Extinguishment of Agency General condition Revocation Withdrawal of agent Death of the Principal Death of the Agent CASES

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-36585 July 16, 1984 MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA, petitioners, vs. THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor of QUIN BATERNA REALTY), respondents. Enrique L. Soriano for petitioners. Domingo Laurea for private respondent.

RELOVA, J.: Appeal by certiorari from a decision of the then Court of Appeals ordering herein petitioners to pay private respondent "the sum of P10,000.00 as damages and the sum of P2,000.00 as attorney's fees, and the costs." This case originated in the then Court of First Instance of Iloilo where private respondents instituted a case of recovery of unpaid commission against petitioners over some of the lots subject of an agency agreement that were not sold. Said complaint, docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano Diolosa and Alegria Villanueva-Diolosa", was dismissed by the trial court after hearing. Thereafter, private respondent elevated the case to respondent court whose decision is the subject of the present petition. The parties petitioners and respondents-agree on the findings of facts made by respondent court which are based largely on the pre-trial order of the trial court, as follows: PRE-TRIAL ORDER When this case was called for a pre-trial conference today, the plaintiff, assisted by Atty. Domingo Laurea, appeared and the defendants, assisted by Atty. Enrique Soriano, also appeared.

A. During the pre-trial conference the parties, in addition to what have been admitted in the pleadings, have agreed and admitted that the following facts are attendant in this case and that they will no longer adduce evidence to prove them: 1. That the plaintiff was and still is a licensed real estate broker, and as such licensed real estate broker on June 20, 1968, an agreement was entered into between him as party of the second part and the defendants spouses as party of the first part, whereby the former was constituted as exclusive sales agent of the defendants, its successors, heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE SUBDIVISION owned by the defendants, under the terms and conditions embodied in Exhibit "A", and pursuant to said agreement (Exhibit "A"), the plaintiff acted for and in behalf of the defendants as their agent in the sale of the lots included in the VILLA ALEGRE SUBDIVISION; 2. That on September 27, 1968, the defendants terminated the services of plaintiff as their exclusive sales agent per letter marked as Exhibit "B", for the reason stated in the latter. B. During the trial of this case on the merit, the plaintiff will adduce by competent evidence the following facts: 1. That as a real estate broker, he had sold the lots comprised in several subdivisions, to wit: Greenfield Subdivision, the Villa Beach Subdivision, the Juntado Subdivision, the St. Joseph Village, the Ledesma Subdivision, the Brookside Subdivision, the Villa Alegre Subdivision, and Cecilia Subdivision, all in the City of Iloilo except St. Joseph which is in Pavia Iloilo. 2. That the plaintiff, as a licensed real estate broker, has been seriously damaged by the action of the defendants in rescinding, by Exhibit "B", the contract (Exhibit "A") for which the plaintiff suffered moral damages in the amount of P50,000.00, damages to his good will in the amount of P100,000.00, for attorney's fees in the amount of P10,000.00 to protect his rights and interests, plus exemplary damages to be fixed by the Court. 3. That the plaintiff is entitled to a commission on the lots unsold because of the rescission of the contract. C. The defendants during the trial will ill prove by competent evidence the following: 1. That the plaintiff's complaint was filed to make money out of the suit from defendants, to harrass and to molest defendants; 2. That because of the unjustified and unfounded complaint of the plaintiff, the defendants suffered moral damages in the amount of P50,000.00, and that for the public good, the court may order the plaintiff to pay the defendants exemplary damages in the amount of P20,000.00, plus attorney's fees of P10,000.00. D. Contentions of the parties: 1. The plaintiff contends: (a) That under the terms of the contract (Exhibit "A") the plaintiff had unrevocable authority to sell all the lots

included in the Villa Alegre Subdivision and to act as exclusive sales agent of the defendants until all the lots shall have been disposed of; (b) That the rescission of the contract under Exhibit "B", contravenes the agreement of the parties. 2. The defendants contend: (a) That they were within their legal right to terminate the agency on the ground that they needed the undisposed lots for the use of the family; (b) That the plaintiff has no right in law to case for commission on lots that they have not sold. E. The parties hereby submit to the Court the following issues: 1. Whether under the terms of Exhibit "A" the plaintiff has the irrevocable right to sen or dispose of all the lots included within Villa Alegre Subdivision; 2. Can the defendants terminate their agreement with the plaintiff by a letter like Exhibit "B"? F. The plaintiff submitted the following exhibits which were admitted by the defendants: Exhibit "A" agreement entered into between the parties on June 20, 1968 whereby the plaintiff had the authority to sell the subdivision lots included in Villa Alegre subdivision; Exhibit "B" Letter of the defendant Alegria V. Diolosa dated September 27, 1968 addressed to the plaintiff terminating the agency and rescinding Exhibit "A" for the reason that the lots remained unsold lots were for reservation for their grandchildren. The Court will decide this case based on the facts admitted in the pleadings, those agreed by the parties during the pre-trial conference, and those which they can prove during the trial of this case, in accordance with the contention of the parties based on the issues submitted by them during the pre-trial conference. SO ORDERED. Iloilo City, Philippines, August 14, 1969. (SGD) VALERI O V. ROVIR A Judge (pp. 2225, Rollo)

The only issue in this case is whether the petitioners could terminate the agency agreement, Exhibit "A", without paying damages to the private respondent. Pertinent portion of said Exhibit "A" reads: That the PARTY OF THE FIRST PART is the lawful and absolute owner in fee simple of VILLA ALEGRE SUBDIVISION situated in the District of Mandurriao, Iloilo City, which parcel of land is more particularly described as follows, to wit: A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer Certificate of Title No. T_____ situated in the District of Mandurriao, Iloilo, Philippines, containing an area of 39016 square meters, more or less, with improvements thereon. That the PARTY OF THE FIRST PART by virtue of these presents, to enhance the sale of the lots of the above-described subdivision, is engaging as their EXCLUSIVE SALES AGENT the PARTY OF THE SECOND PART, its successors, heirs and assigns to dispose of, sell, cede, transfer and convey the above-described property in whatever manner and nature the PARTY OF THE SECOND PART, with the concurrence of the PARTY OF THE FIRST PART, may deem wise and proper under the premises, whether it be in cash or installment basis, until all the subject property as subdivided is fully disposed of. (p. 7 of Petitioner's brief. Emphasis supplied). Respondent court, in its decision which is the subject of review said: Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate the agency agreement, Exh. "A", at will without paying damages. The said agency agreement expressly stipulates ... until all the subject property as subdivided is fully disposed of ..." The testimony of Roberto Malundo(t.s.n. p. 99) that the plaintiff agreed to the intention of Mrs. Diolosa to reserve some lots for her own famay use cannot prevail over the clear terms of the agency agreement. Moreover, the plaintiff denied that there was an agreement to reserve any of the lots for the family of the defendants. (T.s.n. pp. 16). There are twenty seven (27) lots of the subdivision remaining unsold on September 27, 1968 when the defendants rescinded the agency agreement, Exhibit "A". On that day the defendants had only six grandchildren. That the defendants wanted to reserve the twenty seven remaining lots for the six grandchildren is not a legal reason for defendants rescind the agency agreement. Even if the grandchildren were to be given one lot each, there would still be twenty-one lots available for sale. Besides it is undisputed that the defendants have other lands which could be reserved for their grandchildren. (pp. 26-27, Rollo) The present appeal is manifestly without merit. Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to dispose of, sell, cede, transfer and convey ... until out the subject property as subdivided is fully disposed of." The authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the petitioners revoked the contract with private respondent in a letter, Exhibit "B" Dear Mr. Baterna: Please be informed that we have finally decided to reserve the remaining unsold lots, as of this date of our VILLA ALEGRE Subdivision for our grandchildren. In view thereof, notice is hereby served upon you to the effect that our agreement dated June 20, 1968 giving you the authority to sell as exclusive sales agent of our subdivision is hereby rescinded.

Please be duly guided. Very truly yours, (SGD) ALEGRIA V. DIOLOSA Subdivision Owner (p. 11 of Petitioner's Brief) they become liable to the private respondent for damages for breach of contract. And, it may be added that since the agency agreement, Exhibit "A", is a valid contract, the same may be rescinded only on grounds specified in Articles 1381 and 1382 of the Civil Code, as follows: ART. 1381. The following contracts are rescissible: (1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; (5) All other contracts specially declared by law to be subject to rescission. ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible." In the case at bar, not one of the grounds mentioned above is present which may be the subject of an action of rescission, much less can petitioners say that the private respondent violated the terms of their agreementsuch as failure to deliver to them (Subdivision owners) the proceeds of the purchase price of the lots. ACCORDINGLY, the petition is hereby dismissed without pronouncement as to costs. SO ORDERED. Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and Dela Fuente, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-41182-3 April 16, 1988 DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, vs. THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.

SARMIENTO , J.: The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari. The facts are beyond dispute: xxx xxx xxx On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as party of the second part, and hereinafter referred to as appellants, the Tourist World Service, Inc. leased the premises belonging to the party of the first part at Mabini St., Manila for the former-s use as a branch office. In the said contract the party of the third part held herself solidarily liable with the party of the part for the prompt payment of the monthly rental agreed on. When the branch office was opened, the same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc. On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears to have been informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist World Service considered closing down its office. This was firmed up by two resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2, 1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-president of the Tourist World Service, Inc., Ermita Branch, and the second,authorizing the corporate secretary to receive the properties of the Tourist World Service then located at the said branch office. It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of this, and to comply with the mandate of the Tourist World Service, the corporate secretary Gabino Canilao went over to the branch office, and, finding the premises locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June 4, 1962 to protect the interests of the Tourist World Service. When neither the appellant Lina Sevilla nor any of her employees could enter the locked premises, a complaint wall filed by the herein appellants against the appellees with a prayer for the issuance of mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent lack of interest of the parties therein, the trial court ordered the dismissal of the case without prejudice. The appellee Segundina Noguera sought reconsideration of the order dismissing her counterclaim which the court a quo, in an order dated June 8, 1963, granted permitting her to present evidence in support of her counterclaim.

On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees and after the issues were joined, the reinstated counterclaim of Segundina Noguera and the new complaint of appellant Lina Sevilla were jointly heard following which the court a quo ordered both cases dismiss for lack of merit, on the basis of which was elevated the instant appeal on the following assignment of errors: I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFFAPPELLANT MRS. LINA O. SEVILLA'S COMPLAINT. II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0. SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE. III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE LATTER. IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY TAKING THE LAW INTO THEIR OWN HANDS. V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE DISPOSSESSION OF THE A. MABINI PREMISES. VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS. LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS. On the foregoing facts and in the light of the errors asigned the issues to be resolved are: 1. Whether the appellee Tourist World Service unilaterally disco the telephone line at the branch office on Ermita; 2. Whether or not the padlocking of the office by the Tourist World Service was actionable or not; and 3. Whether or not the lessee to the office premises belonging to the appellee Noguera was appellees TWS or TWS and the appellant. In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to the end that her relationship with TWS was one of a joint business venture appellant made declarations showing: 1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear and nose specialist as well as a imediately columnist had been in the travel business prior to the establishment of the joint business venture with appellee Tourist World Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly from her own social circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964). 3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World Service, Inc., which had its own, separate office located at the Trade & Commerce Building; nor was she an employee thereof, having no participation in nor connection with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.). 4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own bookings her own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained from the airline companies. She shared the 7% commissions given by the airline companies giving appellee Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.) 5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965). 6. It was the understanding between them that appellant Mrs. Sevilla would be given the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist World Service, Inc. and as such was designated manager. 1
xxx xxx xxx The trial court 2 held for the private respondent on the premise that the private respondent, Tourist World Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an affirmance. The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they state: I THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY

SETTLE THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW. II THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8) III THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS. IV THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC. 6 As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and whether or not the evidence for the said appellant supports the contention that the appellee Tourist World Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the Ermita branch office of the appellee Tourist World Service, Inc. 7 Tourist World Service, Inc., insists, on the other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The petitioners contend, however, that relation between the between parties was one of joint venture, but concede that "whatever might have been the true relationship between Sevilla and Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in reference to the padlocking now questioned. The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service, Inc., maintains, that the relation between the parties was in the character of employer and employee, the courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9 In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee relation. In general, we have relied on the so-called right of control test, "where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end." 10 Subsequently, however, we have considered, in addition to the standard of right-of control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, in determining the existence of an employer-employee relationship. 11 The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had bound herself in solidumas and for rental payments, an arrangement that would be like claims of a masterservant relationship. True the respondent Court would later minimize her participation in the lease as one of

mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume any liability thereof. In that event, the parties must be bound by some other relation, but certainly not employment. In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business, obviously relied on her own gifts and capabilities. It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking successes. The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's employee. As we said, employment is determined by the right-of-control test and certain economic parameters. But titles are weak indicators. In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28, 1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was run. A joint venture, including a partnership, presupposes generally a of standing between the joint coventurers or partners, in which each party has an equal proprietary interest in the capital or property contributed 15 and where each party exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. 17in lieu of a distinct partnership name. It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. It is the essence of this contract that the agent renders services "in representation or on behalf of another. 18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority as owner of the business undertaking. We are convinced, considering the circumstances and from the respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a joint managament or a partnership.. But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages. As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is 'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch office. 20Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.

The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper. The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for another company. What the evidence discloses, on the other hand, is that following such an information (that Sevilla was working for another company), Tourist World's board of directors adopted two resolutions abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the lease over the branch office premises, incidentally, without notice to her. It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked, personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the Tourist World Service. "22 It is strange indeed that Tourist World Service, Inc. did not find such a need when it cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines, paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein. This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play. We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent, Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be awarded for "breaches of contract where the defendant acted ... in bad faith. 23 We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. 24 ART. 2219. Moral damages 25 may be recovered in the following and analogous cases:
xxx xxx xxx (10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35. The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same damages in a solidary capacity. Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She cannot therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages, 25and P5,000.00 as nominal 26 and/or temperate 27 damages, to be just, fair, and reasonable under the circumstances. WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or temperate damages. Costs against said private respondents. SO ORDERED. Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

Footnotes 1 Rollo, 30-45. 2 Court of First Instance of Manila, Branch XIX Montesa, Agustin, Presiding Judge. 3 Rollo, Id 55; Record on Appeal, 38. 4 Record on Appeal, Id., 37-38. 5 Gaviola, Jr., RAmon, J., Reyes, Luis, and De Castro, Pacific, JJ., Conccurring 6 Rollo, Id., 124; Brief for Petitioners, 1-2. 7 Rollo, Id., 36. 8 Id., 21; emphasis in the original. 9 See Rep. Act No. 875 See also Rep. Act No. 1052, as amended by Rep. Act No. 1787. 10 LVN Pictures, Inc. v. Philippine Musicians Guild, No. L-12582, January 28,1961, 1 SCRA 132,173 (1961); emphasis in the original. 11 Visayan Stevedore Trans. Co., et al. v. C.I.R., et al., No. L-21696, February 25,1967,19 SCRA 426 (1967). 12 Rollo, Id., 40. 13 Id 31. 14 Id., 47. 15 BAUTISTA, TREATISE ON PHILIPPINE PARTNERSHIP LAW 34 (1978).

