum
shopping.

A certification against forum shopping is a peculiar and personal responsibility of the party, an
assurance given to the court or other tribunal that there are no other pending cases involving
basically the same parties, issues and causes of action.28 It must be executed by the party-pleader,
not by his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to
sign, he must execute a Special Power of Attorney (SPA) designating his counsel of record to sign
on his behalf.29

Here, the original complaint contained a proper verification and certification against forum shopping
duly signed by Naval-Sai as plaintiff. The verification and certification in the amended complaint, on
the other hand, was only signed by her counsel, Atty. Norberto L. Ela. Atty. Ela was not authorized to
sign on behalf of Naval-Sai, as in fact, she assigned one Rodolfo Florentino as agent.30 The Court of
Appeals pointed out that in the certification in the amended complaint, Atty. Ela specified that it
should be taken and read together with the original complaint. The Court of Appeals took this as a
cautionary move on the part of Naval-Sai, justifying the relaxation of the rules on the ground of
substantial compliance. We find, however, that this cautionary move is ineffectual because under the
Rules of Civil Procedure, an amended complaint supersedes the original complaint.31 For all intents
and purposes, therefore, the original complaint and its verification and certification ceased to exist.
This, notwithstanding, we find there was still substantial compliance with the Rules.

In the case of Far Eastern Shipping Company v. Court of Appeals,32 while we said that, strictly, a
certification against forum shopping by counsel is a defective certification, the verification, signed by
petitioner’s counsel in said case, is substantial compliance because it served the purpose of the
Rules of informing the Court of the pendency of another action or proceeding involving the same
issues. We then explained that procedural rules are instruments in the speedy and efficient
administration of justice which should be used to achieve such end and not to derail it.33

We also find that the prima facie merits of the case serve as a special circumstance or a compelling
reason to relax the rules on certification against forum shopping.

In Sy Chin v. Court of Appeals,34 we recognized the flaw in the certification against forum shopping
which was signed only by the counsel, and not by the party. In LDP Marketing, Inc. v. Monter,35 there
was initially no proof that the one who signed the certification was authorized to do so in behalf of
the corporation. In these two cases, we nonetheless chose to overlook the procedural lapses in the
interest of substantial justice and the existence of prima facie merit in the petitions.

We have ruled that the general rule is that non-compliance or a defect in the certification is not
curable by its subsequent submission or correction. However, there are cases where we exercised
leniency and relaxed the rules on the ground of substantial compliance, the presence of special
circumstances or compelling reasons.36 The rules on forum-shopping are designed to promote and
facilitate the orderly administration of justice and "should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective or the goal of all rules of
procedure— which is to achieve substantial justice as expeditiously as possible."37

The nature of Naval-Sai’s


action is an action for
reconveyance based on a void
contract, which does not
prescribe.

Petitioner argues that Naval-Sai’s action has already prescribed because her action should have
been filed within one year from the time of the registration of the titles. He asserts that even if the
action is in reality one for reconveyance as found by the Court of Appeals, the same is still barred by
prescription based on judicial pronouncements that an action for reconveyance of registered land
based on implied trust prescribes in ten (10) years. Petitioner also accuses Naval-Sai guilty of laches
and estoppel for her failure to assert her right over the two lots for more than eighteen (18) years.

In order to arrive at a conclusion on whether the action has prescribed, we have to determine the
nature of the action.

We agree with the Court of Appeals that the action of Naval-Sai is one for reconveyance. Although
the designation of the complaint is annulment of deed, and does not include reconveyance, the facts
alleged and reliefs sought show that reconveyance is the end goal. What determines the nature of
the action are the allegations in the complaint. The cause of action in a complaint is not determined
by the designation given by the complaint, but by what the allegations in the body of the complaint
define or describe,38as well as the character of the relief sought.39

An action for reconveyance is a legal and equitable remedy granted to the rightful owner of land
which has been wrongfully or erroneously registered in the name of another for the purpose of
compelling the latter to transfer or reconvey the land to him.40 In an action for reconveyance, the
decree of registration is respected as incontrovertible. What is sought instead is the transfer of the
property, which has been wrongfully or erroneously registered in another person’s name, to its
rightful and legal owner, or to one with a better right.41However, such recourse cannot be availed of
once the property has passed to an innocent purchaser for value. For an action for reconveyance to
prosper, the property should not have passed into the hands of an innocent purchaser for value.42
Here, Naval-Sai does not only seek to annul the purported deed of sale but also to cancel TCTs No.
T-62446 and No. 62447 in the name of petitioner. If the reliefs are granted and the TCTs are
cancelled, the titles to

the lots will revert to Naval-Sai as she was the previously registered owner. Thus, a ruling in favor of
Naval-Sai would be equal to what an action for reconveyance seeks to accomplish.

An action for reconveyanceis basedon Section 53, paragraph 3 of Presidential Decree (PD) No.
1529,43 which provides:

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any innocent
holder for valueof a certificate of title. x x x

In Caro v. Court of Appeals,44 we said that this provision should be read in conjunction with Article
1456 of the Civil Code, which provides:

Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes.

The law creates the obligation of the trustee to reconvey the property and its title in favor of the true
owner. Correlating Section 53, paragraph 3 of PD No. 1529 and Article 1456 of the Civil Code with
Article 1144 (2) of the Civil Code,45 the prescriptive period for the reconveyance of fraudulently
registered real property is ten (10) years reckoned from the date of the issuance of the certificate of
title.46 This ten-year prescriptive period begins to run from the date the adverse party repudiates the
implied trust, which repudiation takes place when the adverse party registers the land.47 An exception
to this rule is when the party seeking reconveyance based on implied or constructive trust is in
actual, continuous and peaceful possession of the property involved.48 Prescription does not
commence to run against him because the action would be in the nature of a suit for quieting of title,
an action that is imprescriptible.49

The foregoing cases on the prescriptibility of actions for reconveyanceapply when the action is
based on fraud, or when the contract used as basis for the action is voidable. Under Article 1390 of
the Civil Code, a contract is voidable when the consent of one of the contracting parties is vitiated by
mistake, violence, intimidation, undue influence or fraud. When the consent is totally absent and not
merely vitiated, the contract is void.50An action for reconveyance may also be based on a void
contract.51When the action for reconveyance is based on a void contract, as when there was no
consent on the part of the alleged vendor, the action is imprescriptible.52The property may be
reconveyed to the true owner, notwithstanding the TCTs already issued in another’s name. The
issuance of a certificate of title in the latter’s favor could not vest upon him or her ownership of the
property; neither could it validate the purchase thereof which is null and void. Registration does not
vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any
better title than what he actually has. Being null and void, the sale produces no legal effects
whatsoever.53

Whether an action for reconveyance prescribes or not is therefore determined by the nature of the
action, that is, whether it is founded on a claim of the existence of an implied or constructive trust, or
one based on the existence of a void or inexistent contract.This is evident in several of our past
decisions. In Casipit v. Court of Appeals,54 we rejected the claim of imprescriptibility and applied the
10-year prescription where the action filed was based on fraud:
There is no dispute that an action for reconveyance based on a void contract is imprescriptible
(Castillo, et al. v. Madrigal, et al., G.R. No. 62650, June 27, 1991; Baranda, et al. v. Baranda, et al.,
G.R. No. 73275, May 20, 1987, 150 SCRA 59). However, We simply cannot apply this principle to
the present case because the action filed by petitioner before the trial court was 1) for reconveyance
based on fraud since the ownership of private respondents over the questioned property was
allegedly established on "false assertions, misrepresentations and deceptive allegations" (p. 182,
Records); and 2) for rescission of the "Kasulatan ng Pagmamana at Paghahati" (pp. 173, 187,
Records). x xx55

On the other hand, in Daclag v. Macahilig,56we rejected the claim of petitioners that prescription is
applicable because the action was based on fraud. We ruled that the action was not subject to
prescription because it was, in fact, based on a deed of sale that was null and void. Thus:

However, a review of the factual antecedents of the case shows that respondents' action for
reconveyance was not even subject to prescription.

The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima was
not the owner of the land she sold to petitioners, and the one-half northern portion of such land was
owned by respondents.

Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of
the Civil Code that an action to declare the inexistence of a void contract does not prescribe. x xxAn
action for reconveyance based on a void contract is imprescriptible. As long as the land wrongfully
registered under the Torrens system is still in the name of the person who caused such registration,
an action in personam will lie to compel him to reconvey the property to the real owner.57 (Citations
omitted)

In Santos v. Heirs of DomingaLustre,58 the complaint alleged that the deed of sale was simulated by
forging the signature of the original registered owner. We ruled in favor of imprescribility applying the
doctrine that the action for reconveyance on the ground that the certificate of title was obtained by
means of a fictitious deed of sale is virtually an action for the declaration of its nullity, which does not
prescribe.

Also, and more illustrative of the discussion above, in Castillo v. Heirs of Vicente Madrigal,59 it was
alleged by the plaintiffs that they never signed any document. We ruled as follows:

Petitioners allege that a reading of paragraphs 9 and 10 of their complaint reveals that they impugn
the existence and validity of the alleged deed of sale. As contained therein, petitioners never entered
into any transaction with any person conveying the subject property. They did not sign any document
in favor of [anyone] neither did they give [anyone]authorization for that purpose. Therefore, consent
and cause did not exist in the execution of the deed of sale, invoking Articles 1318, 1352 and
1409(3),of the Civil Code. And, pursuant to Article 1410 of the Civil Code, an action for the
declaration of the inexistence of a contract does not prescribe.

In dismissing petitioners' complaint on the ground of prescription, the trial court opined (p. 123,
Rollo):

"x xx, any action for annulment of the deed and TCT 72066 should have been instituted within ten
(10) years from the accrual of the cause of action, that, (sic) is, ten years from 1943 when the deed
was executed at the earliest, or ten years from 1944 at the latest. This action was filed on December
17, 1979, or after more than 30 years from 1943 and 1944. The action, therefore, has long
prescribed. xxx."
The Court of Appeals expressed the same opinion (p. 51, Rollo):

"xxx, even as We consider that there was fraud in the registration and the issuance of title in favor of
defendant Madrigal creating thereby a constructive trust in favor of the plaintiffs, the remedy of the
plaintiffs is an action for reconveyance within ten (10) years from the registration of the property in
the name of defendant Madrigal (Alzona v. Capunitan, 4 SCRA 450; Gonzales v. Jimenez 13 SCRA,
80). Again, the filing of the complaint was way beyond the ten-year period of limitation."

Both courts ruled incorrectly. It is evident in paragraphs 9, 10 and 12 of the complaint, supra, that
petitioners sought the declaration of the inexistence of the deed of sale because of the absence of
their consent. Thus, following the provision of Article 1410 of the Civil Code, this kind of action is
imprescriptible. The action for reconveyance is likewise imprescriptible because its basis is the
alleged void contract of sale. x xx60

(Citations omitted)

We conclude that, contrary to the claim of petitioner, the action for reconveyance is based neither on
an implied or constructive trust nor fraud. Naval-Sai alleged that the purported deed of sale, which
1âwphi1

became the basis to transfer the titles in petitioner’s name, was an absolute forgery because she
never sold the two lots to any person.61 Naval-Sai also alleged that her signature and that of her
husband’s, in the deed of sale are forgeries.62These allegations make the action one based on a void
or inexistent contract for lack of consent on the part of the alleged vendor, Naval-Sai. Based on the
complaint, Naval-Sai only consented to use the titles of the two lots as security to a loan she
obtained from Ng.63

Resolution of the issue of prescription hinges on whether the deed of sale was indeed forged and,
thus, void. Unfortunately, both the RTC and the Court of Appeals did not make actual findings on the
alleged forgery.

No full-blown trial occurred in the RTC to prove that the deed of sale was indeed simulated and that
the signatures were forgeries. The case was dismissed based on the pleadings of the parties. The
Court of Appeals also resolved to decide the case on available records and pleadings, in order to
avoid further delay, due to several resettings and motions for postponement filed by the parties one
after another. The lack of factual findings on the alleged forgery from the lower courts prevents us
from ruling on the issue of prescription.

Since it is apparent that the complaint on its face does not show that the action has already
prescribed, the RTC erred in dismissing it. We emphasize once more that a summary or outright
dismissal of an action is not proper where there are factual matters in dispute, which require
presentation and appreciation of evidence.64

Applying the foregoing cases and without prejudging the issue of forgery,the action for reconveyance
will not be subject to prescription if the trial court finds that the deed of sale is indeed forged,
because the action would now be based on a fictitious and void contract. If the trial court finds
otherwise, then the issue of prescription would not matter as the sale would stand and remain
binding between Naval-Sai and petitioner.

Similarly, the elements of laches must be proven positively. Laches is evidentiary in nature, a fact
that cannot be established by mere allegations in the pleadings.65 Therefore, at this stage, the
dismissal on the ground of laches would be premature. The issues must be resolved in the trial on
the merits.
Moreover, laches is a doctrine in equity, and applied only in the absence of, and never against,
statutory law.66 The positive mandate of Article 1410 of the Civil Code conferring imprescriptibility to
actions or defense for the declaration of the inexistence of a contract should pre-empt and prevail
over all abstract arguments based only on equity.67

WHEREFORE, the petition is DENIED. Let the records of this case be remanded for further
proceedings to the Regional Trial Court of Kidapawan City, Branch 17, which is hereby ORDERED
to try and decide the case with dispatch.

SO ORDERED.

FRANCIS H. JARDELEZA
Associate Justice

WE CONCUR:

PREBITERO J. VELASCO, JR.


Associate Justice
Chairperson

DIOSDAO M. PERALTA MARTIN S. VILLARAMA, JR.


Associate Justice Associate Justice

JOSE PORTUGAL PEREZ*


Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PREBITERO J. VELASCO, JR.


Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's attestation, it
is hereby certified that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO


Chief Justice

Footnotes
* Designated as Acting Member in view of the leave of absence of Hon. Bienvenido L.
Reyes, per Special Order No. 2084 dated June 29, 2015.

1
Rollo, pp. 15-27.

2
CA-G.R. CV No. 70648, penned by Associate Justice Teresita Dy-Liacco Flores and
concurred in by Associate Justice Rodrigo F. Lim, Jr. and Associate Justice Ramon R.
Garcia of the Twenty-First Division, rollo, ~1-64.

3
Id. at 77.

4
RTC records, pp. 1-2.

5
Id. at 6.

6
It appears from the records that there is a mistake as to the number of the lot Naval-Sai
sold to Adil. Following the turn of events, this lot could only be either Lot No. 54-B-8 or 54-B-
9.

7
RTC records, p. 2.

8
Id.

9
Id. at 6.

10
CA rollo, p. 47.

11
Memorandum of petitioner dated November 15, 2007, rollo, p. 144.

12
Rollo, pp. 28-35.

13
Id. at 36-43.

14
Id. at 44-49.

15
RTC records, p. 99.

16
Rollo, pp. 50-51.

17
G.R. No. 127064, August 31, 1999, 313 SCRA 367.

18
Additional Requisites for Petitions Filed with the Supreme Court and the Court of Appeals
to Prevent Forum Shopping or Appeals to Prevent Forum Shopping or Multiple Filing of
Petitions and Complaints, February 8, 1994.

19
Rollo, p. 52.

20
Id. at 53-64.

21
Id. at 43.
22
Id. at 62.

23
Id. at 63.

24
Id. at 61.

25
Id. at 63.

26
CA rollo, pp. 145-154.

27
Rollo, p. 79.

Negros Merchants Enterprises, Inc. v. China Banking Corporation, G.R. No. 150918,
28

August 17, 2007, 530 SCRA 478, 485.

Ingles v. Estrada, G.R. Nos. 141809, 147186 and 173641, April 8, 2013, 695 SCRA 285,
29

317-319, citing Altres v. Empleo, G.R. No. 180986, December 10, 2008, 573 SCRA 583,
597-598.

30
RTC records, p. 9.

31
RULES OF CIVIL PROCEDURE, Rule 10, Sec. 8.

32
G.R. No. 130068, October 1, 1998, 297 SCRA 30, 53.

33
Ty-De Zuzuarregui v. Villarosa, G.R. No. 183788, April 5, 2010, 617 SCRA 377, 385.

34
G.R. No. 136233, November 23, 2000, 345 SCRA 673, 684.

35
G.R. No. 159653, January 25, 2006, 480 SCRA 137.

Shipside Incorporated v. Court of Appeals, G.R. No. 143377, February 20, 2001, 352
36

SCRA 334, 346.

Dar v. Alonzo-Legasto, G.R. No. 143016, August 30, 2000, 339 SCRA 306, 309citing
37

Gabionza v. Court of Appeals, G.R. No. 112547, July 18, 1994, 234 SCRA 192, 198.

38
Hernudd v. Lofgren, G.R. No. 140337, September 27, 2007, 534 SCRA 205, 213.

Cañiza v. Court of Appeals, G.R. No. 110427, February 24, 1997, 268 SCRA 640, 647-
39

648.

Hi-Tone Marketing Corporation v. Baikal Realty Corporation, G.R. No. 149992, August 20,
40

2004, 437 SCRA 121, 143.

41
Id., citing Walstrom v. Mapa, Jr., G.R. No. 38387, January 29, 1990, 181 SCRA 431, 442.

Philippine Economic Zone Authority v. Fernandez, G.R. No. 138971, June 6, 2001, 358
42

SCRA 489, 499.


43
Otherwise known as the Property Registration Decree.

44
G.R. No. 76148, December 20, 1989, 180 SCRA 401, 407.

45
ART. 1144. The following actions must be brought within ten years from the time the right
of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

46
Id.

47
Crisostomo v. Garcia, Jr., G.R. No. 164787, January 31, 2006, 481 SCRA 402; Salvatierra
v. Court of Appeals, G.R. No. 107797, August 26, 1996, 261 SCRA 45; Amerol v.
Bagumbaran, G.R. No. L-33261, September 30, 1987, 154 SCRA 396.

48
Vda.de Gualberto v. Go, G.R. No. 139843, July 21, 2005, 463 SCRA 671, 681.

49
Brito, Sr. v. Dianala, G.R. No. 171717, December 15, 2010, 638 SCRA 529, 538.

50
ART.1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

51
Amado D. Aquino, Land Registration and Related Proceedings, p. 133, 4th Ed., 2007.

52
Id. at 136.

53
Macababbad, Jr. v. Masirag,G.R. No. 161237, January 14, 2009, 576 SCRA 70, 86.

54
G.R. No. 96829, December 9, 1991, 204 SCRA 684, 693.

55
Id.

56
G.R. No. 159578, February 18, 2009, 579 SCRA 556.

Id. at 559-560; See also Philippine National Bank v. Heirs of Estanislao Militar and
57

Deogracias Militar, G.R. Nos. 164801 and 165165, August 18, 2005, 467 SCRA 377; and
Santos v. Santos, G.R. No. 133895, October 2, 2001, 366 SCRA 395.

58
G.R. No. 151016, August 6, 2008, 561 SCRA 120, 133.

59
G.R. No. 62650, June 27, 1991, 198 SCRA 556.
60
Id. at 560-561.

61
Rollo, pp. 29-30.

62
Id. at 32.

63
Id. at 29.

64
Sanchez v. Sanchez, G.R. No. 187661, December 4, 2013, 711 SCRA 541, 547.

65
Id.

66
Santos v. Heirs of Dominga Lustre, supra note 58 at133-134.

67
Philippine National Bank v. Heirs of Estanislao Militar and Deogracias Militar, supra note 57
at 389.
FIRST DIVISION

ESTRELLA TIONGCO YARED G.R. No. 161360


(Deceased) substituted by
CARMEN M. TIONGCO a.k.a. Present:
CARMEN MATILDE B.
TIONGCO, CORONA, C.J.,
Petitioner, Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
- versus - DEL CASTILLO, and
VILLARAMA, JR., JJ.

JOSE B. TIONGCO and Promulgated:


ANTONIO G. DORONILA, JR.,
Respondents. October 19, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:

Before us on appeal by way of a petition for review on certiorari under Rule


45 is the Court of Appeals (CA) August 28, 2003 Decision [1] which dismissed
petitioner Estrella Tiongco Yareds appeal and affirmed the Decision [2] of the
Regional Trial Court (RTC), Branch 26, of Iloilo City, dismissing petitioners
complaint for annulment of affidavit of adjudication, deeds of sale and Transfer
Certificates of Title (TCTs), reconveyance and damages. Also assailed is the
appellate courts November 27, 2003Resolution[3] denying petitioners motion for
reconsideration.

The factual antecedents, as culled from the records, follow:

Matilde, Jose, Vicente, and Felipe, all surnamed Tiongco, were born to
Atanacio and Maria Luis Tiongco. Together they were known as the Heirs of
Maria Luis de Tiongco.
The present dispute involves three parcels of land namely, Lots 3244, 3246
and 1404, all located in Iloilo City. Lots 3244 and 1404 used to be covered by
Original Certificates of Title (OCTs) Nos. 484 and 1482, respectively, in the names
of Matilde (wife of Vicente Rodriguez), Jose (married to Carmen Sonora), Vicente
(married to Ursula Casador), and Felipe (married to Sabina Montelibano), each in
undivided share, while Lot 3246 used to be covered by OCT No. 368 in the name
of Heirs of Maria Luis de Tiongco.[4]

While all of the Heirs of Maria Luis de Tiongco have died, they were
survived by their children and descendants. Among the legitimate children of Jose
were petitioner and Carmelo Tiongco, the father of respondent Jose B. Tiongco.[5]

Sometime in 1965, petitioner built her house on Lot 1404[6] and sustained
herself by collecting rentals from the tenants of Lots 3244 and 3246. In 1968,
petitioner, as one of the heirs of Jose, filed an adverse claim affecting all the rights,
interest and participation of her deceased father on the disputed lots, but the
adverse claim was annotated only on OCT No. 484 and OCT No. 1482,
respectively covering Lots 3244 and 1404.[7]

In 1983, respondent Jose prohibited petitioner from collecting rentals from


the tenants of Lots 3244 and 3246. In December 1983, respondent Jose filed a suit
for recovery of possession with preliminary injunction against several tenants of
Lots 3244 and 3246 wherein he obtained a judgment in his favor. [8] Respondent
Jose also filed a case for unlawful detainer with damages against petitioner as she
was staying on Lot 1404. While the RTC, Branch 33, of Iloilo City ruled in
respondent Joses favor, the CA reversed the RTCs decision and ruled in favor of
petitioner.[9] As such, respondent Jose never took possession of the properties.

In 1988, when petitioner inquired at the Office of the Register of Deeds of


Iloilo City, she discovered that respondent Jose had already executed an Affidavit
of Adjudication[10] dated April 17, 1974, declaring that he is the only surviving heir
of the registered owners and adjudicating unto himself Lots 3244, 3246 and 1404.
Consequently, the OCTs of the aforementioned lots were cancelled, and in place
thereof, the Register of Deeds of Iloilo City issued TCT No. T-37195 for Lot 3244,
TCT No. T-4665 for Lot 3246, and TCT No. T-37193 for Lot 1404, all in the name
of respondent Jose.[11]
Based on the records with the Register of Deeds, it also appears that on May
10, 1974, the same day when the TCTs covering Lots 3244 and 1404 were issued,
respondent Jose sold the said lots to Catalino Torre. TCT Nos. T-37195 and T-
37193 were thus cancelled and TCT Nos. T-37196 and T-37194 were issued in the
name of Catalino Torre.[12]

Similarly, the records of the Register of Deeds showed that Lot 3246 was
likewise disposed of by respondent Jose. On March 30, 1979, or barely two days
after obtaining TCT No. T-4665, respondent Jose sold Lot 3246 to respondent
Antonio G. Doronila, Jr. who was issued TCT No. T-4666 which cancelled TCT
No. T-4665. Catalino Torre also sold Lots 3244 and 1404 on the same date to
Doronila who was issued the corresponding new TCTs.[13] However, just a few
days later, or on April 2, 1979, Doronila sold Lot 1404 back to respondent
Jose. Lots 3244 and 3246 were also sold back to respondent on January 17,
1980.[14]

On October 2, 1990, petitioner filed a complaint before the court a


quo against her nephew respondent Jose and respondent Antonio G. Doronila,
Jr. Petitioner argued that respondent Jose knowingly and wilfully made untruthful
statements in the Affidavit of Adjudication because he knew that there were still
other living heirs entitled to the said properties.[15] Petitioner claimed that the
affidavit was null and void ab initio and as such, it did not transmit or convey any
right of the original owners of the properties. Any transfer whatsoever is perforce
likewise null and void.[16] Moreover, the petitioner averred that since respondent
Jose executed said documents through fraud, bad faith, illegal manipulation and
misrepresentation, Lots 3244 and 1404 should be reconveyed to its original
registered owners and Lot 3246 to the heirs of Maria Luis de Tiongco subject to
subsequent partition among the heirs.[17] Petitioner also posited that granting for the
sake of argument that the affidavit of adjudication was simply voidable, respondent
Jose became a trustee by constructive trust of the property for the benefit of the
petitioner.[18]

Respondent Jose, for his part, argued that the petitioners father, Jose, was
not an heir of Maria Luis de Tiongco but an heir of Maria Cresencia de Loiz y
Gonzalez vda. De Tiongco. Respondent Jose claimed that he was the only
legitimate son and that while it was true that he has two other siblings, he refused
to acknowledge them because they are illegitimate.[19] Respondent Jose denied that
the series of sales of the properties was fraudulent. He claimed that Lot 3244 was
bought by the City of Iloilo from its own auction sale for tax delinquency and was
merely resold to him. Respondent Jose averred that he has been paying real
property taxes on the said properties for more than ten (10) years and that
petitioner collected rentals from Lots 3244 and 3246 only because he allowed
her.[20]

After trial, the Iloilo City RTC ruled in favor of respondent Jose. The court a
quo ruled that prescription has set in since the complaint was filed only on October
2, 1990 or some sixteen (16) years after respondent Jose caused to be registered the
affidavit of adjudication on May 10, 1974.[21]

Aggrieved, petitioner appealed to the CA[22] which, however, sustained the


trial courts ruling. The CA agreed with the trial court that an action for
reconveyance can indeed be barred by prescription. According to the CA, when an
action for reconveyance is based on fraud, it must be filed within four years from
discovery of the fraud, and such discovery is deemed to have taken place from the
issuance of the original certificate of title. On the other hand, an action for
reconveyance based on an implied or constructive trust prescribes in ten (10) years
from the date of issuance of the original certificate of title or transfer certificate of
title. For the rule is that the registration of an instrument in the Office of the
Register of Deeds constitutes constructive notice to the whole world and therefore
the discovery of fraud is deemed to have taken place at the time of registration.[23]

Petitioner filed a motion for reconsideration of the above ruling, but the CA
as aforesaid, denied petitioners motion. Hence, the present petition for review on
certiorari.

