Escheats

Castorio Alvarico vs. Amelita Sola

A private individual may not bring an action for reversion or any action which would have the effect of canceling free
patent and the corresponding certificate of title issued on the basis thereof, such that the land covered thereby will again
form part of the public domain. Only the Solicitor General or the officer acting in his stead may do so.

Petition is dismissed.

Involve a miscellaneous sales application over a parcel of land by Fermina Lopez. Subsequently, Fermina Lopez executed
a Deed of Self- Adjudication and Transfer of Rights in favor of her niece, Amelita. The Bureau of lands approved the
transfer of rights, and title was issued in Sola’s name.

Castorio Alvarico, father of Amelita, filed an action for reconveyance against Amelita. He claimed Fermina donated
the land to him and he immediately took possession of the same and that the transfer of rights over the land rendered
between Amelita and Fermina was rendered ineffective. He also claimed that Amelita was in bad faith when she
registered the land in her name, thus he has a better right over the property because he was first in material possession
in good faith.

Amelita, on the other hand, claimed that the donation was void and when Fermina made such donation she was no
longer the owner of the property since the donation was made after the rights over the property was transferred to her.
She added that the donation was void because of lack of approval from the Bureau of Lands.

RTC rendered a decision in favor of Alvarico, on appeal CA reversed the decision and dismissed the case.

Issue: Who between petitioner and respondent has a better claim to the land?

Held: Amelita Sola. Even assuming that Amelita Sola acquired title to the disputed property in bad faith, only the State
can institute reversion proceedings under Sec. 101 of the Public Land Act.

Sec. 101- All actions for reversion to the Government of lands of the public domain or improvements thereon
shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the
Republic of the Philippines.

In other words, a private individual may not bring an action for reversion or any action which would have the effect of
canceling free patent and the corresponding certificate of title issued on the basis thereof, such that the land covered
thereby will again form part of the public domain. Only the Solicitor General or the officer acting in his stead may do so.

Since Amelita Sola’s title originated from a grant by the government, its cancellation is a matter between the grantor
and the grantee. Clearly then, Alvarico has no standing at all to question the validity of Amelita’s title. It follows that he
cannot “recover” the property because, to begin with, he has not shown that he is the rightful owner thereof.

Maltos vs. Heirs of Eusebio Borromeo

The sale of a parcel of agricultural land covered by a free patent during the 5-year prohibitory period under the Public
Land Act is void. Reversion of the parcel of land is proper. However, reversion under Section 101 of the Public Land Act is
not automatic. The Office of the Solicitor General must first file an action for reversion.

Petition is denied
Eusebio Borromeo was issued a Free Patent over a piece of agricultural land located in San Francisco, Agusane del Sur.
Subsequently, Eusebio Borromeo sold the land to Eliseo Maltos within the 5-year prohibitory period under the Public
Land Act.. Thereafter Eusebio died, his heirs filed a complaint for Nullity of Title and Reconveyance of Title against
Maltos spouses and the Register of Deeds of Agusan del Sur.

Maltos spouses, on the other hand, argued that the sale was made in good faith and since the sale was made during the
5-year prohibitory period, the land would revert to the public domain and the proper party to institute reversion
proceedings was the Office of the Solicitor General.

The trial court ruled the sale was null and void and since the property was sold within 5-year prohibitory period, such
transfer resulted in the cancellation of the grant and reversion of the land to the public domain. On appeal, CA reversed
the Decision of the trial court, and held that the government has to file an action for reversion because “reversion is not
automatic.” While there is yet no action for reversion instituted by the Office of the Solicitor General, the property
should be returned to the heirs of Borromeo.

Issue: Who between the parties have a better right to possess the subject parcel of land?

Held: Heirs of Borromeo. Reversion is a remedy under Section 101 of the Public Land Act:

Section 101. All actions for the reversion to the Government of lands of the public domain or improvements
thereon shall be instituted by the Solicitor-General or the officer acting in his stead, in the proper courts, in the name of
Commonwealth of the Philippines.