16 Op cit 37. In Tuazon v. Balanos [95 Phil. 106 (1954)], this Court distinguished between a joint venture and a partnership but this view has since raised questions from authorities. According to Campos, there seems to be no fundamental distinction between the two forms of business combinations. CAMPOS, THE CORPORATION CODE 12 (1981).] For p of this case, we use the terms of interchangeable. 17 See rollo, id. 18 CIVIL CODE, art. 1868. 19 See VI PADILLA, CIVIL LAW 350 (1974). 20 Rollo, id., 36. 21 Id, 31. 22 Id. 23 CIVIL CODE, art. 2220. 24 Supra. 25 Supra, art. 2232. 26 Supra art. 2221. 27 Supra, art. 2224. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-18616 March 31, 1964

VICENTE M. COLEONGCO, plaintiff-appellant, vs. EDUARDO L. CLAPAROLS, defendant-appellee. San Juan, Africa and Benedicto for plaintiff-appellant. Alberto Jamir for defendant-appellee. REYES, J.B.L., J.: Appeal by plaintiff Vicente Coleongco from a decision of the Court of First Instance of Negros Occidental (in its Civil Case No. 4170) dismissing plaintiff's action for damages, and ordering him to pay defendant Eduardo Claparols the amount of P81,387.27 plus legal interest from the filing of the counterclaim till payment thereof; P50,000 as moral and compensatory damages suffered by defendant; and costs. A writ of preliminary attachment for the sum of P100,000 was subsequently issued against plaintiff's properties in spite of opposition thereto.

Plaintiff Coleongco, not being in conformity with the judgment appealed to this Court directly, the claims involved being in excess of P200,000. The antecedent facts as found by the trial court and shown by the records, are as follows: Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory for the manufacture of nails in Talisay, Occidental Negros, under the style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from foreign sources, specially from Belgium; and Claparols had a regular dollar allocation therefor, granted by the Import Control Commission and the Central Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which was owned by a Chinaman named Kho To.
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Losses compelled Claparols in 1953 to look for someone to finance his imports of nail wires. At first, Kho To agreed to do the financing, but on April 25, 1953, the Chinaman introduced his compadre, appellant Vicente Coleongco, to the appellee, recommending said appellant to be the financier in the stead of Kho To. Claparols agreed, and on April 25 of that year a contract (Exhibit B) was perfected between them whereby Coleongco undertook to finance and put up the funds required for the importation of the nail wire, which Claparols bound himself to convert into nails at his plant. It was agreed that Coleongco would have the exclusive distribution of the product, and the "absolute care in the marketing of these nails and the promotion of sales all over the Philippines", except the Davao Agency; that Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a representative in the management; that all contracts and transactions should be jointly approved by both parties; that proper books would be kept and annual accounts rendered; and that profits and losses would be shared "on a 50-50 basis". The contract was renewed from one year to year until 1958, and Coleongco's share subsequently increased by 5% of the net profit of the factory (Exhibits D, E, F). Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953, Claparols executed in favor of Coleongco, at the latter's behest a special power of attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions; to represent appellee and the nail factory; and to accept payments and cash advances from dealers and distributors. Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes. Around mid-November of 1956, appellee Claparols was disagreeably surprised by service of an alias writ of execution to enforce a judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had submitted an amortization plan to settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the bank authorities. Upon arrival, he learned to his dismay that the execution had been procured because of derogatory information against appellee that had reached the bank from his associate, appellant Coleongco. On July 6, 1956, the latter, without appellee's knowledge, had written to the bank in connection with the verbal offer for the acquisition by me of the whole interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow Blocks Factory" (Exhibit 36); and later, on October 29, 1956, Coleongco had written again the bank another letter (Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols with taking machines mortgaged to the bank, and added - . In my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in meeting his obligations with your bank, otherwise he had not taken these machines and equipments a sign of bad faith since the factory is making a satisfactory profit of my administration. Fortunately, Claparols managed to arrange matters with the bank and to have the execution levy lifted. Incensed at what he regarded as disloyalty of his attorney-in-fact, he consulted lawyers. The upshot was that appellee revoked the power of attorney (Exhibit "C"), and informed Coleongco thereof (Exhibits T, T-1), by registered mail, demanding a full accounting at the same time. Coleongco, as could be expected, protested these acts of Claparols, but the latter insisted, and on the first of January, 1957 wrote a letter to Coleongco

dismissing him as assistant manager of the plant and asked C. Miller & Company, auditors, to go over the books and records of the business with a view to adjusting the accounts of the associates. These last steps were taken in view of the revelation made by his machinery superintendent, Romulo Agsam, that in the course of the preceding New Year celebrations Coleongco had drawn Agsam aside and proposed that the latter should pour acid on the machinery to paralyze the factory. The examination by the auditors, summarized in Exhibits 80 and 87, found that Coleongco owed the Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957. In the meantime, Claparols had found in the factory files certain correspondence in February, 1955 between Coleongco and the nail dealer Kho To whereby the former proposed to Kho that the latter should cut his monthly advances to Claparols from P2,000 to P1,000 a month, because I think it is time that we do our plan to take advantage of the difficulties of Eddie with the banks for our benefit. If we can squeeze him more. I am sure that we can extend our contract with him before it ends next year, and perhaps on better terms. If we play well our cards we might yet own his factory (Exhibit 32); and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to present business conditions" the latter could only be allowed to draw P1,000 a month beginning April, 1955 (Exhibit 33). As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols charging breach of contract, asking for accounting, and praying for P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying the charge, and counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by way of damages. After trial, the court rendered judgment, as stated at the beginning of this opinion. In this appeal, it is first contended by the appellant Coleongco that the power of attorney (Exhibit "C") was made to protect his interest under the financing agreement (Exhibit "B") and was one coupled with an interest that the appellee Claparols had no legal power to revoke. This point can not be sustained. The financing agreement itself already contained clauses for the protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco. But granting appellant's view, it must not be forgotten that a power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that responsibility arising from fraud is demandable in all obligations, and that any waiver of action for future fraud is void. It is also on this principle that the Civil Code, in its Article 1800, declares that the powers of a partner, appointed as manager, in the articles of co-partnership are irrevocable without just or lawful cause; and an agent with power coupled with an interest can not stand on better ground than such a partner in so far as irrevocability of the power is concerned. That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and 36) attempting to undermine the credit of the principal and to acquire the factory of the latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to Claparols on account of nail sales in order to squeeze said appellee and compel him to extend the contract entitling Coleongco to share in the profits of the nail factory on better terms, and ultimately "own his factory", a plan carried out by Kho's letter, Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam pour acid on the machinery; his illegal diversion of the profits of the factory to his own benefit; and the surreptitious disposition of the Yates band resaw machine in favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956, are plain acts of deliberate sabotage by the agent that fully justified the revocation of the power of attorney (Exhibit "C") by Claparols and his demand for an accounting from his agent Coleongco.

Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and 36), claiming that Claparols' mal-administration of the business endangered the security for the advances that he had made under the financing contract (Exhibit "B"). But if that were the case, it is to be expected that Coleongco would have first protested to Claparols himself, which he never did. Appellant likewise denies the authorship of the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the machinery of the factory. Between the testimony of Agsam and Claparols and that of Coleongco, the court below whose to believe the former, and we see no reason to alter the lower court's conclusion on the value of the evidence before it, considering that Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of Coleongco is affected adversely by his own admission of his having been previously convicted of estafa (t.s.n., pp. 139, 276), a crime that implies moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals Coleongco's lack of business scruples, the clear preponderance of evidence is against appellant. The same remarks apply to the finding of the trial court that it was appellant Coleongco, and not Claparols, who disposed of the band resawing equipment, since said machine was received in July, 1956 and sold in August of that year to the Hong Shing Lumber Co., managed by appellant's cousin Vicente Kho. The untruth of Coleongco's charge that Claparols, upon his return from Baguio in September, 1956, admitted having sold the machine behind his associate's back is further evidenced by (a) Coleongco's letter, Exhibit "V", dated October 29, 1956, inquiring the whereabouts of the resaw equipment from Claparols (an inquiry incompatible with Claparols' previous admission); (b) by the undenied fact that the appellee was in Baguio and Coleongco was acting for him during the months of July and August when the machine was received and sold; and (c) the fact that as between the two it is Coleongco who had a clear interest in selling the sawing machine to his cousin Kho To's lumber yard. If Claparols wished to sell the machine without Coleongco's knowledge, he would not have picked the latter's cousin for a buyer. The action of plaintiff-appellant for damages and lost profits due to the discontinuance of the financing agreement, Exhibit "B", may not prosper, because the record shows that the appellant likewise breached his part of the contract. It will be recalled that paragraph 2 of the contract, Exhibit "B", it was stipulated: That the Party of the Second Part (Coleongco) has agreed to finance and put up all the necessary money which may be needed to pay for the importation of the raw materials needed by such nail factory and allocated by the ICC from time to time, either in cash of with whatever suitable means which the Party of the Second Part may be able to make by suitable arrangements with any wellknown banking institution recognized by the Central Bank of the Philippines. Instead of putting up all the necessary money needed to finance the imports of raw material, Coleongco merely advanced 25% in cash on account of the price and had the balance covered by surety agreements executed by Claparols and others as solidary, (joint and several) guarantors (see Exhibits G, H, I). The upshot of this arrangement was that Claparols was made to shoulder 3/4 of the payment for the imports, contrary to the financing agreement. Paragraph 11 of the latter expressly denied Coleongco any power or authority to bind Claparols without previous consultation and authority. When the balances for the cost of the importations became due, Coleongco, in some instances, paid it with the dealers' advances to the nail factory against future sales without the knowledge of Claparols (Exhibits "K" to K-11, K-13). Under paragraphs 8 and 11 of the financing agreement, Coleongco was to give preference to the operating expenses before sharing profits, so that until the operating costs were provided for, Coleongco had no right to apply the factory's income to pay his own obligations. Again, the examination of the books by accountant Atienza of C. Miller and Co., showed that from 1954 onwards Coleongco (who had the control of the factory's cash and bank deposits, under Paragraph 11 of Exhibit "B") never liquidated and paid in full to Claparols his half of the profits, so that by the end of 1956 there was due to Claparols P38,068.41 on this account (Exhibit 91). For 1957 to 1958 Claparols financed the imports of nail wire without the help of appellant, and in view of the latter's infringement of his obligations, his acts of disloyalty previously discussed, and his diversions of factory funds (he even bought two motor vehicles with them), we find no justification for his insistence in sharing in the factory's profit for those years, nor for the restoration of the revoked power of attorney.

The accountant's reports and testimony (specially Exhibits 80 to 87) prove that as of June 30, 1957, Coleongco owed to Claparols the sum of P83,466.34 that after some adjustment was reduced to P81,387.37, practically accepted even by appellant's auditor. The alleged discrepancies between the general ledger and the result thus arrived at was satisfactorily explained by accountant Atienza in his testimony (t.s.n., 1173-1178). No error was, therefore, committed by the trial court in declaring the financing contract (Exh. B) properly resolved by Claparols or in rendering judgment against appellant in favor of appellee for the said amount of P81,387.37. The basic rule of contracts requires parties to act loyally toward each other in the pursuit of the common end, and appellant clearly violated the rule of good faith prescribed by Art. 1315 of the new Civil Code. The lower court also allowed Claparols P50,000 for damages, material, moral, and exemplary, caused by the appellant Coleongco's acts in maliciously undermining appellee's credit that led the Philippine National Bank to secure a writ of execution against Claparols. Undeniably, the attempts of Coleongco to discredit and "squeeze" Claparols out of his own factory and business could not but cause the latter mental anguish and serious anxiety, as found by the court below, for which he is entitled to compensation; and the malevolence that lay behind appellee's actions justified also the imposition of exemplary or deterrent damages (Civ. Code, Art. 2232). While the award could have been made larger without violating the canons of justice, the discretion in fixing such damages primarily lay in the trial court, and we feel that the same should be respected. IN VIEW OF THE FOREGOING, the decision appealed from is affirmed. Costs against appellant Vicente Coleongco. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 83122 October 19, 1990 ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners, vs. THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON, ROBERT E. PARNELL, CARLOS K. CATOLICO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., respondents. Albino B. Achas for petitioners. Angara, Abello, Concepcion, Regala & Cruz for private respondents.

GUTIERREZ, JR., J.: This is a petition for review of the January 29, 1988 decision of the Court of Appeals and the April 27, 1988 resolution denying the petitioners' motion for reconsideration, which decision and resolution reversed the decision dated June 23,1986 of the Court of First Instance of Manila, Branch 34 in Civil Case No. 121126 upholding the petitioners' causes of action and granting all the reliefs prayed for in their complaint against private respondents. The antecedent facts of the case are as follows:

Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private respondent Philippine American General Insurance Company, Inc. (Philamgen for short) since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to receive the full agent's commission of 32.5% from Philamgen under the scheduled commission rates (Exhibits "A" and "1"). From 1973 to 1975, Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc. (Division of Electronics Airconditioning and Refrigeration) in the amount of P4.4 Million from which he was entitled to a commission of 32% (Exhibit "B"). However, Valenzuela did not receive his full commission which amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to 1978, premium payments amounting to P1,946,886.00 were paid directly to Philamgen and Valenzuela's commission to which he is entitled amounted to P632,737.00. In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis (Exhibit "C"). Valenzuela refused (Exhibit "D"). On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on the sharing of the commission with Valenzuela (Exhibit E). This was followed by another sharing proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly reiterated his objection to the proposals of respondents stating that: "It is with great reluctance that I have to decline upon request to signify my conformity to your alternative proposal regarding the payment of the commission due me. However, I have no choice for to do otherwise would be violative of the Agency Agreement executed between our goodselves." (Exhibit B-1) Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela. They: (a) reversed the commission due him by not crediting in his account the commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b) placed agency transactions on a cash and carry basis; (c) threatened the cancellation of policies issued by his agency (Exhibits "H" to "H-2"); and (d) started to leak out news that Valenzuela has a substantial account with Philamgen. All of these acts resulted in the decline of his business as insurance agent (Exhibits "N", "O", "K" and "K-8"). Then on December 27, 1978, Philamgen terminated the General Agency Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court dated June 23, 1986, Civil Case No. 121126, Annex I, Petition). The petitioners sought relief by filing the complaint against the private respondents in the court a quo (Complaint of January 24, 1979, Annex "F" Petition). After due proceedings, the trial court found: xxx xxx xxx Defendants tried to justify the termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's General Agent by making it appear that plaintiff Arturo P. Valenzuela has a substantial account with defendant PHILAMGEN particularly Delta Motors, Inc.'s Account, thereby prejudicing defendant PHILAMGEN's interest (Exhibits 6,"11","11- "12- A"and"13-A"). Defendants also invoked the provisions of the Civil Code of the Philippines (Article 1868) and the provisions of the General Agency Agreement as their basis for terminating plaintiff Arturo P. Valenzuela as one of their General Agents. That defendants' position could have been justified had the termination of plaintiff Arturo P. Valenzuela was (sic) based solely on the provisions of the Civil Code and the conditions of the General Agency Agreement. But the records will show that the principal cause of the termination of the plaintiff as General Agent of defendant PHILAMGEN was his refusal to share his Delta commission. That it should be noted that there were several attempts made by defendant Bienvenido M. Aragon to share with the Delta commission of plaintiff Arturo P. Valenzuela. He had persistently pursued the sharing scheme to the point of terminating plaintiff Arturo P. Valenzuela, and to make matters worse, defendants made it appear that plaintiff Arturo P. Valenzuela had substantial accounts with defendant PHILAMGEN.