Petitioner raised the following arguments in the petition, to wit:


A. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING
THE LOWER COURT THAT THE AFFIDAVIT OF ADJUDICATION
EXECUTED BY RESPONDENT JOSE B. TIONGCO, WHO IS A
LAWYER AND IS AWARE OF ITS NULLITY, IS MERELY
VOIDABLE; ON THE CONTRARY, SAID DOCUMENT IS A
COMPLETE NULLITY BECAUSE RESPONDENT JOSE B. TIONGCO
HAS MALICIOUSLY AND IN BAD FAITH ADJUDICATED IN
FAVOR OF HIMSELF THE PROPERTIES IN QUESTION OVER
WHICH HE, AS A LAWYER, KNOWS HE HAS NO RIGHTS
WHATSOEVER AND HE ALSO KNOWS HAS BEEN IN
POSSESSION OF THE PETITIONER AND HER PREDECESSORS-IN-
INTEREST UNTIL THE PRESENT.
B. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING
THE DISMISSAL OF PETITIONERS COMPLAINT BY THE LOWER
COURT ON THE GROUND OF PRESCRIPTION BECAUSE THE
RESPONDENT JOSE B. TIONGCOS AFFIDAVIT OF
ADJUDICATION, BEING A TOTAL NULLITY, THE ACTION TO
DECLARE SUCH NULLITY AND OF THOSE SUBSEQUENT
TRANSACTIONS ARISING FROM SAID ADJUDICATION DOES
NOT PRESCRIBE, ESPECIALLY BECAUSE IN THIS CASE THE
PETITIONER AND HER PREDECESSORS-IN-INTEREST HAVE
ALWAYS BEEN IN POSSESSION OF THE LOTS IN QUESTION
AND RESPONDENT JOSE B. TIONGCO HAS NEVER BEEN IN
POSSESSION THEREOF.[24]

C. FURTHER, EVEN IF ARGUENDO, THE AFFIDAVIT OF


ADJUDICATION IS VOIDABLE, THE HONORABLE COURT OF
APPEALS STILL ERRED IN AFFIRMING THE DISMISSAL OF THE
COMPLAINT BY THE LOWER COURT ON THE GROUND OF
PRESCRIPTION BECAUSE THE RESPONDENT, JOSE B. TIONGCO,
BEING A LAWYER AND BEING AWARE OF PETITIONERS
OWNERSHIP OF THE LOTS IN QUESTION, THE SAID AFFIDAVIT
OF ADJUDICATION MAKES THE RESPONDENT AN IMPLIED
TRUSTEE THEREOF FOR THE PETITIONER AND THE ACTION
FOR RECONVEYANCE BASED ON TRUST DOES NOT PRESCRIBE
SO LONG AS THE BENEFICIARY LIKE THE PETITIONER HAS
BEEN IN ACTUAL PHYSICAL POSSESSION OF THE PROPERTY
SUBJECT THEREOF, AS HELD IN THE CASE OF VDA. DE
CABRERA VS. COURT OF APPEALS (267 SCRA 339).[25]

The only issue in this case is who has a better right over the properties.

The petition is meritorious.

The Court agrees with the CAs disquisition that an action for reconveyance
can indeed be barred by prescription. In a long line of cases decided by this Court,
we ruled that an action for reconveyance based on implied or constructive trust
must perforce prescribe in ten (10) years from the issuance of the Torrens title over
the property.[26]

However, there is an exception to this rule. In the case of Heirs of Pomposa


Saludares v. Court of Appeals,[27] the Court reiterating the ruling in Millena v.
Court of Appeals,[28] held that there is but one instance when prescription cannot be
invoked in an action for reconveyance, that is, when the plaintiff is in possession of
the land to be reconveyed. In Heirs of Pomposa Saludares,[29] this Court explained
that the Court in a series of cases,[30] has permitted the filing of an action for
reconveyance despite the lapse of more than ten (10) years from the issuance of
title to the land and declared that said action, when based on fraud, is
imprescriptible as long as the land has not passed to an innocent buyer for
value. But in all those cases, the common factual backdrop was that the registered
owners were never in possession of the disputed property. The exception was
based on the theory that registration proceedings could not be used as a shield for
fraud or for enriching a person at the expense of another.

In Alfredo v. Borras,[31] the Court ruled that prescription does not run against
the plaintiff in actual possession of the disputed land because such plaintiff has a
right to wait until his possession is disturbed or his title is questioned before
initiating an action to vindicate his right. His undisturbed possession gives him the
continuing right to seek the aid of a court of equity to determine the nature of the
adverse claim of a third party and its effect on his title. The Court held that where
the plaintiff in an action for reconveyance remains in possession of the subject
land, the action for reconveyance becomes in effect an action to quiet title to
property, which is not subject to prescription.

The Court reiterated such rule in the case of Vda. de Cabrera v. Court of
Appeals,[32] wherein we ruled that the imprescriptibility of an action for
reconveyance based on implied or constructive trust applies only when the plaintiff
or the person enforcing the trust is not in possession of the property. In effect, the
action for reconveyance is an action to quiet the property title, which does not
prescribe.

Similarly, in the case of David v. Malay[33] the Court held that there was no
doubt about the fact that an action for reconveyance based on an implied trust
ordinarily prescribes in ten (10) years. This rule assumes, however, that there is an
actual need to initiate that action, for when the right of the true and real owner is
recognized, expressly or implicitly such as when he remains undisturbed in his
possession, the statute of limitation would yet be irrelevant. An action for
reconveyance, if nonetheless brought, would be in the nature of a suit for quieting
of title, or its equivalent, an action that is imprescriptible. In that case, the Court
reiterated the ruling in Faja v. Court of Appeals[34] which we quote:
x x x There is settled jurisprudence that one who is in actual possession of a piece
of land claiming to be owner thereof may wait until his possession is disturbed or
his title is attacked before taking steps to vindicate his right, the reason for the
rule being, that his undisturbed possession gives him a continuing right to seek the
aid of a court of equity to ascertain and determine the nature of the adverse claim
of a third party and its effect on his own title, which right can be claimed only by
one who is in possession. No better situation can be conceived at the moment for
Us to apply this rule on equity than that of herein petitioners whose mother,
Felipa Faja, was in possession of the litigated property for no less than 30 years
and was suddenly confronted with a claim that the land she had been occupying
and cultivating all these years, was titled in the name of a third person. We hold
that in such a situation the right to quiet title to the property, to seek
its reconveyance and annul any certificate of title covering it, accrued only from
the time the one in possession was made aware of a claim adverse to his own, and
it is only then that the statutory period of prescription commences to run against
such possessor.

In this case, petitioners possession was disturbed in 1983 when respondent


Jose filed a case for recovery of possession. [35] The RTC of Iloilo City ruled in
respondent Joses favor but the CA on November 28, 1991, during the pendency
of the present controversy with the court a quo, ruled in favor of
petitioner.[36] Petitioner never lost possession of the said properties, and as such,
she is in a position to file the complaint with the court a quo to protect her rights
and clear whatever doubts has been cast on her title by the issuance of TCTs in
respondent Joses name.

The Court further observes that the circuitous sale transactions of these
properties from respondent Jose to Catalino Torre, then to Antonio Doronila, Jr.,
and back again to respondent Jose were quite unusual. However, this successive
transfers of title from one hand to another could not cleanse the illegality of
respondent Joses act of adjudicating to himself all of the disputed properties so as
to entitle him to the protection of the law as a buyer in good faith. Respondent Jose
himself admitted that there exists other heirs of the registered owners in the OCTs.
Even the RTC found that [t]hese allegations contained in the Affidavit of
Adjudication executed by defendant Jose B. Tiongco are false because defendant
Jose B. Tiongco is not the only surviving heir of Jose Tiongco, Matilde Tiongco,
Vicente Tiongco and Felipe Tiongco as the latters have other children and
grandchildren who are also their surviving heirs.[37]
In the case of Sandoval v. Court of Appeals,[38] the Court defined an innocent
purchaser for value as one who buys property of another, without notice that some
other person has a right to, or interest in, such property and pays a full and fair
price for the same, at the time of such purchase, or before he has notice of the
claim or interest of some other persons in the property. He is one who buys the
property with the belief that the person from whom he receives the thing was the
owner and could convey title to the property. A purchaser can not close his eyes to
facts which should put a reasonable man on his guard and still claim that he acted
in good faith.

And while it is settled that every person dealing with a property registered
under the Torrens title need not inquire further but only has to rely on the title, this
rule has an exception. The exception is when the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such
inquiry or when the purchaser has some knowledge of a defect or the lack of title
in his vendor or of sufficient facts to induce a reasonably prudent man to inquire
into the status of the title of the property in litigation. The presence of anything
which excites or arouses suspicion should then prompt the vendee to look beyond
the certificate and investigate the title of the vendor appearing on the face of said
certificate. One who falls within the exception can neither be denominated an
innocent purchaser for value nor a purchaser in good faith and hence does not
merit the protection of the law.[39]

In this case, when the subject properties were sold to Catalino Torre and
subsequently to Doronila, respondent Jose was not in possession of the said
properties. Such fact should have put the vendees on guard and should have
inquired on the interest of the respondent Jose regarding the subject
properties.[40] But regardless of such defect on transfer to third persons, the
properties again reverted back to respondent Jose. Respondent Jose cannot claim
lack of knowledge of the defects surrounding the cancellation of the OCTs over the
properties and benefit from his fraudulent actions. The subsequent sale of the
properties to Catalino Torre and Doronila will not cure the nullity of the
certificates of title obtained by respondent Jose on the basis of the false and
fraudulent Affidavit of Adjudication.
WHEREFORE, the petition for review on certiorari
is GRANTED. The August 28, 2003 Decision and November 27, 2003
Resolution of the Court of Appeals in CA-G.R. CV No. 44794 are
hereby REVERSED and SET ASIDE. The Register of Deeds of Iloilo City is
ordered to RESTORE Original Certificates of Title Nos. 484, 1482, and 368,
respectively covering Lots 3244, 1404 and 3246, under the name/s of the registered
original owners thereof.

Furthermore, respondent Atty. Jose B. Tiongco is ORDERED to SHOW


CAUSE, within ten (10) days from notice hereof, why he should not be sanctioned
as a member of the bar for executing the April 17, 1974 Affidavit of Adjudication
and registering the same with the Register of Deeds.

No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.


Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN


Associate Justice Associate Justice
MARIANO C. DEL CASTILLO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

[1]
Rollo, pp. 83-92 . Penned by Associate Justice Roberto A. Barrios with Associate Justices Rebecca De Guia-
Salvador and Jose C. Reyes, Jr. concurring.
[2]
Id. at 93-103. Penned by Judge Ricardo M. Ilarde.
[3]
Id. at 105-106.
[4]
Records, pp. 11-13.
[5]
Rollo, p. 84.
[6]
Id. at 86.
[7]
Id. at 54, 86.
[8]
Id. at 85-87.
[9]
Id. at 54-55.
[10]
Id. at 117-118.
[11]
Id. at 84-85, 87; records, pp. 28-30.
[12]
Id. at 85; id at 31-34.
[13]
Id.; id at 36-39.
[14]
Id. at 56.
[15]
Id. at 87.
[16]
Id.
[17]
Id. at 87-88.
[18]
Id. at 71.
[19]
Id. at 88.
[20]
Id.
[21]
Id. at 101.
[22]
Id. at 89.
[23]
Id. at 90-91.
[24]
Id. at 62-63.
[25]
Id. at 68-69.
[26]
Amerol v. Bagumbaran, No. L-33261, September 30, 1987, 154 SCRA 396, 406-407; Bautista v. Bautista, G.R
No.160556, August 3, 2007, 529 SCRA 187, 192.
[27]
G.R. No. 128254, January 16, 2004, 420 SCRA 51, 57.
[28]
G.R. No. 127797, January 31, 2000, 324 SCRA 126, 132.
[29]
Supra note 27 at 58.
[30]
Rodriguez v. Director of Lands, 31 Phil. 272 (1915); Zarate v. Director of Lands, 34 Phil. 416 (1916); Amerol
v. Bagumbaran, supra note 26; Caro v. Court of Appeals, G.R. No. 76148, December 20, 1989, 180 SCRA 401.
[31]
G.R. No. 144225, June 17, 2003, 404 SCRA 145, 166.
[32]
G.R. No. 108547, February 3, 1997, 267 SCRA 339, 353.
[33]
G.R. No. 132644, November 19, 1999, 318 SCRA 711, 720.
[34]
No. L-45045, February 28, 1977, 75 SCRA 441, 446.
[35]
Rollo, p. 86.
[36]
Id. at 55.
[37]
Id. at 96.
[38]
G.R. No. 106657, August 1, 1996, 260 SCRA 283, 296-297.
[39]
David v. Malay, supra note 33 at 722.
[40]
Vide: Heirs of Trinidad De Leon Vda. de Roxas v. Court of Appeals, G.R. No. 138660, February 5, 2004, 422
SCRA 101, 117, citing Development Bank of the Philippines v. Court of Appeals, G.R. No. 129471, April 28,
2000, 331 SCRA 267, 291.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179597 February 3, 2014

IGLESIA FILIPINA INDEPENDIENTE, Petitioner,


vs.
HEIRS of BERNARDINO TAEZA, Respondents.

DECISION

PERALTA, J.:

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that
the Decision1of the Court of Appeals (CA), promulgated on June 30, 2006, and the Resolution2 dated
August 23, 2007, denying petitioner's motion for reconsideration thereof, be reversed and set aside.

The CA's narration of facts is accurate, to wit:

The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly registered religious
corporation, was the owner of a parcel of land described as Lot 3653, containing an area of 31,038
square meters, situated at Ruyu (now Leonarda), Tuguegarao, Cagayan, and covered by Original
Certificate of Title No. P-8698. The said lot is subdivided as follows: Lot Nos. 3653-A, 3653-B, 3653-
C, and 3653-D.

Between 1973 and 1974, the plaintiff-appellee, through its then Supreme Bishop Rev. Macario Ga,
sold Lot 3653-D, with an area of 15,000 square meters, to one Bienvenido de Guzman.

On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area of 10,000 square meters, were
likewise sold by Rev. Macario Ga, in his capacity as the Supreme Bishop of the plaintiff-appellee, to
the defendant Bernardino Taeza, for the amount of ₱100,000.00, through installment, with mortgage
to secure the payment of the balance. Subsequently, the defendant allegedly completed the
payments.

In 1977, a complaint for the annulment of the February 5, 1976 Deed of Sale with Mortgage was filed
by the Parish Council of Tuguegarao, Cagayan, represented by Froilan Calagui and Dante Santos,
the President and the Secretary, respectively, of the Laymen's Committee, with the then Court of
First Instance of Tuguegarao, Cagayan, against their Supreme Bishop Macario Ga and the
defendant Bernardino Taeza.

The said complaint was, however, subsequently dismissed on the ground that the plaintiffs therein
lacked the personality to file the case.

After the expiration of Rev. Macario Ga's term of office as Supreme Bishop of the IFI on May 8,
1981, Bishop Abdias dela Cruz was elected as the Supreme Bishop. Thereafter, an action for the
declaration of nullity of the elections was filed by Rev. Ga, with the Securities and Exchange
Commission (SEC).
In 1987, while the case with the SEC is (sic) still pending, the plaintiff-appellee IFI, represented by
Supreme Bishop Rev. Soliman F. Ganno, filed a complaint for annulment of the sale of the subject
parcels of land against Rev. Ga and the defendant Bernardino Taeza, which was docketed as Civil
Case No. 3747. The case was filed with the Regional Trial Court of Tuguegarao, Cagayan, Branch
III, which in its order dated December 10, 1987, dismissed the said case without prejudice, for the
reason that the issue as to whom of the Supreme Bishops could sue for the church had not yet been
resolved by the SEC.

On February 11, 1988, the Securities and Exchange Commission issued an order resolving the
leadership issue of the IFI against Rev. Macario Ga.

Meanwhile, the defendant Bernardino Taeza registered the subject parcels of land. Consequently,
Transfer Certificate of Title Nos. T-77995 and T-77994 were issued in his name.

The defendant then occupied a portion of the land. The plaintiff-appellee allegedly demanded the
defendant to vacate the said land which he failed to do.

In January 1990, a complaint for annulment of sale was again filed by the plaintiff-appellee IFI, this
time through Supreme Bishop Most Rev. Tito Pasco, against the defendant-appellant, with the
Regional Trial Court of Tuguegarao City, Branch 3.

On November 6, 2001, the court a quo rendered judgment in favor of the plaintiff-appellee. It held
1âwphi1

that the deed of sale executed by and between Rev. Ga and the defendant-appellant is null and
void.3

The dispositive portion of the Decision of Regional Trial Court of Tuguegarao City (RTC) reads as
follows:

WHEREFORE, judgment is hereby rendered:

1) declaring plaintiff to be entitled to the claim in the Complaint;

2) declaring the Deed of Sale with Mortgage dated February 5, 1976 null and void;

3) declaring Transfer Certificates of Title Numbers T-77995 and T-77994 to be null and void
ab initio;

4) declaring the possession of defendant on that portion of land under question and
ownership thereof as unlawful;

5) ordering the defendant and his heirs and successors-in-interest to vacate the premises in
question and surrender the same to plaintiff; [and]

6) condemning defendant and his heirs pay (sic) plaintiff the amount of ₱100,000.00 as
actual/consequential damages and ₱20,000.00 as lawful attorney's fees and costs of the
amount (sic).4

Petitioner appealed the foregoing Decision to the CA. On June 30, 2006, the CA rendered its
Decision reversing and setting aside the RTC Decision, thereby dismissing the complaint.5 The CA
ruled that petitioner, being a corporation sole, validly transferred ownership over the land in question
through its Supreme Bishop, who was at the time the administrator of all properties and the official
representative of the church. It further held that "[t]he authority of the then Supreme Bishop Rev. Ga
to enter into a contract and represent the plaintiff-appellee cannot be assailed, as there are no
provisions in its constitution and canons giving the said authority to any other person or entity."6

Petitioner then elevated the matter to this Court via a petition for review on certiorari, wherein the
following issues are presented for resolution:

A.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THE
FEBRUARY 5, 1976 DEED OF SALE WITH MORTGAGE AS NULL AND VOID;

B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT IS NOT VOID, WHETHER OR
NOT THE COURT OF APPEALS ERRED IN NOT FINDING THE FEBRUARY 5, 1976
DEED OF SALE WITH MORTGAGE AS UNENFORCEABLE, [and]

C.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING


RESPONDENT TAEZA HEREIN AS BUYER IN BAD FAITH.7

The first two issues boil down to the question of whether then Supreme Bishop Rev. Ga is
authorized to enter into a contract of sale in behalf of petitioner.

Petitioner maintains that there was no consent to the contract of sale as Supreme Bishop Rev. Ga
had no authority to give such consent. It emphasized that Article IV (a) of their Canons provides that
"All real properties of the Church located or situated in such parish can be disposed of only with the
approval and conformity of the laymen's committee, the parish priest, the Diocesan Bishop, with
sanction of the Supreme Council, and finally with the approval of the Supreme Bishop, as
administrator of all the temporalities of the Church." It is alleged that the sale of the property in
question was done without the required approval and conformity of the entities mentioned in the
Canons; hence, petitioner argues that the sale was null and void.

In the alternative, petitioner contends that if the contract is not declared null and void, it should
nevertheless be found unenforceable, as the approval and conformity of the other entities in their
church was not obtained, as required by their Canons.

Section 113 of the Corporation Code of the Philippines provides that:

Sec. 113. Acquisition and alienation of property. - Any corporation sole may purchase and hold real
estate and personal property for its church, charitable, benevolent or educational purposes, and may
receive bequests or gifts for such purposes. Such corporation may mortgage or sell real property
held by it upon obtaining an order for that purpose from the Court of First Instance of the province
where the property is situated; x x x Provided, That in cases where the rules, regulations and
discipline of the religious denomination, sect or church, religious society or order concerned
represented by such corporation sole regulate the method of acquiring, holding, selling and
mortgaging real estate and personal property, such rules, regulations and discipline shall control,
and the intervention of the courts shall not be necessary.8

Pursuant to the foregoing, petitioner provided in Article IV (a) of its Constitution and Canons of the
Philippine Independent Church,9 that "[a]ll real properties of the Church located or situated in such
parish can be disposed of only with the approval and conformity of the laymen's

committee, the parish priest, the Diocesan Bishop, with sanction of the Supreme Council, and finally
with the approval of the Supreme Bishop, as administrator of all the temporalities of the Church."
Evidently, under petitioner's Canons, any sale of real property requires not just the consent of the
Supreme Bishop but also the concurrence of the laymen's committee, the parish priest, and the
Diocesan Bishop, as sanctioned by the Supreme Council. However, petitioner's Canons do not
specify in what form the conformity of the other church entities should be made known. Thus, as
petitioner's witness stated, in practice, such consent or approval may be assumed as a matter of
fact, unless some opposition is expressed.10

Here, the trial court found that the laymen's committee indeed made its objection to the sale known
to the Supreme Bishop.11 The CA, on the other hand, glossed over the fact of such opposition from
the laymen's committee, opining that the consent of the Supreme Bishop to the sale was sufficient,
especially since the parish priest and the Diocesan Bishop voiced no objection to the sale.12

The Court finds it erroneous for the CA to ignore the fact that the laymen's committee objected to the
sale of the lot in question. The Canons require that ALL the church entities listed in Article IV (a)
thereof should give its approval to the transaction. Thus, when the Supreme Bishop executed the
contract of sale of petitioner's lot despite the opposition made by the laymen's committee, he acted
beyond his powers.

This case clearly falls under the category of unenforceable contracts mentioned in Article 1403,
paragraph (1) of the Civil Code, which provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers;

In Mercado v. Allied Banking Corporation,13 the Court explained that:

x x x Unenforceable contracts are those which cannot be enforced by a proper action in court,
unless they are ratified, because either they are entered into without or in excess of authority or they
do not comply with the statute of frauds or both of the contracting parties do not possess the
required legal capacity. x x x.14

Closely analogous cases of unenforceable contracts are those where a person signs a deed of
extrajudicial partition in behalf of co-heirs without the latter's authority;15 where a mother as judicial
guardian of her minor children, executes a deed of extrajudicial partition wherein she favors one
child by giving him more than his share of the estate to the prejudice of her other children;16 and
where a person, holding a special power of attorney, sells a property of his principal that is not
included in said special power of attorney.17

In the present case, however, respondents' predecessor-in-interest, Bernardino Taeza, had already
obtained a transfer certificate of title in his name over the property in question. Since the person
supposedly transferring ownership was not authorized to do so, the property had evidently been
acquired by mistake. In Vda. de Esconde v. Court of Appeals,18 the Court affirmed the trial court's
ruling that the applicable provision of law in such cases is Article 1456 of the Civil Code which states
that "[i]f property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes."
Thus, in Aznar Brothers Realty Company v. Aying,19 citing Vda. de Esconde,20 the Court clarified the
concept of trust involved in said provision, to wit:

Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the Court
stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical
trust, confidence is reposed in one person who is named a trustee for the benefit of another who is
called the cestui que trust, respecting property which is held by the trustee for the benefit of the
cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a
fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or
fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust nor intends holding the property for the
beneficiary.

The concept of constructive trusts was further elucidated in the same case, as follows:

. . . implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent or which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the parties. In turn, implied trusts are
either resulting or constructive trusts. These two are differentiated from each other as follows:

Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have been contemplated by
the parties. They arise from the nature of circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by
the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or
holds the legal right to property which he ought not, in equity and good conscience, to hold. (Italics
supplied)

A constructive trust having been constituted by law between respondents as trustees and petitioner
as beneficiary of the subject property, may respondents acquire ownership over the said property?
The Court held in the same case of Aznar,21 that unlike in express trusts and resulting implied trusts
where a trustee cannot acquire by prescription any property entrusted to him unless he repudiates
the trust, in constructive implied trusts, the trustee may acquire the property through prescription
even if he does not repudiate the relationship. It is then incumbent upon the beneficiary to bring an
action for reconveyance before prescription bars the same.

In Aznar,22 the Court explained the basis for the prescriptive period, to wit:

x x x under the present Civil Code, we find that just as an implied or constructive trust is an offspring
of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the
title thereto in favor of the true owner. In this context, and vis-á-vis prescription, Article 1144 of the
Civil Code is applicable.

Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxx xxx xxx


An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten
years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an
implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the
property.

It has also been ruled that the ten-year prescriptive period begins to run from the date of registration
of the deed or the date of the issuance of the certificate of title over the property, x x x.23

Here, the present action was filed on January 19, 1990,24 while the transfer certificates of title over
the subject lots were issued to respondents' predecessor-in-interest, Bernardino Taeza, only on
February 7, 1990.25

Clearly, therefore, petitioner's complaint was filed well within the prescriptive period stated above,
and it is only just that the subject property be returned to its rightful owner.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated June 30,
2006, and its Resolution dated August 23, 2007, are REVERSED and SET ASIDE. A new judgment
is hereby entered:

(1) DECLARING petitioner Iglesia Filipina Independiente as the RIGHTFUL OWNER of the
lots covered by Transfer Certificates of Title Nos. T-77994 and T-77995;

(2) ORDERING respondents to execute a deed reconveying the aforementioned lots to


petitioner;

(3) ORDERING respondents and successors-in-interest to vacate the subject premises and
surrender the same to petitioner; and

(4) Respondents to PAY costs of suit.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.


Associate Justice
Chairperson

ROBERTO A. ABAD JOSE CATRAL MENDOZA


Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN


Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.


Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO


Chief Justice

Footnotes

1
Penned by Associate Justice Amelita G. Tolentino, with Associate Justices Portia Aliño-
Hormachuelos and Santiago Javier Ranada, concurring; rollo, pp. 36-52.

2
Penned by Associate Justice Amelita G. Tolentino, with Associate Justices Portia Aliño-
Hormachuelos and Arcangelita Romilla-Lontok, concurring; id. at 54-55.

3
Rollo, pp. 37-39.

4
Records, p. 429.

5
Rollo, p. 51.

6
Id. at 44-45.

7
Rollo, pp. 16-17.

8
Emphasis supplied.

9
Exhibit "F," records, pp. 154-157.

10
TSN, July 7, 1994, p. 43.

See Exhibit "H," records, pp. 176-177, "Resolution No. 6. A Resolution Requesting the
11

Supreme Bishop and the Supreme Council of Bishop Not to Sell the Remaining Portion of
Lot No. 8698 Located at Ruyu, Tuguegarao. Cagayan"; See also Exhibit "I," records p. 178.
Telegram of Bishop Cuarteros sent to Most Rev. Macario Ga stating that, "Parishioners of
Tuguegarao oppose the sale of the remaining portion of cemetery lot."

See RTC Decision, records, p. 427, pertinent portion of which reads:


The other proof presented to prove that no consent was given by the laymen is the
Resolution No. 6 marked as Exhibit "H" signed by the Secretary, Dante Santos,
which shows among others that the officers and members of the Church are not in
favor of the sale because the lot is essential to the interest of the congregation.

This Court gives credence to this resolution as genuine, authentic, and hence,
credible.

See also excerpts from the TSN of the April 28, 1994 hearing, pp. 14-15, to wit:

Q: x x x x

Do you know Bishop if this provision regarding the disposition of the property of the
church was complied?

A: Not complied. In fact, we protested before the sale was made.

Q: Do you mean to say that before the sale it was already protested?

A: Yes, Sir.

Q: What prompted you to protest before the sale, that there was an impending sale
that prompted you to make a protest?

A: Because we have learned already from rumors that Mr. Taeza has the plan to get
that lot.

Q: In what manner or form did you protest?

A: Through resolution, written and verbal.

12
CA Decision, rollo, pp. 43-44.

13
555 Phil. 411 (2007).

14
Id. at 429.

Heirs of Policronio M. Ureta, Sr. v. Heirs of Liberato M. Ureta, G.R. Nos. 165748 & 165930,
15

September 14, 2011, 657 SCRA 555.

16
Vda. de Esconde v. Court of Appeals, 323 Phil. 81 (1996).

17
Mercado v. Allied Banking Corporation, supra note 13.

18
Supra note 16.

19
497 Phil. 788, 799-800 (2005).

20
Supra note 16.
21
Supra note 19.

22
Id.

23
Id. at 801. (Emphasis supplied)

24
Records, p. 1.

25
Exhibits "B" and "C," id. at 148-149.
Republic of the Philippines
SUPREME COURT
Baguio City

FIRST DIVISION

G.R. No. 196023 April 21, 2014

JOSE JUAN TONG, ET AL., Petitioners,


vs.
GO TIAT KUN, ET AL., Respondents.

DECISION

REYES, J.:

This appeal by petition for review seeks to annul and set aside the Decision1 dated October 28, 2010
and the Resolution2 dated March 3, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 03078,
which reversed the Decision3 dated May 21, 2009 of the Regional Trial Court of Iloilo City, Branch
37, in Civil Case No. 05-28626.

The Facts

The instant petition stemmed from an action for Nullification of Titles and Deeds of Extra-Judicial
Settlement and Sale and Damages instituted by the petitioners against the respondents over a
parcel of land known as Lot 998-A of the Cadastral Survey of Iloilo, having an area of 2,525 square
meters and now covered by Transfer Certificate of Title (TCT) No. 134082.

The petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong) and Sy Un (Spouses
Juan Tong), namely: Jose Juan Tong, Lucio Juan Tong, Simeon Juan Tong, Felisa Juan Tong
Cheng, Luisa Juan Tong Tan, Julia Juan Tong Dihiansan, Ana Juan Tong Dy, Elena Juan Tong Yng
Choan, and Vicente Juan Tong, who being already deceased, is survived by his widow, Rosita So
and their children, Chanto Juan Tong and Alfonso So-Chanto Juan Tong.

Completing the ten children of Spouses Juan Tong is the deceased Luis Juan Tong, Sr. (Luis, Sr.)
whose surviving heirs are: his spouse Go Tiat Kun, and their children, Leon, Mary, Lilia, Tomas,
Luis, Jr., and Jaime, who being already dead, is survived by his wife, Roma Cokee Juan Tong
(respondents).

Sometime in 1957, Juan Tong had a meeting with all his children to inform them of his intention to
purchase Lot 998 to be used for the family’s lumber business called "Juan Tong Lumber". However,
since he was a Chinese citizen and was disqualified from acquiring the said lot, the title to the
property will be registered in the name of his eldest son, Luis, Sr., who at that time was already of
age and was the only Filipino citizen among his children. On May 11, 1957, Juan Tong bought Lot
998 from the heirs of Jose Ascencio. Accordingly, on May 16, 1957, TCT No. 10346 was issued by
the Register of Deeds in the name of Luis, Sr.

On December 8, 1978, the single proprietorship of Juan Tong Lumber was incorporated into a
corporation known as the Juan Tong Lumber, Inc.4 However, Sy Un and Juan Tong both died
intestate on October 31, 1984, and November 13, 1990, respectively.
Meanwhile, on May 30, 1981, Luis, Sr. died and the respondents, being his surviving heirs, claimed
ownership over Lot 998 by succession, alleging that no trust agreement exists and it was Luis, Sr.
who bought Lot 998. On July 2, 1982, the respondents executed a Deed of Extra-Judicial Settlement
of Estate of Luis, Sr., adjudicating unto themselves Lot 998 and claiming that the said lot is the
conjugal property of Luis, Sr., and his wife, which the Juvenile and Domestic Relations Court of Iloilo
City approved on June 28, 1982. On July 19, 1982, the said deed was registered causing the
cancellation of TCT No. 10346 and the issuance of TCT No. T-60231 in the name of the
respondents.

Subsequently, the respondents agreed to subdivide Lot 998, thus, on October 12, 1992, two new
titles were issued: (1) TCT No. 97068 over Lot 998-A in the name of Go Tiat Kun and her children;
and (2) TCT No. T-96216 over Lot 998-B in the name of Luis, Jr.

After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock Development Corporation
(FRDC), which in turn sold the same to Visayas Goodwill Credit Corporation (VGCC). It was only
after the petitioners received a letter from VGCC, on August 31, 1995, that they discovered about
the breach of the trust agreement committed by the respondents.

To protect their rights, the petitioners filed an action for Annulment of Sales, Titles, Reconveyance
and Damages of Lot 998-B docketed as Civil Case No. 22730 against Luis, Jr., FRDC and VGCC.
On March 6, 1997, the trial court ruled5 in favor of the petitioners which were later affirmed by the
CA6 and this Court7 on appeal. Consequently, Lot 998-B was reconveyed to the petitioners and TCT
No. T-14839 was issued under their names including the late Luis, Sr.

Then, on February 24, 2001, Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot
998-A in favor of her children, Leon, Mary, Lilia, Tomas, and the late Jaime, resulting in the issuance
of TCT No. T-134082 over Lot 998-A.

Hence, on August 2, 2005, the petitioners filed the instant case for Nullification of Titles, and Deeds
of Extra-judicial Settlement and Sale and Damages claiming as owners of Lot 998-A.8

After trial, the court a quo rendered its judgment in favor of the petitioners, ruling that there was an
implied resulting trust between Juan Tong, Luis, Sr., the petitioners and the respondents, over Lot
998. The trial court found that Luis Sr. was a mere trustee, and not the owner of Lot 998, and the
beneficial interest over said property remained in Juan Tong and subsequently in the Juan Tong
Lumber, Inc. The trust is further established by the fact that Luis Sr., during his lifetime: (1) did not
build a house or any structure thereon or make use of the property in any manner; (2) resided with
his family together with his parents, brothers and sisters in Juan Tong building in front of the said lot;
(3) have acquired a residential property at Ledesco Village, La Paz, Iloilo City and other places,
where his heirs now reside; and (4) did not exercised any other act of ownership over the said lot.

The trial court further claimed that any right that the respondents may have over Lot 998-A would
have been merely derived from that of their predecessor-in-interest, Luis Sr. Since the respondents
were not the owners of Lot 998-A, they could not appropriate the property unto themselves, much
less convey the same unto third persons. Thus, any document executed by them adjudicating unto
themselves or conveying in favor of each other Lot 998-A, as well as the titles issued in their favor as
a consequence of those documents, are invalid. Since the petitioners were deprived of Lot 998-A
through the surreptitious and fraudulent acts of the respondents, the petitioners are entitled to the
reconveyance of the properties, and the validity of TCT No. T-134082 which covers Lot 998-A as
well as the previous titles and documents of conveyance covering the said lot were null and void.
Thus:
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered in favor of the
plaintiffs and against the defendants:

1. Declaring null and void the following:

a. Deed of Extrajudicial Settlement of Estate of Deceased Person executed by the


Defendants on July 2, 1982 executed by defendants Go Tiat Kun, Leon Juan Tong,
Mary Juan Tong, Lilia Juan Tong, and Tomas Juan Tong, and the late Jaime Juan
Tong;

b. Transfer Certificate of Title No. T-60231 in the name of defendants Go Tiat Kun,
Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and the
late Jaime Juan Tong;

c. Transfer Certificate of Title No. T-97068 in the name of defendants Go Tiat Kun,
Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and the
late Jaime Juan Tong;

d. Deed of Sale of Undivided Interest over Real Property executed by defendant Go


Tiat Kun on February 24, 2001 in favor of defendants Leon Juan Tong, Mary Juan
Tong, Lilia Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong; [and]

e. Transfer Certificate of Title No. T-134082, and all titles issued subsequent thereto,
covering Lot 998-A, in the names of defendants Leon Juan Tong, Mary Juan Tong,
Lilia Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong[.]

2. Ordering defendants to jointly and severally pay Jose Juan Tong Moral Damages of
Php200,000.00, and the plaintiffs Litigation Expenses of Php100,000.00 and Attorney’s Fees
of Php200,000.00.

3. Ordering the Register of Deeds of the City of Iloilo to issue a new transfer certificate of title
covering Lot 998-A in the name of the plaintiffs and Luis Juan Tong, in equal shares.

4. The Counterclaim is hereby ordered dismissed for lack of merit.

SO ORDERED.9

On appeal, the CA rendered the herein assailed decision, which reversed and set aside the trial
court’s decision, and dismissed the complaint for lack of merit.

The appellate court, more particularly ruled that an express trust was created because there was a
direct and positive act from Juan Tong to create a trust. And when an express trust concerns an
immovable property or any interest therein, it may not be proved by parol or oral evidence, but must
be proven by some writing or deed.10 The CA also ruled that even granting that an implied resulting
trust was created; the petitioners are still barred by prescription because the said resulting trust was
terminated upon the death of Luis, Sr. and was then converted into a constructive trust.11 Since in an
action for reconveyance based on a constructive trust prescribes in ten years from the issuance of
the Torrens title over the property, counting from the death of Luis, Sr. in 1981, the action has
already prescribed.
The CA went on to rule that there is a presumption of donation in this case pursuant to Article 1448
of the Civil Code that if the person to whom the title is conveyed is a child, legitimate or illegitimate,
of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that
there is a gift in favor of the child. Thus, even though the respondents did not present evidence to
prove a donation, the petitioners likewise did not also try to dispute it. The CA also held that the
petitioners were already barred by estoppel and laches.

Aggrieved by the foregoing disquisition, the petitioners moved for reconsideration but it was denied
by the appellate court,12 hence, they filed this petition for review.

The Issue

Briefly stated, the issues to be resolved in this petition are: (1) Was there an implied resulting trust
constituted over Lot 998 when Juan Tong purchased the property and registered it in the name of
Luis, Sr.? (2) May parol evidence be used as proof of the establishment of the trust? (3) Were the
petitioners’ action barred by prescription, estoppel and laches?

The Court’s Ruling

The petition is impressed with merit.

As a general rule, in petitions for review under Rule 45 of the Rules of Court, the jurisdiction of this
Court in cases brought before it from the CA is limited to the review and revision of errors of law
allegedly committed by the appellate court. The question of the existence of an implied trust is
factual, hence, ordinarily outside the purview of Rule 45. Nevertheless, the Court’s review is justified
by the need to make a definitive finding on this factual issue in light of the conflicting rulings
rendered by the courts below.13

At the outset, it is worthy to note that the issues posited in this case are not novel because in Civil
Case No. 22730 involving Lot 998-B which forms part of Lot 998, the trial court already found that
said lot was held in trust by Luis Sr. in favor of his siblings by virtue of an implied resulting trust. The
trial court’s decision was then affirmed by the CA in CA-G.R. CV No. 56602, and this Court in G.R.
No. 156068. Thus, Lot 998-A, the subject of this instant case, and Lot 998-B, are similarly situated
as they comprise the subdivided Lot 998, the property which in its entirety was held in trust by Luis
Sr. in favor of his siblings.

A review of the records shows an intention to create a trust between the parties. Although Lot 998
was titled in the name of Luis, Sr., the circumstances surrounding the acquisition of the subject
property eloquently speak of the intent that the equitable or beneficial ownership of the property
should belong to the Juan Tong family.

First, Juan Tong had the financial means to purchase the property for ₱55,000.00. On the other
hand, respondents failed to present a single witness to corroborate their claim that Luis, Sr. bought
the property with his own money since at that time, Luis Sr., was merely working for his father where
he received a monthly salary of ₱200.00 with free board and lodging.

Second, the possession of Lot 998 had always been with the petitioners. The property was
physically possessed by Juan Tong and was used as stockyard for their lumber business before it
was acquired, and even after it was acquired. In fact, the lot remains to be the stockyard of the
family lumber business until this very day.
Third, from the time it was registered in the name of Luis, Sr. in 1957, Lot 998 remained undivided
and untouched by the respondents. It was only after the death of Luis, Sr. that the respondents
claimed ownership over Lot 998 and subdivided it into two lots, Lot 998-A and Lot 998-B.

Fourth, respondent Leon admitted that up to the time of his father’s death, (1) Lot 998 is in the
possession of the petitioners, (2) they resided in the tenement in the front part of Juan Tong’s
compound, (3) Luis Sr. never sent any letter or communication to the petitioners claiming ownership
of Lot 998, and (4) he and his mother have a residence at Ledesco Village, La Paz, Iloilo City while
his brother and sisters also have their own residences.

Fifth, the real property taxes on Lot 998 were paid not by Luis Sr. but by his father Juan Tong and
the Juan Tong Lumber, Inc., from 1966 up to early 2008 as evidenced by the following: a) the letter
of assessment sent by the City Treasurer of Iloilo, naming Juan Tong as the owner of Lot 998; and
b) the receipts of real property taxes paid by Juan Tong Lumber, and later by Juan Tong Lumber,
Inc., from 1997 to 2008. While some of the tax receipts were in the name of Luis Sr., the fact that the
petitioners were in possession of the originals thereof established that the petitioners, the Juan Tong
Lumber, Inc., or the late Juan Tong paid for the taxes. The respondents did not try to explain the
petitioners’ possession of the realty property tax receipts in the name of Luis Sr.

The appellate court’s conclusion that an express trust was created because there was a direct and
positive act by Juan Tong to create a trust must inevitably yield to the clear and positive evidence on
record which showed that what was truly created was an implied resulting trust. As what has been
fully established, in view of the mutual trust and confidence existing between said parties who are
family members, the only reason why Lot 998 was registered in the name of Luis, Sr. was to
facilitate the purchase of the said property to be used in the family’s lumber business since Luis, Sr.
is the only Filipino Citizen in the Juan Tong family at that time. As the registered owner of Lot 998, it
is only natural that tax declarations and the corresponding tax payment receipts be in the name of
Luis, Sr. so as to effect payment thereof.

The principle of a resulting trust is based on the equitable doctrine that valuable consideration and
not legal title determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other hand, a constructive
trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. Constructive
trusts are created by the construction of equity in order to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in equity and good
conscience, to hold.14

Guided by the foregoing definitions, the Court is in conformity with the finding of the trial court that an
implied resulting trust was created as provided under the first sentence of Article 144815 which is
sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual
payment of money, property or services, or an equivalent, constituting valuable consideration; and
(b) such consideration must be furnished by the alleged beneficiary of a resulting trust.16 Here, the
petitioners have shown that the two elements are present in the instant case. Luis, Sr. was merely a
trustee of Juan Tong and the petitioners in relation to the subject property, and it was Juan Tong
who provided the money for the purchase of Lot 998 but the corresponding transfer certificate of title
was placed in the name of Luis, Sr.

The principle that a trustee who puts a certificate of registration in his name cannot repudiate the
trust by relying on the registration is one of the well-known limitations upon a title. A trust, which
derives its strength from the confidence one reposes on another especially between families, does
not lose that character simply because of what appears in a legal document.17

Contrary to the claim of the respondents, it is not error for the trial court to rely on parol evidence,
i.e., the oral testimonies of witnesses Simeon Juan Tong and Jose Juan Tong, to arrive at the
conclusion that an implied resulting trust exists. What is crucial is the intention to create a trust.

"Intention—although only presumed, implied or supposed by law from the nature of the transaction
or from the facts and circumstances accompanying the transaction, particularly the source of the
consideration—is always an element of a resulting trust and may be inferred from the acts or
conduct of the parties rather than from direct expression of conduct. Certainly, intent as an
indispensable element is a matter that necessarily lies in the evidence, that is, by evidence, even
circumstantial, of statements made by the parties at or before the time title passes. Because an
implied trust is neither dependent upon an express agreement nor required to be evidenced by
writing, Article 1457 of our Civil Code authorizes the admission of parol evidence to prove their
existence. Parol evidence that is required to establish the existence of an implied trust necessarily
has to be trustworthy and it cannot rest on loose, equivocal or indefinite declarations."18

Lastly, the respondents’ assertion that the petitioners’ action is barred by prescription, laches and
estoppel is erroneous.

As a rule, implied resulting trusts do not prescribe except when the trustee repudiates the
trust. Further, the action to reconvey does not prescribe so long as the property stands in the name
1âwphi 1

of the trustee.19 To allow prescription would be tantamount to allowing a trustee to acquire title
against his principal and true owner. It should be noted that the title of Lot 998 was still registered in
the name of Luis Sr. even when he predeceased Juan Tong. Considering that the implied trust has
been repudiated through such death, Lot 998 cannot be included in his estate except only insofar as
his undivided share thereof is concerned. It is well-settled that title to property does not vest
ownership but it is a mere proof that such property has been registered. And, the fact that the
petitioners are in possession of all the tax receipts and tax declarations of Lot 998 all the more
amplify their claim of ownership over Lot 998-A. Although these tax declarations or realty tax
payments of property are not conclusive evidence of ownership, nevertheless, they are good indicia
of possession in the concept of owner, for no one in his right mind would be paying taxes for a
property that is not in his actual or at least constructive possession. Such realty tax payments
constitute proof that the holder has a claim of title over the property.20 Therefore, the action for
reconveyance of Lot 998-A, which forms part of Lot 998, is imprescriptible and the petitioners are not
estopped from claiming ownership thereof.

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

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

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

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

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO


Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN


Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.


Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO


Chief Justice

Footnotes

1
Penned by Associate Justice Socorro B. Inting, with Executive Justice Portia A.
Hormachuelos and Associate Justice Edwin D. Sorongon, concurring; rollo, pp. 58-70.

2
Id. at 71-73.

3
Issued by Judge Jose D. Azarraga; id. at 148-159.
4
Id. at 248.

5
Id. at 87-104.

6
Decision dated July 23, 2002; id. at 247-256.

7
Court Resolution dated January 13, 2003; id. at 258.

8
Id. at 74-85.

9
Id. at 158-159.

10
Id. at 64.

11
Id. at 66.

12
Id. at 71-73.

13
Juan v. Yap, Sr., G.R. No. 182177, March 30, 2011, 646 SCRA 753, 758.

14
Tigno v. CA, 345 Phil. 486, 498 (1997).

15
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of
the property. The former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, no trust is implied by law, it being disputably presumed that there is a
gift in favor of the child.

16
Comilang v. Burcena, 517 Phil. 538, 546 (2006).

17
Supra note 14, at 500.

Estate of Margarita D. Cabacungan v. Laigo, G.R. No. 175073, August 15, 2011, 655
18

SCRA 366, 380.

19
Ringor v. Ringor, 480 Phil. 141, 160-161 (2004).

20
Tating v. Marcella, 548 Phil. 19, 29 (2007).
THIRD DIVISION

July 5, 2017

G.R. No. 227894

JOSE S. OCAMPO, Petitioner


vs.
RICARDO1 S. OCAMPO, SR., Respondent

DECISION

VELASCO, JR., J.:

The Case

Pending before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Rules of
Court, seeking to reverse and set aside the Decision2 dated June 28, 2016 and the Resolution3 dated
October 20, 2016 of the Court of Appeals (CA) in CA-G.R. CV No. 99908. The CA affirmed the
Decision4 dated September 30, 2011 of the Regional Trial Court (RTC) of Manila, Branch 55, in Civil
Case No. 92-61716, which ordered the partition of the subject property and the annulment and
cancellation of petitioner's title over the same.

The Facts

Petitioner Jose S. Ocampo and respondent Ricardo S. Ocampo are full-blooded brothers being sons
of the late Basilio Ocampo and Juliana Sunglao.5

The present case arose from a complaint filed by respondent against petitioner for partition and
annulment of Transfer Certificate of Title (TCT) No. 102822 ("Subject Property").6

In the complaint, respondent alleged that he and petitioner are co-owners of the Subject Property,
which was a conjugal property left by their parents, consisting of a 150-square meter lot and the
improvements thereon located at 2227 Romblon Street, G. Tuazon, Sampaloc, Manila. The Subject
Property was originally registered in their parents' names under TCT No. 36869.7

Respondent claimed that petitioner and his wife, Andrea Mejia Ocampo, conspired in falsifying his
signature on a notarized Extra-Judicial Settlement with Waiver ("ESW") dated September 1970, and
effecting the transfer of the property in the name of petitioner under TCT No. 102822, which was
issued on November 24, 1970. Based on a finding by the National Bureau of Investigation (NBI) that
respondent's signature was forged, an Information was filed against petitioner, the notary public, and
two others. Respondent requested for partition of the property, but petitioner refused to do so and
secretly mortgaged the property for ₱200,000.00.8

Petitioner and his wife moved for the dismissal of the complaint, but it was denied by the trial court.
Thereafter, they filed their Answer with Motion for Preliminary Hearing on the Affirmative Defense of
prescription.9

Based on their Answer, petitioner and his wife claimed that their parents executed a Deed of
Donation Propter Nuptias of the Subject Property in their favor as they were getting married, with a
promise on their part to demolish the old house and replace it with a new two-storey house, which
they did. To build the new house, they obtained a ₱l0,000.00 loan from the Development Bank of the
Philippines (DBP), with petitioner and his parents as borrowers.10

Petitioner further alleged that his parents gave respondent several properties outside Metro Manila,
which respondent eventually lost. Petitioner and his wife then allowed respondent to stay at the
second floor of the house. Petitioner was able to pay the DBP loan through a loan secured from the
Social Security System (SSS) with the consent of his father. He claimed that on September 30,
1970, their father executed the ESW and secured respondent's signature. By virtue of the ESW,
petitioner was able to have TCT No. 36869 cancelled and have TCT No. 102822 issued in favor of
himself and his wife.11

Finally, petitioner argued that TCT No. 102822 became indefeasible one year after its issuance on
November 24, 1971, and that the action to annul TCT No. 102822 had prescribed since it was filed
only on June 29, 1992, or 21 years and 7 months from the issuance of the title. He further claimed
that the action to annul the ES W is a collateral attack on the title, and the rule on non-prescription
against a co-owner does not apply since he and his wife had become exclusive owners of the
Subject Property.12

In an Order dated January 21, 1994, the trial court dismissed the complaint on the ground of
prescription. Respondent filed a Motion for Reconsideration and other supplemental pleadings, but
they were denied by the trial court. Respondent thus elevated the matter to the CA, which declared
the RTC's January 21, 1994 Order null and void. Petitioner filed a motion for extension of time to file
a petition for review on certiorari before this Court, but the same was denied in a minute resolution.13

Thereafter, respondent filed a motion for writ of execution before the RTC. However, the motion was
denied on the ground that there is nothing to execute since the setting aside of the R TC Order
dated January 21, 1994 calls for the case to be tried on the merits. Thus, the RTC set the case for
pre-trial.14

Meanwhile, petitioner filed a Motion for Leave to File Amended Answer which was granted by the
RTC. In the Amended Answer, petitioner alleged that after their mother passed away in 1965, the
₱3,000.00 balance of the DBP loan was paid through an SSS loan. Petitioner alleged that in
consideration of the loan, respondent and their father waived their rights to the property under the
ESW. Petitioner further claimed that on November 19, 1970, their father executed a Deed of
Absolute Sale, where he sold his interest in the Subject Property for ₱9,000.00 in favor of petitioner.15

Pre-trial ensued and the case was twice referred to mediation, but the parties refused to mediate.
Thus, trial proceeded.16

Respondent presented three witnesses, as follows: 1) himself, 2) his wife, Francisca Elera Ocampo,
and 3) Rhoda B. Flores, the Officer-inCharge of the Questioned Documents Division of the NBI.17 On
the other hand, petitioner presented himself as the only witness for the defense.18

Ruling of the Regional Trial Court

In a Decision dated September 30, 2011, the RTC ruled in favor of respondent, to wit:

WHEREFORE, premises considered, judgment is hereby rendered IN FAVOR OF THE PLAINTIFF,


RICARDO S. OCAMPO and AGAINST the defendant JOSE S. OCAMPO, as follows:
1. ORDERING the property located at 2227 Romblon St. G. Tuazon, Sampaloc, Manila, including
the improvements found therein to be partitioned between the plaintiff and the defendant, each
having a share of one-half in the property;

2. ORDERING that TCT No. 102822 of the Registry of Deeds of the City of Manila be ANNULLED;

3. ORDERING the Registry of Deeds of the City of Manila to CANCEL Transfer Certificate of Title
No. 102822, issued in the name of defendant, the same being null and void;

4. ORDERING the defendant to pay the costs of the suit.

SO ORDERED.19

Petitioner's motion for reconsideration was denied in an Order dated May 21, 2012. Thus, he filed a
Notice of Appeal, which was granted in the Order dated July 10, 2012.20

Ruling of the Court of Appeals

In the assailed Decision dated June 20, 2016, the CA affirmed the findings of the RTC, the
dispositive portion of which reads:

WHEREFORE, the appeal is DENIED. The September 30, 2011 Decision of the Regional Trial
Court, Branch 55, Manila in Civil Case No. 92-61716 is AFFIRMED.

SO ORDERED.21

In dismissing the petition, the CA found that respondent was able to prove that his signature on the
ESW is not genuine, based on his and his wife's testimony, as well as the NBI report. According to
the CA, this finding of forgery was also supported by petitioner's own admission on cross-
examination that he was not present when the ESW was executed. Based on the evidence
presented, the preponderance of evidence weighed in favor of respondent and against petitioner.

As to petitioner's argument that the action is a collateral and not a direct attack on the title, the CA
found it unmeritorious and ruled that the action precisely assails the validity of petitioner's title on the
ground that it is based on a forged document, and it is also an action for reconveyance. Thus, the
CA ruled that the action to annul the ESW is imprescriptible since it is a void or inexistent contract.
With this, the CA affirmed the RTC Decision.

Petitioner filed a Motion for Reconsideration before the CA, but the same was denied in the assailed
Resolution22dated October 20, 2016.

Hence, this petition.

The Petition

Petitioner argues that the CA committed a reversible error in dismissing the appeal and in affirming
the RTC Decision. Petitioner claims that the ESW, being a notarized document, enjoys a prima
facie presumption of authenticity and due execution. He claims that there was no clear and
convincing evidence to overcome this presumption.
Even assuming that the ESW is void or inexistent, petitioner argues that the action filed by
respondent is barred by the doctrine of estoppel by laches. The ESW was executed and notarized
on September 30, 1970. However, it was only on July 1, 1992 that respondent filed the present case
for partition and annulment of title, claiming that the ESW was forged. Thus, petitioner argues that
there was an unreasonable delay on respondent's part to assert his rights and pursue his claims
against petitioner.

In compliance with the Court's Resolution dated February 1, 2017, respondent filed his Comment
dated April 20, 2017. Respondent prayed for the dismissal of the petition, arguing that the issues
raised therein have already been exhaustively and judiciously passed upon by the CA and the trial
court. He argues that the CA was correct in declaring that the action was not barred by laches since
the ESW is a void or inexistent contract which makes an action declaring it imprescriptible.

The Issue

Petitioner raises the following grounds in support of his petition:

1. The CA erred in finding that the preponderance of evidence lies in favour of the view that the
signature of the respondent is not genuine.

2. The CA erred in sustaining that the ESW is a void or inexistent contract.

3. The CA erred in ruling that the action to declare the nullity of the ESW is not barred by laches.

Essentially, the principal issue in this case is whether or not the CA committed reversible error in
upholding the RTC's findings.

The Court's Ruling

The petition is without merit.

The petition raises questions of fact

It is well settled that questions of fact are not reviewable in petitions for review on certiorari under
Rule 45 of the Rules of Court. Only questions of law distinctly set forth shall be raised in a petition
and resolved. Moreover, the factual findings of the lower courts, if supported by substantial
evidence, are accorded great respect and even finality by the courts. Except for a few recognized
exceptions, this Court will not disturb the factual findings of the trial court.23 This Court sees no
reason to overturn the factual findings of the trial court, as affirmed by the CA, as the records show
that preponderant evidence established the falsity of the ESW and the fraudulent registration of the
subject property in petitioner's name.

Prescription has not set in

We find it proper to delve into the more important issue to be resolved, that is, whether the action for
annulment of title and partition has already prescribed. It must be pointed out that the issue of
prescription had already been raised by petitioner in his Motion to Dismiss24 dated August 5, 1992.
This motion was granted by the trial court in its Order25 dated January 21, 1994. However,
respondent appealed this Order with the Court of Appeals in CA-G.R. CV No. 45121. The CA then
rendered a Decision26 dated March 30, 2001, nullifying the order of dismissal of the trial court. The
CA essentially ruled that the case for partition and annulment of title did not prescribe. The CA
Decision was eventually affirmed by the Second Division of this Court in G.R. No. 149287 by virtue
of a minute Resolution27dated September 5, 2001, which became final and executory and was
entered into the Book of Entries of Judgments on October 16, 2001.

Accordingly, the resolution in G.R. No. 149287 should have written finis to the issue of prescription.
Nonetheless, to finally put to rest this bothersome issue, it behooves this Court to further elucidate
why the respondent's action and right of partition is not barred by prescription. The CA explained that
prescription is inapplicable. While the appellate court's observation is proper, it is inadequate as it
fails to sufficiently explain why the rule on the imprescriptibility and indefeasibility of Torrens titles do
not apply.