The purpose of reversion is “to restore public land fraudulently awarded and disposed of to private individuals or
corporations to the mass of public domain.

The general rule is that reversion of lands to the state is not automatic, and the Office of the Solicitor General is the
proper party to file an action for reversion.

Reversion is not automatic. The government has to take action to cancel the patent and the certificate of title in order
that the land involved may be reverted to it. Correspondingly, any new transaction would be subject to whatever steps
the government may take for the reversion to it.

The objective of an action for reversion of public land is the cancellation of the certificate of title and the resulting
reversion of land covered by the title to the State. We clarify that the remedy of reversion is not the same as the remedy
of declaration of nullity of free patents and certificate of title. In reversion, the “allegations in the complaint would admit
State ownership of the disputed land,” while in an action for the declaration of nullity of free patent and certificate of
title, the allegations would include “plaintiffs ownership of the contested lot prior to the issuance of the free patent and
certificate of title.”

Since an action for reversion presupposes that the property in dispute is owned by the state, it is proper that the action
be filed by the Office of the Solicitor General, being the real party-in-interest.

There is, however, an exception to the rule that reversion is not automatic. Section 29 of the Public Land Act.

Section 29. After the cultivation of the land has begun, the purchaser, with the approval of the Secretary of
Agricultural and Commerce, may convey or encumber his rights to any person, corporation, or association legally
qualified under this Act to purchase agricultural public lands, provided such conveyance or encumbrance does not affect
any right or interest of the Government in the land: And provided, further, that the transferee is not delinquent in the
payment of any installment due and payable. Any sale and encumbrance made without the previous approval of the
Secretary of Agriculture and Commerce shall be null and void and shall produce the effect of annulling the acquisition
and reverting the property and all rights to the State, and all payments on the purchase price therefore made to the
Government shall be forfeited. After the sale has been approved, the vendor shall not lose his right to acquire
agricultural public lands under the provisions of this Act, provided he has the necessary qualifications.

In Francisco vs.Rodriguez, the SC differentiated reversion under Sections 29 and 101 of the Public Land Act. The SC
explained that reversion under Section 29 is self-operative, unlike Section 101 which requires the Office of the Solicitor
General to institute reversion proceedings. Also, Section 101 applies in cases where “title has already vested in the
individual.”

In this case, a free patent over the subject parcel of land was issued to Eusebio Borromeo. This shows that he already
had title to the property when he sold it to petitioner Eliseo Maltos. Thus, Section 101 of the Public Land Act applies.

Narcise vs Valbueco, Inc.

The difference between them lies in the allegations as to the character of ownership the realty whose title is sought to be
nullified. In action for reversion, the pertinent allegations in the complaint would admit State ownership of the disputed
land, while in an action for annulment of patent and certificate of title, pertinent allegations deal with plaintiff’s
ownership of the contested land prior to the issuance of the same as wells as defendant’s fraud or mistake in successfully
obtaining these documents of title over the parcel of land claimed by the plaintiff.

Petition is denied

Valbueco, Inc. filed an action for annulment of the Free Patents issued against Narcise, et al., by the DENR and the
Register of Deeds of Bataan. Valbueco, Inc. alleged that it is the possessor of the subjects in an actual, peaceful, adverse
and peaceful possession since 1970. Narcise, et al., filed motion to dismiss on the ground of lack of cause of action
among others. The RTC ruled that the instant case is an action for reversion because Narcise, et al., are not qualified to
be issued said free patents. As such, the land must revert back to the State. Thus, it is the OSG who is the real party-in-
interest. The CA reversed and the set aside the ruling of the RTC.

Issue: Whether or not the instant case is actually a reversion case, and not a case for annulment of free patents and
certificates of title

Held: An action for annulment of free patents and certificates of title. An action for reversion, a remedy provided
under Commonwealth Act No. 141, seeks to cancel the original certificate of registration, and nullify the original
certificate of title, including the transfer of certificate of title of the successors-in –interest because the same were all
procured through fraud and misrepresentation. In cancelling and nullifying such title, it restores the public land
fraudulently awarded and disposed of to private individuals or corporations to the mass of public domain. Such action is
filed by the OSG pursuant to its authority under the Administrative Code.