Not only that, defendants have also started (a) to treat separately the Delta Commission of plaintiff Arturo P. Valenzuela, (b) to reverse the Delta commission due plaintiff Arturo P. Valenzuela by not crediting or applying said commission earned to the account of plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P. Valenzuela's agency transactions on a "cash and carry basis", (d) sending threats to cancel existing policies issued by plaintiff Arturo P. Valenzuela's agency, (e) to divert plaintiff Arturo P. Valenzuela's insurance business to other agencies, and (f) to spread wild and malicious rumors that plaintiff Arturo P. Valenzuela has substantial account with defendant PHILAMGEN to force plaintiff Arturo P. Valenzuela into agreeing with the sharing of his Delta commission." (pp. 9-10, Decision, Annex 1, Petition). xxx xxx xxx These acts of harrassment done by defendants on plaintiff Arturo P. Valenzuela to force him to agree to the sharing of his Delta commission, which culminated in the termination of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's General Agent, do not justify said termination of the General Agency Agreement entered into by defendant PHILAMGEN and plaintiff Arturo P. Valenzuela. That since defendants are not justified in the termination of plaintiff Arturo P. Valenzuela as one of their General Agents, defendants shall be liable for the resulting damage and loss of business of plaintiff Arturo P. Valenzuela. (Arts. 2199/2200, Civil Code of the Philippines). (Ibid, p. 11) The court accordingly rendered judgment, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against defendants ordering the latter to reinstate plaintiff Arturo P. Valenzuela as its General Agent, and to pay plaintiffs, jointly and severally, the following: 1. The amount of five hundred twenty-one thousand nine hundred sixty four and 16/100 pesos (P521,964.16) representing plaintiff Arturo P. Valenzuela's Delta Commission with interest at the legal rate from the time of the filing of the complaint, which amount shall be adjusted in accordance with Article 1250 of the Civil Code of the Philippines; 2. The amount of seventy-five thousand pesos (P75,000.00) per month as compensatory damages from 1980 until such time that defendant Philamgen shall reinstate plaintiff Arturo P. Valenzuela as one of its general agents; 3. The amount of three hundred fifty thousand pesos (P350,000.00) for each plaintiff as moral damages; 4. The amount of seventy-five thousand pesos (P75,000.00) as and for attorney's fees; 5. Costs of the suit. (Ibid., P. 12) From the aforesaid decision of the trial court, Bienvenido Aragon, Robert E. Parnell, Carlos K. Catolico and PHILAMGEN respondents herein, and defendants-appellants below, interposed an appeal on the following: ASSIGNMENT OF ERRORS I

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA HAD NO OUTSTANDING ACCOUNT WITH DEFENDANT PHILAMGEN AT THE TIME OF THE TERMINATION OF THE AGENCY. II THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P. VALENZUELA IS ENTITLED TO THE FULL COMMISSION OF 32.5% ON THE DELTA ACCOUNT. III THE LOWER COURT ERRED IN HOLDING THAT THE TERMINATION OF PLAINTIFF ARTURO P. VALENZUELA WAS NOT JUSTIFIED AND THAT CONSEQUENTLY DEFENDANTS ARE LIABLE FOR ACTUAL AND MORAL DAMAGES, ATTORNEYS FEES AND COSTS. IV ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES AGAINST DEFENDANT PHILAMGEN WAS PROPER, THE LOWER COURT ERRED IN AWARDING DAMAGES EVEN AGAINST THE INDIVIDUAL DEFENDANTS WHO ARE MERE CORPORATE AGENTS ACTING WITHIN THE SCOPE OF THEIR AUTHORITY. V ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN FAVOR OF PLAINTIFF ARTURO P. VALENZUELA WAS PROPER, THE LOWER COURT ERRED IN AWARDING DAMAGES IN FAVOR OF HOSPITALITA VALENZUELA, WHO, NOT BEING THE REAL PARTY IN INTEREST IS NOT TO OBTAIN RELIEF. On January 29, 1988, respondent Court of Appeals promulgated its decision in the appealed case. The dispositive portion of the decision reads: WHEREFORE, the decision appealed from is hereby modified accordingly and judgment is hereby rendered ordering: 1. Plaintiff-appellee Valenzuela to pay defendant-appellant Philamgen the sum of one million nine hundred thirty two thousand five hundred thirty-two pesos and seventeen centavos (P1,902,532.17), with legal interest thereon from the date of finality of this judgment until fully paid. 2. Both plaintiff-appellees to pay jointly and severally defendants-appellants the sum of fifty thousand pesos (P50,000.00) as and by way of attorney's fees. No pronouncement is made as to costs. (p. 44, Rollo) There is in this instance irreconcilable divergence in the findings and conclusions of the Court of Appeals, vis-avisthose of the trial court particularly on the pivotal issue whether or not Philamgen and/or its officers can be held liable for damages due to the termination of the General Agency Agreement it entered into with the petitioners. In its questioned decision the Court of Appeals observed that: In any event the principal's power to revoke an agency at will is so pervasive, that the Supreme Court has consistently held that termination may be effected even if the principal acts in bad faith, subject only to the principal's liability for damages (Danon v. Antonio A.

Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G. 2158 and Infante V. Cunanan, 93 Phil. 691, cited in Paras, Vol. V, Civil Code of the Philippines Annotated [1986] 696). The lower court, however, thought the termination of Valenzuela as General Agent improper because the record will show the principal cause of the termination of the plaintiff as General Agent of defendant Philamgen was his refusal to share his Delta commission. (Decision, p. 9; p. 13, Rollo, 41) Because of the conflicting conclusions, this Court deemed it necessary in the interest of substantial justice to scrutinize the evidence and records of the cases. While it is an established principle that the factual findings of the Court of Appeals are final and may not be reviewed on appeal to this Court, there are however certain exceptions to the rule which this Court has recognized and accepted, among which, are when the judgment is based on a misapprehension of facts and when the findings of the appellate court, are contrary to those of the trial court (Manlapaz v. Court of Appeals, 147 SCRA 236 [1987]); Guita v. Court of Appeals, 139 SCRA 576 [1986]). Where the findings of the Court of Appeals and the trial court are contrary to each other, this Court may scrutinize the evidence on record (Cruz v. Court of Appeals, 129 SCRA 222 [1984]; Mendoza v. Court of Appeals, 156 SCRA 597 [1987]; Maclan v. Santos, 156 SCRA 542 [1987]). When the conclusion of the Court of Appeals is grounded entirely on speculation, surmises or conjectures, or when the inference made is manifestly mistaken, absurd or impossible, or when there is grave abuse of discretion, or when the judgment is based on a misapprehension of facts, and when the findings of facts are conflict the exception also applies (Malaysian Airline System Bernad v. Court of Appeals, 156 SCRA 321 [1987]). After a painstaking review of the entire records of the case and the findings of facts of both the court a quo and respondent appellate court, we are constrained to affirm the trial court's findings and rule for the petitioners. We agree with the court a quo that the principal cause of the termination of Valenzuela as General Agent of Philamgen arose from his refusal to share his Delta commission. The records sustain the conclusions of the trial court on the apparent bad faith of the private respondents in terminating the General Agency Agreement of petitioners. It is axiomatic that the findings of fact of a trial judge are entitled to great weight (People v. Atanacio, 128 SCRA 22 [1984]) and should not be disturbed on appeal unless for strong and cogent reasons, because the trial court is in a better position to examine the evidence as well as to observe the demeanor of the witnesses while testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985]; People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans., Inc. v. Court of Appeals, 147 SCRA 82 [1987]). In the case at bar, the records show that the findings and conclusions of the trial court are supported by substantial evidence and there appears to be no cogent reason to disturb them (Mendoza v. Court of Appeals. 156 SCRA 597 [1987]). As early as September 30,1977, Philamgen told the petitioners of its desire to share the Delta Commission with them. It stated that should Delta back out from the agreement, the petitioners would be charged interests through a reduced commission after full payment by Delta. On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by 50% thus giving them an agent's commission of 16.25%. On February 8, 1978, Philamgen insisted on the reduction scheme followed on June 1, 1978 by still another insistence on reducing commissions and proposing two alternative schemes for reduction. There were other pressures. Demands to settle accounts, to confer and thresh out differences regarding the petitioners' income and the threat to terminate the agency followed. The petitioners were told that the Delta commissions would not be credited to their account (Exhibit "J"). They were informed that the Valenzuela agency would be placed on a cash and carry basis thus removing the 60-day credit for premiums due. (TSN., March 26, 1979, pp. 54-57). Existing policies were threatened to be cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp. 29-30). The Valenzuela business was threatened with diversion to other agencies. (Exhibit "NNN"). Rumors were also spread about alleged accounts of the Valenzuela agency (TSN., January 25, 1980, p. 41). The petitioners consistently opposed the pressures to hand over the agency or half of their commissions and for a treatment of the Delta account distinct from other accounts. The pressures and demands, however, continued until the agency agreement itself was finally terminated. It is also evident from the records that the agency involving petitioner and private respondent is one "coupled with an interest," and, therefore, should not be freely revocable at the unilateral will of the latter.

In the insurance business in the Philippines, the most difficult and frustrating period is the solicitation and persuasion of the prospective clients to buy insurance policies. Normally, agents would encounter much embarrassment, difficulties, and oftentimes frustrations in the solicitation and procurement of the insurance policies. To sell policies, an agent exerts great effort, patience, perseverance, ingenuity, tact, imagination, time and money. In the case of Valenzuela, he was able to build up an Agency from scratch in 1965 to a highly productive enterprise with gross billings of about Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per annum. The records sustain the finding that the private respondent started to covet a share of the insurance business that Valenzuela had built up, developed and nurtured to profitability through over thirteen (13) years of patient work and perseverance. When Valenzuela refused to share his commission in the Delta account, the boom suddenly fell on him. The private respondents by the simple expedient of terminating the General Agency Agreement appropriated the entire insurance business of Valenzuela. With the termination of the General Agency Agreement, Valenzuela would no longer be entitled to commission on the renewal of insurance policies of clients sourced from his agency. Worse, despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and severally liable with the insured for unpaid premiums. Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency when it was unceremoniously terminated not only because of the commissions he should continue to receive from the insurance business he has solicited and procured but also for the fact that by the very acts of the respondents, he was made liable to Philamgen in the event the insured fail to pay the premiums due. They are estopped by their own positive averments and claims for damages. Therefore, the respondents cannot state that the agency relationship between Valenzuela and Philamgen is not coupled with interest. "There may be cases in which an agent has been induced to assume a responsibility or incur a liability, in reliance upon the continuance of the authority under such circumstances that, if the authority be withdrawn, the agent will be exposed to personal loss or liability" (See MEC 569 p. 406). Furthermore, there is an exception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of third persons or for the mutual interest of the principal and the agent. In these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal (See Padilla, Civil Code Annotated, 56 ed., Vol. IV p. 350). The following citations are apropos: The principal may not defeat the agent's right to indemnification by a termination of the contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32 ALR 196). Where the principal terminates or repudiates the agent's employment in violation of the contract of employment and without cause ... the agent is entitled to receive either the amount of net losses caused and gains prevented by the breach, or the reasonable value of the services rendered. Thus, the agent is entitled to prospective profits which he would have made except for such wrongful termination provided that such profits are not conjectural, or speculative but are capable of determination upon some fairly reliable basis. And a principal's revocation of the agency agreement made to avoid payment of compensation for a result which he has actually accomplished (Hildendorf v. Hague, 293 NW 2d 272; Newhall v. Journal Printing Co., 105 Minn 44,117 NW 228; Gaylen Machinery Corp. v. Pitman-Moore Co. [C.A. 2 NY] 273 F 2d 340) If a principal violates a contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring an appropriate action for the breach of that duty. The agent may in a proper case maintain an action at law for compensation or damages ... A wrongfully discharged agent has a right of action for damages and in such action the measure and element of damages are controlled generally by the rules governing any other action for the employer's breach of an employment contract. (Riggs v. Lindsay, 11 US 500, 3L Ed 419; Tiffin Glass Co. v. Stoehr, 54 Ohio 157, 43 NE 2798) At any rate, the question of whether or not the agency agreement is coupled with interest is helpful to the petitioners' cause but is not the primary and compelling reason. For the pivotal factor rendering Philamgen and the other private respondents liable in damages is that the termination by them of the General Agency Agreement was tainted with bad faith. Hence, if a principal acts in bad faith and with abuse of right in

terminating the agency, then he is liable in damages. This is in accordance with the precepts in Human Relations enshrined in our Civil Code that "every person must in the exercise of his rights and in the performance of his duties act with justice, give every one his due, and observe honesty and good faith: (Art. 19, Civil Code), and every person who, contrary to law, wilfully or negligently causes damages to another, shall indemnify the latter for the same (Art. 20, id). "Any person who wilfully causes loss or injury to another in a manner contrary to morals, good customs and public policy shall compensate the latter for the damages" (Art. 21, id.). As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and uncollected premiums which the respondent court ordered Valenzuela to pay Philamgen the amount of One Million Nine Hundred Thirty-Two Thousand Five Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon until fully paid (Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that the respondent court erred in holding Valenzuela liable. We find no factual and legal basis for the award. Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or contract of insurance is valid and binding unless and until the premiums thereof have been paid except in the case of a life or industrial life policy whenever the grace period provision applies (P.D. 612, as amended otherwise known as the Insurance Code of 1974) In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419 [1979]) we held that the non-payment of premium does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract. And in Arce v. The Capital Insurance and Surety Co. Inc.(117 SCRA 63, [1982]), we reiterated the rule that unless premium is paid, an insurance contract does not take effect. Thus: It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v. Delgado, 9 SCRA 177 [1963] was decided in the light of the Insurance Act before Sec. 72 was amended by the underscored portion. Supra. Prior to the Amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no insurance. " (Arce v. Capitol Insurance and Surety Co., Inc., 117 SCRA 66; Emphasis supplied) In Philippine Phoenix Surety case, we held: Moreover, an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity. (Citing Insurance Law and Practice by John Alan Appleman, Vol. 15, p. 331; Emphasis supplied) The foregoing findings are buttressed by Section 776 of the insurance Code (Presidential Decree No. 612, promulgated on December 18, 1974), which now provides that no contract of Insurance by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary (Ibid., 92 SCRA 425) Perforce, since admittedly the premiums have not been paid, the policies issued have lapsed. The insurance coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing. In this instance, with the lapsing of the policies through the nonpayment of premiums by the insured there were no more insurance contracts to speak of. As this Court held in the Philippine Phoenix Surety case, supra "the non-payment of premiums does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract."