In the recent case of Pontigon v. Sanchez, We explained thus:

Under the Torrens System as enshrined in P.D. No. 1529, the decree of registration and the
certificate of title issued become incontrovertible upon the expiration of one (1) year from the date of
entry of the decree of registration, without prejudice to an action for damages against the applicant
or any person responsible for the fraud. However, actions for reconveyance based on implied trusts
may be allowed beyond the one-year period. As elucidated in Walstrom v. Mapa, Jr.:

[N]otwithstanding the irrevocability of the Torrens title already issued in the name of another person,
he can still be compelled under the law to reconvey the subject property to the rightful owner. The
property registered is deemed to be held in trust for the real owner by the person in whose name it is
registered. After all, the Torrens system was not designed to shield and protect one who had
committed fraud or misrepresentation and thus holds title in bad faith. In an action for reconveyance,
the decree of registration is respected as incontrovertible. What is sought instead is the transfer of
the property, in this case the title thereof, which has been wrongfully or erroneously registered in
another person's name, to its rightful and legal owner, or to one with a better right. This is what
reconveyance is all about. Yet, the right to seek reconveyance based on an implied or constructive
trust is not absolute nor is it imprescriptible. An action for reconveyance based on an implied or
constructive trust must perforce prescribe in ten years from the issuance of the Torrens title over the
property. (Emphasis supplied)

Thus, an action for reconveyance of a parcel of land based on implied or constructive trust
prescribes in ten (10) years, the point of reference being the date of registration of the deed or the
date of the issuance of the certificate of title over the property.

By way of additional exception, the Court, in a catena of cases, has permitted the filing of an action
for reconveyance despite the lapse of more than ten (10) years from the issuance of title. The
common denominator of these cases is that the plaintiffs therein were in actual possession of the
disputed land, converting the action from reconveyance of property into one for quieting of title.
lmprescriptibility is accorded to cases for quieting of title since the plaintiff has the right to wait until
his possession is disturbed or his title is questioned before initiating an action to vindicate his
right.28 (Emphasis supplied; citations omitted)

Given the falsity of the ESW, it becomes apparent that petitioner obtained the registration through
fraud. This wrongful registration gives occasion to the creation of an implied or constructive trust
under Article 1456 of the New Civil Code.29 An action for reconveyance based on an implied trust
generally prescribes in ten years. However, if the plaintiff remains in possession of the property, the
prescriptive period to recover title of possession does not run against him. In such case, his action is
deemed in the nature of a quieting of title, an action that is imprescriptible.30
In the case before us, the certificate of title over the subject property was issued on November 24,
1970. Yet, the complaint for partition and annulment of the title was only filed on July 1, 1992, more
than twenty (20) years since the assailed title was issued. Respondent's complaint before the RTC
would have been barred by prescription. However, based on respondent's submission before the
trial court, both petitioner and respondent were residing at the subject property at the time the
complaint was filed. The complaint31 states:

1) That Plaintiff is of legal age, married, Filipino and presently residing at 2227 Romblon St., G.
Tuazon, Sampaloc, Manila; while defendant is likewise of legal age, married, Filipino and residing at
2227 Romblon St., G. Tuazon, Sampaloc, Manila, where he may be served with summons and other
processes of this Honorable Court;32

This was unqualifiedly admitted by petitioner in his Amended Answer and no denial was interposed
therefrom.33Petitioner's failure to refute respondent's possession of the subject property may be
deemed as a judicial admission. A party may make judicial admissions in (a) the pleadings, (b)
during the trial, either by verbal or written manifestations or stipulations, or (c) in other stages of the
judicial proceeding.34 A judicial admission conclusively binds the party making it and he cannot
thereafter take a position contradictory to or inconsistent with his pleadings. Acts or facts admitted
do not require proof and cannot be contradicted, unless it is shown that the admission was made
through palpable mistake or that no such admission was made.35

Considering that respondent was in actual possession of the disputed land at the time of the filing of
the complaint, the present case may be treated as an action for quieting of title.

Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting
title to real property.36 In Heirs of Delfin and Maria Tappa v. Heirs of Jose Bacud,37 this Court
reiterated the requisites for an action for quieting of title:

The action filed by Spouses Tappa was one for quieting oftitle and recovery of possession.
In Baricuatro, Jr. v. Court of Appeals, an action for quieting of title is essentially a common law
remedy grounded on equity, to wit:

x x x Originating in equity jurisprudence, its purpose is to secure "…an adjudication that a claim of
title to or an interest in property, adverse to that of the complainant, is invalid, so that the
complainant and those claiming under him may be forever afterward free from any danger of hostile
claim. 11 In an action for quieting of title, the competent court is tasked to determine the respective
rights of the complainant and other claimants, "…not only to place things in theirproper place, to
make the one who has no rights to said immovable respect and not disturb the other, but also for
the benefit of both, so that he who has the right would see every cloud of doubt over the property
dissipated, and he could afterwards without fear introduce the improvements he may desire,
to use, and even to abuse the property as he deems best. x x x." (Emphasis in the original.)

In our jurisdiction, the remedy is governed by Article 476 and 477 of the Civil Code, which state:

Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in
truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title,
an action may be brought to remove such cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real property or any
interest therein.
1âwphi1
Art. 477. The plaintiff must have legal or equitable title to, or interest in the real property which is the
subject-matter of the action. He need not be in possession of said property.

From the foregoing provisions, we reiterate the rule that for an action to quiet title to prosper, two
indispensable requisites must concur, namely: (1) the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the action; and (2) the deed, claim,
encumbrance or proceeding claimed to be casting cloud on his title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity or legal efficacy.

A cloud on a title exists when (1) there is an instrument (deed, or contract) or record or claim or
encumbrance or proceeding; (2) which is apparently valid or effective; (3) but is, in truth and in fact,
invalid, ineffective, voidable, or unenforceable or extinguished (or terminated) or barred by extinctive
prescription; and (4) and may be prejudicial to the title.

Since it was already established that respondent's signature on the ESW, which was the basis of
petitioner's title over the property, was forged, then it is only necessary for the cloud on respondent's
title to be removed. Thus, the trial court's order to cancel TCT No. 102822 and uphold the parties'
co-ownership was proper.

The present action is not barred by


laches

We also find no merit in petitioner's argument that the case is barred by laches.

Jurisprudence has defined laches as the failure or neglect, for an unreasonable and unexplained
length of time, to do that which-by the exercise of due diligence-could or should have been done
earlier. It is the negligence or omission to assert a right within a reasonable period, warranting the
presumption that the party entitled to assert it has either abandoned or declined to assert it.38

Based on the facts presented before us, it appears that respondent did not sleep on his rights, as
claimed by petitioner. It is undeniable that respondent had filed several cases to assert his rights
over the property. Aside from the present complaint, respondent also filed, on separate occasions,
three criminal complaints for: 1) falsification of public document, 2) estafa through falsification of
public documents, and 3) forgery, all against herein petitioner. To Our mind, the filing of these cases
at different times negates the claim of laches. Time and again, this Court has ruled that courts, under
the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine
of laches when to do so, manifest wrong or injustice would result.39

IN VIEW OF THE FOREGOING, the petition is DENIED. The Decision dated September 3 0, 2011
of the Regional Trial Court, Branch 55, Manila in Civil Case No. 92-61716, as affirmed by the Court
of Appeals in its Decision dated June 28, 2016 in CA-G.R. CV No. 99908, is hereby AFFIRMED.

The Regional Trial Court shall proceed with the partition of the subject lot with dispatch.

SO ORDERED.

PRESBITERO J. VELASCO, JR.


Associate Justice

WE CONCUR:
LUCAS P. BERSAMIN
Associate Justice

BIENVENIDO L. REYES FRANCIS H. JARDELEZA


Associate Justice Associate Justice

NOEL G. TIJAM
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decisionhad been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

PRESBITERO J. VELASCO, JR.


Associate Justice
Chairperson

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation,
I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO


Chief Justice

Footnotes

1
Petitioner indicated in the caption of the petition that respondent is Roberto S. Ocampo, Sr.
However, the body of the petition and the assailed Decision show that the correct name of
respondent is Ricardo S. Ocampo, Sr.

2
Rollo, pp. 28-41. Penned by Associate Justice Melchor Q.C. Sadang and concurred in by
Associate Justices Celia C. Librea-Leagogo and Amy C. Laz.aro-Javier.

3
Id. at 43.

4
Id. at 133-141. Rendered by Pairing Judge Armando A. Yanga.

5
Id. at 5.

6
Id. at 28.

7
Id. at 28-29.

8
Id. at 29.
9
Id.

10
Id. at 29-30.

11
Id. at 30.

12
Id.

13
Id. at 30-31.

14
Id. at 31.

15
Id. at 31-32.

16
Id. at 32.

17
Id. at 133.

18
Id. at 136.

19
Id. at 140-141.

20
Id. at 32.

21
Id. at 40.

22
Id. at 43.

23
Virtucio v. Alegarbes, G.R. No. 187451, August 29, 2012, 679 SCRA 412.

24
Rollo, pp. 73-75.

25
Id. at 80-81.

26
Id. at 83-96.

27
Id. at 115-116.

28
G.R. No. 221513, December 5, 2016.

29
Art. 14 56. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.

Aniceto Uy v. Court of Appeals, Mindanao Station, Cagayan de Oro City, Carmencita


30

Naval- Sai, rep. by her Attorney-in-fact Rodolfo Florentino, G.R. No. 173186, September 16,
2015.

31
Rollo, pp. 68-72.
32
Id. at 68.

33
Id. at 123.

Adolfo v. Adolfo, G.R. No. 201427, March 18, 2015, 753 SCRA 580, citing 2 Regalado,
34

REMEDIAL LAW COMPENDIUM 656 (9th rev ed.).

Extraordinary Development Corporation v. Samson-Bica, G.R. No. 191090, October 13,


35

2014, 738 SCRA 147, 164.

36
Quintos v. Nicolas, G.R. No. 210252, June 16, 2014, 726 SCRA 482, 493.

37
G.R. No. 187633, April 4, 2016, 788 SCRA 13, 25-30.

38
Quintas v. Nicolas, supra note 36, at 502.

Raymundo Coderias v. Estate of Juan Cidoco, G.R. No. 180476, June 26, 2013, 699
39

SCRA 684, 698.


SECOND DIVISION

March 8, 2017

G.R. No. 202088

MANUEL L. BAUTISTA, SPOUSES ANGEL SAHAGUN and CARMELITA BAUTISTA, and


ANIANO L. BAUTISTA , Petitioners
vs
MARGARITO L. BAUTISTA, Respondent

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari filed by petitioners Manuel L. Bautista, Spouses Angel
Sahagun and Carmelita Bautista, and Aniano L. Bautista before this Court is the Decision1 dated
March 6, 2012 and Resolution2dated May 25, 2012 of the Court of Appeals (CA) which reversed the
Decision3 dated February 16, 2009 of the Regional Trial Court (RTC) of San Pablo City, Branch 32,
declaring that the subject property covered by Transfer Certificate of Title (TCT) No. T-59882 is
exclusively owned by respondent Margarito L. Bautista (Margarito).

The factual and procedural antecedents follow:

The present case stemmed from a Complaint for Partition and Accounting with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction filed by the petitioners against Margarito and
the other defendants over several properties allegedly co-owned by them, which included the subject
property.

The Bautista siblings - Margarito, Manuel L. Bautista, Carmelita Bautista


Sahagun (Carmelita), Aniano L. Bautista (Aniano), Florencia Bautista de Villa (Florencia), and Ester
Bautista Cabrera (Ester) - established a lending business through a common fund from the proceeds
of the sale of a parcel of coconut land they inherited from their mother Consorcia Lantin
Bautista.4 Margarito, Florencia, and Ester managed the business with Reginald Sahagun, Carmelita's
son, as credit investigator.5 Senen Cabrera, Ester's husband, prepared the documents for mortgage
and reported the status of the lending business to the Bautista siblings.6 Through the said lending
business, the siblings acquired several real properties in San Pablo City.7

On March 2, 1998, Amelia V. Mendoza (Amelia) obtained a loan in the amount of P690,000.00 from
Florencia, and secured the same with a real estate mortgage over a 25,518-square-meter parcel of
land she owned situated at Barangay Sta. Monica, San Pablo City, denominated as Lot 2, Plan Psu-
45117 and covered by Transfer Certificate of Title (TCT) No. T-2371 (Sta. Monica property).8 They
later extended the mmigage through a Kasulatan ng Pagdaragdag ng Sanla, for an additional loan of
₱l15,000.00 on April 6, 1998.9

On May 13, 1998, Amelia and Florencia renewed the mortgage for ₱l,085,000.0010 and cancelled the
previous loan of ₱690,000.00 through a "Cancellation and Discharge of Mortgage."11

Subsequently, on April 12, 1999, Amelia and Florencia executed another Kasulatan ng Pagdaragdag
ng Sanla in the amount of ₱57,500.00.12 Florencia, thereafter, received the owner's duplicate copy of
TCT No. T-2371, which she, in turn, entrusted to Carmelita when she went overseas.
On November 28, 2002, Amelia allegedly sold the subject property to Margarito through a Kasulatan
ng Bilihang Tuluyan13 for ₱500,000.00 and, likewise, cancelled the ₱l,085,000.00 loan through
another "Cancellation and Discharge of Mortgage."14 On the same date, Florencia filed a Petition for
the Issuance of a Second Owner's Duplicate of TCT No. T-2371 before the RTC of San Pablo City,
Branch 29.15 She alleged that she was the mortgagee of the subject property, and that she could not
locate, despite diligent search, the owner's duplicate title in her possession, which she misplaced
sometime in September 2002.16 Florencia also executed a Special Power of Attorney in favor of
Margarito to represent her in the proceedings.17

Petitioners tried to oppose the issuance,18 but on January 30, 2003, the RTC granted the petition and
TCT No. T-59882 was later issued in the name of Margarito.19 On January 12, 2004, petitioners
registered an Adverse Claim over the Sta. Monica property, which was annotated on TCT No. T-
59882.20

Failing to settle their differences, petitioners subsequently instituted a Complaint for Partition and
Accounting with Prayer for Temporary

Restraining Order and/or Writ of Preliminary Injunction docketed as Civil Case No. SP-6064(04)
before the RTC of San Pablo City, Branch 32, over several properties against herein respondent
Margarito, the Spouses Marconi de Villa and Florencia Bautista, and the Spouses Senen Cabrera
and Ester Bautista.21

Petitioners averred that Margarito and the others refused to heed their oral and written demands for
the partition of the properties they co-owned, which included the Sta. Monica property.22

On April 23, 2004, the parties filed a "Partial Settlement" manifesting that they have entered into an
amicable settlement over the other properties involved in the complaint.23 In a Decision24 dated April
28, 2004, the RTC approved the compromise agreement.

Since no settlement was reached as regards the Sta. Monica property, petitioners presented copies
of their bank transactions with Far East Bank to support their claim of co-ownership over the
same.25 They also presented an undated, unnotarized, and without the name of the
vendee Kasulatan ng

Bilihang Tuluyan (blank Kasulatan ), which Amelia purportedly executed and signed disposing the
subject property in favor of the Bautista siblings.26 Petitioner Carmelita also alleged that the duplicate
copy of TCT No. T-2371 in the name of Amelia was in her possession and was never lost.

For his part, Margarito asseverated that he exclusively owns the property in controversy since he
used his personal funds in purchasing the land.27 Margarito presented TCT No. T-59882 covering the
Sta. Monica property, and the Tax Declaration and Receipts thereof.28

On February 16, 2009, the RTC ruled in favor of the petitioners and declared, among other things,
that the Sta. Monica property was commonly owned by the siblings.29 The RTC also ordered that the
property be partitioned among all of them and that an accounting of its income be held. The
dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered, as follows:


a. Declaring the lot covered by Transfer Certificate of Title No. T-59882, with an area of 25,578
square meters, situated at Barangay Sta. Monica, San Pablo City, as commonly owned by the
plaintiffs and defendants;

b. Ordering the partition of the lot covered by Transfer Certificate of Title No. T-59882 between and
among Manuel L. Bautista, Carmelita B. Sahagun, Margarito L. Bautista, Florencia Bautista De Villa,
Aniano L. Bautista and Ester B. Cabrera;

c. Ordering defendant Margarito Bautista to render an accounting of all the income from the subject
lot in litigation from November 28, 2002, up to the present, until the rendition of the account; and d.
Directing defendant Margarito Bautista to deliver to the plaintiffs and the other defen4ant their
respective shares of the income derived from the lot in litigation starting November 28, 2002.

No pronouncement as to the award of damages, attorney's fees, and costs.

SO ORDERED.30

On March 3, 2009, Margarito filed a Motion for Reconsideration,31 but the RTC denied it in an
Order32 dated April 2, 2009.

Aggrieved, Margarito elevated the case before the CA. In a Decision dated March 6, 2012, the CA
reversed and set aside the decision of the RTC. Thefallo of the decision reads:

WHEREFORE, premises considered, the Appeal is GRANTED. The Decision dated February 16,
2009 of the Regional Trial Court of San Pablo City, Branch 32 is hereby SET ASIDE. The subject
property covered by Transfer Certificate of Title (TCT) No. T-59882 under the name of defendant-
appellant Margarito L. Bautista is declared exclusively owned by defendant-appellant Margarito L.
Bautista.

SO ORDERED.33

The CA concluded that petitioners failed to establish that they are coowners of the Sta. Monica
property. It held that the TCT under Margarito's name was an indefeasible and incontrovertible title
to the property and has more probative weight than the blank Kasulatan adduced by the petitioners.
Consequently, petitioners' action for partition and accounting cannot be acted upon because they
failed to prove that they are co-owners of the Sta. Monica property.

Petitioners filed a Motion for Reconsideration, but it was denied in the Resolution dated May 25,
2012.

Hence, the present recourse raising the following errors on the part of the appellate court:

A. The Court of Appeals seriously erred when it relied on the case of Manuel Catindig vs. Aurora
Irene Vda. de Meneses which led to a conclusion that the TCT held by the defendant-appellant
serves as an indefeasible and incontrovertible title to said property.

B. The Decision promulgated on March 06, 2012 subject of this Petition failed to consider the fact
that the appealed Decision dated February 16, 2009 of the court a quo is already final and
executory, and for which reason, the Court of Appeal[s] has no jurisdiction to entertain the Appeal.
C. The Court of Appeals erred when it failed to appreciate the fact that there was a compromise
decision based on an agreement by all the parties which included property where some of the titles
are already in the names of the siblings concerned.

D. The Court of Appeals thus erred when it did not give weight to the evidence presented by the
petitioners-appellees and this is notwithstanding the findings of the court a quo in their favor.

The petition is impressed with merit.

As a general rule, the jurisdiction of this Court in cases brought before it from the CA is limited to the
review and revision of errors of law allegedly committed by the appellate court in petitions for review
under Rule 45 of the

Rules of Court.34 We note that the arguments raised here would necessarily require a re-evaluation
of the parties' submissions and the CA's factual findings. Nevertheless, the need to make a definitive
finding on the factual issue in light of the conflicting rulings rendered by the RTC and the CA justifies
this Court's review.35

At the outset, petitioners maintain that the CA has no jurisdiction to entertain the appeal since the
Decision dated February 16, 2009 of the RTC was already final and executory. They claim that the
motion for reconsideration filed by Margarito before the R TC was not in accordance with the Rules
because a copy of the said motion was served or received by them through a private courier service
and that there was a defect in the verification or affidavit of service.36

The Rules provide that pleadings may be filed in court either personally or by registered mail.37 In the
first case, the date of filing is the date of receipt. In the second case, the date of mailing is the date
of receipt.

Though filing of pleadings thru a private courier is not prohibited by the Rules, it is established in
jurisprudence that the date of actual receipt of pleadings by the court is deemed the date of filing of
such pleadings, and not the date of delivery thereof to a private letter-forwarding agency.38 Records
reveal that respondent received a copy of the Decision on February 23, 2009. In an Order39 dated
March 5, 2009, the trial court acknowledged that it received the motion for reconsideration filed by
respondent on March 4, 2009, or on the 9th day, which is still within the reglementary period.

The RTC gave petitioners 15 days from notice to file a comment on the motion for reconsideration
filed by respondent. Petitioners filed its Opposition to the Motion for Reconsideration on March 12,
2009.40 In their Opposition, petitioners pointed the defect in the service of the motion when the same
was delivered through LBC, a private courier. They also alleged therein that the motion should be
denied as it would prejudice their rights. From the foregoing, the RTC gave petitioners the
opportunity to be heard, and sufficient time to study the motion and meaningfully oppose the same. It
was not even alleged nor proven that the motion for reconsideration was filed out of time.
Considering the circumstances, the purpose of the service of the motion was substantially complied
with. The Rules should be liberally construed as long as their purpose is sufficiently met and no
violation of due process and fair play takes place.41

While We disagree with the petitioners on the procedural issues, this Court, however, finds cogent
reasons to grant the petition based on the substantial issues raised in the case at bar.

It is to be noted that the present action stemmed from an action for partition and accounting. A
special civil action of judicial partition under Rule 69 of the Rules of Court is a judicial controversy
between persons who, being co-owners or coparceners of common property, seek to secure a
division or partition thereof among themselves, giving to each one of them the part corresponding to
him.42 The object of partition is to enable those who own property as joint tenants, or coparceners, or
tenants in common to put an end to the joint tenancy so as to vest in each a sole estate in specific
property or an allotment in the lands or tenements.43 It is typically brought by a person claiming to be
the owner of a specified property against a defendant or defendants whom the plaintiff recognizes to
be his co-owners44and is premised on the existence or non-existence of co-ownership between the
parties.45 Hence, unless and until the issue of co-ownership is definitively resolved, it would be
premature to effect a partition of an estate.46

Consequently, the first stage of an action for judicial partition and/or accounting is concerned with
the determination of whether or not a coownership in fact exists and a partition is proper.47 In the
case at bar, petitioners aver that although the Sta. Monica property was registered solely in
Margarito's name, they are co-owners of the property because it was acquired through the siblings'
lending business, as such, they are entitled to partition and the conveyance to them of their
respective shares.

To support their allegations, petitioners presented several mortgage contracts evidencing the
transactions between Amelia and Florencia, computer printouts of their bank transactions, and the
blank Kasulatan. In Carmelita's direct testimony, she illustrated how they acquired properties through
their lending business and how ownership of the properties was transferred under their names. She
also testified that the money used in the purchase of the Sta. Monica property came from their
common fund. The pertinent portions of her testimony read:

ATTY. JAVIER

Q: And how did you acquire these properties?

A: Through our lending activities, sir.

Q: Would you care to illustrate the actual acquisition or demonstrate the acquisition?

A: If the borrower failed to pay, she or he [is] requested to secure the Deed of Sale, sir.

COURT

Paano, paano? Tagalugin nga.

A: We foreclosed the mortgage, sir.

A TTY. JAVIER

Q: But there was the mentioning of a Deed of Sale?

A: We asked the borrower to execute the Deed of Sale, sir.

Q: And by these sales, in whose names were these properties put?

A: To us, on our names, sir.

xxx xxx xxx


ATTY: JAVIER

Q: Now, I am asking you, how about the Sta. Monica property?

A: The Sta. Monica is co-owned also by six (6), sir.

Q: Why do you say so?

A: Because the money acquired... Ang pera... The money used in buying that property came from
the common funds, sir.

Q: Do you have tangible proof of this?

A: The computer [printout] as to the one withdrawn in our bank account, Slf.

Q: Is this the one you are referring to?

A: Yes, this [is] what I mean, all the transactions are here, sir.

Q: Do you have other than these computer [printouts], Exhibit "B," do you have any tangible proof
that the Sta. Monica property is co-owned by the six (6) Bautista siblings?

A: The blank Deed of Sale issued, sir.

Q: I am now showing to you a Kasulatan ng Bilihang Tuluyan already previously marked as Exhibit
"E" and consisting of two (2) pages, could this be that Kasulatan?

A: This is the document I am referring to, sir.

ATTY. JAVIER

For the record, we wish that it be reflected that the Kasulatan does not indicate although it indicates
the vendor, does not indicate the vendee, Your Honor. And the same has not been notarized.48

From the foregoing, petitioners established the manner in which they acquired several properties
through their business and have them registered under their names. Even the compromise
agreement they entered into, which was approved by the RTC, reflected their claim and admission
that they co-owned the properties although titled to only one of their siblings. It was, thus, logical for
the RTC to conclude that it was through this practice that they also acquired the Sta. Monica
property.

Moreover, several other circumstances buttressed petitioners' claim, among which is that they have
proven that their lending business has the financial capacity to acquire the Sta. Monica property; that
Florencia, who was co-manager of the business, entered into several mortgage transactions with
Amelia; and that the blank Kasulatan was in their possession. They even opposed the issuance of a
second owner's duplicate copy of TCT No. T-2371 since the original TCT was in their safekeeping
and was not actually lost.

As for Margarito, he narrated in his direct testimony how the ownership of the property was allegedly
transferred to him:
ATTY.REYES

Q: Will you kindly tell the Honorable Court, how it came about this property in Sta. Monica, San
Pablo City was purchased by you, I am referring to the Deed of Sale of Amelia Mendoza from the
start up to the final deed of sale?

A: That property was mortgaged to my sister Florencia de Villa, and part of the money came from my
own money. At that time Amelia Mendoza informed me that she would like to sell that property to
both of us[,] Florencia and I, and then Florencia de Villa asked me if I am interested to buy that
property.

Q: What was your answer?

A: I told her that I am interested.

Q: What finally happened, when Amelia Mendoza informed you about that Deed of Sale, what was
the final consideration of the Deed of Sale?

A: What was stated in the Absolute Deed of Sale was [₱]500,000.00.

Q: But again that was actually paid by you?

A: What was stated in the annotation at the back of the title plus Amelia Mendoza asked for
additional amount of ₱50,000.00.

xxxx

ATTY. REYES

Q: Do you remember Mr. Witness, when did you execute the Deed of Sale with Amelia Mendoza?

A: More or less on November 28, 2002.

Q: Do you have a copy of that document?

A: I will try to look with the files I have on hand.

I have here the document stating the amount of [₱]500,000.00 only.

Q: Why [did it take] you four (4) years in order to execute that Deed of Sale?

A: Because the mortgage to sell was prepared in order for them to redeem the property and at the
same time to return the money we have given.

x x x x49

The CA held that Margarito presented pieces of evidence, including a deed of sale between Amelia
and Margarito. However, as found by the RTC and based on the List of Exhibits, aside from his bare
allegations and testimony, Margarito neither identified nor presented the deed of sale during trial nor
formally offered the same as his evidence.50 It is elementary that he who alleges a fact has the
burden of proving it and a mere allegation is not evidence.51 It appears that Margarito's evidence of
exclusive ownership are the certificate of title, the tax declarations pertaining thereto, his bank
deposits, and other mortgage contracts involving different mortgagors. Despite all these, Margarito
failed to prove that Amelia conveyed the Sta. Monica property exclusively in his name. It is also quite
intriguing why he did not even bother to present the testimony of Amelia or of Florencia, who could
have enlightened the court about their transactions. In addition, We find it incredible that a property,
which secured a loan roughly over a million pesos, would be sold for considerably less than that
amount or for only ₱550,000.00.

As for the TCT No. T-59882 in the name of Margarito, like in the case at bar, although a certificate of
title is the best proof of ownership of a piece of land, the mere issuance of the same in the name of
any person does not foreclose the possibility that the real property may be under co-ownership with
persons not named in the certificate or that the registrant may only be a trustee or that other parties
may have acquired interest subsequent to the issuance of the certificate of title.52 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.53

There is an implied trust when a 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.54 This is
sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual
payment of money, property or services, or an equivalent, constituting valuable consideration; and
(b) such consideration must be furnished by the alleged beneficiary of a resulting trust.55

A trust, which derives its strength from the confidence one reposes on another especially between
families, does not lose that character simply because of what appears in a legal document.56 From
the foregoing, this Court finds that an implied resulting trust existed among the parties. The pieces of
evidence presented demonstrate their intention to acquire the Sta. Monica property in the course of
their business, just like the other properties that were also the subjects of the partition case and the
compromise agreement they entered into. Although the Sta. Monica property was titled under the
name of Margarito, the surrounding circumstances as to its acquisition speak of the intent that the
equitable or beneficial ownership of the property should belong to the Bautista siblings.