On the other hand, an action for annulment of free patents and certificates of title also seeks for the cancellation and
nullification of the certificate of title, but once the same is granted, it does not operate to revert the property back to
the State, but to its lawful owner. In such action, the nullity arises not from fraud or deceit but from the fact that the
director of the Land Management Bureau had no jurisdiction to bestow title; hence, the issued patent or certificate of
title was void ab initio.

Thus, the difference between them lies in the allegations as to the character of ownership the realty whose title is
sought to be nullified. In action for reversion, the pertinent allegations in the complaint would admit State ownership of
the disputed land, while in an action for annulment of patent and certificate of title, pertinent allegations deal with
plaintiff’s ownership of the contested land prior to the issuance of the same as wells as defendant’s fraud or mistake in
successfully obtaining these documents of title over the parcel of land claimed by the plaintiff.

The SC held that the action is one of annulment of patents and titles. The allegations in the complaint show that the
Valbueco, Inc. asserts its ownership over the subject properties by acquisitive prescription. Being an action for
annulment of patents and titles, it is the Valbuenco, Inc., who is the real party-in-interest for it is the one claiming title or
ownership adverse to that of the registered owner.

Guardianship

Goyena vs. Amparo Ledesma-Gustilo

Goyena opposed the petition for the appointment of respondent as guardian before the trial court because, among other
reasons, she felt she was disliked by respondent, a ground which does not render respondent unsuitable for appointment
as guardian

Petition is dismissed

RTC of Makati granted Amparo Ledesma Gustilo as guardian over the person and property of her sister Julieta Ledesma.
Goyena appealed citing that she was a friend for than 60 years.

In respondent's application for guardianship, she mentioned that her sister suffered a stroke and needed outside
assistance. Her sister also owns a real estate and in controlling such she needs an assistance of a guardian and the
nearest kin was respondent.

Petitioner filed an opposition citing that Julieta can take care of herself and that the siblings had antagonistic interests.
Petitioner even gave other names the court may appoint if she was not herself appointed.

The trial court ruled that indeed Julieta needed assistance; that Goyena even though she has a special bond with Julieta,
at 90, is not physically fit to do such chores; that Goyena's reason that Julieta dislikes her sister is not sufficient to make
prevent her from being a guardian. The trial court appointed Gustilo.

Goyena filed a motion for reconsideration which was also denied. The trial court adds that the court found Amparo to be
the most qualified after they considered Goyena and the other names, given that the next of kin would not oppose.

Goyena the appealed with the CA which they also denied. The CA cites that there are no antagonistic interests between
the siblings because they are co-owners. There is also no showing that petitioner’s business decisions in the past had
resulted in the prejudice of Julieta. There is no enough proof of Amparo's hostile interests against Julieta as she was the
one who petitioned for the guardianship. The CA even pointed that Goyena initially concealed the deteriorating state of
mind of Julieta from the court. Lastly, that even if Goyena declared her disinterest as guardian, the names she
mentioned have not acted, nor even indicated, their desire to act as such.

Issue: Whether or not the appellate court and the trial court erred in finding that respondent is suitable for appointment
as guardian of the person and properties of Julieta

Held: No. First of all, Rule 65 should have been applied as the case was a question of fact, not of law.

Second, the SC examined the letters that as per Goyena showed proof of antagonistic interest between the sisters. The
SC found the four letters presented to be insufficient to prove antagonistic interests. A mere disagreement is not proof
of such.
Third, Goyena’s claim that Amparo's intent to be a guardian is for the control and use for her own benefits of Julieta's
properties is purely speculative and finds no support from the records.

Finally, the SC noted two undisputed facts, that; Goyena opposed the petition for the appointment of respondent as
guardian before the trial court because, among other reasons, she felt she was disliked by respondent, a ground which
does not render respondent unsuitable for appointment as guardian, and concealment of the deteriorating state of
mind of Julieta before the trial court, is reflective of a lack of good faith.