The respondent appellate court also seriously erred in according undue reliance to the report of Banaria and Banaria and Company, auditors, that as of December 31, 1978, Valenzuela owed Philamgen P1,528,698.40. This audit report of Banaria was commissioned by Philamgen after Valenzuela was almost through with the presentation of his evidence. In essence, the Banaria report started with an unconfirmed and unaudited beginning balance of account of P1,758,185.43 as of August 20, 1976. But even with that unaudited and unconfirmed beginning balance of P1,758,185.43, Banaria still came up with the amount of P3,865.49 as Valenzuela's balance as of December 1978 with Philamgen (Exh. "38-A-3"). In fact, as of December 31, 1976, and December 31, 1977, Valenzuela had no unpaid account with Philamgen (Ref: Annexes "D", "D-1", "E", Petitioner's Memorandum). But even disregarding these annexes which are records of Philamgen and addressed to Valenzuela in due course of business, the facts show that as of July 1977, the beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80. This was confirmed by Philamgen itself not only once but four (4) times on different occasions, as shown by the records. On April 3,1978, Philamgen sent Valenzuela a statement of account with a beginning balance of P744,159-80 as of July 1977. On May 23, 1978, another statement of account with exactly the same beginning balance was sent to Valenzuela. On November 17, 1978, Philamgen sent still another statement of account with P744,159.80 as the beginning balance. And on December 20, 1978, a statement of account with exactly the same figure was sent to Valenzuela. It was only after the filing of the complaint that a radically different statement of accounts surfaced in court. Certainly, Philamgen's own statements made by its own accountants over a long period of time and covering examinations made on four different occasions must prevail over unconfirmed and unaudited statements made to support a position made in the course of defending against a lawsuit. It is not correct to say that Valenzuela should have presented its own records to refute the unconfirmed and unaudited finding of the Banaria auditor. The records of Philamgen itself are the best refutation against figures made as an afterthought in the course of litigation. Moreover, Valenzuela asked for a meeting where the figures would be reconciled. Philamgen refused to meet with him and, instead, terminated the agency agreement. After off-setting the amount of P744,159.80, beginning balance as of July 1977, by way of credits representing the commission due from Delta and other accounts, Valenzuela had overpaid Philamgen the amount of P530,040.37 as of November 30, 1978. Philamgen cannot later be heard to complain that it committed a mistake in its computation. The alleged error may be given credence if committed only once. But as earlier stated, the reconciliation of accounts was arrived at four (4) times on different occasions where Philamgen was duly represented by its account executives. On the basis of these admissions and representations, Philamgen cannot later on assume a different posture and claim that it was mistaken in its representation with respect to the correct beginning balance as of July 1977 amounting to P744,159.80. The Banaria audit report commissioned by Philamgen is unreliable since its results are admittedly based on an unconfirmed and unaudited beginning balance of P1,758,185.43 as of August 20,1976. As so aptly stated by the trial court in its decision: Defendants also conducted an audit of accounts of plaintiff Arturo P. Valenzuela after the controversy has started. In fact, after hearing plaintiffs have already rested their case. The results of said audit were presented in Court to show plaintiff Arturo P. Valenzuela's accountability to defendant PHILAMGEN. However, the auditor, when presented as witness in this case testified that the beginning balance of their audit report was based on an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of August 20, 1976, which was unverified and merely supplied by the officers of defendant PHILAMGEN.

Even defendants very own Exhibit 38- A-3, showed that plaintiff Arturo P. Valenzuela's balance as of 1978 amounted to only P3,865.59, not P826,128.46 as stated in defendant Bienvenido M. Aragon's letter dated December 20,1978 (Exhibit 14) or P1,528,698.40 as reflected in defendant's Exhibit 46 (Audit Report of Banaria dated December 24, 1980). These glaring discrepancy (sic) in the accountability of plaintiff Arturo P. Valenzuela to defendant PHILAMGEN only lends credence to the claim of plaintiff Arturo P. Valenzuela that he has no outstanding account with defendant PHILAMGEN when the latter, thru defendant Bienvenido M. Aragon, terminated the General Agency Agreement entered into by plaintiff (Exhibit A) effective January 31, 1979 (see Exhibits "2" and "2-A"). Plaintiff Arturo P. Valenzuela has shown that as of October 31, 1978, he has overpaid defendant PHILAMGEN in the amount of P53,040.37 (Exhibit "EEE", which computation was based on defendant PHILAMGEN's balance of P744,159.80 furnished on several occasions to plaintiff Arturo P. Valenzuela by defendant PHILAMGEN (Exhibits H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ and , ZZ-2). Prescinding from the foregoing, and considering that the private respondents terminated Valenzuela with evidentmala fide it necessarily follows that the former are liable in damages. Respondent Philamgen has been appropriating for itself all these years the gross billings and income that it unceremoniously took away from the petitioners. The preponderance of the authorities sustain the preposition that a principal can be held liable for damages in cases of unjust termination of agency. In Danon v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for the continuance of the contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith. The right of the principal to terminate his authority is absolute and unrestricted, except only that he may not do so in bad faith. The trial court in its decision awarded to Valenzuela the amount of Seventy Five Thousand Pesos (P75,000,00) per month as compensatory damages from June 1980 until its decision becomes final and executory. This award is justified in the light of the evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-1") showing that the average gross premium collection monthly of Valenzuela over a period of four (4) months from December 1978 to February 1979, amounted to over P300,000.00 from which he is entitled to a commission of P100,000.00 more or less per month. Moreover, his annual sales production amounted to P2,500,000.00 from where he was given 32.5% commissions. Under Article 2200 of the new Civil Code, "indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain." The circumstances of the case, however, require that the contractual relationship between the parties shall be terminated upon the satisfaction of the judgment. No more claims arising from or as a result of the agency shall be entertained by the courts after that date. ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29, 1988 and resolution of April 27, 1988 of respondent court are hereby SET ASIDE. The decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED TWENTY ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS (P521,964.16) representing the petitioners Delta commission shall earn only legal interests without any adjustments under Article 1250 of the Civil Code and that the contractual relationship between Arturo P. Valenzuela and Philippine American General Insurance Company shall be deemed terminated upon the satisfaction of the judgment as modified. SO ORDERED. Bidin and Cortes, JJ., concur. Fernan, C.J., (Chairman), took no part Feliciano, J., is on leave.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 74623 August 31, 1987 BISAYA LAND TRANSPORTATION CO., INC., ANTONIO V. CUENCO and BENJAMIN G. ROA, petitioners, vs. MARCIANO C. SANCHEZ AND THE HON. INTERMEDIATE APPELLATE COURT, respondents.

PADILLA, J.: This is a petition for certiorari to review the decision * of respondent Intermediate Appellate Court, dated 25 April 1986, in AC-G.R. No. CV-01300 which affirmed the decision ** of the Regional Trial Court, 7th Judicial Region, Branch XII, Cebu City, dated 14 February 1983, in Civil Case No. R-18830 which was a suit for Specific Performance with Preliminary Injunction and Damages. Petitioner Bisaya Land Transportation Company, Inc. (BISTRANCO, for short) has been engaged in the shipping business, operating several passenger-cargo vessels, and among the ports of call of these vessels has been Butuan City. As early as 1954, private respondent Marciano Sanchez (Sanchez, for short) was an employee of BISTRANCO, specifically, a quartermaster in one of its vessels, In 1959, he ceased to be an employee as he engaged in stevedoring services in the port of Butuan City and rendered steverdoring services for the vessels of BISTRANCO. 1 In May 1975, Sanchez was appointed by BISTRANCO as shipping agent in Butuan City for the vessel M/V Don Mariano. 2 The new Butuan City Agent 3 referred to in the letter "Exhibit "C" was Marciano Sanchez. Later, on 12 March 1976, when BISTRANCO was under receivership, Sanchez was appointed by its Receiver, Atty. Adolfo V. Amor, as acting shipping agent, also for M/V Doa Remedies, in addition to M/V Doa Filomena, in the port of Butuan City "pending the execution of the formal contract of agency. 4 When Sanchez was constituted as acting shipping agent, he received the same commission as his predecessor, one ONG YUI who received 10% for all freight and passenger revenues coming from Butuan City and 5 % for all freight going to Butuan. 5 Thereafter, or on 27 July 1976, a formal Contract of Agency, marked as Exhibit "F", was executed between BISTRANCO, represented by Receiver Atty. Adolfo V. Amor and Marciano C. Sanchez, represented by his authorized representative Exequiel Aranas. On 30 July 1976, after Sanchez found that Paragraph 16 of the Contract of agency was quite prejudicial to him, he executed with BISTRANCO a Supplemental Shipping Agency Contract, marked as Exhibit "G", which was duly signed by Receiver Atty. Adolfo V. Amor on behalf of BISTRANCO and Marciano C. Sanchez himself. 6 But, both the Contract of Agency and the Supplemental Shipping Agency Contract were never submitted by Atty. Adolfo Amor to the receivership court for its approval. By virtue of the Contract of Agency and the Supplemental Shipping Agency Contract (hereinafter referred to as Contracts), Sanchez performed his duties as shipping agent of BISTRANCO, and he received his corresponding commissions as such shipping agent. Pursuant to the Contracts, Sanchez leased a parcel of land owned by Jose S. Mondejar which was used as the wharf and berthing facilities of BISTRANCO. 7 At an expense of more than P100,000.00, Sanchez constructed the wharf on the land he leased and the wharf was used to facilitate the loading and unloading of cargoes of the BISTRANCO vessels at the port of Butuan City from 1976 to December 1979. Sanchez also constructed a bodega at his wharf for use in connection with the shipping business of BISTRANCO. He constructed an office for the agency and, as of December 1979, he had an office force of 13 employees, all paid and maintained by him. Sanchez operated six (6) cargo trucks and one (1) jeep for the service of the shipping agency. As shipping agent, Sanchez put up billboards and other forms of advertisement to enhance the shipping business of BISTRANCO. He established good business relations with

the business community of Butuan City. 8 In these endeavors, Sanchez succeeded in increasing the volume of the shipping business of BISTRANCO at the Butuan City port, so much so that his earnings on freight alone increased from an average of P8,535.00 a month in 1975 to an average of about P32,000.00 a month in the last seven months of 1979. 9 While the shipping business of BISTRANCO in Butuan City flourished, evidently to the mutual benefit of both parties, on 26 December 1979, co-petitioner Benjamin G. Roa, as Executive Vice-President of BISTRANCO, wrote Sanchez a letter 10 advising him that, effective 1 January 1980, BISTRANCO would commence operating its branch office in Butuan City. Prior to this, on 11 December 1979, Sanchez was invited to attend a meeting of the Board of Directors of BISTRANCO wherein he was told by co-petitioner Antonio V. Cuenco that the Board was to open a branch office in Butuan City and he was asked what would be his proposals. Sanchez submitted his proposals in writing, marked as Exhibit "NN", but these were not acceptable to BISTRANCO . 11 Realizing that the letter, marked as Exhibit "FF", was in effect a repudiation of the Contracts, Sanchez filed an action for specific performance with preliminary injunction and damages with the Regional Trial Court of Cebu City on 28 December 1979. Pursuant to the letter (Exhibit "FF"), BISTRANCO actually opened and operated a branch office in Butuan City on 15 January 1980. BISTRANCO through its new representative contacted the shippers in Butuan City and neighboring towns, advising them to transact their business directly with its new branch office in Butuan City. Under these circumstances, the business of Sanchez, as shipping agent of BISTRANCO in Butuan City, was seriously impaired and undermined He could not solicit as many passengers as he used to, because the passenger tickets issued to him by BISTRANCO were limited. The cargoes solicited by Sanchez were loaded on a "chance basis" because those that were solicited by the branch office were given priority. 12 After due hearing and their respective memorandum filed, the trial court rendered judgment in favor of Sanchez, the dispositive portion of which is quoted hereunder: 13 WHEREFORE, judgment is hereby rendered declaring the contracts, Exhibits "F" and "G", as valid and binding between the plaintiff and defendant BISTRANCO up to its expiry date on July 27, 1981, and ordering the defendant BISTRANCO to pay the plaintiff the total sum of FIVE HUNDRED EIGHTY EIGHT THOUSAND PESOS (P588,000.00) in concept of unearned commissions as well as damages, with interest at the legal rate counted from July 28, 1981 up to the time the amount is fully paid, and the further sum of P15,000.00 as attorney's fees, and the costs of this action. Thereafter, BISTRANCO appealed to the Court of Appeals which, as heretofore stated, affirmed the decision of the trial court in toto. Hence this Petition for certiorari brought to this Court, with the petitioners raising the following issues: 14 I CAN A COURT APPOINTED RECEIVER VALIDLY ENTER INTO A CONTRACT WITHOUT COURT APPROVAL? II IS THE OPENING BY BISTRANCO OF A BRANCH OFFICE IN BUTUAN CITY A VIOLATION OF THE CONTRACT OF AGENCY AND SUPPLEMENTAL SHIPPING AGENCY CONTRACT EXHIBITS "F" and "G") ASSUMING THEM TO BE VALID? III

WHAT EFFECT DID THE WORKING AGREEMENTS (EXHIBITS "S" and "U") HAVE ON AFORESAID QUESTIONED CONTRACTS? IV IS THE AWARD FOR UNEARNED COMMISSION AND DAMAGES JUSTIFIED? The general powers of a court-appointed receiver are provided in Section 7, Rule 59 of the Rules of Court. Under such rule, the receiver is "subject to the control of the court in which the action is pending" and he can "generally do such acts respecting the property as the court may authorize". The act of Receiver Amor in entering into a contract of agency with Sanchez is not one of the acts specifically allowed in the mentioned rule. While such act of Amor may be arguably implied from the power of the receiver to "take and keep possession of the property in controversy", and that the act of Amor is covered by the broad phrase that a receiver can "generally do such acts respecting the property as the court may authorize", still, it is necessary that the acts of the receiver have the approval or authorization of the court which appointed him as a receiver. As held in one case, 15 a court-appointed receiver cannot validly enter into a contract without the approval of the court. What then is the status of the Contracts which Receiver Amor entered into with Sanchez, without the approval of the court which appointed him receiver? Even the petitioners noticeably waver as to the exact status of these Contracts. The petitioners allege in their Memorandum 16 submitted to this Court that they are void contracts under Article 1409(l) of the Civil Code, whereas, in their Petition, 17 they labelled the contracts as unenforceable under Article 1403(l) of the Civil Code. The determination, therefore, of whether the questioned contracts are void or merely unenforceable is important, because of the settled distinction that a void and inexistent contract can not be ratified and become enforceable, whereas an unenforceable contract may still be ratified and, thereafter, enforced. The petitioners allege that the Contracts are void, citing Article 1409(l) of the Civil Code which provides that contracts whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy, are inexistent and void from the beginning. In the case at bar, the contracts of agency were entered into for the management and operation of BISTRANCO's business in Butuan City. Said Contracts necessarily imposed obligations and liabilities on the contracting parties, thereby affecting the disposition of the assets and business of the company under receivership. But a perusal of the Contracts in question would show that there is nothing in their cause, object or purpose which renders them void. The purpose of the Contracts was to create an agency for BISTRANCO with Marciano Sanchez as its agent in Butuan City. Even as to the other provisions of the Contracts, there is nothing in their cause or object which can be said as contrary to law, morals, good customs, public order or public policy so as to render them void. On the other hand, paragraph 1. Article 1403 of the Civil Code provides that contracts "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" are unenforceable, unless they are ratified. In the case at bar, it is undisputed that Atty. Adolfo Amor was entrusted, as receiver, with the administration of BISTRANCO and it business. But the act of entering into a contract is one which requires the authorization of the court which appointed him receiver. Consequently, the questioned Contracts can rightfully be classified as unenforceable for having been entered into by one who had acted beyond his powers, due to Receiver Amor's failure to secure the court's approval of said Contracts. These unenforceable Contracts were nevertheless deemed ratified in the case at bar, based upon the facts and circumstances on record which have led this Court to conclude that BISTRANCO had actually ratified the questioned Contracts. Private respondent Sanchez filed his complaint in the lower court on 28 December 1979. But on 10 January 1980, copetitioner Benjamin G. Roa, as Executive Vice-President of BISTRANCO, still sent Sanchez three (3) separate letters with the following contents: (3) reducing his passage commission from 10%, as he used to receive in the previous years, to 7-1/2% "as stated in the agency contract dated 27 July 1976, 18 (2) advising