Inevitably, the RTC's Order of partition of the Sta. Monica property was erroneously set aside by the
CA and this Court is convinced that petitioners satisfactorily established that they are co-owners of
the property and are entitled to the reliefs prayed for.

WHEREFORE, the petition is hereby GRANTED. The Decision dated March 6, 2012 and the
Resolution dated May 25, 2012 of the Court of Appeals in CA-G.R. CV No. 93562 are REVERSED
and SET ASIDE. Consequently, the Decision dated February 16, 2009 of the Regional Trial Court of
San Pablo City, Branch 32, in Civil Case No. SP-6064(04) is REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson
JOSE CATRAL MENDOZA MARVIC M.V.F. LEONEN
Associate Justice Associate Justice

FRANCIS H. JARDELEZA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation,
I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO


Chief Justice

Footnotes

1
Penned by Associate Justice Fiorito S. Macalino, with Associate Justices Remedios S.
Salazar-Fernando and Ramon M. Bato, Jr., concurring, rollo, pp. 40-49.

2
Id. at 51-53.

3
Penned by Judge Agripino G. Morga; id. at 72-81.

4
Rollo, p. 41.

5
Id. at 42.

6
Id

7
Id.at41.

8
Id. at 74.

9
Id

10
Id. at 43.
Id.
11

12
Id. at 74.

13
Id. at 43.

14
Id. at 43-44.

15
Id. at 43.

16
Id.

17
Id. at 43-44.

18
Id. at 44.

19
Id.

20
Id. at 76.

21
Id. at 44.

22
Id.

23
Id. at45.

24
Penned by Judge Zorayda Herradura-Salcedo; records, Vol. I, pp. I IO-l l(/3.

25
Rollo, p. 45.

26
Id.

27
Id.

28
Id.

29
Id. at 72-81.

30
Id. at 81.

31
Records, Vol. 2, pp. 459-465.

32
Id. at 481-486.

33
Rollo, p. 48.

34
Tong, et al. v. Go Tiat Kun, et al., 733 Phil. 581, 590 (2014).

35
Id.
36
Rollo, pp. 32-33.

37
Sec. 3. Manner of filing. - The filing of pleadings, appearances, motions, notices, orders,
judgments and all other papers shall be made by presenting the original copies thereof,
plainly indicated as such, personally to the clerk of court or by sending them by registered
mail. In the first case, the clerk of court shall endorse on the pleading the date and hour of
filing. In the second case, the date of the mailing of motions, pleadings, or any other papers
or payments or deposits, as shown by the post office stamp on the envelope or the registry
receipt, shall be considered as the date of their filing, payment, or deposit in court The
envelope shall be attached to the record of the case.

Heirs of Numeriano Miranda, Sr. v. Miranda, 713 Phil. 541, 550 (2013), citing Philippine
38

National Bank v. Commissioner of internal Revenue, 678 Phil. 660, 673 (2011). (Emphases
supplied)

39
Records, Vol. 2, p. 467.

40
Id. at 468-471.

41
People v. Court of Appeals, G.R. No. 183652, February 25, 2015, 751 SCRA 675, 693.

42
Oribello v. Court of Appeals, G.R. No. 163504, August 5, 2015, 765 SCRA 18, 32-33.

43
id. at 33.

44
De Mesa v. Court of Appeals, 301 Phil. 783, 792 (1994).

45
Spouses Villafria v. Plaza, G.R. No. 187524, August 5, 2015, 765 SCRA 227, 250.

46
Id.

47
De Mesa v. Court of Appeals, supra note 44.

48
TSN, December 20, 2005, pp. 13-14; 17-19. (Emphases ours).

49
TSN, April 29, 2008, pp. 8-9; 15-16. (Emphases ours)

50
Rollo, p. 79.

51
Luxuria Homes, Inc. v. CA, 361 Phil. 989, 1000 (1999).

52
Lee Tek Sheng v. CA, 354 Phil. 556, 561-562 (1998).

53
Tong v. Go Tiat Kun, supra note 35, at 593.

54
Article 1448 of the Civil Code.

55
Tong v. Go Tiat Kun, supra note 35, at 592-593.

56
Id. at 593.
THIRD DIVISION

G.R. No. 167120 April 23, 2014

RODOLFO V. FRANCISCO, Petitioner,


vs.
EMILIANA M. ROJAS, and the legitimate heirs of JOSE A. ROJAS, namely: JOSE FERDINAND
M. ROJAS II, ROLANDO M. ROJAS, JOSE M. ROJAS, JR., CARMELITA ROJAS-JOSE, VICTOR
M. ROJAS, and LOURDES M. ROJAS, all represented by JOSE FERDINAND M. ROJAS
II, Respondents.

DECISION

PERALTA, J.:

This petition for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure
(Rules) assails the December 22, 2003 Decision1 and February 7, 2005 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 62449, which nullified the decision and orders of the Regional Trial
Court (RTC) of Binangonan, Rizal, Branch 69, and its predecessor, Court of First Instance (CF!) of
Rizal, Branch 10, in Land Registration Case (LRC) Case No. 95-0004 (formerly LRC Case No. N-
9293), captioned In Re: Application for Registration of Land Title, Rosalina V Francisco, et al.,
Applicants, to wit:

1. Decision dated September 15, 1977, declaring Rosalina V. Francisco, Carmen V.


Francisco, Carmela V. Francisco and herein petitioner Rodolfo V. Francisco as the true and
absolute owners of Lots 1, 2, 3, and 4 of Plan Psu-04-001463;3

2. Order dated February 22, 1978, directing the Land Registration Commission to issue a
decree of registration over the parcels of land covered by the Decision dated September 15,
1977;4

3. Order dated March 23, 1998, directing the Register of Deeds of Morong, Rizal to issue
new certificates of title covering the same parcels of land, which are now technically
identified as Lots 6-B, 6-C, 6-D and 6-E, in relation to Lot 6-A of Plan Psu 04-083681;5 and

4. Order dated May 8, 2000, requiring the Register of Deeds of Morong, Rizal to show cause
why she should not be cited in contempt of court for not issuing new certificates of title
covering the same parcels of land.6

The factual antecedents, as the CA thoroughly narrated, appear as follows:

[Respondent] Emiliana M. Rojas is the widow of the late Jose Rojas, while the other [respondents]
are the children of the spouses. For purposes of this disposition, [respondents] shall hereafter be
collectively referred to as the Rojases.

On the other hand, x x x Rosalina V. Francisco, [petitioner] Rodolfo V. Francisco, and Carmela V.
Francisco, hereafter collectively referred to as the Franciscos, are the applicants for registration in
Land Registration Case No. 95-0004 from whence the challenged decision and orders sprung.7

Subject of the controversy is a portion of the 3,181.74 hectares of a vast track of land, known as the
Hacienda de Angono, in Angono, Rizal. The entire hacienda used to be owned by one Don
Buenaventura Guido y Santa Ana upon whose death left a portion thereof, consisting of the said
3,181.74 hectares, to his two (2) sons Francisco Guido and Hermogenes Guido.

Sometime in September 1911, Decreto No. 6145, covering the same 3,181.74-hectare portion of
Hacienda de Angono was issued in favor of the brothers Francisco and Hermogenes. On the basis
thereof, Original Certificate of Title (OCT) No. 633 over the same 3,181.74 hectares was issued in
the names of the two (2) brothers.

Several years later, or on May 12, 1933, OCT No. 633 was cancelled, and, in lieu thereof, Transfer
Certificate of Title No. 23377 was issued. Nine (9) years later, or sometime in 1942, the heirs of
Francisco and Hermogenes adjudicated among themselves the same 3,181.74 hectares and
transferred the one-half (1/2) portion thereof to Jose A. Rojas, predecessor-in-interest of the
[respondents] Rojases. Allegedly, the adjudication was formalized by the heirs of Francisco and
Hermogenes only on December 17, 1973, when they purportedly executed an Extra-Judicial
Settlement of Estate With Quitclaim.

Confusingly, some few months thereafter, or on August 20, 1974, the heirs of Don Buenaventura
Guido y Santa Ana, represented by their lawyer, requested the then Land Registration Commission
(now, Land Registration Authority) to issue the corresponding original certificate of title based on
Decreto No. 6145, evidently because OCT No. 633 which was earlier issued on the basis of the
same Decreto was previously cancelled. The request, however, was denied by the said office on
January 8, 1976.

Meanwhile, on March 29, 1976, Alfredo Guido, Sr., representing the other heirs, filed with the
Registry of Deeds of Morong a petition for reconstitution of TCT No. 23377, alleging that the original
of the same title could not be located in the files of the Registry of Deeds of Rizal when he and his
co-heirs sought the registration of their aforementioned [Extra]-Judicial Settlement of Estate With
Quitclaim. The petition was supported by the owner’s duplicate copy of the title sought to be
reconstituted.

On the same date that Guido, Sr. filed the petition for reconstitution, the same was granted and a
reconstituted certificate of title – TCT (23377) RT-M-0002 – was issued.

After the reconstitution, the heirs presented before the Registry of Deed of Morong the same Extra-
Judicial Settlement of Estate With Quitclaim.

Subsequently, the entire parcel of land covered by Decreto No. 6145 was subdivided into twenty-one
(21) lots and twenty-one (21) different certificates of title were issued in lieu of the reconstituted TCT
No. 23377.

Thereafter, the heirs who executed the aforesaid document of extra-judicial settlement, including the
now spouses Jose Rojas and Emiliana Rojas, sold the property to Pacil Management Corporation
(Pacil, for short), and new titles were issued in favor of Pacil on June 26, 1976. Three (3) months
later, or on August 26, 1976, Pacil reconveyed all the 21 lots to the former owners. On August 25,
1978, fourteen (14) of the 21 lots were exchanged for shares of stock of Interport Resources
Corporation. On April 25, 1980, all the named heirs in the same Extra-Judicial Settlement of Estate
With Quitclaim renounced their rights over the remaining portion of the 3,181.74 hectares in favor of
their co-heir Alfredo Guido, Sr., in exchange for monetary considerations.

It appears, however, that on August 13, 1976, barely five (5) months from the time Alfredo Guido, Sr.
filed his petition for reconstitution of TCT No. 23377 on March 29, 1976, which petition was approved
on the same date, an Application for Registration of Title over four (4) parcels of land (lots 1, 2, 3
and 4), as shown in plan Psu-04-001463, which lots are presently alleged by the [respondents]
Rojases to be "overlapping a portion of the area covered by TCT No. 23377," x x x was filed with the
then Court of First Instance (CFI) of Rizal, Branch 10, by Rosalina, Rodolfo, Carmela and Carmen,
all surnamed Francisco (the Franciscos), about which petition the Rojases now claim to be unaware
of. Raffled to Branch 10 of the court, the petition was docketed in the same court as Land
Registration Case No. N-9293 x x x.

Acting thereon, the said court issued on June 22, 1977 an Order of General Default premised on the
fact that despite notice which was duly published, posted and served in accordance with law, "no
person has appeared as respondent in the case or filed an answer within the time for that purpose
allowed, with the exception of the Director of Lands, the Provincial Government of Rizal and the
Municipal Government of Binangonan, Rizal thru their counsel, who are given ten (10) days from
today within which to file their formal opposition." x x x

Eventually, in the herein assailed Decision dated September 15, [1977], CFI Branch 10, acting as a
land registration court, declared the applicant Franciscos "the true and absolute owners of Lots 1, 2,
3 and 4 of Plan Psu-04-00460," thus:

"WHEREFORE, the Court hereby declares the following the true and absolute owners of Lots 1, 2, 3
and 4 of Plan Psu-04-[001463] in the ratio [as] set opposite their respective names:

Rosalina Villamor Francisco, widow, of legal age and residing at Angono, Rizal ----------------------------
------ 5/8

Carmen V. Francisco, single, of legal age and residing at Angono, Rizal --------------------------------------
---- 1/8

Rodolfo V. Francisco, married to Teofila Gil, of legal age and residing at Angono, Rizal ------------------
----- 1/8

Carmela V. Francisco, single, of legal age and residing at Angono, Rizal -------------------------------------
---- 1/8

The title to be issued shall contain the inscriptions:

‘Lots 2 and 3 of Plan Psu-04-001463 are hereby reserved for the future widening of Manila East
Road.’

Once this decision becomes final, let an order for the issuance of decree issue.

SO ORDERED" x x x

The aforequoted decision having become final and executory, the Franciscos filed with the same
court (CFI, Branch 10), a petition for the issuance of a decree of registration. And, in the herein
assailed Order dated February 22, 1978, the court directed the Commissioner of Land Registration
to issue the desired decree x x x.

To complicate matters, it appears that on August 22, 1979, in the then Court of First Instance of
Rizal, Branch 155, stationed in Pasig, the Republic of the Philippines, represented by the Solicitor
General, filed a complaint for declaration of nullity of Decreto No. 6145 and the owner’s duplicate
copy of TCT No. 23377 against the heirs of Francisco Guido and Hermogenes Guido, the spouses
Jose Rojas and Emiliana Rojas, the Pacil Development Corporation and Interport Resources
Corporation, it being alleged in the same complaint that both the Decreto No. 6145 and the owner’s
copy of TCT No. 23377 were false, spurious and fabricated and were never issued by virtue of
judicial proceedings for registration of land either under Act No, 496, as amended, otherwise known
as the Land Registration Act, or under any other law. The complaint for annulment was docketed as
Civil Case No. 34242.

After trial, the CFI of Rizal, Branch 155, rendered a decision dismissing the Republic’s complaint and
declaring Decreto No. 6145 and TCT No. 23377 "genuine and authentic." We quote the pertinent
portions of the decision:

"Considering that Decree 6145 and TCT No. 23377 are genuine and authentic, the decree cannot
now be reopened or revived.

‘A decree of registration binds the land and quiets title thereto, is conclusive upon all persons and
cannot be reopened or revived after the lapse of one year after entry of the decree (Ylarde vs.
Lichauco, 42 SCRA 641)

WHEREFORE, premises considered, this case is hereby dismissed. Likewise, the counterclaims of
the defendants are dismissed."

From the same decision, the Republic went on appeal to [the Court of Appeals] in CA-G.R. CV No.
12933. And, in a decision promulgated on July 12, 1988, [the CA] dismissed the Republic’s appeal
and affirmed the appealed decision of the Rizal CFI, Branch 155.

In time, the Republic moved for a reconsideration with an alternative prayer declaring Decreto No.
6145 and its derivative titles authentic except with respect to such portions of the disputed property
which were either: (1) possessed and owned by bona fide occupants who already acquired
indefeasible titles thereto; or (2) possessed and owned by bona fide occupants and their families
with lengths of possession which amounted to ownership.

In a resolution promulgated on September 14, 1988, [the CA] denied the motion, saying:

"After careful consideration of the motion for reconsideration and defendants-appellees’ opposition
thereto, We find no cogent reason to justify the reversal of Our decision dated July 12, 1988, hence
the motion is DENIED.

Likewise DENIED, is the alternative prayer to modify the aforementioned Decision ‘to the extent that
the recognition of the authenticity of Decree No. 6145 and TCT No. 23377 shall not affect and
prejudice the parcels of land already possessed and owned by bona fide occupants who have
already acquired indefeasible title thereto’, for to grant said alternative prayer would be to run
roughshod over Our decision adverted to."

Undaunted, the Republic, again thru the Solicitor General, went to [this Court] on a petition for
review in G.R. No. 84966, entitled ["Republic of the Philippines vs. Court of Appeals"]. In a decision
promulgated on November 21, 1991, [the Court] affirmed the decision of the [CA], subject to certain
conditions therein stated, thus:

"ACCORDINGLY, the decision of the Court of Appeals in CA-G.R. No. 12933 is AFFIRMED subject
to the herein declared superior rights of bona fide occupants with registered titles within the area
covered by the questioned decree and bona fide occupants therein with lengths of possession which
had ripened to ownership, the latter to be determined in an appropriate proceeding. 1âw phi 1

SO ORDERED" (204 SCRA 160, 181)

Two (2) years after [this Court] handed down its aforementioned decision, a Supplementary Report,
dated December 13, 1993, was submitted in LRC Case No. N-9293 by Director Silverio Perez of the
Land Registration Authority, recommending to the court that "the applicants (i.e., the Franciscos) be
ordered to submit a subdivision plan of Lot 6 of the subdivision plan (LRC) Psd-240150 covered by
TCT No. 2095, together with the corresponding technical descriptions duly approved by the Regional
Technical Director by segregating therefrom the parcels of land described as Lots 1, 2, 3 and 4 in
plan Psu-04-001463 decided in favor of the applicants and the issuance of new [transfer certificates
of title]by the Register of Deeds of Morong, Rizal, in accordance with the decision of the Supreme
Court" x x x.

On March [13,] 1995, the Franciscos, as applicants a quo moved for a transfer of venue to the newly
created RTC of Binangonan, Rizal. The case was then raffled to Branch 69 of said court, whereat
the same application for registration was docketed as Land Registration Case No. 95-0004.

In the herein other assailed Order dated March 23, 1998, the Binangonan RTC directed the Register
of Deeds of Rizal to issue transfer certificates of title in favor of the applicant Franciscos, to wit:

"WHEREFORE, the Register of Deeds of Morong, Rizal is hereby directed to issue a new transfer
certificate of title covering the subject parcels of land which are now technically identified as Lot 6-B,
Lot 6-C, Lot 6-D, and Lot 6-E in relation to Lot 6-A of plan Psu-04-083681 in accordance with the
recommendation of the Land Registration Authority in its Supplementary Report dated December 13,
1993 and [the] decision of the Supreme Court in Republic vs. CA, 204 SCRA 160; [179] – in the
names of applicants who are hereby declared to be the owners and bona fide occupants of the land
in question, with possession for more than 30 years since the time that started way back during the
American regime, by themselves and their predecessors-in-interest, which has ripened into
ownership, in the following proportion or interest, to wit:

1) Carmen V. Francisco, married to Thomas Whalen, of legal age, and residing at Angono,
Rizal – 1/3

2) Rodolfo V. Francisco, married to Teofila Gil, of legal age, and residing at Angono, Rizal –
1/3

3) Carmela V. Francisco, single, of legal age, and residing at Angono, Rizal – 1/3

Let the technical descriptions of Lots 6-B, 6-C, 6-D and 6-E, of Plan 04-083681, as submitted to this
court, be used in the issuance of [certificates] of [title] in favor of the applicants, in lieu of the
technical descriptions of Lots 1, 2, 3 & 4 of Plan Psu-04-001463.

SO ORDERED." x x x

Said Order not having been complied with, the Binangonan RTC issued the herein last assailed
Order dated May 8, 2000, requiring Atty. Dian Lao of the Morong Registry to show cause within ten
(10) days from receipt why she should not be held in contempt of court for failing to implement the
earlier Order of March 23, 1998 x x x.
Such was the state of things when, on January 3, 2001, the herein [respondents] – the Rojases –
filed the x x x petition for certiorari and prohibition [before the CA] for the purpose already stated at
the threshold hereof, claiming that they came to know of the existence of Land Registration Case
No. 95-0004 only "sometime in June 2000" when a real estate agent by the name of Florentina
Rivera discovered the same and brought it to their knowledge x x x.8

Meantime, on July 29, 2000, the subject parcels of land were eventually registered in the names of
petitioner and his sisters, Carmen and Carmela with the issuance of TCT Nos. M-102009, M-
102010, M-102011, and M-102012, covering lots 6-E, 6-C, 6-D, and 6-B, respectively.9

On December 22, 2003, the CA ruled in favor of respondents. The fallo of the Decision declared:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, a writ of certiorari is hereby
issued ANNULLING and SETTING ASIDE the Decision dated September 15, 1977, and the
subsequent Orders dated February 22, 1978, March 23, 1978 and May 8, 2000 of the respondent
court and its predecessor, the then CFI of Rizal, Branch 10, in Land Registration Case No. 95-0004.
Consequently, Transfer [Certificate] of Title [Nos.] M-102012, M-102010, and M-102009 issued
pursuant thereto by the Register of Deeds at Morong, Rizal are hereby declared NULL and VOID.

No costs.

SO ORDERED.10

As to the appropriateness of the petition, the CA rejected petitioner’s supposition that the issue to be
resolved is only a pure question of law, that is, the determination or interpretation of what an
"appropriate proceeding" is as referred to in the dispositive portion of Republic v. Court of
Appeals11 (Guido). It held that since the petition raised the issue of lack of jurisdiction on the part of
the land registration court, the remedy of certiorari under Rule 65 of the Rules properly applies.
Anent the timeliness of the petition, the CA overlooked the procedural lapse of filing the petition
beyond the 60-day reglementary period in the interest of substantial justice given the compelling
merit of the petition.

On the merits of respondents’ petition, the CA ruled that the challenged decision and orders were
indeed issued without or in excess of jurisdiction. It opined:

Unquestionably, the title covering the lots applied for was made subject to the "superior rights" not
only of those already with registered titles within the area, but also of those bona fide occupants
whose lengths of possession have ripened into ownership to be determined in a proper proceeding.

Notwithstanding, We cannot subscribe to [the Franciscos’] theory that the ruling in Republic vs.
Court of Appeals and [Antonina] Guido, et al., supra, allowed what otherwise is a void proceeding for
lack of jurisdiction.

Indeed, the existence of a valid title covering the land sought to be registered is the determinative
factor in this case as far as the matter of jurisdiction to entertain the application for registration is
concerned.

In Orchard Realty and Development Corp. vs. Republic, 364 SCRA 100, 107, where the previous
registration of the subject parcel of land being applied for was subsequently declared null and void
by a competent court, the Supreme Court made clear:
"A land covered by a title which is outstanding cannot be subject of an application for registration
unless the existing title which has become indefeasible is first nullified by a proper court proceeding,
x x x."

Thus, unless and until an existing torrens title is declared a nullity, or, for that matter, declared
authentic but subject to any "superior rights," as herein, it remains subsisting as it is, and an
application for registration of the land covered thereunder, or any portion thereof, cannot, as yet, be
entertained.

Here, at the time the application for original registration was filed on August 13, 1976 and even when
the decision of the then CFI of Rizal granting the application was rendered on September 15, 1977,
there was no doubt as to the authenticity of TCT No. 23377 covering the lots in question, considering
that the action for annulment of said TCT was filed by the Solicitor General only on August 22, 1979.
Hence, by the simple fact that the lots in question were already covered by an existing title at the
time [the Franciscos] filed their application for registration, the then CFI of Rizal is bereft of
jurisdiction to take cognizance thereof, much less grant the same. Accordingly, herein [land
registration court] was without authority to order the issuance of new titles covering the same lots.

Moreover, [if We were] to follow [the Franciscos’] reasoning, We would, in effect, be sanctioning a
collateral attack on an existing title, which simply runs smack against the well-settled rule that "a title
may be challenged only in a proceeding for that purpose, not in an application for registration of a
land already registered in the name of another person" (Carvajal v. CA, 280 SCRA 351, 360).

For want of jurisdiction then, We inevitably rule and so hold that the decision dated September 15,
1977, in LRC No. 95-0004 adjudging [the Franciscos] the true and absolute owners of the subject
parcels of land therein sought to be registered, and the orders issued in consequence thereof, are
null and void ab initio.

And being null and void, such decision and orders can never become final and executory. Hence, an
action to declare them void is imprescriptible. In the graphic words of Republic vs. Court of Appeals,
309 SCRA 110, 122:

"x x x. (A) void judgment is not entitled to the respect accorded to a valid judgment, but may be
entirely disregarded or declared inoperative by any tribunal in which effect is sought to be given to it.
It is attended by none of the consequences of a valid adjudication. It has no legal or binding effect or
efficacy for any purpose or at any place. It cannot affect, impair or create rights. It is not entitled to
enforcement and is, ordinarily, no protection to those who seek to enforce. All proceedings founded
on the void judgment are themselves regarded as invalid. In other words, a void judgment is
regarded as a nullity, and the situation is the same as it would be if there were no judgment x x x."12

Petitioner moved for a reconsideration of the aforesaid Decision, but the CA resolved to deny the
same on February 7, 2005; hence, this petition which raises the following issues:

I. WHETHER OR NOT THE ASSAILED LAND REGISTRATION PROCEEDINGS IN LRC


NO. 95-0004 [RTC]; LRC NO. N-9293 [CFI] IS THE "APPROPRIATE PROCEEDING"
CONTEMPLATED IN THIS HONORABLE COURT’S PRONOUNCEMENT IN "GUIDO
CASE"? IN THE ALTERNATIVE, WHETHER OR NOT AN ACTION FOR
‘RECONVEYANCE’ BEING MAINTAINED BY THE RESPONDENTS IS THE
"APPROPRIATE PROCEEDING"?
WE RESPECTFULLY STATE IT SIMPLY, WHAT IS THE "APPROPRIATE PROCEEDING"
THAT WAS CONTEMPLATED BY THIS HONORABLE COURT IN THE "GUIDO CASE"?
II. WHETHER OR NOT THE "CA FINAL AND EXECUTORY DECISION" IN CA-G.R. CV
NO. 77764 HAD ESTABLISHED A PRECEDENT, I.E., "LAND REGISTRATION" IS THE
PROPER PROCEEDING, IN SO FAR AS ALL COURTS LOWER THAN THIS HONORABLE
SUPREME COURT AND THE GUIDO ESTATE IS CONCERNED? IF SO, WHETHER OR
NOT THE HONORABLE COURT OF APPEALS MAY STILL VALIDLY RENDER DECISION
IN CONTRAST THERETO?

III. WHETHER OR NOT PETITIONER IS IMPLEADED AS PARTY TO THE ACTION FOR


DECLARATION OF NULLITY OF DECRETO 6145 AND THE OWNER’S DUPLICATE
COPY OF TCT NO. 23377 FILED BY THE OFFICE OF THE SOLICITOR GENERAL IN
CIVIL CASE NO. 34242, BR. 155, CFI, RIZAL, WHICH WAS APPEALED TO THE
HONORABLE COURT OF APPEALS IN CA-G.R. CV NO. 12933, AND ELEVATED TO THIS
COURT VIA PETITION FOR REVIEW IN G.R. NO. 84966, ENTITLED ‘REPUBLIC OF THE
PHILIPPINES VS. COURT OF APPEALS ET AL.,’ NOW KNOWN AS GUIDO CASE?

IV. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN


ENTERTAINING THE PETITION FOR CERTIORARI AND PROHIBITION (CA-G.R. SP NO.
62449) DESPITE ADMITTING THAT SAID PETITION WAS FILED EXCEEDINGLY
BEYOND THE MANDATORY AND JURISDICTIONAL 60-DAY PERIOD?

V. WHETHER OR NOT THE TRIAL COURT ACTED WITHOUT JURISDICTION OR


COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION?13

On February 1, 2006, during the pendency of the case, respondents, through counsel, filed a Motion
for Approval of Transaction and Agreement Involving Property under Litigation. They alleged that:
the parcels of land covered by TCT Nos. M-102010 and M-102012 were acquired by Citimar Realty
& Development Corporation (Citimar) by virtue of a Deed of Absolute Sale executed on September
7, 2001; that TCT Nos. M-102010 and M-102012 were cancelled and replaced by TCT Nos. M-
107343 and M-107344, respectively, in the name of Citimar; that pursuant to a Memorandum of
Agreement dated January 31, 2006, respondents, for valuable consideration, ceded their rights over
the lots covered by said TCTs in favor of Citimar; that on account of the agreement, Citimar, which is
the successor-in-interest of petitioner with respect to the already cancelled TCT Nos. M-102010 and
M-102012, has been subrogated to the rights of respondents relative to the parcels of land covered
thereby; and that, in effect, there is no longer any controversy that needs to be resolved by the Court
with regard to the rightful ownership of the lots mentioned because Citimar acquired the rights
pertaining to the party-litigants.14 Respondents prayed that the MOA executed between them and
Citimar be approved and that the present case be limited to the matter of determining the validity of
TCT No. M-102009 and its derivatives.

Despite no objection interposed by petitioner, the Court resolved to deny respondents’ motion in its
Resolution dated November 26, 2007 due to lack of legal basis.15

The petition is denied.