Caniza vs. CA

Petition is granted.

Being then 94 years of age, Carmen Caniza, a spinster, a retired pharmacist, and former professor, was declared
incompetent by judgment of the RTC of Quezon City, in a guardianship proceeding instituted by her niece, Amparo A.
Evangelista. She was so adjudged because of her advanced age and physical infirmities which included cataracts in both
eyes and senile dementia. Amparo A. Evangelista was appointed legal guardian of her person and estate.

Later, her guardian Amparo Evangelista commenced a suit to eject the spouses Pedro and Leonora Estrada in a house
and lot owned by Carmen Caniza in Quezon City.

In their Answer, the defendants declared that they had been living in Caniza's house since the 1960's; that in
consideration of their faithful service they had been considered by Caniza as her own family, and the latter had in fact
executed a holographic will which she "bequeathed" to the Estradas the house and lot in question. The Estradas insist
that the devise of the house to them by Caiza clearly denotes her intention that they remain in possession thereof, and
legally incapacitated her judicial guardian, Amparo Evangelista, from evicting them therefrom, since their ouster would
be inconsistent with the ward's will. Carmen Caniza died during the pendency of the appeal. The Estrada’s moved to
dismiss the petition arguing that Caniza’s death automatically terminated the guardianship.

Issue 1: Whether or not Caiza’s legal guardian has the authority to bring ejectment action

Held: Yes. Amparo Evangelista was appointed by a competent court the general guardian of both the person and the
estate of her aunt, Carmen Caiza. Her Letters of Guardianship clearly installed her as the "guardian over the person and
properties of the incompetent CARMEN CAIZA with full authority to take possession of the property of said incompetent
in any province or provinces in which it may be situated and to perform all other acts necessary for the management of
her properties ** " By that appointment, it became Evangelista's duty to care for her aunt's person, to attend to her
physical and spiritual needs, to assure her well-being, with right to custody of her person in preference to relatives and
friends. It also became her right and duty to get possession of, and exercise control over, Caiza's property, both real and
personal, it being recognized principle that the ward has no right to possession or control of his property during her
incompetency. That right to manage the ward's estate carries with it the right to take possession thereof and recover it
from anyone who retains it, and bring and defend such actions as may be needful for this purpose.

Issue 2: Whether or not Caiza’s death automatically terminated the guardianship

Held: No. While it is indeed well-established rule that the relationship of guardian and ward is necessarily terminated
by the death of either the guardian or the ward, the rule affords no advantage to the Estradas. Amparo Evangelista, as
niece of Carmen Caiza, is one of the latter's only two (2) surviving heirs, the other being Caiza's nephew, Ramon C.
Nevado. On their motion and by Resolution of this Court of June 20, 1994, they were in fact substituted as parties in the
appeal at bar in place of the deceased, in accordance with Section 17, Rule 3 of the Rules of Court, viz.

To be sure, an ejectment case survives the death of a party. Caiza's demise did not extinguish the desahucio suit
instituted by her through her guardian.That action, not being a purely personal one, survived her death; her heirs have
taken her place and now represent her interests in the appeal at bar.
 Neri vs. Heirs of Hadji Yusop Uy

Parents should apply for judicial guardianship in order for them to sell properties of their children. *Even the parents of
their minor children are bound to post bond.*

Petition is granted

Anunciacion Neri had seven children: first marriage with Gonzalo Illut, namely: Eutropia and Victoria and second
marriage with Enrique Neri, namely: Napoleon, Alicia, Visminda, Douglas and Rosa. Throughout the marriage of spouses
Enrique and Anunciacion, they acquired several homestead properties located in Samal, Davao del Norte.

In 1977, Anunciacion died intestate. Enrique, in his personal capacity and as natural guardian of his minor children Rosa
and Douglas, with Napoleon, Alicia, and Visminda executed an Extra-Judicial Settlement of the Estate with Absolute
Deed of Saleon 7/7/1979, adjudicating among themselves the said homestead properties and thereafter, conveying
them to the late spouses Uy for a consideration ofP80,000.00.