Sanchez that in view of "his failure to post a bond or such other securities acceptable to the company in the sum of P5,000.00pursuant to par. 8 of the Contract executed by Sanchez the plaintiff with BISTRANCO on 27 July 1976, we are recalling all unused passage tickets issued your agency" and reminding him (Sanchez) also that "pursuant to par. 2 of aforementioned Contract, solicitation of cargo and passengers shall be undertaken by you strictly in accordance with the scheduled rates of the Company; 19 and (3) informing Sanchez that "we (petitioners) are abiding strictly with the terms of the contracts executed between Marciano C Sanchez, and Atty. Adolfo V Amor in behalf of BISTRANCO, etc. etc. 20 The three (3) letters of Benjamin G. Roa in effect recognized and gave efficacy to the Contracts in question. The declaration of Benjamin G. Roa that BISTRANCO did not have any knowledge about the Contracts before the complaint was filed on 28 December 1979 is contradicted by his own testimony that, as early as 14 December 1979, he was already looking for the contract, after he saw Exhibit "NN", wherein Sanchez requested the company "to abide with the terms of the contract which will expire on July 1981; 21 Besides, the pretended lack which will expire on July 1981 of knowledge of Benjamin G. Roa can not be equated with BISTRANCO's. It should be noted that Roa started to work for BISTRANCO only on 27 April 1979, 22 whereas, the Contracts were executed in 1976. The people who were more in a position to know about the Contracts, like the company officers and members of the board of directors at the time the Contracts were entered into, especially Antonio V. Cuenco, were never presented as witnesses. Aside from this, the company cannot deny its ratification of the Contracts even before the time of Benjamin G. Roa, because when Atty. Fulveo Pelaez succeeded Atty. Adolfo Amor as Receiver, he was represented by BISTRANCO's shipping manager as having taken cognizance of these Contracts and sanctioned the acts of Sanchez as shipping agent of BISTRANCO in Butuan City. This is shown by a letter, 23 dated 15 February 1977, written by Capt. Federico Reyes, 24 the shipping manager of BISTRANCO at that time. The letter states that "the Receiver (Atty. Fulveo Pelaez) maintains that the previous agency contract remains and (sic) basically the same except that the rates of the agency commission were modified. Furthermore, it is clear that BISTRANCO received material benefits from the contracts of agency of Sanchez, based upon the monthly statements of income of BISTRANCO, upon which the commissions of Sanchez were based. 25 A perusal of the Contracts will also show that there is no single provision therein that can be said as prejudicial or not beneficial to BISTRANCO. As held in Savings v. Ball-Bearing Chain Co. 26 Not every act within the letter of an order can be sanctioned, nor everything done without the direction of the court condemned. The tests to be applied are: (1) was the act under investigation within the authority conferred by an order of court? (2) If so, was it performed with reference to the preservation of the estate, as a man of ordinary sagacity and prudence would have performed it under like circumstances? (3) If without authority, was it beneficial to the estate? Besides, in our considered opinion, the doctrine of estoppel precludes BISTRANCO from repudiating an obligation voluntarily assumed by it, after having accepted benefits therefrom. To countenance such, repudiation would be contrary to equity and would put a premium on fraud or misrepresentation, 27 which this Court will not sanction. Anent the issue of whether the Memorandum of Agreement and the Working Agreement (Exhibits "S" and "U") which were executed by the parties in this case on 4 February 1977 and 28 May 1979, respectively, novated the questioned Contracts, the answer is also in the negative. BISTRANCO avers that Exhibit "S" substantially altered or changed the principal terms and conditions of Exhibits "F" and "G" on material points, such as, reduction of the rate of commission for freight and passage (from 10% to 7-1/2%), the manner of liquidation and remittance of collections of the agent, the mode of payment of the agent's commissions, and the term of the Contract which is from a period of 5 years to a term of 1 year renewable yearly upon mutual consent; and that Exhibit "U" ,furthermore, bolstered this novation theory. Novation is not equivalent or synonymous to mere alteration, modification or amendment. Novation is the substitution of a new obligation for an existing or old one, which is thereby extinguished. Novation takes place when the object or principal condition of an obligation is changed or altered. 28 Novation is never presumed; it must be explicitly stated or there must be a manifest incompatibility between the old and the new obligations in

every aspect. 29 The test of incompatibility between two obligations or contracts, is whether or not they can stand together, each one having an independent existence. If they cannot, they are incompatible, and the later obligation novates the first. In the case at bar, it can be deduced that the Agreements, Exhibits "S" and "U", were not meant to novate the herein questioned contracts. Rather, the intent of the parties was to suspend some of the provisions of the Contracts for a period of one (1) year, during which, the provisions of the Agreements will prevail. As par. 8 of the Memorandum of Agreement provides: "It is in this spirit of cooperation with the Receiver to enable him to pay huge obligations of the company that the agent Marciano Sanchez has acceded to the request of Messrs. Miguel Cuenco and Antonio Cuenco to accept the reduction of his commissions." It would not be equitable to Sanchez to say now that the Contracts were extinguished and substituted by the Agreements. It would be tantamount to punishing Sanchez for the concessions he extended to BISTRANCO. Besides, the changes were not really substantial to bring about a novation. The changes pointed out by BISTRANCO between the Contracts and the Agreements do not go into the essence of the cause or object of the former. Under the Agreements, Sanchez remains the agent of BISTRANCO in Butuan City. There is really no clear proof of incompatibility. In fact, the Contracts and the Agreements can be reconciled. The provisions of the Agreements which were more of changes on how to enforce the agency, prevailed during the period provided in them, but after their expiration, the conditions under the Contracts were implemented again. The term of the agency contract which was for a period of five (5) years still continued, until 27 July 1981. Considering that the contract of agency and the supplemental shipping agency contract are valid and binding between BISTRANCO and Sanchez, the former's opening of a branch in Butuan City was, in effect, a violation of the Contracts. Sanchez entered into the agency Contract because of the expected income and profits for himself. There could be no other motive from a businessman's point of view. A provision in the Supplemental Shipping Agency Contract reads: 6. That in consideration of the foregoing additional particular obligations of the AGENT, the COMPANY agrees not to appoint or employ another agent in Butuan City or in any of the City's neighboring towns without the written consent of the AGENT first obtained. (Exhibit "G ") The additional particular obligations referred to in Exhibit "G" were the putting up of an adequate agency office in Butuan City, the employment of canvassers of passengers and solicitors of cargoes, that the Agent shall provide at least two (2) cargo trucks and a private docking and berthing facilities for the vessels of the company, at the expense of Sanchez. Aside from this, Sanchez also had to spend for the lease of the wharf and the construction of the bodega at the wharf. It may be true that there is no express prohibition for BISTRANCO to open its branch in Butuan City. But, the very reason why BISTRANCO agreed not to employ or appoint another agent in Butuan City was to prevent competition against Sanchez' agency, in order that he might recover what he invested and eventually maximize his profits. The opening by BISTRANCO of a branch in Butuan City virtually resulted in consequences to Sanchez worse than if another agent had been appointed. In effect, the opening of a branch office in Butuan City was a violation of the Contracts of agency. Article 1315 of the Civil Code provides: Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. In the case at bar, good faith required that BISTRANCO refrain from opening its branch in Butuan City during the effectivity of the agency contract with Sanchez, or until 27 July 1981. Moreover, the opening of the branch office which, in effect, was a revocation of the contracts of agency is not sanctioned by law because the agency was the means by which Sanchez could fulfill his obligations under Exhibits "F" and "G". Article 1927 of the Civil Code, among others, provides: "An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted".

As to the issue of whether the award of P588,000.00 to Sanchez for unearned commissions and damages is justified, the answer is also in the affirmative, considering that BISTRANCO violated the Contracts of agency and that Sanchez, before the breach by BISTRANCO of said agency Contracts, was already earning an average monthly commission of P32,000.00, as shown by the statements of commissions prepared by BISTRANCO itself. WHEREFORE, the petition is denied. The decision of the respondent Court is affirmed. SO ORDERED. Yap (Chairman), Melencio-Herrera, Paras and Sarmiento, JJ., concur.

Footnotes * Penned by Justice Leonor Ines- Luciano with the concurrence of Justices Ramon Gaviola, Jr. and Ma. Rosario Quetulio-Losa ** Written by Judge Francis J. Militant. 1 Rollo, p. 55 2 Exhibit "C". 3 Exhibit "C-1." 4 Exhibit "E". 5 Rollo, p. 56. 6 Ibid. 7 Exhibit "H". 8 Rollo, p. 57. 9 Exhibits "12" to "12-M" 10 Exhibit "FF". 11 Rollo, p. 57. 12 Ibid, p. 59. 13 Decision of the Regional Trial Court, p. 9. 14 Petition, p. 10. 15 Pacific Merchandising Corporation v. Consolacion Insurance and Surety Co. Inc., et al., L30204, October 29,1976, 73 SCRA 564.

16 Memorandum, p. 11. 17 Petition, p. 15. 18 Exhibit "G ", emphasis supplied. 19 Exhibit "HH", emphasis supplied. 20 Exhibit "II", emphasis supplied 21 T.S.N., p. 15, August 19,1980, 22 T.S.N., p. 9, August 20,1980. 23 Exhibit "AA". 24 T.S.N., p. 18, August 19,1980. 25 Exhibits "12" "12M" 26 118 Iowa 698, 703, 92 N.W. 712. 27 Pangilinan v. Aguilar, No. L-29275, January 31, 1972, 43 SCRA 151. 28 Goni v. CA, No. L-27434, September 23,1986,144 SCRA 122. 29 National Power Corporation v. Dayrit, Nos. L-62845-46, November 25, 1983, 125 SCRA 849 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-41420 July 10, 1992 CMS LOGGING, INC., petitioner, vs. THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.

NOCON, J.: This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of Appeals in CAG.R. No. 47763-R which affirmed in toto the decision of the Court of First Instance of Manila, Branch VII, in Civil Case No. 56355 dismissing the complaint filed by petitioner CMS Logging, Inc. (CMS, for brevity) against private respondent D.R. Aguinaldo Corporation (DRACOR, for brevity) and ordering the former to pay the latter attorney's fees in the amount of P1,000.00 and the costs.

The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the logging business, while private respondent DRACOR is engaged in the business of exporting and selling logs and lumber. On August 28, 1957, CMS and DRACOR entered into a contract of agency 1 whereby the former appointed the latter as its exclusive export and sales agent for all logs that the former may produce, for a period of five (5) years. The pertinent portions of the agreement, which was drawn up by DRACOR, 2 are as follows: 1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full authority, subject to the conditions and limitations hereinafter set forth, to sell and export under a firm sales contract acceptable to SISON, all logs produced by SISON for a period of five (5) years commencing upon the execution of the agreement and upon the terms and conditions hereinafter provided and DRACOR hereby accepts such appointment; xxx xxx xxx 3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of SISON with the buyers and arrange the procurement and schedules of the vessel or vessels for the shipment of SISON's logs in accordance with SISON's written requests, but DRACOR shall not in anyway [sic] be liable or responsible for any delay, default or failure of the vessel or vessels to comply with the schedules agreed upon; xxx xxx xxx 9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%) per cent commission of the gross sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted from the proceeds of any and/or all moneys received by DRACOR for and in behalf and for the account of SISON; By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962. About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's president, Atty. Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3 CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered. After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, 4 directly to several firms in Japan without the aid or intervention of DRACOR. CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages, while DRACOR counterclaimed for its commission, amounting to P144,167.59, from the sales made by CMS of logs to Japanese firms. In its reply, CMS averred as a defense to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of its commission for the sales made by CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded DRACOR return the amount it unlawfully retained. DRACOR later filed an amended counterclaim, alleging that the balance of its commission on the sales made by CMS was P42,630.82, 6 thus impliedly admitting that it retained the amount alleged by CMS. In dismissing the complaint, the trial court ruled that no evidence was presented to show that Shinko received the commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan, though the trial court stated that "Shinko was able to collect the total amount of $77,264.67 US Dollars (Exhs. M and M-1)." 7 The counterclaim was likewise dismissed, as it was shown that DRACOR had waived its rights to the balance of its

commission in a letter dated February 2, 1963 to Atty. Carlos Moran Sison, president of CMS. decision, only CMS appealed to the Court of Appeals.

From said

The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since "[t]he trial court could not have made a categorical finding that Shinko collected commissions from the buyers of Sison's logs in Japan, and could not have held that Sison is entitled to recover from Dracor the amount collected by Shinko as commissions, plaintiff-appellant having failed to prove by competent evidence its claims." 10 Moreover, the appellate court held: There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-appellee out of its own commission of 5%, as indicated in the letter of its president to the president of Sison, dated February 2, 1963 (Exhibit "N"), and in the Agreement between Aguinaldo Development Corporation (ADECOR) and Shinko Trading Co., Ltd. (Exhibit "9"). Daniel R. Aguinaldo stated in his said letter:

. . . , I informed you that if you wanted to pay me for the service, then it would be no more than at the standard rate of 5% commission because in our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a similar amount of 2-1/2% for the service which we would render you in the Philippines. 11
Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1) that the Court of Appeals erred in not making a complete findings of fact; (2) that the testimony of Atty. Teodoro R. Dominguez, regarding the admission by Shinko's president and director that it collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese buyers, is admissible against DRACOR; (3) that the statement of DRACOR's chief legal counsel in his memorandum dated May 31, 1965, Exhibit "K", is an admission that Shinko was able to collect the commission in question; (4) that the fact that Shinko received the questioned commissions is deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court when it failed to reply to Atty. Carlos Moran Sison's letter dated February 6, 1962; (5) that DRACOR is not entitled to its 5% commission arising from the direct sales made by CMS to buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its dealings with CMS. With regard to CMS's arguments concerning whether or not Shinko received the commission in question, We find the same unmeritorious. To begin with, these arguments question the findings of fact made by the Court of Appeals, which are final and conclusive and can not be reviewed on appeal to the Supreme Court. 12 Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in Japan, 13 there is no evidence which established the fact that Shinko did receive the amount of U.S. $77,264.67 as commission arising from the sale of CMS's logs to various Japanese firms. The fact that Shinko received the commissions in question was not established by the testimony of Atty. Teodoro R. Dominguez to the effect that Shinko's president and director told him that Shinko received a commission of U.S. $1.00 for every 1,000 board feet of logs sold, since the same is hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14 is also hearsay since Mr. Shibata was not presented to testify on his letter. CMS's other evidence have little or no probative value at all. The statements made in the memorandum of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the letter dated February 2, 1963 of Daniel R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17 by DRACOR's counsel Atty. V. E. Del Rosario to CMS's demand letter dated September 25, 1963 can not be categorized as admissions that Shinko did receive the commissions in question. The alleged admission made by Atty. Ciocon, to wit

Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which should enable Shinko to collect a commission of US $67,747.73 only can not be considered as such since the statement was made in the context of questioning CMS's tally of logs delivered to various Japanese firms. Similarly, the statement of Daniel R. Aguinaldo, to wit . . . Knowing as we do that Toyo Menka is a large and reputable company, it is obvious that they paid Shinko for certain services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have paid Shinko and that of Atty. V. E. Del Rosario, . . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to concern itself with, much less question, the right of Shinko Trading Co., Ltd. with which our client debt directly, to whatever benefits it might have derived form the ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears to be no justification for your client's contention that these benefits, whether they can be considered as commissions paid by Toyo Menka Kaisha to Shinko Trading, are to be regarded part of the gross sales. can not be considered admissions that Shinko received the questioned commissions since neither statements declared categorically that Shinko did in fact receive the commissions and that these arose from the sale of CMS's logs. As correctly stated by the appellate court:

It is a rule that "a statement is not competent as an admission where it does not, under a reasonable construction, appear to admit or acknowledge the fact which is sought to be proved by it". An admission or declaration to be competent must have been expressed in definite, certain and unequivocal language (Bank of the Philippine Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18
CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received the commissions in question when it failed to respond to Atty. Carlos Moran Sison's letter dated February 6, 1963, is not supported by the evidence. DRACOR did in fact reply to the letter of Atty. Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which stated: This is to acknowledge receipt of your letter dated February 6, 1963, and addressed to Mr. D. R. Aguinaldo, who is at present out of the country. xxx xxx xxx We have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing to do with it. The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of $77,264.67 US Dollars," can not be given weight since this was based on the summary prepared by CMS itself, Exhibits "M" and "M-1". Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs.