First, We shall tackle matters of procedure.

Petitioner contends that the CA should have dismissed the petition for certiorari and prohibition filed
by respondents on January 3, 2001 for being filed beyond the 60-day reglementary period in
violation of Section 4, Rule 65 of the Rules from the time they allegedly discovered the existence of
LRC Case No. 95-0004 in June 2000. He asserts that failure to perfect an appeal within the
prescribed period is not a mere technicality but mandatory and jurisdictional in nature and that, for
want of allegations of compelling reason for the court to exercise its equity jurisdiction, procedural
rules on timeliness of filing should have been strictly adhered to. Due to the CA’s error in
entertaining the petition, he avers that it did not acquire jurisdiction over the same, effectively
rendering invalid its questioned Decision and Resolution. Further, while petitioner agrees with the
CA’s opinion that Torrens title cannot be attacked collaterally, he argues that respondents’ petition
for certiorari before the CA does not and cannot be considered as a direct attack to the Franciscos’
title; hence, the CA’s Decision nullifying TCT Nos. M-102009, M-102010, and M-102012 is likewise
void.

Indeed, respondents committed a lapse in procedure, but not due to a petition that was filed out of
time before the CA. Respondents erred because they should have filed a petition for annulment of
judgment under Rule 47 of the Rules instead of a petition for certiorari under Rule 65 thereof. Such
petition does not require a person to be a party to the judgment sought to be
annulled.16 Nevertheless, considering that the petition before the CA essentially alleged lack of
jurisdiction and denial of due process – two grounds upon which a petition for annulment of
judgment may be based (aside from extrinsic fraud)17 – We deem it wise to ignore the procedural
infirmity and resolve the substantial merits of the case, especially so since the action filed is not yet
barred by laches or estoppel.18

As to the alleged indefeasibility of the Franciscos’ title, petitioner’s contention is incorrect. Unlike
ordinary civil actions, the adjudication of land in a cadastral or land registration proceeding does not
become final, in the sense of incontrovertibility until after the expiration of one (1) year from the entry
of the final decree of registration. As long as a final decree has not yet been entered by the LRA and
the period of one (1) year has not elapsed from date of entry, the title is not finally adjudicated and
the decision in the registration proceeding continues to be under the control and sound discretion of
the court rendering it.19 In this case, the subject parcels of land were eventually registered in the
names of petitioner and his sisters on July 29, 2000 with the issuance of TCT Nos. M-102009, M-
102010, M-102011, and M-102012. Less than a year later, on January 3, 2001, respondents already
filed a petition for certiorari and prohibition before the CA.

Therefore, the principle that a Torrens title cannot be collaterally attacked does not apply.

Next, petitioner calls Our attention to an alleged "closely related case," Civil Case No. 01-052 then
pending before Branch 68 of the RTC of Binangonan, Rizal, entitled "Heirs of Alfredo I. Guido,
represented by Roberto A. Guido v. Carmen V. Francisco, et al." for "Annulment of the Decision and
Order dated August 7, 2000 in LRC Case No. 95-0004 with Prayer for Issuance of Writ of
Preliminary Injunction." It was dismissed by the trial court on September 13, 2002 and,
subsequently, by the CA on June 11, 2003 in CA-G.R. CV No. 77764. The CA Decision became final
and executory on July 3, 2004. Petitioner opines that with the CA dismissal of the Guidos’ appeal, it
has been settled that the land registration case is an "appropriate proceeding." He posits that CA-
G.R. CV No. 77764 has established a precedent and that the challenged orders of the land
registration court constitute the law between the parties because the Guidos and the Rojases are
similarly situated in the sense that they are both registered co-owners of the Guido Estate and both
of them assailed the same decisions and orders albeit via different modes of appeal. The effect of
this, petitioner holds, is that the CA Decision assailed in this petition was not validly promulgated,
since applying the doctrine of stare decisis, the CA did not follow the authority established in CA-
G.R. CV No. 77764.

We do not agree. The principle of stare decisis et non quieta movere (to adhere to precedents and
not to unsettle things which are established) is well entrenched in Article 8 of the Civil Code, which
states that "[j]udicial decisions applying or interpreting the laws or the Constitution shall form part of
the legal system of the Philippines." The doctrine embodies the legal maxim that a principle or rule of
law which has been established by the decision of a court of controlling jurisdiction will be followed in
other cases involving a similar situation. It is founded on the necessity for securing certainty and
stability in the law and does not require identity of or privity of parties.20 In a hierarchical judicial
system like ours, the decisions of the higher courts bind the lower courts; the courts of co-ordinate
authority do not bind each other; and the one highest court does not bind itself, it being invested with
the innate authority to rule according to its best lights.21 The principle of stare decisis enjoins
adherence by lower courts to doctrinal rules established by the Supreme Court in its final
decisions.22 Thus, a ruling of a particular division of the CA, while may be taken cognizance of in
some cases, cannot bind or prejudice a ruling of another division thereof, the former being a co-
ordinate authority and, relative to Us, is still considered as a lower court albeit empowered with an
appellate jurisdiction.

The procedural issues having been disposed of, We now turn to the substantive issues raised by
petitioner. Given that the resolution of the present case inevitably takes into consideration Our
pronouncements in Guido, a background thereof is in order.

On August 22, 1979, the Republic of the Philippines filed a complaint for declaration of nullity of
Decreto No. 6145, the owner's duplicate copy of TCT No. 23377 and all titles derived from said
decree; and the declaration of the parcel of land covered by the decree as belonging to the State,
except so much thereof as had been validly disposed of to third persons. The complaint, which was
docketed as Civil Case No. 34242 before the CFI of Rizal, alleged that Decreto No. 6145 issued on
September 10, 1911 and the alleged owner's copy of TCT No. 23377 issued on May 12, 1933, both
in the name of Francisco and Hermogenes Guido, and which supposed owner's duplicate was made
the basis of the administrative reconstitution of TCT No. (23377) RT-M-0002 on March 29, 1976 are
false, spurious and fabricated, and were never issued by virtue of judicial proceedings for
registration of land, either under Act No. 496, as amended, otherwise known as the Land
Registration Act, or any other law.

Named as defendants in the case were: (1) Antonina, Margarita, Feliza, Crisanta and Candida, all
surnamed Guido, who claimed to be the heirs of Francisco Guido and whose spouses were joined
as defendants; (2) Esperanza, Alfredo (who died during the pendency of this case and who was
substituted by his heirs), Eufronia, Gliceria, Priscilla, Profetiza, Buenaventura, Buensuceso and
Carlos, all surnamed Guido, who claimed to be the heirs of Hermogenes Guido and whose
respective spouses were joined as defendants; (3) spouses Jose and Emiliana Rojas; (4) Pacil
Development Corporation; and (5) Interport Resources Corporation.

The trial court dismissed the complaint and declared Decreto No. 6145 and TCT No. 23377 genuine
and authentic. The CA affirmed the Decision. In its motion for reconsideration, the Republic prayed
for an alternative judgment recognizing the authenticity and validity of Decreto No. 6145 and TCT
No. 23377 only with respect to such portions of the property which were either: (1) not possessed
and owned by bona fide occupants with indefeasible registered titles thereto or (2) possessed and
owned by bona fide occupants and their families with lengths of possession that has ripened to title
of ownership. The motion was denied. When elevated to Us, the same prayer for alternative
judgment was presented. This time, all the private respondents accepted the alternative prayer.

In Our November 21, 1991 Decision, We upheld the findings of the courts below that Decreto No.
6145 and TCT No. 23377 are authentic. However, the effects of laches and waiver were applied,
thus:

Anent the alternative prayer of the petitioner, We find no legal basis for the declaration of the
questioned documents as valid only with respect to such portions of the property not possessed and
owned by [bona fide] occupants with indefeasible registered titles of ownership or with lengths of
possession which had ripened to ownership. Having been found valid and genuine, Decreto No.
6145 therefore, possessed all the attributes of a decree of registration. Section 31 of the Property
Registration Decree (P.D. 1529), second paragraph provides:

The decree of registration shall bind the land and quiet title thereto, subject only to such exceptions
or liens as may be provided by law. It shall be conclusive upon and against all persons, including the
National Government and all branches thereof, whether mentioned by name in the application or
notice, the same being included in the general description "To all whom it may concern".

Likewise, TCT No. 23377, having been found true and authentic also possessed all the attributes of
a torrens certificate of title. By express provision of Section 47 of P.D 1529, no title to registered land
in derogation to that of the registered owner shall be acquired by prescription or adverse possession.
To declare that the decree and its derivative titles is valid but only with respect to the extent of the
area described in the decree not possessed by occupants with indefeasible registered titles or to
possessors with such lengths of possession which had ripened to ownership is to undermine the
people's faith in the torrens titles being conclusive as to all matters contained therein. The certificate
serves as evidence of an indefeasible title to the property in favor of the person whose names
appear therein. After the expiration of the one year period from the issuance of the decree of
registration upon which it is based, it becomes incontrovertible (see case of Pamintuan v. San
Agustin, 43 Phil. 558; Reyes and Nadres v. Borbon and Director of Lands, 50 Phil. 791, Sy Juco v.
Francisco, O.G. p. 2186, April 15, 1957, Brizuela v. de Vargas, 53 O.G. 2822, May 15, 1957), unless
subsequent to the issuance of the decree a third party may be able to show that he acquired title
thereto by any of the means recognized by law.

It should be noted however, that prior to the reconstruction of TCT No. 23377 on March 29, 1976,
[there was] no record in the Office of the Register of Deeds of Rizal show of the existence of any
registered title covering the land area subject of this case. The Court takes judicial notice of the fact
that prior to said date, certain portions of the area were in the possession of occupants who
successfully obtained certificates of titles over the area occupied by them. There were also
occupants who had not obtained certificates of titles over the area possessed by them but the
lengths of their possession were long enough to amount to ownership, had the land been in fact
unregistered. This fact is admitted by the parties.

Although prescription is unavailing against private respondents because they are holders of a valid
certificate of title, the equitable presumption of laches may be applied against them for failure to
assert their ownership for such an unreasonable length of time (only in 1976) against subsequent
occupants. The records showed that it was only in 1974 when they tried to obtain an original
certificate of title. When rebuffed by the LRC, they applied for a reconstitution of a TCT only in 1976.

In the recent case of Lola v. CA, G.R. No. L-46573, Nov. 13, 1986, 145 SCRA 439, citing the cases
of Pabalete v. Echarri, Jr., G.R. No. L-24357, 37 SCRA 518, 521, 522 quoting Mejia de Lucas v.
Gamponia, 100 Phil. 277, it was held that "although the defense of prescription is unavailing to the
petitioners (Pablo and Maxima Lola) because, admittedly, the title to Lot No. 5517 is still registered
in the name of the respondent (Dolores Zabala), still the petitioners have acquired title to it by virtue
of the equitable principle of laches due to the respondent's failure to assert her claim and ownership
for thirty two (32) years."

Moreover, conscious of the resulting "largescale dispossession and social displacement of several
hundreds of bona fide occupants and their families" which the Solicitor General pointed out, the
private respondent agreed unanimously to accept the alternative prayer of the petitioner in their joint
memorandum (pp. 624-636, Rollo). This agreement by private respondents takes the form of a
waiver. Though a valid and clear right over the property exists in their favors, they seemingly have
voluntarily abandoned the same favor of: 1) those who possessed and actually occupied specific
portions and obtained torrens certificates of titles, and 2) those who possessed certain specific
portions for such lengths of time as to amount to full ownership. The waiver, not being contrary to
law, morals, good customs and good policy, is valid and binding on the private respondents.

However, with respect to the second set of possessors, whose alleged bona fide occupancy of
specific portions of the property is not evidenced by Torrens Titles, it is imperative that their
claims/occupancy be duly proven in an appropriate proceeding.

ACCORDINGLY, the decision of the Court of Appeals in CA-G.R. No. 12933 is AFFIRMED subject
to the herein declared superior rights of bona fide occupants with registered titles within the area
covered by the questioned decree and bona fide occupants therein with length of possession which
had ripened to ownership, the latter to be determined in an appropriate proceeding.

SO ORDERED.23

Going back to this case, petitioner contends that the Franciscos correctly chose the land registration
proceeding as the "appropriate proceeding" referred to in Guido because, as evidently shown in the
CFI Decision, their titles, rights or interests to Lots 1-4 of Psu-04-001463 (now Lots 6B-6E of Psd-
04-083681) have been successfully confirmed. While recognizing that such proceeding is normally
untenable because the case involved the filing of an application for registration of land that is already
covered by a Torrens certificate of title, petitioner submits that Guido impliedly allowed the same. He
avers that their application was filed on August 13, 1976, or fifteen (15) years before this Court
rendered its decision in Guido on November 21, 1991, and that they were made aware of the
administrative reconstitution of TCT No. 23377 only in 1978 when the LRA Report was submitted to
the CFI and a copy of which was furnished them. By then, however, the CFI Decision granting the
application for registration already became final and executory.

Moreover, petitioner asserts that in view of the waiver made by the Guidos and the Rojases in
Guido, as well as the declared superior rights of the Franciscos, the latter’s title over the four parcels
of land is deemed vested to them as far back as the time the reconstituted TCT No. 23377 was
issued. Their title thereto was merely confirmed in the questioned land registration proceedings.
Petitioner notes the Motion for Approval of Transaction and Agreement Involving Property under
Litigation filed by respondents, which allegedly recognized the validity of TCT Nos. M-102010 and
M-102012 and reinforces the view that land registration is an "appropriate proceeding."

Petitioner attacks the CA in ruling that "[indeed,] the existence of a valid title covering the land
sought to be registered is the determinative factor in this case as far as the matter of jurisdiction to
entertain the application for registration is concerned." He argues that if the CA would be followed,
any subsequent proceeding for land registration involving the Guido Estate would be declared void,
because OCT No. 633 was registered as early as June 22, 1912.

Lastly, in disputing respondents’ contention that the "appropriate proceeding" should be an action for
reconveyance, petitioner states that such action may be proper but is still not an exclusive remedy.
He maintains that actual fraud in securing a title must be proved so as to succeed in an action for
reconveyance, but the Court already held in Guido that TCT No. 23377 is authentic and genuine;
hence, it is assumed that there is no infirmity or defect therein. Also, an action for reconveyance
cannot be availed of like an application for registration of land as it would be dismissed forthwith on
the ground of prescription.

The contentions of petitioner are untenable.


The Franciscos have based their claim to ownership of the subject lots on the alleged fact of open,
continuous, exclusive, and notorious possession and occupation of alienable and disposable lands
of the public domain. Their application represented to the land registration court that the parcels of
land subjects of the case were unregistered and not yet brought within the coverage of the Torrens
system of registration. These are obvious as they filed an application pursuant to Chapter III (I) of
Presidential Decree No. (PD) 1529 (Property Registration Decree) by following the ordinary
registration proceedings for the confirmation of their title. Specifically, under Section 14 (1) of PD
1529, three requisites must be satisfied: (1) open, continuous, exclusive, and notorious possession
and occupation of the land since June 12, 1945 or earlier; (2) pertains to alienable and disposable
land of the public domain, and (3) under a bona fide claim of ownership.

As the very nature of the action limits the subject matter to alienable and disposable lands of the
public domain, an ordinary registration proceeding cannot be availed of by the Franciscos in order to
establish claims over lands which had already been brought within the coverage of the Torrens
system. Chapter III (I) of PD 1529 does not provide that original registration proceedings can be
automatically and unilaterally converted into a proceeding for the issuance of new TCT involving
parcels of land already registered under the Torrens system. Certainly, it is improper to make a legal
short-cut by implementing the judgment of the land registration court against the parcels of land in
the names of the Rojases and Guidos under the guise that it is contemplated in Guido.

A land registration court has no jurisdiction to order the registration of land already decreed in the
name of another in an earlier land registration case. Issuance of another decree covering the same
land is, therefore, null and void.24

The rationale behind the Torrens System is that the public should be able to rely on a registered title.
The Torrens System was adopted in this country because it was believed to be the most effective
measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of
ownership is established and recognized. In Fil-Estate Management, Inc. v. Trono, we explained:

It has been invariably stated that the real purpose of the Torrens System is to quiet title to land and
to stop forever any question as to its legality. Once a title is registered, the owner may rest secure,
without the necessity of waiting in the portals of the court, or sitting on the "mirador su casa" to avoid
the possibility of losing his land.25

It is clear that the March 23, 1998 Order of the RTC Binangonan, Rizal, Branch 69, which purports to
merely enforce the September 15, 1977 Decision of the CFI, disturbs the stability of TCT No. M-
2095, a collateral attack that is impermissible under Section 48 of PD 1529 and well-entrenched
jurisprudence. After the promulgation of the Guido on November 21, 1991, it can no longer be said
that an original registration proceeding is proper, since Guido held that Decreto No. 6145 and TCT
No. 23377 (the mother title from which TCT No. M-2095 was derived) are genuine and authentic.
What the land registration court should have done was to dismiss the application for registration
upon learning that the same property was already covered by a valid TCT. We reiterate that, unlike
ordinary civil actions, the adjudication of land in a land registration or cadastral proceeding does not
become final and incontrovertible until after the expiration of one (1) year after the entry of the final
decree of registration and that until such time the title is not finally adjudicated and the decision in
the registration proceeding continues to be under the control and sound discretion of the court
rendering it.26 Until then the court rendering the decree may, after hearing, set aside the decision or
decree and adjudicate the land to another person.27

Likewise, on the assumption that what is being applied for formed part of a bigger parcel of land
belonging to the Guidos and Rojases, then, as registered owners thereof, they (Guidos and Rojases)
should have been mentioned in the Application for Registration as adjoining owners conformably
with Section 15 of PD 1529, which requires in the application for registration the inclusion of the full
names and addresses of the adjoining owners. Contrary to the mandatory requirement of the law,
there is nothing in the application for registration alleging that the Rojases and Guidos are adjoining
owners. As adjoining owners, respondents are indispensable parties entitled to actual and personal
notice of the application for registration. A valid judgment cannot be rendered where there is want of
indispensable parties like respondents who hold subsisting Torrens title to the property in question.

Notably, a Manifestation and/or Compliance28 was filed by the Franciscos on November 19, 1998
before the RTC Binangonan, Rizal, Branch 69. They alleged that despite service of notice of the
Manifestation with Motion dated July 10, 1998 to the registered owners appearing on TCT No. M-
2095, said owners, including Jose Rojas whose envelope was stamped "RETURN TO SENDER,"
did not file any comment or opposition. The Franciscos stated that TCT M-2095 does not bear the
complete address of the registered owners, so they gathered their respective addresses from the
available and accessible public records. This reasoning does not suffice. In Divina v. Court of
Appeals,29 We stressed:

Section 15 of P.D. 1529 is explicit in requiring that in the application for registration of land titles, the
application "shall also state the full names and addresses of all occupants of the land and those of
the adjoining owners if known, and if not known, it shall state the extent of the search made to find
them." As early as Francisco vs. Court of Appeals, 97 SCRA 22 [1980] we emphasized that a mere
statement of the lack of knowledge of the names of the occupants and adjoining owners is not
sufficient but "what search has been made to find them is necessary." x x x30

The "appropriate proceeding" referred to in Guido is a case where the Franciscos must present
specific acts of ownership to substantiate their claim that they are bona fide occupants of Lots 1-4 of
Psu-04-001463 (now Lots 6B-6E of Psd-04-083681) while, at the same time, respondents are
accorded due process of law by availing of the opportunity to oppose and refute the representations
made by the Franciscos. Whatever the "appropriate proceeding" may be, the decisive factor is that
the same should be a proceeding in personam wherein personal service of summons and copy of
the complaint/petition is necessary.

Truly, one of the appropriate legal remedies that should have been availed of by the Franciscos is an
action for reconveyance. Contrary to petitioner’s declaration, proof of actual fraud is not required as
it may be filed even when no fraud intervened such as when there is mistake in including the land for
registration. In the action for reconveyance, the decree of registration is highly respected as
incontrovertible; what is sought instead is the transfer of the property wrongfully or erroneously
registered in another’s name to its rightful owner or to the one with a better right.31

An action for reconveyance resulting from fraud prescribes four years from the discovery of the fraud
and if it is based on an implied or a constructive trust it prescribes ten (10) years from the alleged
fraudulent registration or date of issuance of the certificate of title over the property.32

However, an action for reconveyance based on implied or constructive trust is imprescriptible if the
plaintiff or the person enforcing the trust is in possession of the property.33 In effect, the action for
reconveyance is an action to quiet the property title, which does not prescribe.34 This Court held in
Yared v. Tiongco:35

The Court agrees with the CA’s disquisition that an action for reconveyance can indeed be barred by
prescription. In a long line of cases decided by this Court, we ruled that an action for reconveyance
based on implied or constructive trust must perforce prescribe in ten (10) years from the issuance of
the Torrens title over the property.
However, there is an exception to this rule. In the case of Heirs of Pomposa Saludares v. Court of
Appeals, the Court reiterating the ruling in Millena v. Court of Appeals, held that there is but one
instance when prescription cannot be invoked in an action for reconveyance, that is, when the
plaintiff is in possession of the land to be reconveyed. In Heirs of Pomposa Saludares, this Court
explained that the Court in a series of cases, has permitted the filing of an action for reconveyance
despite the lapse of more than ten (10) years from the issuance of title to the land and declared that
said action, when based on fraud, is imprescriptible as long as the land has not passed to an
innocent buyer for value. But in all those cases, the common factual backdrop was that the
registered owners were never in possession of the disputed property. The exception was based on
the theory that registration proceedings could not be used as a shield for fraud or for enriching a
person at the expense of another.

In Alfredo v. Borras, the Court ruled that prescription does not run against the plaintiff in actual
possession of the disputed land because such plaintiff has a right to wait until his possession is
disturbed or his title is questioned before initiating an action to vindicate his right. His undisturbed
possession gives him the continuing right to seek the aid of a court of equity to determine the nature
of the adverse claim of a third party and its effect on his title. The Court held that where the plaintiff
in an action for reconveyance remains in possession of the subject land, the action for reconveyance
becomes in effect an action to quiet title to property, which is not subject to prescription.

The Court reiterated such rule in the case of Vda. de Cabrera v. Court of Appeals, wherein we ruled
that the imprescriptibility of an action for reconveyance based on implied or constructive trust applies
only when the plaintiff or the person enforcing the trust is not in possession of the property. In effect,
the action for reconveyance is an action to quiet the property title, which does not prescribe.

Similarly, in the case of David v. Malay the Court held that there was no doubt about the fact that an
action for reconveyance based on an implied trust ordinarily prescribes in ten (10) years. This rule
assumes, however, that there is an actual need to initiate that action, for when the right of the true
and real owner is recognized, expressly or implicitly such as when he remains undisturbed in his
possession, the statute of limitation would yet be irrelevant. An action for reconveyance, if
nonetheless brought, would be in the nature of a suit for quieting of title, or its equivalent, an action
that is imprescriptible. In that case, the Court reiterated the ruling in Faja v. Court of Appeals which
we quote:

x x x There is settled jurisprudence that one who is in actual possession of a piece of land claiming
to be owner thereof may wait until his possession is disturbed or his title is attacked before taking
steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a
continuing right to seek the aid of a court of equity to ascertain and determine the nature of the
adverse claim of a third party and its effect on his own title, which right can be claimed only by one
who is in possession. No better situation can be conceived at the moment for Us to apply this rule on
equity than that of herein petitioners whose mother, Felipa Faja, was in possession of the litigated
property for no less than 30 years and was suddenly confronted with a claim that the land she had
been occupying and cultivating all these years, was titled in the name of a third person. We hold that
in such a situation the right to quiet title to the property, to seek its reconveyance and annul any
certificate of title covering it, accrued only from the time the one in possession was made aware of a
claim adverse to his own, and it is only then that the statutory period of prescription commences to
run against such possessor.36

In this case, the Franciscos claim to be in open, continuous, exclusive, and notorious possession
and occupation of the subject lots. It appears that they never lost possession of said properties, and
as such, they are in a position to file the complaint with the trial court to protect their alleged rights
and clear whatever doubts has been cast thereon.
WHEREFORE, premises considered, the instant Petition is DENIED. The December 22, 2003
Decision and February 7, 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 62449, which
nullified the Decision and Orders of the Regional Trial Court of Binangonan, Rizal, Branch 69, and its
predecessor, Court of First Instance of Rizal, Branch 10, in Land Registration Case Case No. 95-
0004 (formerly LRC Case No. N-9293), and consequently, declared as null and void TCT Nos. M-
102009, M-102010, and M-102012, are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.


Associate Justice
Chairperson

ROBERTO A. ABAD JOSE CATRAL MENDOZA


Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN


Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.


Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO


Chief Justice

Footnotes

1
Penned by Presiding Justice Cancio C. Garcia (retired member of the Supreme Court), with
Associate Justices Renato C. Dacudao and Danilo B. Pine, concurring; rollo, pp. 86-101.
2
Penned by Associate Justice Danilo 8. Pine, with Associate Justices Renato C. Dacdudao
and Perlita J. Tria-Tirona, concurring; rollo, pp. 102-104.

3
CA rollo, pp. 37-40.

4
Id. at 42.

5
Id. at 46-50.

6
Id. at 54.

7
The CA failed to mention Carmen V. Francisco as one of the applicants.

8
Rollo, pp. 87-95. (Emphasis omitted; italics in the original; citations omitted).

9
Id. at 135-138. Rosalina V. Francisco died sometime in 1987 (Id. at 145).

10
Id. at 100. (Emphasis in the original)

11
G.R. No. 84966, November 21, 1991, 204 SCRA 160.

12
Rollo, pp. 98-100.

13
Id. at 396-397.

14
Id. at 327-334.

15
Id. at 423-428, 438-439.

16
Judge Carillo v. Court of Appeals, 534 Phil. 154, 166 (2006).

See Rules of Court, Rule 47, Sec. 2, and the cases of Diona v. Balangue, G.R. No.
17

173559, January 7, 2013, 688 SCRA 22, 35; Benatiro v. Heirs Evaristo Cuyos, G.R. No.
161220, July 30, 2008, 560 SCRA 478, 495; Biaco v. Phil. Countryside Rural Bank, 544 Phil.
45, 53 (2007); and Intestate Estate of the late Nimfa Sian v. Phil. National Bank, 542 Phil.
648, 654 (2007).

18
Rules of Court, Rule 47, Sec. 3.

19
Gomez v. Court of Appeals, 250 Phil. 504, 510 (1988).

20
Pepsi-Cola Products Phils., Inc. v. Pagdanganan, 535 Phil. 540, 554 (2006).

De Castro v. Judicial and Bar Council (JBC), G.R. Nos. 191002, 191032, 191057, A.M. No.
21

10-2-5-SC and G.R. No. 191149, April 20, 2010, 618 SCRA 639, 658.

The Baguio Regreening Movement, Inc. v. Masweng, G.R. No. 180882, February 27, 2013,
22

692 SCRA 109, 125; Philippine Guardians Brotherhood, Inc. (PGBI) v. Commission on
Elections, G.R. No. 190529, April 29, 2010, 619 SCRA 585, 594; Lazatin v. Desierto, G.R.
No. 147097, June 5, 2009, 588 SCRA 285, 294; Ting v. Velez-Ting, G.R. No. 166562, March
31, 2009, 582 SCRA 694, 704; and De Mesa v. Pepsi Cola Products Phils., Inc., 504 Phil.
685, 691 (2005).

23
Republic v. Court of Appeals, supra note 11, at 178-181. (Emphasis in the original)

Top Management Programs Corporation v. Fajardo, G.R. No. 150462, June 15, 2011, 652
24

SCRA 18, 37 and Mercado v. Valley Mountain Mines Exploration, Inc., G.R. Nos. 141019,
164281, and 185781, November 23, 2011, 661 SCRA 13, 44.

25
Ingusan v. Heirs of Reyes, 558 Phil. 50, 61 (2007)

Gomez v. Court of Appeals, supra note 19, as cited in Spouses Laburada v. Land
26

Registration Authority, 350 Phil. 779, 788 (1998) and Ramos v. Rodriguez, 314 Phil. 326,
331 (1995).