In June 1996, the children of Enrique filed a complaint for annulment of sale of the homestead properties against
spouses Uy before the RTC, assailing the validity of the sale for having been sold within the prohibited period. The
complaint was later amended to include Eutropia and Victoria additional plaintiffs for having been excluded and
deprived of their legitimes as children of Anunciacion from her first marriage. RTC Ruling: Rendered the sale void
because Eutropia and Victoria were deprived of their hereditary rights and that Enrique had no judicial authority to sell
the shares of his minor children, Rosa and Douglas. CA Ruling: Reversed the RTC ruling and declared the extrajudicial
settlement and sale valid. While recognizing Rosa and Douglas to be minors at that time, they were deemed to have
ratified the sale when they failed to question it upon reaching the age of majority. It also found laches to have set in
because of their inaction for a long period of time.

Issue: Whether Enrique, as the natural guardian of the minor under parental authority, has the power to dispose or
encumber the property of the minor

Held: No. All the petitioners are legitimate children of Anunciacion from her first and second marriages and
consequently, they are entitled to inherit from her in equal shares, pursuant to Articles 979 and 980 of the Civil Code. In
the execution of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale in favor of spouses Uy, all the
heirs of Anunciacion should have participated. Considering that Eutropia and Victoria were admittedly excluded and that
then minors Rosa and Douglas were not properly represented therein, the settlement was not valid and binding upon
them.

While the settlement of the estate is null and void, the subsequent sale of the properties made by Enrique and his
children, Napoleon, Alicia and Visminda, in favor of the spouses is valid but only with respect to their proportionate
shares. With respect to Rosa and Douglas who were minors at the time of the execution of the settlement and sale, their
natural guardian and father, Enrique, represented them in the transaction. However, on the basis of the laws prevailing
at that time, Enrique was merely clothed with powers of administration and bereft of any authority to dispose of their
2/16 shares in the estate of their mother.Administration includes all acts for the preservation of the property and the
receipt of fruits according to the natural purpose of the thing. Any act of disposition or alienation, or any reduction in
the substance of the patrimony of child, exceeds the limits of administration. Thus, a father or mother, as the natural
guardian of the minor under parental authority, does not have the power to dispose or encumber the property of the
latter. Such power is granted by law only to a judicial guardian of the wards property and even then only with courts
prior approval secured in accordance with the proceedings set forth by the Rules of Court.Consequently, the disputed
sale entered into by Enrique in behalf of his minor children without the proper judicial authority, unless ratified by them
upon reaching the age of majority, is unenforceable in accordance with Articles 1317 and 1403(1) of the Civil Code.
However, records show that Napoleon and Rosa had ratified the extrajudicial settlement of the estate with absolute
deed of sale. In their Joint-Affidavit and Manifestation before the RTC, they both confirmed, respect and acknowledge
the validity of the Extra-Judicial Settlement of the Estate with Absolute Deed of Sale in 1979. The ratification thus purged
all the defects existing at the time of its execution and legitimizing the conveyance of Rosas 1/16 share in the estate of
Anunciacion to spouses Uy. The same, however, is not true with respect to Douglas for lack of evidence showing
ratification.

Oropesa vs. Oropesa

Petition is denied

The Petitioner, Nilo Oropesa filed a petition for him and a certain Ms. Louie Ginez to be appointed as guardians over the
property of his father, the respondent, Cirilo Oropesa. In the said petition, it is alleged that the respondent has been
afflicted with several maladies and has been sickly for over ten (10) years already having suffered a stroke on April 1,
2003 and June 1, 2003, that his judgment and memory were impaired and such has been evident after his hospitalization;
that even before his stroke, he was observed to have had lapses in memory and judgment, showing signs of failure to
manage his property properly; that due to his age and medical condition, he cannot, without outside aid, manage his
property wisely, and has become an easy prey for deceit and exploitation by people around him, particularly his girlfriend.