However, We find merit in CMS's contention that the appellate court erred in holding that DRACOR was entitled to its commission from the sales made by CMS to Japanese firms. The principal may revoke a contract of agency at will, and such revocation may be express, or implied, 20 and may be availed of even if the period fixed in the contract of agency as not yet expired. 21 As the principal has this absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from such revocation, 22 unless it is shown that such was done in order to evade the payment of agent's commission.23 In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under Article 1924 of the Civil Code, which provides: Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the act of a contractor, who, after executing powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from the Government, and thereafter demanded and collected from the government the money the collection of which he entrusted to his attorney-in-fact, constituted revocation of the agency in favor of the attorney-in-fact. Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent's commission. Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had committed acts of fraud and bad faith, We find the same unmeritorious. Like the contention involving Shinko and the questioned commissions, the findings of the Court of Appeals on the matter were based on its appreciation of the evidence, and these findings are binding on this Court. In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's contention that Shinko earned a separate commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's logs. However, We reverse the ruling of the Court of Appeals with regard to DRACOR's right to retain the amount of P101,536.77 as part of its commission from the sale of logs by CMS, and hold that DRACOR has no right to its commission. Consequently, DRACOR is hereby ordered to remit to CMS the amount of P101,536.77. WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding paragraph. Costs de officio. SO ORDERED. Narvasa, C.J., Padilla and Regalado JJ., concur.

Footnotes 1 Exhibit "A".

2 Exhibit "B". 3 Exhibits "M" and "M-1". 4 Exhibit "AA-2". 5 See Record on Appeal. p. 25. 6 Exhibit "BB-1". 7 Record on Appeal, p. 39. 8 Exhibit "N" and "N-1". 9 Ponente: Justice Luis B. Reyes; Justices Ricardo C. Puno and Francisco Tantuico, Jr., concurring. Justices Roseller T. Lim and Magno S. Gatmaitan, dissenting. Because of a 2 to 1 vote within the division hearing the case, two additional members of the Court of Appeals were assigned to sit with the members of the division. 10 Decision of the Court of Appeals, p. 12. 11 Id., pp. 13-14. 12 Amigo vs. Teves, 50 O.G. 5799. 13 Exhibits "C", "C-1", "C-2", "E", "E-1", "E-1-A", to "E-1-C". See also T.S.N., August 24, 1967, pp. 156-159, and T.S.N., October 12, 1967, pp. 164-169. 14 Exhibit "FF", "FF-1" and "FF-2". 15 Exhibit "K" and "K-1". 16 Exhibit "N". 17 Exhibit "X". 18 Decision of the Court of Appeals, p. 13. 19 Exhibit "P". 20 Art. 1920, Civil Code. 21 Barretto vs. Santa Marina, 26 Phil. 440. 22 Padilla, Civil Law, Vol. VI, p. 297. 23 Infante vs. Cunanan, 93 Phil. 691. 24 107 Phil. 824 (1960).

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 85494 May 7, 1991 CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI and MOTI G. RAMNANI, petitioners, vs. COURT OF APPEALS, SPOUSES ISHWAR JETHMAL RAMNANI, SONYA JETHMAL RAMNANI and OVERSEAS HOLDING CO., LTD., respondents. G.R. No. 85496 May 7, 1991 SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JET RAMNANI, petitioners, vs. THE HONORABLE COURT OF APPEALS, ORTIGAS & CO., LTD. PARTNERSHIP, and OVERSEAS HOLDING CO., LTD., respondents. Quasha, Asperilla Ancheta, Pea and Nolasco for petitioners Ishwar Jethmal Ramnani & Sonya Ramnani. Salonga, Andres, Hernandez & Allado for Choithram Jethmal Ramnani, Nirmla Ramnani & Moti Ramnani. Rama Law Office for private respondents in collaboration with Salonga, Andres, Hernandez & Allado. Eulogio R. Rodriguez for Ortigas & Co., Ltd.

GANCAYCO, J.:p This case involves the bitter quarrel of two brothers over two (2) parcels of land and its improvements now worth a fortune. The bone of contention is the apparently conflicting factual findings of the trial court and the appellate court, the resolution of which will materially affect the result of the contest. The following facts are not disputed. Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood. Ishwar and his spouse Sonya had their main business based in New York. Realizing the difficulty of managing their investments in the Philippines they executed a general power of attorney on January 24, 1966 appointing Navalrai and Choithram as attorneys-in-fact, empowering them to manage and conduct their business concern in the Philippines. 1 On February 1, 1966 and on May 16, 1966, Choithram, in his capacity as aforesaid attorney-in-fact of Ishwar, entered into two agreements for the purchase of two parcels of land located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership (Ortigas for short) with a total area of approximately 10,048 square meters. 2Per agreement, Choithram paid the down payment and installments on the lot with his personal checks. A building was constructed thereon by Choithram in 1966 and this was occupied and rented by Jethmal Industries and a wardrobe shop called Eppie's Creation. Three other buildings were built thereon by Choithram through a loan of P100,000.00 obtained from the Merchants Bank as well as the income derived

from the first building. The buildings were leased out by Choithram as attorney-in-fact of Ishwar. Two of these buildings were later burned. Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these properties during the period 1967 to 1970. Choithram failed and refused to render such accounting. As a consequence, on February 4, 1971, Ishwar revoked the general power of attorney. Choithram and Ortigas were duly notified of such revocation on April 1, 1971 and May 24, 1971, respectively. 3 Said notice was also registered with the Securities and Exchange Commission on March 29, 1971 4 and was published in the April 2, 1971 issue of The Manila Timesfor the information of the general public. 5 Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Ishwar and Sonya in favor of his daughter-in-law, Nirmla Ramnani, on February 19, 1973. Her husband is Moti, son of Choithram. Upon complete payment of the lots, Ortigas executed the corresponding deeds of sale in favor of Nirmla. 6 Transfer Certificates of Title Nos. 403150 and 403152 of the Register of Deeds of Rizal were issued in her favor. Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for short) filed a complaint in the Court of First Instance of Rizal against Choithram and/or spouses Nirmla and Moti (Choithram et al. for brevity) and Ortigas for reconveyance of said properties or payment of its value and damages. An amended complaint for damages was thereafter filed by said spouses. After the issues were joined and the trial on the merits, a decision was rendered by the trial court on December 3, 1985 dismissing the complaint and counterclaim. A motion for reconsideration thereof filed by spouses Ishwar was denied on March 3, 1986. An appeal therefrom was interposed by spouses Ishwar to the Court of Appeals wherein in due course a decision was promulgated on March 14, 1988, the dispositive part of which reads as follows: WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed decision of the lower court dated December 3, 1985 and the Order dated March 3, 1986 which denied plaintiffs-appellants' Motion for Reconsideration from aforesaid decision. A new decision is hereby rendered sentencing defendants- appellees Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani, and Ortigas and Company Limited Partnership to pay, jointly and severally, plaintiffs-appellants the following: 1. Actual or compensatory damages to the extent of the fair market value of the properties in question and all improvements thereon covered by Transfer Certificate of Title No. 403150 and Transfer Certificate of Title No. 403152 of the Registry of Deeds of Rizal, prevailing at the time of the satisfaction of the judgment but in no case shall such damages be less than the value of said properties as appraised by Asian Appraisal, Inc. in its Appraisal Report dated August 1985 (Exhibits T to T-14, inclusive). 2. All rental incomes paid or ought to be paid for the use and occupancy of the properties in question and all improvements thereon consisting of buildings, and to be computed as follows: a) On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's Creation; b) Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to 1978, the rental incomes based on then rates prevailing as shown under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as indicated under Exhibit "Q";

c) On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental incomes based upon then prevailing rates shown under Exhibit "P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q"; d) On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the rentals based on the Lease Contract, Exhibit "Q", and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be paid for the use and occupancy of the properties and all improvements totalling 10,048 sq. m based on the rate per square meter prevailing in 1981 as indicated annually cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment, rentals shall be computed at ten percent (10%) annually of the fair market values of the properties as appraised by the Asian Appraisal, Inc. in August 1985 (Exhibits T to T-14, inclusive.) 3. Moral damages in the sum of P200,000.00; 4. Exemplary damages in the sum of P100,000.00; 5. Attorney's fees equivalent to 10% of the award herein made; 6. Legal interest on the total amount awarded computed from first demand in 1967 and until the full amount is paid and satisfied; and

7. The cost of suit. 7

Acting on a motion for reconsideration filed by Choithram, et al. and Ortigas, the appellate court promulgated an amended decision on October 17, 1988 granting the motion for reconsideration of Ortigas by affirming the dismissal of the case by the lower court as against Ortigas but denying the motion for reconsideration of Choithram, et al. 8 Choithram, et al. thereafter filed a petition for review of said judgment of the appellate court alleging the following grounds: 1. The Court of Appeals gravely abused its discretion in making a factual finding not supported by and contrary, to the evidence presented at the Trial Court. 2. The Court of Appeals acted in excess of jurisdiction in awarding damages based on the value of the real properties in question where the cause of action of private respondents is recovery of a sum of money. ARGUMENTS I THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF ITS DISCRETION IN MAKING A FACTUAL FINDING THAT PRIVATE RESPONDENT ISHWAR REMITTED THE AMOUNT OF US $150,000.00 TO PETITIONER CHOITHRAM IN THE ABSENCE OF PROOF OF SUCH REMITTANCE. II

THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND MANIFEST PARTIALITY IN DISREGARDING THE TRIAL COURTS FINDINGS BASED ON THE DIRECT DOCUMENTARY AND TESTIMONIAL EVIDENCE PRESENTED BY CHOITHRAM IN THE TRIAL COURT ESTABLISHING THAT THE PROPERTIES WERE PURCHASED WITH PERSONAL FUNDS OF PETITIONER CHOITHRAM AND NOT WITH MONEY ALLEGEDLY REMITTED BY RESPONDENT ISHWAR. III

THE COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION IN AWARDING DAMAGES BASED ON THE VALUE OF THE PROPERTIES AND THE FRUITS OF THE IMPROVEMENTS THEREON. 9
Similarly, spouses Ishwar filed a petition for review of said amended decision of the appellate court exculpating Ortigas of liability based on the following assigned errors I THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT A) IN PROMULGATING THE QUESTIONED AMENDED DECISION (ANNEX "A") RELIEVING RESPONDENT ORTIGAS FROM LIABILITY AND DISMISSING PETITIONERS' AMENDED COMPLAINT IN CIVIL CASE NO. 534-P, AS AGAINST SAID RESPONDENT ORTIGAS; B) IN HOLDING IN SAID AMENDED DECISION THAT AT ANY RATE NO ONE EVER TESTIFIED THAT ORTIGAS WAS A SUBSCRIBER TO THE MANILA TIMES PUBLICATION OR THAT ANY OF ITS OFFICERS READ THE NOTICE AS PUBLISHED IN THE MANILA TIMES, THEREBY ERRONEOUSLY CONCLUDING THAT FOR RESPONDENT ORTIGAS TO BE CONSTRUCTIVELY BOUND BY THE PUBLISHED NOTICE OF REVOCATION, ORTIGAS AND/OR ANY OF ITS OFFICERS MUST BE A SUBSCRIBER AND/OR THAT ANY OF ITS OFFICERS SHOULD READ THE NOTICE AS ACTUALLY PUBLISHED; C) IN HOLDING IN SAID AMENDED DECISION THAT ORTIGAS COULD NOT BE HELD LIABLE JOINTLY AND SEVERALLY WITH THE DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI, AS ORTIGAS RELIED ON THE WORD OF CHOITHRAM THAT ALL ALONG HE WAS ACTING FOR AND IN BEHALF OF HIS BROTHER ISHWAR WHEN IT TRANSFERRED THE RIGHTS OF THE LATTER TO NIRMLA V. RAMNANI; D) IN IGNORING THE EVIDENCE DULY PRESENTED AND ADMITTED DURING THE TRIAL THAT ORTIGAS WAS PROPERLY NOTIFIED OF THE NOTICE OF REVOCATION OF THE GENERAL POWER OF ATTORNEY GIVEN TO CHOITHRAM, EVIDENCED BY THE PUBLICATION IN THE MANILA TIMES ISSUE OF APRIL 2, 1971 (EXH. F) WHICH CONSTITUTES NOTICE TO THE WHOLE WORLD; THE RECEIPT OF THE NOTICE OF SUCH REVOCATION WHICH WAS SENT TO ORTIGAS ON MAY 22, 1971 BY ATTY. MARIANO P. MARCOS AND RECEIVED BY ORTIGAS ON MAY 24, 1971 (EXH. G) AND THE FILING OF THE NOTICE WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29,1971 (EXH. H);

E) IN DISCARDING ITS FINDINGS CONTAINED IN ITS DECISION OF 14 MARCH 1988 (ANNEX B) THAT ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY OF CHOITHRAM, HENCE ORTIGAS ACTED IN BAD FAITH IN EXECUTING THE DEED OF SALE TO THE PROPERTIES IN QUESTION IN FAVOR OF NIRMLA V. RAMNANI; F) IN SUSTAINING RESPONDENT ORTIGAS VACUOUS REHASHED ARGUMENTS IN ITS MOTION FOR RECONSIDERATION THAT IT WOULD NOT GAIN ONE CENTAVO MORE FROM CHOITHRAM FOR THE SALE OF SAID LOTS AND THE SUBSEQUENT TRANSFER OF THE SAME TO THE MATTER'S DAUGHTER-IN-LAW, AND THAT IT WAS IN GOOD FAITH WHEN IT TRANSFERRED ISHWAR'S RIGHTS TO THE LOTS IN QUESTION. II