27
Cayanan v. De Los Santos, 129 Phil. 612, 615 (1967); Santos v. Ichon, 95 Phil. 677, 681
(1954); Capio v. Capio, 94 Phil. 113, 116 (1953).

28
CA rollo, pp. 51-53; Rollo, pp. 205-206.

29
405 Phil. 161 (2001).

30
Divina v. Court of Appeals, supra, at 172.

31
Pasiño v. Monterroyo, G.R. No. 159494, July 31, 2008, 560 SCRA 739, 751

32
Philippine Economic Zone Authority (PEZA) v. Fernandez, 411 Phil. 107, 119 (2001)

33
Id.

34
Id.

35
G.R. No. 161360, October 19, 2011, 659 SCRA 545.

36
Yared v. Tiongco, supra, at 552-554. (Citations omitted)
SECOND DIVISION

June 5, 2017

G.R. No. 208450

SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, Petitioners


vs.
SPS. PETER L. PO AND VICTORIA L. PO, Respondents

x-----------------------x

G.R. No. 208497

SPS. PETER L. PO AND VICTORIA L. PO, Petitioners,


vs.
SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, JOSE MARIA MORAZA, AND
ERNESTO ABOITIZ AND ISABEL ABOITIZ, Respondents

DECISION

LEONEN, J.:

This resolves two (2) Petitions for Review on Certiorari 1 assailing the Court of Appeals' October 31,
2012 Decision2and its June 17, 2013 Resolution3 in CA-G.R. CV No. 03803. The assailed decision
affirmed the Regional Trial Court's Decision,4 which declared the spouses Peter Po and Victoria Po
(Spouses Po) as the rightful owners of the parcel of land. However, the Court of Appeals ruled that
respondents Jose Maria Moraza (Jose), spouses Ernesto Aboitiz (Ernesto), and Isabel Aboitiz
(Isabel) were innocent buyers in good faith whose titles were entitled to protection. 5 The assailed
resolution denied the Motion for Partial Reconsideration of the spouses Roberto Aboitiz and Maria
Cristina Cabarrus (Spouses Aboitiz).6

The Spouses Aboitiz filed the Petition7 docketed as G.R. No. 208450. The Spouses Po filed the
Petition8 docketed as G.R. No. 208497. These cases are consolidated in the case at bar.

This case involves a parcel of land located in Cabancalan, Mandaue City,9 initially registered as
Original Certificate of Title No. 0-887, and titled under the name of Roberto Aboitiz (Roberto). 10 The
land is referred to as Lot No. 2835. 11

This parcel of land originally belonged to the late Mariano Seno (Mariano). 12

On July 31, 1973, Mariano executed a Deed of Absolute Sale in favor of his son, Ciriaco Seno
(Ciriaco), over a 1.0120-hectare land in Cebu covered by Tax Declaration No. 43358. 13 This property
included two (2)

lots: Lot No. 2807 and the land subject of this case, Lot No. 2835.14

On May 5, 1978, Ciriaco sold the two (2) lots to Victoria Po (Victoria).15 The parties executed a Deed
of Absolute Sale. 16
On July 15, 1982, Mariano died and was survived by his five (5) children (Mariano Heirs): Esperanza
Seno V da. De Kuizon, Ramon Seno, 17 Benita Seno Vda. De Lim, Simeon Seno,18 and Ciriaco.19

In 1990, Peter Po (Peter) discovered that Ciriaco "had executed a [q]uitclaim dated August 7, 1989
renouncing [his] interest over Lot [No.] 2807 in favor of [petitioner] Roberto."20 In the quitclaim,
Ciriaco stated that he was "the declared owner of Lot [Nos.] 2835 and 2807."21

The Spouses Po confronted Ciriaco.22 By way of remedy, Ciriaco and the Spouses Po executed a
Memorandum of Agreement dated June 28, 1990 in which Ciriaco agreed to pay Peter the difference
between the amount paid by the Spouses Po as consideration for the entire property and the value
of the land the Spouses Po were left with after the quitclaim. 23

However, also in 1990, Lot No. 2835 was also sold to Roberto.24 The Mariano Heirs, including
Ciriaco, executed separate deeds of absolute sale in favor of Roberto.25 Thereafter, Roberto
immediately developed the lot as part of a subdivision called North Town Homes.26

In 1991, the Spouses Po declared Lot No. 2835 for taxation purposes and was issued Tax
Declaration No. 0634-A.27

In 1992, Roberto also declared Lot No. 2835 for taxation purposes and was issued Tax Declaration
No. 1100, annotated with: "This tax declaration is also declared in the name of Mrs. VICTORIA LEE
PO married to PETER PO under [T]ax [Declaration] [N]o. 0634-A so that one may be considered a
duplicate to the other. "28

On April 19, 1993, Roberto filed an application for original registration of Lot No. 2835 with the
Mandaue City Regional Trial Court, acting as land registration court. 29 The case was raffled to
Branch 28 and docketed as LRC Case No. N-208.30

In its Decision dated October 28, 1993, the trial court granted the issuance of Original Certificate of
Title No. 0-887 in the name of Roberto.31 The lot was immediately subdivided with portions sold to
Ernesto and Jose.32

On November 19, 1996, the Spouses Po filed a complaint to recover the land and to declare nullity
of title with damages.33

The complaint was docketed in Branch 55, Regional Trial Court of Mandaue City. 34

The trial court ruled in favor of the Spouses Po in its Decision dated November 23, 2009:

WHEREFORE, premises considered, judgment is rendered in favor of plaintiffs, and against


defendants, declaring the plaintiffs as owner of subject land and ordering the defendants reconvey
and/or return to plaintiffs Lot No. 2835; declaring as absolute nullity all the documents of sale
involving Lot 283 5 executed by the Heirs of Mariano Seno in favor of defendant Roberto Aboitiz and
such other documents used in the improvident issuance of titles in the name of defendants, and to
cancel the said titles.35

The Spouses Aboitiz appealed to the Court of Appeals. The Court of Appeals, in its Decision dated
October 31, 2012, partially affirmed the trial court decision, declaring the Spouses Po as the rightful
owner of the land. However, it ruled that the titles issued to respondents Jose, Ernesto, and Isabel
should be respected.36
The Court of Appeals discussed the inapplicability of the rules on double sale and the doctrine of
buyer in good faith since the land was not yet registered when it was sold to the Spouses
Po.37 However, it ruled in favor of the Spouses Po on the premise that registered property may be
reconveyed to the "rightful or legal owner or to the one with a better right if the title [was] wrongfully
or erroneously registered in another person's name."38 The Court of Appeals held that the Mariano
Heirs were no longer the owners of the lot at the time they sold it to Roberto in 1990 because
Mariano, during his lifetime, already sold this to Ciriaco in 1973. 39

It found that the Deed of Absolute Sale between Ciriaco and the Spouses Po was duly notarized and
was thus presumed regular on its face.40 Their Memorandum of Agreement did not cancel or rescind
the Deed of Absolute Sale but rather strengthened their claim that they "entered into a contract of
[s]ale. "41

It likewise ruled that, contrary to the assertion of the Spouses Aboitiz, there was no showing that
Ciriaco merely held the property in trust for the Mariano Heirs. 42

It held that the action of the Spouses Po had not yet prescribed because their complaint in 1996 was
within the 10-year prescriptive period as the title in favor of the Spouses Aboitiz was issued in 1994.43

However, the Court of Appeals ruled that the certificates of title of Jose, Ernesto, and Isabel were
valid as they were innocent buyers in good faith.44

The Spouses Aboitiz thus filed their Petition for Review, which was docketed as G.R. No. 208450. 1âwphi1

45
They argue that the Decision of Branch 55, Regional Trial Court of Mandaue City granting the
complaint of the Spouses Po is void for lack of jurisdiction over the matter.46 They claim that a branch
of the Regional Trial Court has no jurisdiction to nullify a final and executory decision of a co-equal
branch;47 it is the Court of Appeals that has this jurisdiction. 48

They likewise assert that the Spouses Po's cause of action has prescribed 49 and allegedly accrued
when the Deed of Absolute Sale between the Spouses Po and Ciriaco was executed on May 5,
1978.50 They maintain that more than 10 years had elapsed when the complaint was filed on
November 12, 1996, thus barring the action through prescription.51

The Spouses Aboitiz further insist that "estoppel and laches have already set in."52 They claim that
they have been "in open, public, continuous, uninterrupted, peaceful[,] and adverse possession" in
the concept of owners over the property for "46 years as of 1993," without the Spouses Po acting on
the Deed of Absolute Sale.53 They attest that the development of North Town Homes Subdivision
"was covered by utmost publicity," but the Spouses Po did not immediately question the
development or interpose any objection during the registration proceedings. 54

They posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is "clearly fake and
fraudulent" 55 as evidenced by certifications of its non-existence in the notarial books and the
Spouses Po's failure to enforce their rights over the property until 18 years later. 56 They also affirm
that the Deed of Absolute Sale between Ciriaco and the Spouses Po is inadmissible as no
documentary stamp was paid and affixed. 57

Lastly, they contend that the Mariano Heirs should have been impleaded in the action as they are
indispensable parties. 58
The Spouses Po filed a Comment59 where they argued that the Regional Trial Court had jurisdiction
when it granted their complaint because the case filed by the Spouses Aboitiz was for the
registration of the land, while the case they filed was for reconveyance.60 They insisted that their
action had not prescribed because an action for reconveyance prescribes in 10 years from the "date
of issuance of the certificate of title over the property."61 They argued that "laches ha[d] not set
in."62 They claimed that the notarized Deed of Absolute Sale between them and Ciriaco was not fake
or fraudulent and was admissible in evidence63 whereas the Spouses Aboitiz failed "to overcome [its]
presumption of regularity and due execution."64 They asserted that "the documentary stamps tax
ha[d] been paid"65 and that the Mariano Heirs were not indispensable parties.66

Spouses Aboitiz filed a Reply67 reiterating their arguments in the Petition.

The Spouses Po also filed a Petition for Review, which was docketed as G.R. No. 208497. They
claim that respondents Jose, Ernesto, and Isabel are not "innocent purchasers for value."68 They
allegedly knew of the defective title of Roberto because his tax declaration had the following
annotation: "This tax declaration is also declared in the name of Mrs. VICTORIA LEE PO, married to
PETER PO under tax dec. No. 0634-A so that one may be considered a duplicate to the other.
(Section 89 Paragraph H PD 464)."69

Spouses Aboitiz filed a Comment.70 Aside from reiterating their assertions in their Petition for Review
in G.R No. 208450, they argued that there was no evidence that they acted in bad faith as
"subdivision lot buyers [were] not obliged to go beyond the [T]orrens title."71

Spouses Po filed a Reply. 72

For resolution are the following issues:

First, whether the Regional Trial Court has jurisdiction over the Spouses Peter and Victoria Po's
complaint;

Second, whether the action is barred by prescription,

Third, whether the doctrines of estoppel and laches apply;

Fourth, whether the land registration court's finding that Ciriaco Seno only held the property in trust
for the Mariano Heirs is binding as res judicata in this case;

Fifth, whether the Deed of Absolute Sale between Ciriaco Seno and the Spouses Peter and Victoria
Po should be considered as evidence of their entitlement to the property;

Sixth, whether the Mariano Heirs, as sellers in a deed of conveyance of realty, are indispensable
parties; and

Finally, whether the respondents Jose Maria Moraza, Ernesto Aboitiz, and Isabel Aboitiz are
innocent purchasers in good faith.

The Spouses Aboitiz argue that Branch 55, Regional Trial Court did not have jurisdiction to nullify
the final and executory Decision of Branch 28, Regional Trial Court in LRC Case No. N-208.73 They
claim that that it is the Court of Appeals that has jurisdiction to annul judgments of the Regional Trial
Court.74

However, the instant action is not for the annulment of judgment of a Regional Trial Court. It is a
complaint for reconveyance, cancellation of title, and damages.75

A complaint for reconveyance is an action which admits the registration of title of another party but
claims that such registration was erroneous or wrongful. 76 It seeks the transfer of the title to the
rightful and legal owner, or to the party who has a superior right over it, without prejudice to innocent
purchasers in good faith. 77 It seeks the transfer of a title issued in a valid proceeding. The relief
prayed for may be granted on the basis of intrinsic fraud-fraud committed on the true owner instead
of fraud committed on the procedure amounting to lack of jurisdiction.

An action for annulment of title questions the validity of the title because of lack of due process of
law. There is an allegation of nullity in the procedure and thus the invalidity of the title that is issued.

The complaint of the Spouses Po asserted that they were the true owners of the parcel of land which
was registered in the name of the

Spouses Aboitiz.78 They alleged that they acquired the property from Ciriaco, who acquired it from
Mariano. 79 They claimed that the Spouses Aboitiz had the property registered without their
knowledge and through fraud. 80 Thus, they sought to recover the property and to cancel the title of
the Spouses Aboitiz.81 Thus the prayer in their Complaint stated:

WHEREFORE, premises considered, this Honorable Court is respectfully prayed to render judgment
in favor of plaintiffs and against defendants, ordering the latter as follows:

1. To reconvey and/or return to plaintiffs Lot No. 2835 which is the subject matter of
this complaint;

2. To declare as absolute nullity all the documents of sale involving Lot 2835 in favor
of defendants and such other documents used in the improvident issuance of the
Title in the name of defendants, and to cancel said Title;

3. To pay jointly and severally the amount of ₱ 1,000,000.00 as moral damages;


₱500,000.00 as actual damages; ₱ 100,000.00 as attorneys fees and ₱ 20,000.00 as
litigation expenses.

Plaintiffs further pray for such other reliefs and remedies just and equitable in the premises. 82

Except for actions falling within the jurisdiction of the Municipal Trial Courts, the Regional Trial
Courts have exclusive original jurisdiction over actions involving "title to, or possession of, real
property."83 Section 19 of Batas Pambansa Blg. 129 provides:

Section 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive original
jurisdiction:

(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein,
except actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction
over which is conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts[.]
An action for reconveyance and annulment of title is an action involving the title to real property. 84

The complaint of the Spouses Po is clearly an action for reconveyance and annulment of title. Thus,
the Regional Trial Court has jurisdiction to hear the case.

The Spouses Aboitiz claim that it is the Court of Appeals that has jurisdiction over the annulment of
Regional Trial Court judgments. 85

The jurisdiction of the Court of Appeals is provided in Section 9 of Batas Pambansa Blg. 129:

Section 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:

(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts[.]

While the Court of Appeals has jurisdiction to annul judgments of the Regional Trial Courts, the case
at bar is not for the annulment of a judgment of a Regional Trial Court. It is for reconveyance and the
annulment of title.

The difference between these two (2) actions was discussed in Toledo l 86 v. Court of Appeals:

An action for annulment of judgment is a remedy in equity so exceptional in nature that it may be
availed of only when other remedies are wanting, and only if the judgment, final order or final
resolution sought to be annulled was rendered by a court lacking jurisdiction or through extrinsic
fraud. An action for reconveyance, on the other hand, is a legal and equitable remedy granted to the
rightful owner of land which has been wrongfully or erroneously registered in the name of another for
the purpose of compelling the latter to transfer or reconvey the land to him. The Court of Appeals
has exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts
whereas actions for reconveyance of real property may be filed before the Regional Trial Courts or
the Municipal Trial Courts, depending on the assessed value of the property involved.

Petitioners allege that: first, they are the owners of the land by virtue of a sale between their and
respondents' predecessors-in-interest; and second, that respondents Ramoses and ARC Marketing
illegally dispossessed them by having the same property registered in respondents' names. Thus, far
from establishing a case for annulment of judgment, the foregoing allegations clearly show a case
for reconveyance. 87 (Citations omitted)

As stated, a complaint for reconveyance is a remedy where the plaintiff argues for an order for the
defendant to transfer its title issued in a proceeding not otherwise invalid. The relief prayed for may
be granted on the basis of intrinsic rather than extrinsic fraud; that is, fraud committed on the real
owner rather than fraud committed on the procedure amounting to lack of jurisdiction.

An action for annulment of title, on the other hand, questions the validity of the grant of title on
grounds which amount to lack of due process of law. The remedy is premised in the nullity of the
procedure and thus the invalidity of the title that is issued. Title that is invalidated as a result of a
successful action for annulment against the decision of a Regional Trial Court acting as a land
registration court may still however be granted on the merits in another proceeding not infected by
lack of jurisdiction or extrinsic fraud if its legal basis on the merits is properly alleged and proven.

Considering the Spouses Aboitiz's fraudulent registration without the Spouses Po's knowledge and
the latter's assertion of their ownership of the land, their right to recover the property and to cancel
the Spouses Aboitiz' s88 title, the action is for reconveyance and annulment of title and not for
annulment of judgment.

Thus, the Regional Trial Court has jurisdiction to hear this case.

II

The Spouses Aboitiz argue that the Spouses Po's cause of action has prescribed.89 They claim that
prescription has set in because the original complaint was filed only on November 12, 1996, after
more than 10 years after the Deed of Absolute Sale between Ciriaco and Spouses Po was executed
on May 5, 1978. 90

The Spouses Po's action has not prescribed.

"[A]n action for reconveyance ... prescribes in [10] years from the issuance of the Torrens title over
the property."91The basis for this is Section 53, Paragraph 392 of Presidential Decree No. 152993 in
relation to Articles 145694 and 1144(2)95 of the Civil Code.96

Under Presidential Decree No. 1529 (Property Registration Decree), the owner of a property may
avail of legal remedies against a registration procured by fraud:

SECTION 53. Presentation of Owner's Duplicate Upon Entry of New Certificate. - ...

In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any innocent
holder for value of a certificate of title ...

Article 1456 of the Civil Code provides that a person acquiring a property through fraud becomes an
implied trustee of the property's true and lawful owner.97

An implied trust is based on equity and is either (i) a constructive trust, or (ii) a resulting trust.98 A
resulting trust is created by implication of law and is presumed as intended by the parties.99 A
constructive trust is created by force of law 100 such as when a title is registered in favor of a person
other than the true owner. 101

The implied trustee only acquires the right "to the beneficial enjoyment of [the] property." 102 The legal
title remains with the true owner. 103 In Crisostomo v. Garcia, J,r., .: 104

Art. 1456 of the Civil Code provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.

Thus, it was held that when a party uses fraud or concealment to obtain a certificate of title of
property, a constructive trust is created in favor of the defrauded party.

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."
When property is registered in another's name, an implied or constructive trust is created by law in
favor of the true owner. The action for reconveyance of the title to the rightful owner prescribes in 10
years from the issuance of the title. 105 (Citations omitted)

Thus, the law creates a trust in favor of the property's true owner.

The prescriptive period to enforce this trust is 10 years from the time the right of action accrues.
Article 1144 of the Civil Code provides:

Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

In an action for reconveyance, the right of action accrues from the time the property is registered . 106

In Crisostomo, 107 the petitioners were able to transfer the property under their names without
knowledge of the respondent. 108 The respondent filed an action for reconveyance. 109 In arguing that
the action for reconveyance had prescribed, the petitioners claimed that the cause of action of the
respondent should be based on the latter's Deed of Sale and thus the respondent's right of action
should have accrued from its execution.110 This Court, however, ruled that the right of action accrued
from the time the property was registered because registration is the act that signifies that the
adverse party repudiates the implied trust:

In the case at bar, respondent's action which is for Reconveyance and Cancellation of Title is based
on an implied trust under Art. 1456 of the Civil Code since he averred in his complaint that through
fraud petitioners were able to obtain a Certificate of Title over the property. He does not seek the
annulment of a voidable contract whereby Articles 1390 and 1391 of the Civil Code would find
application such that the cause of action would prescribe in four years.

An action for reconveyance based on implied or constructive trust prescribes in ten years from the
alleged fraudulent registration or date of issuance of the certificate of title over the property.

It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake,
giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years pursuant to Art.
1144. This tenyear prescriptive period begins to run from the date the adverse party repudiates the
implied trust, which repudiation takes place when the adverse party registers the land. 111 (Citations
omitted, emphasis supplied)

Likewise, in Duque v. Domingo: 112

The registration of an instrument in the Office of the Register of Deeds constitutes constructive
notice to the whole world, and, therefore, discovery of the fraud is deemed to have taken place at the
time of registration. Such registration is deemed to be a constructive notice that the alleged fiduciary
or trust relationship has been repudiated. It is now settled that an action on an implied or
constructive trust prescribes in ten (10) years from the date the right of action accrued. The issuance
of Transfer Certificate of Title No. 7501 in 1931 to Mariano Duque commenced the effective
assertion of adverse title for the purpose of the statute of limitations. 113 (Citations omitted)

Registration of the property is a "constructive notice to the whole world."114 Thus, in registering the
property, the adverse party repudiates the implied trust. 115 Necessarily, the cause of action accrues
upon registration. 116

An action for reconveyance and annulment of title does not seek to question the contract which
allowed the adverse party to obtain the title to the property. 117 What is put on issue in an action for
reconveyance an d cancellation of title is the ownership of the property and its registration. 118 It does
not question any fraudulent contract. 119 Should that be the case, the applicable provisions are
Articles 1390120 and 1391 121 of the Civil Code. 122

Thus, an action for reconveyance and cancellation of title prescribes in 10 years from the time of the
issuance of the Torrens title over the property. 123

Considering that the Spouses Po's complaint was filed on November 19, 1996, less than three (3)
years from the issuance of the Torrens title over the property on April 6, 1994, it is well within the 10-
year prescriptive period imposed on an action for reconveyance.

III

The Spouses Aboitiz insist that estoppel and laches have already set in. 124 They claim that they have
been in "open, continuous, public, peaceful, [and] adverse" possession in the concept of owners
over the property for "46 years as of 1993," without the Spouses Po acting on their Deed of Absolute
Sale. 125 Moreover, the development of North Town Homes Subdivision "was covered by utmost
publicity" but the Spouses Po did not promptly question the development. 126 In fact, they did not
interpose any objection during the registration proceedings. 127

There is laches when a party was negligent or has failed "to assert a right within a reasonable time,"
thus giving rise to the presumption that he or she has abandoned it. 128 Laches has set in when it is
already inequitable or unfair to allow the party to assert the right. 129 The elements of laches were
enumerated in Ignacio v. Basilio:

There is laches when: (1) the conduct of the defendant or one under whom he claims, gave rise to
the situation complained of; (2) there was delay in asserting a right after knowledge of the
defendant's conduct and after an opportunity to sue; (3) defendant had no knowledge or notice that
the complainant would assert his right; (4) there is injury or prejudice to the defendant in the event
relief is accorded to the complainant. 130 (Citation omitted)

"Laches is different from prescription."131 Prescription deals with delay itself and thus is an issue of
how much time has passed. 132 The time period when prescription is deemed to have set in is fixed by
law. 133 Laches, on the other hand, concerns itself with the effect of delay and not the period of time
that has lapsed.134 It asks the question whether the delay has changed "the condition of the property
or the relation of the parties" such that it is no longer equitable to insist on the original
right. 135 In Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.: 136

Appellee is correct in its contention that the defense of laches applies independently of prescription.
Laches is different from the statute of limitations. Prescription is concerned with the fact of delay.
Whereas laches is concerned with the effect of delay. Prescription is a matter of time; laches is
principally a question of inequity of permitting a claim to be enforced, this inequity being founded on
some change in the condition of the property or the relation of the parties. Prescription is statutory;
laches is not. Laches applies in equity, whereas prescription applies at law. Prescription is based on
fixed time, Laches is not. 137

The defense of laches is based on equity. 138 It is not based on the title of the party invoking it, but on
the right holder's "long inaction or inexcusable neglect" to assert his claim. 139

This Court rules that the Spouses Po is not barred by laches. There is no showing that they
abandoned their right to the property. The factual findings reveal that the Spouses Po had their
rights over the property registered in the assessor's office. 140 They testified that they introduced
improvements by cultivating fruit trees after they purchased the lots.141 When the Spouses Po
discovered that Ciriaco executed a quitclaim renouncing his interest over Lot No. 2807 in favor of
Roberto, the Spouses Po executed a Memorandum of Agreement with Ciriaco to protect their
interest in Lot No. 2835.142

The Spouses Po also had the property declared for taxation purposes in their names and Tax
Declaration No. 0634-A was issued. 143 Thus, when the Spouses Aboitiz also had the property
declared for taxation purposes, it had the annotation: "This tax declaration is also declared in the
name of Mrs. Victoria Lee Po, married to Peter Po under tax dee. no. 0634-A so that one may be
considered a duplicate to the other." 144

The Spouses Aboitiz only acquired their alleged rights over the property in 1990, when the Mariano
Heirs executed the Deeds of Sale in their favor. 145 Assuming the Spouses Aboitiz immediately took
possession and began construction in 1990, it cannot be said that the Spouses Po were in delay in
asserting their right. In the Spouses Po's complaint, they asserted that they made demands upon the
Spouses Aboitiz to reconvey to them the property. 146 They also referred the matter to the barangay
for conciliation:

11) That demands were made upon the defendants to reconvey to plaintiffs Lot 2835 unlawfully and
feloniously acquired by defendants, but to no avail, thereby compelling the plaintiffs to elevate the
matter for barangay conciliation, and for failure of the parties to effect a settlement, the proper
Certification to file action was then issued, a copy of which is hereto attached as Annex "L." 147

In their Answer with Counterclaim, the Spouses Aboitiz did not deny that demands were made upon
them and that the matter was elevated for barangay conciliation:

8. Par. 11 is denied as regards the all[e]gation that Lot 2835 was feloniously and un[l]awfully
acquired by defendants, for being false. The truth is that defendants were in good faith in acquiring
same property. Defendants refused to meet the demands of settlement by plaintiffs because they
are strangers to the property in question. 148

When they discovered that the property was registered in the name of the Spouses Aboitiz in 1993,
the Spouses Po then filed the instant complaint to recover the property sold to them by Ciriaco,
alleging that it was done without their knowledge, through evident bad faith and fraud. 149 The
Spouses Po filed this case in less than three (3) years from the time of registration.

Based on these circumstances, the elements of laches are clearly lacking in this case. There was no
delay in asserting their right over the property, and the Spouses Aboitiz had knowledge that the
Spouses Po would assert their right.

Thus, it cannot be said that they are barred by laches.


IV

The Spouses Aboitiz insist that there is already a finding by the Regional Trial Court in LRC Case
No. N-208 that Ciriaco merely held the property "in trust for the [Mariano Heirs]." 150 Thus, Ciriaco
could not have validly sold the property to the Spouses Po. 151 They claim that these findings are
binding on the whole world because land registration proceedings are actions in rem. 152

In the Decision in LRC Case No. N-208, no one opposed the application for registration.153 Moreover,
the Spouses Aboitiz presented only one (I) witness, Gregorio Espina (Espina), an employee of
Roberto, 154 whotestified:

That this parcel of land is covered by tax declarations, to wit: 1) Tax Dec. No. 43174 in the name of
Ciriaco Seno for the year 1953 (Exh. "T");

11) Tax Dec. No. 2835 in the name of applicant, Roberto Aboitiz for the year 1991 (Exh. "DD").

That the tax declarations covering Lot No. 2835 are in the name of Ciriaco Seno because the heirs
of Mariano Seno have agreed that Lot No. 2835 be held in trust by Ciriaco Seno in favor of the
heirs. 155

This Court rules that this cannot be binding in this action for reconveyance.

Res judicata embraces two (2) concepts: (i) bar by prior judgment and (ii) conclusiveness of
judgment, respectively covered under Rule 39, Section 47 of the Rules of Court, paragraphs (b) and
(c): 156

Section 47. Effect of judgments or final orders. - The effect of a judgment or final order rendered by a
court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as
follows:

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to
any other matter that could have been raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its face to
have been so adjudged, or which was actually and necessarily included therein or necessary
thereto.