After presenting evidence, petitioner rested his case but failed to file his written formal offer of evidence. Respondent filed
his Omnibus Motion to declare that petitioner has waived the presentation of his Offer of Exhibits and Evidence since they
were not formally offered.

RTC granted the demurrer and dismissed the case stating that petitioner has failed to provide sufficient evidence to
establish that Gen. Cirilo O. Oropesa is incompetent to run his personal affairs and to administer his properties. CA
affirmed the decision of the RTC.

Issue: WHETHER RESPONDENT IS CONSIDERED AN "INCOMPETENT" PERSON AS DEFINED UNDER SECTION 2,

RULE 92 OF THE RULES OF COURT WHO SHOULD BE PLACED UNDER GUARDIANSHIP.

Ruling: No, In a guardianship proceeding, a court may appoint a qualified guardian if the prospective ward is proven to be
a minor or an incompetent. Under Section 2, Rule 92 of the Rules of Court tells us that persons who, though of sound
mind but by reason of age, disease, weak mind or other similar causes, are incapable of taking care of themselves and
their property without outside aid are considered as incompetents who may properly be placed under guardianship.

The full text of the said provision reads:

Sec. 2. Meaning of the word "incompetent." – Under this rule, the word "incompetent" includes persons suffering the
penalty of civil interdiction or who are hospitalized lepers, prodigals, deaf and dumb who are unable to read and write,
those who are of unsound mind, even though they have lucid intervals, and persons not being of unsound mind, but by
reason of age, disease, weak mind, and other similar causes, cannot, without outside aid, take care of themselves and
manage their property, becoming thereby an easy prey for deceit and exploitation.

With the failure of petitioner to offer his documentary evidence, his proof of his father’s incompetence consisted purely of
testimonies given by himself and his sister (who were claiming interest in their father’s real and personal properties) and
their father’s former caregiver (who admitted to be acting under their direction). These testimonies, which did not include
any expert medical testimony, were insufficient to convince the trial court of petitioner’s cause of action and instead lead it
to grant the demurrer to evidence that was filed by respondent.

In an analogous guardianship case wherein the soundness of mind of the proposed ward was at issue, we had the
occasion to rule that "where the sanity of a person is at issue, expert opinion is not necessary [and that] the observations
of the trial judge coupled with evidence establishing the person’s state of mental sanity will suffice."

The Court noted the absence of any testimony of a medical expert which states that Gen. Cirilo O. Oropesa does not have
the mental, emotional, and physical capacity to manage his own affairs. On the contrary, Oppositor’s evidence includes a
Neuropsychological Screening Report which states that Gen. Oropesa, (1) performs on the average range in most of the
domains that were tested; (2) is capable of mental calculations; and (3) can provide solutions to problem situations. The
Report concludes that Gen. Oropesa possesses intact cognitive functioning, except for mildly impaired abilities in
memory, reasoning and orientation. It is the observation of the Court that oppositor is still sharp, alert and able.
Abad vs. Biason

Eduardo T. Abad filed a petition for guardianship over the person and properties of Maura Abad with the Regional Trial
Court of Dagupan City stating therein that he is Maura’s nephew and that the latter is already more than 90 years old,
single and is in dire need of a guardian who will look after her and her business affairs. Leonardo Biason intervened in
Eduardo’s petition stating that he is also Maura’s nephew and that Abad cannot possibly be an efficient guardian as he is
residing in Quezon City and Maura is in Dagupan. The Regional Trial Court awarded the guardianship to Biason
prompting Abad to institute an appeal before the Court of Appeals which also affirmed the lower court’s decision stating
that there are no vices in Biason’s character that will disqualify him to be a guardian and Maura’s choice of Eduardo may
be given weight but not overly so in view of her alleged mental state.

Issue: Whether or not the decision of Court of Appeals should be reversed

Held: During the pendency of the petition, Biason died as stated in the Manifestation and Motion of Maura filed before the
Court. The Court then ruled that with Biason’s demise, it has become impractical and futile to proceed with resolving the
merits of the petition. It is a well-established rule that the relationship of guardian and ward is necessarily terminated by
the death of either the guardian or the ward.