THE RESPONDENT HONORABLE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDING WHEN IT HELD IN THE QUESTIONED AMENDED DECISION OF 17 NOVEMBER 1988 (ANNEX A) THAT RESPONDENT ORTIGAS & CO., LTD., IS NOT JOINTLY AND SEVERALLY LIABLE WITH DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI IN SPITE OF ITS ORIGINAL DECISION OF 14 MARCH 1988 THAT ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY OF CHOITHRAM RAMNANI. 10
The center of controversy is the testimony of Ishwar that during the latter part of 1965, he sent the amount of US $150,000.00 to Choithram in two bank drafts of US$65,000.00 and US$85,000.00 for the purpose of investing the same in real estate in the Philippines. The trial court considered this lone testimony unworthy of faith and credit. On the other hand, the appellate court found that the trial court misapprehended the facts in complete disregard of the evidence, documentary and testimonial. Another crucial issue is the claim of Choithram that because he was then a British citizen, as a temporary arrangement, he arranged the purchase of the properties in the name of Ishwar who was an American citizen and who was then qualified to purchase property in the Philippines under the then Parity Amendment. The trial court believed this account but it was debunked by the appellate court. As to the issue of whether of not spouses Ishwar actually sent US$150,000.00 to Choithram precisely to be used in the real estate business, the trial court made the following disquisition After a careful, considered and conscientious examination of the evidence adduced in the case at bar, plaintiff Ishwar Jethmal Ramanani's main evidence, which centers on the alleged payment by sending through registered mail from New York two (2) US$ drafts of $85,000.00 and $65,000.00 in the latter part of 1965 (TSN 28 Feb. 1984, p. 10-11). The sending of these moneys were before the execution of that General Power of Attorney, which was dated in New York, on January 24, 1966. Because of these alleged remittances of US $150,000.00 and the subsequent acquisition of the properties in question, plaintiffs averred that they constituted a trust in favor of defendant Choithram Jethmal Ramnani. This Court can be in full agreement if the plaintiffs were only able to prove preponderantly these remittances. The entire record of this case is bereft of even a shred of proof to that effect. It is completely barren. His uncorroborated testimony that he remitted these amounts in the "later part of 1965" does not engender enough faith and credence. Inadequacy of details of such remittance on the two (2) US dollar drafts in such big amounts is completely not positive, credible, probable and entirely not in accord with human experience. This is a classic situation, plaintiffs not exhibiting any commercial document or any document and/or paper as regard to these alleged remittances. Plaintiff Ishwar Ramnani is not an ordinary businessman in the strict sense of the word. Remember his main business is based in New York, and he

should know better how to send these alleged remittances. Worst, plaintiffs did not present even a scum of proof, that defendant Choithram Ramnani received the alleged two US dollar drafts. Significantly, he does not know even the bank where these two (2) US dollar drafts were purchased. Indeed, plaintiff Ishwar Ramnani's lone testimony is unworthy of faith and credit and, therefore, deserves scant consideration, and since the plaintiffs' theory is built or based on such testimony, their cause of action collapses or falls with it.

Further, the rate of exchange that time in 1966 was P4.00 to $1.00. The alleged two US dollar drafts amounted to $150,000.00 or about P600,000.00. Assuming the cash price of the two (2) lots was only P530,000.00 (ALTHOUGH he said: "Based on my knowledge I have no evidence," when asked if he even knows the cash price of the two lots). If he were really the true and bonafide investor and purchaser for profit as he asserted, he could have paid the price in full in cash directly and obtained the title in his name and not thru "Contracts To Sell" in installments paying interest and thru an attorney-in fact (TSN of May 2, 1984, pp. 10-11) and, again, plaintiff Ishwar Ramnani told this Court that he does not know whether or not his late father-in-law borrowed the two US dollar drafts from the Swiss Bank or whether or not his late father-in-law had any debit memo from the Swiss Bank (TSN of May 2, 1984, pp. 9-10). 11
On the other hand, the appellate court, in giving credence to the version of Ishwar, had this to say While it is true, that generally the findings of fact of the trial court are binding upon the appellate courts, said rule admits of exceptions such as when (1) the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) when the inferences made is manifestly mistaken, absurd and impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts and when the court, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee (Ramos vs. Court of Appeals, 63 SCRA 33; Philippine American Life Assurance Co. vs. Santamaria, 31 SCRA 798; Aldaba vs. Court of Appeals, 24 SCRA 189). The evidence on record shows that the t court acted under a misapprehension of facts and the inferences made on the evidence palpably a mistake. The trial court's observation that "the entire records of the case is bereft of even a shred of proof" that plaintiff-appellants have remitted to defendant-appellee Choithram Ramnani the amount of US $ 150,000.00 for investment in real estate in the Philippines, is not borne by the evidence on record and shows the trial court's misapprehension of the facts if not a complete disregard of the evidence, both documentary and testimonial. Plaintiff-appellant Ishwar Jethmal Ramnani testifying in his own behalf, declared that during the latter part of 1965, he sent the amount of US $150,000.00 to his brother Choithram in two bank drafts of US $65,000.00 and US $85,000.00 for the purpose of investing the same in real estate in the Philippines. His testimony is as follows: ATTY. MARAPAO: Mr. Witness, you said that your attorney-in-fact paid in your behalf. Can you tell this Honorable Court where your attorney-in-fact got the money to pay this property? ATTY. CRUZ: Wait. It is now clear it becomes incompetent or hearsay.

COURT: Witness can answer. A I paid through my attorney-in-fact. I am the one who gave him the money. ATTY. MARAPAO: Q You gave him the money? A That's right. Q How much money did you give him? A US $ 150,000.00. Q How was it given then? A Through Bank drafts. US $65,000.00 and US $85,000.00 bank drafts. The total amount which is $ 150,000.00 (TSN, 28 February 1984, p. 10; Emphasis supplied.) xxx xxx xxx ATTY. CRUZ: Q The two bank drafts which you sent I assume you bought that from some banks in New York? A No, sir. Q But there is no question those two bank drafts were for the purpose of paying down payment and installment of the two parcels of land? A Down payment, installment and to put up the building. Q I thought you said that the buildings were constructed . . . subject to our continuing objection from rentals of first building? ATTY. MARAPAO: Your Honor, that is misleading. COURT; Witness (may) answer. A Yes, the first building was immediately put up after the purchase of the two parcels of land that was in 1966 and the finds were used for the construction of the building from the US $150,000.00 (TSN, 7 March 1984, page 14; Emphasis supplied.) xxx xxx xxx

Q These two bank drafts which you mentioned and the use for it you sent them by registered mail, did you send them from New Your? A That is right. Q And the two bank drafts which were put in the registered mail, the registered mail was addressed to whom? A Choithram Ramnani. (TSN, 7 March 1984, pp. 14-15). On cross-examination, the witness reiterated the remittance of the money to his brother Choithram, which was sent to him by his father-in-law, Rochiram L. Mulchandoni from Switzerland, a man of immense wealth, which even defendants-appellees' witness Navalrai Ramnani admits to be so (tsn., p. 16, S. Oct. 13, 1985). Thus, on cross-examination, Ishwar testified as follows: Q How did you receive these two bank drafts from the bank the name of which you cannot remember? A I got it from my father-in-law. Q From where did your father- in-law sent these two bank drafts? A From Switzerland. Q He was in Switzerland. A Probably, they sent out these two drafts from Switzerland. (TSN, 7 March 1984, pp. 16-17; Emphasis supplied.) This positive and affirmative testimony of plaintiff-appellant that he sent the two (2) bank drafts totalling US $ 150,000.00 to his brother, is proof of said remittance. Such positive testimony has greater probative force than defendant-appellee's denial of receipt of said bank drafts, for a witness who testifies affirmatively that something did happen should be believed for it is unlikely that a witness will remember what never happened (Underhill's Cr. Guidance, 5th Ed., Vol. 1, pp. 10-11). That is not all. Shortly thereafter, plaintiff-appellant Ishwar Ramnani executed a General Power of Attorney (Exhibit "A") dated January 24, 1966 appointing his brothers, defendantsappellees Navalrai and Choithram as attorney-in-fact empowering the latter to conduct and manage plaintiffs-appellants'business affairs in the Philippines and specifically No. 14. To acquire, purchase for us, real estates and improvements for the purpose of real estate business anywhere in the Philippines and to develop, subdivide, improve and to resell to buying public (individual, firm or corporation); to enter in any contract of sale in oar behalf and to enter mortgages between the vendees and the herein grantors that may be needed to finance the real estate business being undertaken. Pursuant thereto, on February 1, 1966 and May 16, 1966, Choithram Jethmal Ramnani entered into Agreements (Exhibits "B' and "C") with the other defendant. Ortigas and Company, Ltd., for the purchase of two (2) parcels of land situated at Barrio Ugong, Pasig, Rizal, with said defendant-appellee signing the Agreements in his capacity as Attorney-in-fact of Ishwar Jethmal Ramnani.

Again, on January 5, 1972, almost seven (7) years after Ishwar sent the US $ 150,000.00 in 1965, Choithram Ramnani, as attorney-in fact of Ishwar entered into a Contract of Lease with Sigma-Mariwasa (Exhibit "P") thereby re-affirming the ownership of Ishwar over the disputed property and the trust relationship between the latter as principal and Choithram as attorneyin-fact of Ishwar. All of these facts indicate that if plaintiff-appellant Ishwar had not earlier sent the US $ 150,000.00 to his brother, Choithram, there would be no purpose for him to execute a power of attorney appointing his brothers as s attorney-in-fact in buying real estate in the Philippines. As against Choithram's denial that he did not receive the US $150,000.00 remitted by Ishwar and that the Power of Attorney, as well as the Agreements entered into with Ortigas & Co., were only temporary arrangements, Ishwar's testimony that he did send the bank drafts to Choithram and was received by the latter, is the more credible version since it is natural, reasonable and probable. It is in accord with the common experience, knowledge and observation of ordinary men (Gardner vs. Wentors 18 Iowa 533). And in determining where the superior weight of the evidence on the issues involved lies, the court may consider the probability or improbability of the testimony of the witness (Sec. 1, Rule 133, Rules of Court).

Contrary, therefore, to the trial court's sweeping observation that 'the entire records of the case is bereft of even a shred of proof that Choithram received the alleged bank drafts amounting to US $ 150,000.00, we have not only testimonial evidence but also documentary and circumstantial evidence proving said remittance of the money and the fiduciary relationship between the former and Ishwar. 12
The Court agrees. The environmental circumstances of this case buttress the claim of Ishwar that he did entrust the amount of US $ 150,000.00 to his brother, Choithram, which the latter invested in the real property business subject of this litigation in his capacity as attorney-in-fact of Ishwar. True it is that there is no receipt whatever in the possession of Ishwar to evidence the same, but it is not unusual among brothers and close family members to entrust money and valuables to each other without any formalities or receipt due to the special relationship of trust between them. And another proof thereof is the fact that Ishwar, out of frustration when Choithram failed to account for the realty business despite his demands, revoked the general power of attorney he extended to Choithram and Navalrai. Thereafter, Choithram wrote a letter to Ishwar pleading that the power of attorney be renewed or another authority to the same effect be extended, which reads as follows: June 25,1971 MR. ISHWAR JETHMAL NEW YORK (1) Send power of Atty. immediately, because the case has been postponed for two weeks. The same way as it has been send before in favor of both names. Send it immediately otherwise everything will be lost unnecessarily, and then it will take us in litigation. Now that we have gone ahead with a case and would like to end it immediately otherwise squatters will take the entire land. Therefore, send it immediately. (2) Ortigas also has sued us because we are holding the installments, because they have refused to give a rebate of P5.00 per meter which they have to give us as per contract. They have filed the law suit that since we have not paid the installment they should get back the land. The hearing of this case is in the month of July. Therefore, please send the power immediately. In one case DADA (Elder Brother) will represent and in another one, I shall.

(3) In case if you do not want to give power then make one letter in favor of Dada and the other one in my favor showing that in any litigation we can represent you and your wife, and whatever the court decide it will be acceptable by me. You can ask any lawyer, he will be able to prepare these letters. After that you can have these letters ratify before P.I. Consulate. It should be dated April 15, 1971. (4) Try to send the power because it will be more useful. Make it in any manner whatever way you have confident in it. But please send it immediately. You have cancelled the power. Therefore, you have lost your reputation everywhere. What can I further write you about it. I have told everybody that due to certain reasons I have written you to do this that is why you have done this. This way your reputation have been kept intact. Otherwise if I want to do something about it, I can show you that inspite of the power you have cancelled you can not do anything. You can keep this letter because my conscience is clear. I do not have anything in my mind. I should not be writing you this, but because my conscience is clear do you know that if I had predated papers what could you have done? Or do you know that I have many paper signed by you and if had done anything or do then what can you do about it? It is not necessary to write further about this. It does not matter if you have cancelled the power. At that time if I had predated and done something about it what could you have done? You do not know me. I am not after money. I can earn money anytime. It has been ten months since I have not received a single penny for expenses from Dada (elder brother). Why there are no expenses? We can not draw a single penny from knitting (factory). Well I am not going to write you further, nor there is any need for it. This much I am writing you because of the way you have conducted yourself. But remember, whenever I hale the money I will not keep it myself Right now I have not got anything at all. I am not going to write any further.