Res judicata in the concept of bar by prior judgment proscribes the filing of another action based on
"the same claim, demand, or cause of action."157 It applies when the following are present: (a) there is
a final judgment or order; (b) it is a judgment or order on the merits; (c) it was "rendered by a court
having jurisdiction over the subject matter and parties"; and (d) there is "identity of parties, of subject
matter, and of causes of action" between the first and second actions. 158

Res judicata in the concept of conclusiveness of judgment applies when there is an identity of issues
in two (2) cases between the same parties involving different causes of action.159 Its effect is to bar
"the relitigation of particular facts or issues" which have already been adjudicated in the other
case. 160 In Calalang v. Register of Deeds of Quezon City:161
The second concept - conclusiveness of judgment - states that a fact or question which was in issue
in a former suit and was there judicially passed upon and determined by a court of competent
jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and
persons in privity with them are concerned and cannot be again litigated in any future action
between such parties or their privies, in the same court or any other court of concurrent jurisdiction
on either the same or different cause of action, while the judgment remains unreversed by proper
authority. It has been held that in order that a judgment in one action can be conclusive as to a
particular matter in another action between the same parties or their privies, it is essential that the
issue[s] be identical. If a particular point or question is in issue in the second action, and the
judgment will depend on the determination of that particular point or question, a former judgment
between the same parties or their privies will be final and conclusive in the second if that same point
or question was in issue and adjudicated in the first suit (Nabus vs. Court of Appeals, 193 SCRA 732
[1991]). Identity of cause of action is not required but merely identity of issues. 162

However, in Racoma v. Fortich, 163 this Court held that res judicata could not be a defense in an
action for reconveyance based on fraud where the complainant had no knowledge of the application
for registration:

The other ground upon which the lower court dismissed the complaint is res judicata. It is stated in
the order of dismissal that the plaintiff had admitted that the property in controversy was applied for
by defendant Maximina Fortich in a cadastral proceeding and under Act 496; that the proceedings
were in rem and, therefore, the whole world, including the plaintiff, were parties thereto and bound
by the judgment thereon ... [I]t is obvious that the lower court was referring to the legal effect of the
conclusiveness against all persons of the in rem decision in the cadastral case rather than the actual
fact that the plaintiff was a claimant who appeared in the said case, for he alleged in his complaint
that he "has no knowledge whatsoever of the application for registration filed by defendant Maximina
Fortich and the order of decree of registration issued in favor of the defendant Maximina Fortich by
this Honorable Court until on February 25, 1967 ... " (Record on Appeal, page 30). Such being the
case, then an action for reconveyance is available to the plaintiff, the decree of registration
notwithstanding, for ...

" ... , it is now a well-settled doctrine in this jurisdiction that the existence of a decree of registration in
favor of one party is no bar to an action to compel reconveyance of the property to the true owner,
which is an action in personam, even if such action be instituted after the year fixed by Section 38 of
the Land Registration Act as a limit to the review of the registration decree, provided it is shown that
the registration is wrongful and the property sought to be reconveyed has not passed to an innocent
third party holder for value.["] 164 (Emphasis supplied)

The reason for this rule is to prevent the unjust deprivation of rights over real property. As discussed
in People v. Cainglet: 165

It is fundamental and well-settled that a final judgment in a cadastral proceeding - a proceeding in


rem - is binding and conclusive upon the whole world. Reason is that public policy and public order
1âw phi1

demand not only that litigations must terminate at some definite point but also that titles over lands
under the Torrens system should be given stability for on it greatly depends the stability of the
country's economy. Interest republicae ut sit finis litium. However, this conclusiveness of judgment in
the registration of lands is not absolute. It admits of exception. Public policy also dictates that those
unjustly deprived of their rights over real property by reason of the operation of our registration laws
be afforded remedies. Thus, the aggrieved party may file a suit for reconveyance of property or a
personal action for recovery of damages against the party who registered his property through fraud,
or in case of insolvency of the party who procured the registration through fraud, an action against
the Treasurer of the Philippines for recovery of damages from the Assurance Fund. Through these
remedial proceedings, the law, while holding registered titles indefeasible, allows redress calculated
to prevent one from enriching himself at the expense of other. Necessarily, without setting aside the
decree of title, the issues raised in the previous registration case are relit1ated, for purposes of
reconveyance of said title or recovery of damages. 166 (Citations omitted, emphasis supplied)

In this case, the Spouses Po allege that the registration was done through fraud. They contend that
they were unaware and were thus unable to contest the registration and prove their claim over the
property. Aside from several tax receipts, the Spouses Po formally offered as evidence, among
others, the Deed of Sale executed by Mariano in Ciriaco's favor, the Deed of Absolute Sale executed
by Ciriaco in their favor, and the Tax Declaration under Victoria's name. Additionally, they also
submitted their Memorandum of Agreement with Ciriaco and the Quitclaim executed by Ciriaco in
favor of the Spouses Aboitiz.167 These documents were not considered by the land registration court
when it issued the title in favor of the Spouses Aboitiz. The Spouses Po also offered the Application
of Original Registration of Title of the Spouses Aboitiz to prove that the Spouses Aboitiz only
submitted to the land registration court the cancelled tax declarations of Ciriaco, instead of the tax
declaration of the Spouses Po. 168

Thus, the ruling of the land registration court cannot be so conclusive as to deny the Spouses Po the
remedy afforded to them by law. The action for reconveyance allows them to prove their ownership
over the property. Hence, they are not precluded from presenting evidence that is contrary to the
findings in the land registration case.

The factual findings of the land registration court are not being questioned. An action for
reconveyance based on an implied trust seeks to compel the registered owner to transfer the
property to its true owner. 169 In Hortizuela v. Tagufa: 170

[A]n action for reconveyance is a recognized remedy, an action in personam, available to a person
whose property has been wrongfully registered under the Torrens system in another's name. In an
action for reconveyance, the decree is not sought to be set aside. It does not seek to set aside the
decree but, respecting it as incontrovertible and no longer open to review, seeks to transfer or
reconvey the land from the registered owner to the rightful owner. Reconveyance is always available
as long as the property has not passed to an innocent third person for value.

There is no quibble that a certificate of title, like in the case at bench, can only be questioned
through a direct proceeding. The MCTC and the CA, however, failed to take into account that in a
complaint for reconveyance, the decree of registration is respected as incontrovertible and is not
being questioned. What is being sought is the transfer of the property wrongfully or erroneously
registered in another's name to its rightful owner or to the one with a better right. If the registration of
the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee,
and the real owner is entitled to file an action for reconveyance of the property. 171 (Citations omitted,
emphasis supplied)

Likewise in Naval v. Court of Appeals:172

Ownership is different from a certificate of title. The fact that petitioner was able to secure a title in
her name did not operate to vest ownership upon her of the subject land. Registration of a piece of
land under the Torrens System does not create or vest title, because it is not a mode of acquiring
ownership. A certificate of title is merely an evidence of ownership or title over the particular property
described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a
shield for the commission of fraud; neither does it permit one to enrich himself at the expense of
others. Its issuance in favor of a particular person does not foreclose the possibility that the real
property may be coowned with persons not named in the certificate, or that it may be held in trust for
another person by the registered owner.

As correctly held by the Court of Appeals, notwithstanding the indefeasibility of the Torrens title, the
registered owner may still be compelled to reconvey the registered property to its true owners. The
rationale for the rule is that reconveyance does not set aside or re-subject to review the findings of
fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the property or its title which has been
wrongfully or erroneously registered in another person's name, to its rightful or legal owner, or to the
one with a better right. 173 (Citations omitted, emphasis supplied)

The rationale for allowing reconveyance despite the finality of the registration is that the issuance of
a certificate of title does not create or vest ownership to a person over the property. 174 Registration
under the Torrens system "is not a mode of acquiring ownership."175 A certificate is only a proof of
ownership. 176 Thus, its issuance does not foreclose the possibility of having a different owner, and it
cannot be used against the true owner as a shield for fraud. 177

In an action for reconveyance, the parties are obliged to prove their ownership over the property.
Necessarily, the parties may present evidence to support their claims. The court must weigh these
pieces of evidence and decide who between the parties the true owner is. Therefore, it cannot be
bound simply by the factual findings of the land registration court alone.

An exception to this rule is if the party claiming ownership has already had the opportunity to prove
his or her claim in the land registration case. 178 In such a case, res judicata will then apply. 179 When
an issue of ownership has been raised in the land registration proceedings where the adverse party
was given full opportunity to present his or her claim, the findings in the land registration case will
constitute a bar from any other claim of the adverse party on the property. 180

However, this is not the circumstance in the case at bar. The Spouses Po were not able to prove
their claim in the registration proceedings. Thus, res judicata cannot apply to their action for
reconveyance.

The Spouses Aboitiz posit that the Deed of Absolute Sale between Ciriaco and the Spouses Po is
fake and fraudulent. 181 They argue that this is evidenced by certifications of the document's non-
existence in the notarial books and the Spouses Po's failure to enforce their rights over the property
until 18 years later. 182 They also claim that the Deed of Absolute Sale is inadmissible as no
documentary stamp was paid and affixed. 183

This Court notes that the Spouses Aboitiz are raising questions of fact which are not within the
scope of a review on certiorari under Rule 45 of the Rules of Court. 184 An appeal under Rule 45 must
raise only questions of law, unless the factual findings are not supported by evidence or the
judgment is based on a misapprehension of facts. 185Absent these exceptions, the factual findings of
the lower courts are accorded respect and are beyond the review of this Court.186

The Spouses Aboitiz failed to prove that these exceptions exist in the case at bar. The Regional Trial
Court lent credence to documents presented by the Spouses Po, Peter's testimony about Mariano's
sale of the property to Ciriaco,187 Ciriaco's sale of the property to the Spouses Po, and the issuance
of a Tax Declaration in the name of Victoria. 188
During trial, Peter also testified that after they bought the land, they had a caretaker who cultivated
the property by planting fruit trees. 189 He claimed that when they subsequently discovered the
quitclaim executed by Ciriaco in favor of the Spouses Aboitiz, they executed a Memorandum of
Agreement to protect their interests in the property. 190 He stated that they filed a complaint in the
barangay when the Spouses Aboitiz started cutting down their improvements and that they
subsequently discovered that Ciriaco was forced by the Mariano Heirs to sell the property to the
Spouses Aboitiz. 191

The Spouses Aboitiz presented as their first witness Armando Avenido, who testified according to
the records only. 192 He claimed that he was familiar with the land which was being developed by
Aboitiz Land. He testified that Roberto acquired the land through separate Deeds of Sale from the
Mariano Heirs, had the tax declaration transferred in his name, paid the taxes on the property,
applied for the property's registration, and developed the property into a subdivision.193 During cross-
examination it was revealed that the tax declaration of the Spouses Po was issued before the tax
declaration of the Spouses Aboitiz and that the Spouses Po acquired from Ciriaco the entire land,
while the Spouses Aboitiz purchased only one-fifth (1/5) of the property. 194

The Spouses Aboitiz's second witness, Bienvenido Escoton, testified that he was a mason working
in the subdivision on the road lot and that he knew no person claiming ownership of the land since
1989. 195

The Regional Trial Court thus held:

Analyzing the adduced and admitted evidence of both parties, Art. 1544 of the Civil Code cannot be
aptly applied in the case at bar, for reason that only the sale of Ciriaco Seno (Exh. "A" Exh. All" Exh.
2"/ A, A-1 and A-2) has the validating elements of sale, whereas the rest of the Deeds of Sale (Exhs
1 to 5) executed by the Heirs of Mariano Seno in favor of the Defendants are void, for containing
untruthful statements as pleaded and proven. They are no longer the owners of the subject property
when they executed the several Deeds of Conveyance to defendant Roberto Aboitiz.

On the first issue on the identity and location of the land, the sale of Ciriaco Seno to Plaintiffs (Exh.
"A") reflected in the Tax Declarations that the Defendants used in their titling proceeding is the very
same lot as certified by the Barangay Captain dated July 28, 1999 under Plaintiff's Request for
Admission. Concerning the second formulated issue, only the Deed of Sale executed by Ciriaco
Seno was valid with all the attending requisites of sale. It was sold by the legitimate owner of the
land, Ciriaco Seno to the Plaintiffs. The sale (Exh. A, Exhibit "X") enjoyed preferential date of
execution, being dated or executed in 1978 by the lawful owner Ciriaco Seno who was first to
register the sale in the Registry of Property office, and due to such registration, the Tax Declaration
of Ciriaco Seno, was cancelled and a new Tax Declaration was issued in the name of Victoria Po for
as shown in Exh. E the said tax declaration succeeded in canceling the Tax Declaration of Mariano
Seno (Exh. C) and was issued thereafter a Tax Declaration in the name of C[i]riaco Seno (Exh. D).
So, when the latter sold the subject land to plaintiffs in 1978, the same was already owned by
C[i]riaco Seno.

When Mariano Seno died in 1982, the subject land owned by C[i]riaco Seno, naturally, is not part of
the estate of Mariano Seno, for at that point in time, the subject land is now owned by plaintiffs Sps.
Po, and the same was declared in their names (Exh. "D" "E" & "E-1 ").

As to the issue whether defendant Roberto Aboitiz was a purchaser in good faith and for value, the
Court holds that defendant Roberto Aboitiz was not a purchaser in good faith and for value for he
was already informed of the ownership of plaintiffs over the subject land during the conciliation
proceedings before the barangay official when plaintiffs filed a barangay case against him.
In this case, the Court believes that defendant Roberto Aboitiz is aware of the proprietary rights of
the plaintiffs considering the land was already declared for taxation purposes in plaintiffs' names
after the tax declaration of said land, first in the name of Mariano Seno was cancelled and another
one issued in the name of C[i]riaco Seno when the latter bought the said land from his father
Mariano Seno, and after the said tax declaration in the name of C[i]riaco Seno was cancelled and
another one issued in the name of plaintiffs herein.

So, defendant Roberto Aboitiz purchased the subject land from the Heirs of Mariano Seno who are
no longer the owners thereof and the tax declaration of subject land was no longer in the name of
Mariano Seno nor in the name of Heirs of Mariano Seno.

The City Assessor of Mandaue City even issued a Certification (Exh. X) to the effect that Tax
Declaration No. 0634-A in the name of Mrs. Victoria Lee Po married to Peter Po was issued prior to
the issuance of T.D. No. 1100 in the name of Roberto Aboitiz married to Maria Cristina Cabarruz.

Buyers of any untitled parcel of land for that matter, to protect their interest, will first verify from the
Assessor's Office that status of said land whether it has clean title or not. 196

With the exception of its ruling regarding respondents Jose, Ernesto, and Isabel being purchasers in
good faith, these factual findings were affirmed by the Court of Appeals.

Thus, there is no showing that the factual findings are not supported by evidence or that the
judgment seems to be based on a misapprehension of facts. Therefore, the factual findings of the
lower courts are binding.

Furthermore, this Court finds that the Spouses Aboitiz failed to prove their claim of fraud. The
Spouses Aboitiz attempted to prove that the Deed of Absolute Sale between Ciriaco and the
Spouses Po was fake and fraudulent by presenting certifications of its non-existence in the notarial
books of the notary public who notarized the document.197

However, a review of the certifications does not even state that the document does not exist in the
notarial books.

The Certification dated April 1, 1997 of the Records Management and Archives Office of the
Department of Education, Culture and Sports states:

This is to certify that per records of this Office, Deed of Sale executed by and between Ciriaco Seno
and Victoria Lee known as Doc. No. 66; Page No. 14; Book No. I; Series of 1978 entered in the
Notarial Register of Notary Public Jesus Pono is not among the documents transferred by the
Regional Trial Court of Cebu for safekeeping. 198

Likewise, the Certification dated April 4, 1997 of the Office of the Clerk of Court of the Regional Trial
Court of Cebu, 7th Judicial Region, Cebu City provides:

This is to certify that as per notarial records on file with this office, available and found as of this
date, Atty. Jesus M. Pono had been issued a Notarial Commission for the term 1978-1979.

It is further certifie[d] that said Notary Public has not submitted his notarial reports for the year 1978-
1979 in this office wherein the Deed of Sale as stated on the letter dated March 31, 1997 designated
as Doc. no. 66; Page no. 14; Book no. I and Series of 1978 is allegedly included. 199 (Emphasis
supplied)
These Certifications do not declare that the Deed of Absolute Sale does not exist. They only state
that at the time of their issuance, the Notary Public had not submitted his notarial reports or that the
document had not been transferred to the archives for safekeeping. It cannot logically be concluded
from these certifications that the document is inexistent, false, or fraudulent. In any case, the Notary
Public's failure to submit his or her notarial report does not affect the act of notarization. 200

Rule 132, Section 30 of the Rules of Court provides that:

Section 30. Proof of notarial documents. - Every instrument duly acknowledged or proved and
certified as provided by law, may be presented in evidence without further proof, the certificate of
acknowledgment being prima facie evidence of the execution of the instrument or document
involved.

When a private document is notarized, the document is converted to a public document which is
presumed regular, admissible in evidence without need for proof of its authenticity and due
execution, and entitled to full faith and credit upon its face. 201

To overturn the presumption in favor of a notarized document, the party questioning it must present
"clear, convincing, and more than merely preponderant evidence."202

Thus, parties who appear before a Notary Public should not be prejudiced by the failure of the
Notary Public to follow rules imposed by the Notarial Law.203 They are not obliged to ensure that the
Notary Public submits his or her notarial reports. 204

The Spouses Aboitiz failed to present clear and convincing evidence to overturn the presumption.
The notarized Deed of Absolute Sale between Ciriaco and the Spouses Po is, thus, presumed
regular and authentic.

Consequently, this Court can affirm the finding that the property was sold to Ciriaco in 1973, and that
Ciriaco, as the owner of the property, had the right to sell it to the Spouses Po. Hence, the lot did not
form part of the estate of Mariano, and the Mariano Heirs did not have the capacity to sell the
property to the Spouses Aboitiz later on.

VI

The Spouses Aboitiz argue that the Mariano Heirs are indispensable parties who should have been
impleaded in this case.205

The Mariano Heirs are not indispensable parties.

Rule 3, Section 7 of the Revised Rules of Court provides:

Section 7. Compulsory Joinder of Indispensable Parties. - Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is the party whose legal presence in the proceeding is so necessary that "the
action cannot be finally determined" without him or her because his or her interests in the matter and
in the relief "are so bound up with that of the other parties."206

The property owners against whom the action for reconveyance is filed are indispensable
parties.207 No relief can be had, and the court cannot render a valid judgment, without them. 208 The
property has been sold to respondents Jose, Ernesto, and Isabel.209 Thus, they are indispensable
parties.

However, the seller of the property is not an indispensable party.210 In Spring Homes Subdivision Co.,
Inc. v. Spouses Tablada, Jr.: 211

Similarly, by virtue of the second Deed of Absolute Sale between Spring Homes and the Spouses
Lumbres, the Spouses Lumbres became the absolute and registered owner of the subject property
herein. As such, they possess that certain interest in the property without which, the courts cannot
proceed for settled is the doctrine that registered owners of parcels of land whose title is sought to
be nullified should be impleaded as an indispensable party. Spring Homes, however, which has
already sold its interests in the subject land, is no longer regarded as an indispensableparty, but is,
at best, considered to be a necessary party whose presence is necessary to adjudicate the whole
controversy, but whose interests are so far separable that a final decree can be made in its absence
without affecting it. This is because when Spring Homes sold the property in question to the
Spouses Lumbres, it practically transferred all its interests therein to the said Spouses. In fact, a new
title was already issued in the names of the Spouses Lumbres. As such, Spring Homes no longer
stands to be directly benefited or injured by the judgment in the instant suit regardless of whether the
new title registered in the names of the Spouses Lumbres is cancelled in favor of the Spouses
Tablada or not. Thus, contrary to the ruling of the RTC, the failure to summon Spring Homes does
not deprive it of jurisdiction over the instant case for Spring Homes is not an indispensable
party. 212 (Citations omitted, emphasis supplied).

The Mariano Heirs, as the alleged sellers of the property, are not indispensable parties. They are at
best necessary parties, which are covered by Rule 3, Section 8 of the Rules of Court:

Section 8. Necessary Party. - A necessary party is one who is not indispensable but who ought to be
joined as a party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.

Necessary parties may be joined in the case "to adjudicate the whole controversy," but the case may
go on without them because a judgment may be rendered without any effect on their rights and
interests. 213

The Mariano Heirs may likewise be considered material witnesses to the action. A material matter to
which a witness can testify on can be a "main fact which was the subject of the inquiry" or any
circumstance or fact "which tends to prove" the fact subject of the inquiry, "which tends to
corroborate or strengthen the testimony relative to such inquiry," and "which legitimately affects the
credit of any witness who testifies."214

The validity of the Deeds of Sale allegedly executed by the parties in this case is a material matter in
determining who the true owner of the property is. Thus, the Mariano Heirs, including Ciriaco, may
testify as to the Deeds of Sale they executed to prove which sale is the valid one.

However, it is clear that the Mariano Heirs are not indispensable parties. They have already sold all
their interests in the property to the Spouses Aboitiz. They will no longer be affected, benefited, or
injured byany ruling of this Court on the matter, whether it grants or denies the complaint for
reconveyance. The ruling of this Court as to whether the Spouses Po are entitled to reconveyance
will not affect their rights. Their interest has, thus, become separable from that of Jose, Ernesto, and
Isabel.

Thus, the Court of Appeals correctly ruled that the Mariano Heirs are not indispensable parties.
VII

Despite these findings, the Spouses Po cannot recover the property. Respondents Jose, Ernesto,
and Isabel are innocent purchasers for value.

An innocent purchaser for value refers to the buyer of the property who pays for its full and fair price
without or before notice of another person's right or interest in it.215 He or she buys the property
believing that "the [seller] [i]s the owner and could [transfer] the title to the property."216

The Spouses Po argue that respondents Jose, Ernesto, and Isabel are not innocent purchasers for
value because the tax declaration over the property has the following annotation:

This tax declaration is also declared in the name of Mrs. Victoria Lee Po, married to Peter Po under
tax dee. no. 0634-A so that one may be considered a duplicate to the other.

However, if a property is registered, the buyer of a parcel of land is not obliged to look beyond the
transfer certificate of title to be considered a purchaser in good faith for value.217

Section 44 of Presidential Decree No. 1529218 states:

Section 44. Statutory liens affecting title. - Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which may be subsisting,
namely:

First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines
which are not by law required to appear ofrecord in the Registry of Deeds in order to be valid against
subsequent purchasers or encumbrancers of record.

Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the
acquisition of any right over the land by an innocent purchaser for value, without prejudice to the
right of the government to collect taxes payable before that period from the delinquent taxpayer
alone.

Third. Any public highway or private way established or recognized by law, or any government
irrigation canal or lateral thereof, if the certificate of title does not state that the boundaries of such
highway or irrigation canal or lateral thereof have been determined.

Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to,
Presidential Decree No. 27 or any other law or regulations on agrarian reform. (Emphasis supplied)

In Cruz v. Court of Appeals:219

The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any
question of legality of the title except claims which have been recorded in the certificate of title at the
time of registration or which may arise subsequent thereto. Every registered owner and every
subsequent purchaser for value in good faith holds the title to the property free from all
encumbrances except those noted in the certificate. Hence, a purchaser is not required to explore
further what the Torrens title on its face indicates in quest for any hidden defect or inchoate right that
may subsequently defeat his right thereto.
Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire
rights over the property the court cannot disregard such rights and order the total cancellation of the
certificate. The effect of such an outright cancellation would be to impair public confidence in the
certificate of title, for everyone dealing with property registered under the Torrens system would
have to inquire in every instance whether the title has been regularly or irregularly issued. This is
contrary to the evident purpose of the law. Every person dealing with registered land may safely rely
on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go
behind the certificate to determine the condition of the property. Even if a decree in a registration
proceeding is infected with nullity, still an innocent purchaser for value relying on a Torrens title
issued in pursuance thereof is protected. 220

The rationale for this rule is the public's interest in sustaining "the indefeasibility of a certificate of
title, as evidence of the lawful ownership of the land or of any encumbrance" on it.221 In Leong
v. See:222

One need not inquire beyond the four comers of the certificate of title when dealing with registered
property ...

The protection of innocent purchasers in good faith for value grounds on the social interest
embedded in the legal concept granting indefeasibility of titles. Between the third party and the
1âwphi1

owner, the latter would be more familiar with the history and status of the titled property.
Consequently, an owner would incur less costs to discover alleged invalidities relating to the
property compared to a third party. Such costs are, thus, better borne by the owner to mitigate costs
for the economy, lessen delays in transactions, and achieve a less optimal welfare level for the
entire society.223 (Citations omitted)

Thus, respondents were not obliged to look beyond the title before they purchased the property.
They may rely solely on the face of the title.

The only exception to the rule is when the purchaser has actual knowledge of any defect or other
circumstance that would cause "a reasonably cautious man" to inquire into the title of the seller.224 If
there is anything which arouses suspicion, the vendee is obliged to investigate beyond the face of
the title. 225 Otherwise, the vendee cannot be deemed a purchaser in good faith entitled to protection
under the law.226

In this case, there is no showing that respondents Jose, Ernesto, and Isabel had any knowledge of
the defect in the title. Considering that the annotation that the Spouses Po are invoking is found in
the tax declaration and not in the title of the property, respondents Jose, Ernesto, and Isabel cannot
be deemed purchasers in bad faith.

WHEREFORE, the Court of Appeals' October 31, 2012 Decision227 and its June 17, 2013
Resolution228 in CA-G.R. CV No. 03803 is AFFIRMED.

SO ORDERED.

MARVIC M.V.F. LEONEN


Associate Justice

WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson

(On Official Leave)


DIOSDADO M. PERALTA
JOSE CATRAL MENDOZA
Associate Justice
Associate Justice

(On Official Leave)


SAMUEL R. MARTIRES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to the Section13, Article VIII of the Constitution and the Division Chairperson’s Attestation,
I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO


Chief Justice

Footnotes

*
On official leave.

**
On official leave.

1
The Petitions were filed under Rule 45 of the Rules of Court. 2 Rollo (G.R. No. 208450), pp.
42-57-A. The Decision was penned by Associate Justice Edgardo L. Delos Santos and
concurred in by Associate Justices Gabriel T. Ingles and Maria Elisa Sempio Diy of the
Special Nineteenth Division, Court of Appeals, Cebu City.

3
Id. at 60-61. The Resolution was penned by Associate Justice Edgardo L. Delos Santos
and concurred in by Associate Justices Gabriel T. Ingles and Maria Elisa Sempio Diy of the
Special Nineteenth Division, Court of Appeals, Cebu City.
4
Rollo (G.R. No. 208497), pp. 60-71. The Decision, docketed as Civil Case No. MAN-2803,
was penned by Presiding Judge Ulric R. Cafiete of Branch 55, Regional Trial Court,
Mandaue City.

5
Rollo (G.R. No. 208450), pp. 55-56.

6
Id. at 60-61.

7
Id. at 11-40-A.

8
Rollo (G.R. No. 208497), pp. 10-27.

9
Rollo (G.R. No. 208450), p. 43.

10
Id. at 45.

11
Id.

12
Id. at 43.

13
Id. at 43-44.

14
Id.

15
Id. at 44.

16
Id.

17
Deceased and survived by his spouse and seven (7) children.

18
Deceased and survived by his spouse and six (6) children.

19
Rollo (G.R. No. 208450), p. 43.

20
Id. at 44.

21
Id. at 87.

22
Id. at 44.

23
Id.

24
Id.

25
Id.

26
Id. at 16, Petition for Review of Spouses Aboitiz.

27
Id.
28
Id. at 45.

29
Id.

30
Id.

31
Id.

32
Id. See rollo, p. 74. Ernesto is married to Maria Isabel Aboitiz.

Id. In the CA Decision and in the Spouses Po's Brief for the Appellee filed with the Court of
33

Appeals, the date of filing of the complaint is November 19, 1996. See rollo, (G.R. No.
208450), pp. 45 and 193, respectively.

34
Id. at 42.

35
ld.at175.

36
Id. at 57.

37
Id. at 48-49.

38
Id. at 54.

3