LBP vs. Perez

Petitioner Land Bank of the Philippines (LBP) is a government financial institution and the official depository of the
Philippines. Respondents were officers of Asian Construction and Development Corporation (ACDC), a corporation
engaged in the construction business. On several occasions, respondents executed in favor of Land Bank of the
Philippines (LBP) trust receipts to secure the purchase of construction materials that they will need in their construction
projects. When the trust receipts matured, ACDC failed to return to LBP the proceeds of the construction projects or the
construction materials subject of the trust receipts. After several demands went unheeded, LBP filed a complaint for
Estafa or violation of Art. 315, par. 1(b) of the RPC, in relation to PD 115, against the respondent officers of ACDC.

ISSUE:

1. WON the disputed transactions is a trust receipt or a loan?

HELD:

1. TRUST RECEIPT.

There are two obligations in a trust receipt transaction. The first is covered by the provision that refers to money under the
obligation to deliver it (entregarla) to the owner of the merchandise sold. The second is covered by the provision referring
to merchandise received under the obligation to return it (devolvera) to the owner. Thus, under the Trust Receipts Law,]
intent to defraud is presumed when (1) the entrustee fails to turn over the proceeds of the sale of goods covered by the
trust receipt to the entruster; or (2) when the entrustee fails to return the goods under trust, if they are not disposed of in
accordance with the terms of the trust receipts.

In all trust receipt transactions, both obligations on the part of the trustee exist in the alternative the return of the proceeds
of the sale or the return or recovery of the goods, whether raw or processed. When both parties enter into an agreement
knowing that the return of the goods subject of the trust receipt is not possible even without any fault on the part of the
trustee, it is not a trust receipt transaction penalized under Section 13 of P.D. 115; the only obligation actually agreed
upon by the parties would be the return of the proceeds of the sale transaction. This transaction becomes a mere loan,
where the borrower is obligated to pay the bank the amount spent for the purchase of the goods.
Article 1371 of the Civil Code provides that [i]n order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. Under this provision, we can examine the
contemporaneous actions of the parties rather than rely purely on the trust receipts that they signed in order to understand
the transaction through their intent.

We note in this regard that at the onset of these transactions, LBP knew that ACDC was in the construction business and
that the materials that it sought to buy under the letters of credit were to be used for the following projects: the Metro Rail
Transit Project and the Clark Centennial Exposition Project. LBP had in fact authorized the delivery of the materials on
the construction sites for these projects, as seen in the letters of credit it attached to its complaint. Clearly, they were
aware of the fact that there was no way they could recover the buildings or constructions for which the materials subject
of the alleged trust receipts had been used. Notably, despite the allegations in the affidavit-complaint wherein LBP sought
the return of the construction materials, its demand letter dated May 4, 1999 sought the payment of the balance but failed
to ask, as an alternative, for the return of the construction materials or the buildings where these materials had been used.

The fact that LBP had knowingly authorized the delivery of construction materials to a construction site of two
government projects, as well as unspecified construction sites, repudiates the idea that LBP intended to be the
owner of those construction materials. As a government financial institution, LBP should have been aware that the
materials were to be used for the construction of an immovable property, as well as a property of the public
domain. As an immovable property, the ownership of whatever was constructed with those materials would
presumably belong to the owner of the land, under Article 445 of the Civil Code.

Even if we consider the vague possibility that the materials, consisting of cement, bolts and reinforcing steel bars, would
be used for the construction of a movable property, the ownership of these properties would still pertain to the government
and not remain with the bank as they would be classified as property of the public domain, which is defined by the Civil
Code as:

In contrast with the present situation, it is fundamental in a trust receipt transaction that the person who advanced payment
for the merchandise becomes the absolute owner of said merchandise and continues as owner until he or she is paid in
full, or if the goods had already been sold, the proceeds should be turned over to him or to her.

WHEREFORE, we DENY the petition and AFFIRM the January 20, 2005 decision of the Court of Appeals in CA-
G.R. SP No. 76588. No costs.