Keep your business clean with Naru. Otherwise he will discontinue because he likes to keep his business very clean. 13
The said letter was in Sindhi language. It was translated to English by the First Secretary of the Embassy of Pakistan, which translation was verified correct by the Chairman, Department of Sindhi, University of Karachi. 14 From the foregoing letter what could be gleaned is that 1. Choithram asked for the issuance of another power of attorney in their favor so they can continue to represent Ishwar as Ortigas has sued them for unpaid installments. It also appears therefrom that Ortigas learned of the revocation of the power of attorney so the request to issue another. 2. Choithram reassured Ishwar to have confidence in him as he was not after money, and that he was not interested in Ishwar's money. 3. To demonstrate that he can be relied upon, he said that he could have ante-dated the sales agreement of the Ortigas lots before the issuance of the powers of attorney and acquired the same in his name, if he wanted to, but he did not do so. 4. He said he had not received a single penny for expenses from Dada (their elder brother Navalrai). Thus, confirming that if he was not given money by Ishwar to buy the Ortigas lots, he could not have consummated the sale. 5. It is important to note that in said letter Choithram never claimed ownership of the property in question. He affirmed the fact that he bought the same as mere agent and in behalf of Ishwar. Neither did he mention the

alleged temporary arrangement whereby Ishwar, being an American citizen, shall appear to be the buyer of the said property, but that after Choithram acquires Philippine citizenship, its ownership shall be transferred to Choithram. This brings us to this temporary arrangement theory of Choithram. The appellate court disposed of this matter in this wise Choithram's claim that he purchased the two parcels of land for himself in 1966 but placed it in the name of his younger brother, Ishwar, who is an American citizen, as a temporary arrangement,' because as a British subject he is disqualified under the 1935 Constitution to acquire real property in the Philippines, which is not so with respect to American citizens in view of the Ordinance Appended to the Constitution granting them parity rights, there is nothing in the records showing that Ishwar ever agreed to such a temporary arrangement. During the entire period from 1965, when the US $ 150,000. 00 was transmitted to Choithram, and until Ishwar filed a complaint against him in 1982, or over 16 years, Choithram never mentioned of a temporary arrangement nor can he present any memorandum or writing evidencing such temporary arrangement, prompting plaintiff-appellant to observe: The properties in question which are located in a prime industrial site in Ugong, Pasig, Metro Manila have a present fair market value of no less than P22,364,000.00 (Exhibits T to T-14, inclusive), and yet for such valuable pieces of property, Choithram who now belatedly that he purchased the same for himself did not document in writing or in a memorandum the alleged temporary arrangement with Ishwar' (pp. 4-41, Appellant's Brief). Such verbal allegation of a temporary arrangement is simply improbable and inconsistent. It has repeatedly been held that important contracts made without evidence are highly improbable. The improbability of such temporary arrangement is brought to fore when we consider that Choithram has a son (Haresh Jethmal Ramnani) who is an American citizen under whose name the properties in question could be registered, both during the time the contracts to sell were executed and at the time absolute title over the same was to be delivered. At the time the Agreements were entered into with defendant Ortigas & Co. in 1966, Haresh, was already 18 years old and consequently, Choithram could have executed the deeds in trust for his minor son. But, he did not do this. Three (3) years, thereafter, or in 1968 after Haresh had attained the age of 21, Choithram should have terminated the temporary arrangement with Ishwar, which according to him would be effective only pending the acquisition of citizenship papers. Again, he did not do anything. Evidence to be believed, said Vice Chancellor Van Fleet of New Jersey, must not only proceed from the mouth of a credible witness, but it must be credible in itselfsuch as the common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous and is outside of judicial cognizance. (Daggers vs. Van Dyek 37 M.J. Eq. 130, 132). Another factor that can be counted against the temporary arrangement excuse is that upon the revocation on February 4, 1971 of the Power of attorney dated January 24, 1966 in favor of Navalrai and Choithram by Ishwar, Choithram wrote (tsn, p. 21, S. July 19, 1985) a letter dated June 25, 1971 (Exhibits R, R-1, R-2 and R-3) imploring Ishwar to execute a new power of attorney in their favor. That if he did not want to give power, then Ishwar could make a letter

in favor of Dada and another in his favor so that in any litigation involving the properties in question, both of them could represent Ishwar and his wife. Choithram tried to convince Ishwar to issue the power of attorney in whatever manner he may want. In said letter no mention was made at all of any temporary arrangement. On the contrary, said letter recognize(s) the existence of principal and attorney-in-fact relationship between Ishwar and himself. Choithram wrote: . . . do you know that if I had predated papers what could you have done? Or do you know that I have many papers signed by you and if I had done anything or do then what can you do about it?' Choithram was saying that he could have repudiated the trust and ran away with the properties of Ishwar by predating documents and Ishwar would be entirely helpless. He was bitter as a result of Ishwar's revocation of the power of attorney but no mention was made of any temporary arrangement or a claim of ownership over the properties in question nor was he able to present any memorandum or document to prove the existence of such temporary arrangement. Choithram is also estopped in pais or by deed from claiming an interest over the properties in question adverse to that of Ishwar. Section 3(a) of Rule 131 of the Rules of Court states that whenever a party has, by his own declaration, act, or omission intentionally and deliberately led another to believe a particular thing true and act upon such belief, he cannot in any litigation arising out of such declaration, act or omission be permitted to falsify it.' While estoppel by deed is a bar which precludes a party to a deed and his privies from asserting as against the other and his privies any right of title in derogation of the deed, or from denying the truth of any material fact asserted in it(31 C.J.S. 195; 19 Am. Jur. 603). Thus, defendants-appellees are not permitted to repudiate their admissions and representations or to assert any right or title in derogation of the deeds or from denying the truth of any material fact asserted in the (1) power of attorney dated January 24, 1966 (Exhibit A); (2) the Agreements of February 1, 1966 and May 16, 1966 (Exhibits B and C); and (3) the Contract of Lease dated January 5, 1972 (Exhibit P). . . . The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. The doctrine of estoppel springs from equitable principles and the equities in the case. It is designed to aid the law in the administration of justice where without its aid injustice might result. It has been applied by court wherever and whenever special circumstances of a case so demands' (Philippine National Bank vs. Court of Appeals, 94 SCRA 357, 368 [1979]). It was only after the services of counsel has been obtained that Choithram alleged for the first time in his Answer that the General Power of attorney (Annex A) with the Contracts to Sell (Annexes B and C) were made only for the sole purpose of assuring defendants' acquisition and ownership of the lots described thereon in due time under the law; that said instruments do not reflect the true intention of the parties (par. 2, Answer dated May 30, 1983), seventeen (17) long years from the time he received the money transmitted to him by his brother, Ishwar. Moreover, Choithram's 'temporary arrangement,' by which he claimed purchasing the two (2) parcels in question in 1966 and placing them in the name of Ishwar who is an American citizen, to circumvent the disqualification provision of aliens acquiring real properties in the Philippines under the 1935 Philippine Constitution, as Choithram was then a British subject, show a palpable disregard of the law of the land and to sustain the supposed "temporary arrangement" with Ishwar would be sanctioning the perpetration of an illegal act and culpable violation of the Constitution.

Defendants-appellees likewise violated the Anti-Dummy Law (Commonwealth Act 108, as amended),which provides in Section 1 thereof that: In all cases in which any constitutional or legal provision requires Philippine or any other specific citizenship as a requisite for the exercise or enjoyment of a right, franchise or privilege, . . . any alien or foreigner profiting thereby, shall be punished . . . by imprisonment . . . and of a fine of not less than the value of the right, franchise or privileges, which is enjoyed or acquired in violation of the provisions hereof . . . Having come to court with unclean hands, Choithram must not be permitted foist his 'temporary arrangement' scheme as a defense before this court. Being in delicto, he does not have any right whatsoever being shielded from his own wrong-doing, which is not so with respect to Ishwar, who was not a party to such an arrangement. The falsity of Choithram's defense is further aggravated by the material inconsistencies and contradictions in his testimony. While on January 23, 1985 he testified that he purchased the land in question on his own behalf (tsn, p. 4, S. Jan. 23, 1985), in the July 18, 1985 hearing, forgetting probably what he stated before, Choithram testified that he was only an attorney-infact of Ishwar (tsn, p. 5, S. July 18, 1985). Also in the hearing of January 23, 1985, Choithram declared that nobody rented the building that was constructed on the parcels of land in question (tsn, pp. 5 and 6), only to admit in the hearing of October 30, 1985, that he was in fact renting the building for P12,000. 00 per annum (tsn, p. 3). Again, in the hearing of July 19, 1985, Choithram testified that he had no knowledge of the revocation of the Power of Attorney (tsn, pp. 20- 21), only to backtrack when confronted with the letter of June 25, 1971 (Exhibits R to R-3), which he admitted to be in "his own writing," indicating knowledge of the revocation of the Power of Attorney. These inconsistencies are not minor but go into the entire credibility of the testimony of Choithram and the rule is that contradictions on a very crucial point by a witness, renders s testimony incredible People vs. Rafallo, 80 Phil. 22). Not only this the doctrine of falsus in uno, falsus in omnibus is fully applicable as far as the testimony of Choithram is concerned. The cardinal rule, which has served in all ages, and has been applied to all conditions of men, is that a witness willfully falsifying the truth in one particular, when upon oath, ought never to be believed upon the strength of his own testimony, whatever he may assert (U.S. vs. Osgood 27 Feb. Case No. 15971-a, p. 364); Gonzales vs. Mauricio, 52 Phil, 728), for what ground of judicial relief can there be left when the party has shown such gross insensibility to the difference between right and wrong, between truth and falsehood? (The Santisima Trinidad, 7 Wheat, 283, 5 U.S. [L. ed.] 454). True, that Choithram's testimony finds corroboration from the testimony of his brother, Navalrai, but the same would not be of much help to Choithram. Not only is Navalrai an interested and biased witness, having admitted his close relationship with Choithram and that whenever he or Choithram had problems, they ran to each other (tsn, pp. 17-18, S. Sept. 20, 1985), Navalrai has a pecuniary interest in the success of Choithram in the case in question. Both he and Choithram are business partners in Jethmal and Sons and/or Jethmal Industries, wherein he owns 60% of the company and Choithram, 40% (p. 62, Appellant's Brief). Since the acquisition of the properties in question in 1966, Navalrai was occupying 1,200 square meters thereof as a factory site plus the fact that his son (Navalrais) was occupying the apartment on top of the factory with his family rent free except the amount of P l,000.00 a month to pay for taxes on said properties (tsn, p. 17, S. Oct. 3, 1985).

Inherent contradictions also marked Navalrai testimony. "While the latter was very meticulous in keeping a receipt for the P 10,000.00 that he paid Ishwar as settlement in Jethmal Industries, yet in the alleged payment of P 100,000.00 to Ishwar, no receipt or voucher was ever issued by him (tsn, p. 17, S. Oct. 3, 1983). 15

We concur. The foregoing findings of facts of the Court of Appeals which are supported by the evidence is conclusive on this Court. The Court finds that Ishwar entrusted US$150,000.00 to Choithram in 1965 for investment in the realty business. Soon thereafter, a general power of attorney was executed by Ishwar in favor of both Navalrai and Choithram. If it is true that the purpose only is to enable Choithram to purchase realty temporarily in the name of Ishwar, why the inclusion of their elder brother Navalrai as an attorney-in-fact? Then, acting as attorney-in-fact of Ishwar, Choithram purchased two parcels of land located in Barrio Ugong Pasig, Rizal, from Ortigas in 1966. With the balance of the money of Ishwar, Choithram erected a building on said lot. Subsequently, with a loan obtained from a bank and the income of the said property, Choithram constructed three other buildings thereon. He managed the business and collected the rentals. Due to their relationship of confidence it was only in 1970 when Ishwar demanded for an accounting from Choithram. And even as Ishwar revoked the general power of attorney on February 4, 1971, of which Choithram was duly notified, Choithram wrote to Ishwar on June 25, 1971 requesting that he execute a new power of attorney in their favor. 16 When Ishwar did not respond thereto, Choithram nevertheless proceeded as such attorney-in-fact to assign all the rights and interest of Ishwar to his daughter-in-law Nirmla in 1973 without the knowledge and consent of Ishwar. Ortigas in turn executed the corresponding deeds of sale in favor of Nirmla after full payment of the purchase accomplice of the lots. In the prefatory statement of their petition, Choithram pictured Ishwar to be so motivated by greed and ungratefulness, who squandered the family business in New York, who had to turn to his wife for support, accustomed to living in ostentation and who resorted to blackmail in filing several criminal and civil suits against them. These statements find no support and should be stricken from the records. Indeed, they are irrelevant to the proceeding. Moreover, assuming Ishwar is of such a low character as Choithram proposes to make this Court to believe, why is it that of all persons, under his temporary arrangement theory, Choithram opted to entrust the purchase of valuable real estate and built four buildings thereon all in the name of Ishwar? Is it not an unconscious emergence of the truth that this otherwise wayward brother of theirs was on the contrary able to raise enough capital through the generosity of his father-in-law for the purchase of the very properties in question? As the appellate court aptly observed if truly this temporary arrangement story is the only motivation, why Ishwar of all people? Why not the own son of Choithram, Haresh who is also an American citizen and who was already 18 years old at the time of purchase in 1966? The Court agrees with the observation that this theory is an afterthought which surfaced only when Choithram, Nirmla and Moti filed their answer. When Ishwar asked for an accounting in 1970 and revoked the general power of attorney in 1971, Choithram had a total change of heart. He decided to claim the property as his. He caused the transfer of the rights and interest of Ishwar to Nirmla. On his representation, Ortigas executed the deeds of sale of the properties in favor of Nirmla. Choithram obviously surmised Ishwar cannot stake a valid claim over the property by so doing. Clearly, this transfer to Nirmla is fictitious and, as admitted by Choithram, was intended only to place the property in her name until Choithram acquires Philippine citizenship. 17 What appears certain is that it appears to be a scheme of Choithram to place the property beyond the reach of Ishwar should he successfully claim the same. Thus, it must be struck down. Worse still, on September 27, 1990 spouses Ishwar filed an urgent motion for the issuance of a writ of preliminary attachment and to require Choithram, et al. to submit certain documents, inviting the attention of this Court to the following:

a) Donation by Choithram of his 2,500 shares of stock in General Garments Corporation in favor of his children on December 29, 1989; 18 b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex (Phils.), Inc., in favor of his children; 19 and

c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact, Choithram, of the properties subject of this litigation, for the amount of $3 Million in favor of Overseas Holding, Co. Ltd., (Overseas for brevity), a corporation which appears to be organized and existing under and by virtue of the laws of Cayman Islands, with a capital of only $100.00 divided into 100 shares of $1.00 each, and with address at P.O. Box 1790, Grand Cayman, Cayman Islands. 20
An opposition thereto was filed by Choithram, et al. but no documents were produced. A manifestation and reply to the opposition was filed by spouses Ishwar. All these acts of Choithram, et al. appear to be fraudulent attempts to remove these properties to the detriment of spouses Ishwar should the latter prevail in this litigation. On December 10, 1990 the court issued a resolution that substantially reads as follows: Considering the allegations of petitioners Ishwar Jethmal Ramnani and Sonya Ramnani that respondents Choithram Jethmal Ramnani, Nirmla Ramnani and Moti G. Ramnani have fraudulently executed a simulated mortgage of the properties subject of this litigation dated June 20, 1989, in favor of Overseas Holding Co., Ltd. which appears to be a corporation organized in Cayman Islands, for the amount of $ 3,000,000.00, which is much more than the value of the properties in litigation; that said alleged mortgagee appears to be a "shell" corporation with a capital of only $100.00; and that this alleged transaction appears to be intended to defraud petitioners Ishwar and Sonya Jethmal Ramnani of any favorable judgment that this Court may render in this case; Wherefore the Court Resolved to issue a writ of preliminary injunction enjoining and prohibiting said respondents Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti G. Ramnani and the Overseas Holding Co., Ltd. from encumbering, selling or otherwise disposing of the properties and improvements subject of this litigation until further orders of the Court. Petitioners Ishwar and Sonya Jethmal Ramnani are hereby required to post a bond of P 100,000.00 to answer for any damages d respondents may suffer by way of this injunction if the Court finally decides the said petitioners are not entitled thereto. The Overseas Holding Co., Ltd. with address at P.O. Box 1790 Grand Cayman, Cayman Islands, is hereby IMPLEADED as a respondent in these cases, and is hereby required to SUBMIT its comment on the Urgent Motion for the Issuance of a Writ of Preliminary Attachment and Motion for Production of Documents, the Manifestation and the Reply to the Opposition filed by said petitioners, within Sixty (60) days after service by publication on it in accordance with the provisions of Section 17, Rule 14 of the Rules of Court, at the expense of petitioners Ishwar and Sonya Jethmal Ramnani.

Let copies of this resolution be served on the Register of Deeds of Pasig, Rizal, and the Provincial Assessor of Pasig, Rizal, both in Metro Manila, for its annotation on the transfer Certificates of Titles Nos. 403150 and 403152 registered in the name of respondent Nirmla V. Ramnani, and on the tax declarations of the said properties and its improvements subject of this litigation. 21
The required injunction bond in the amount of P 100,000.00 was filed by the spouses Ishwar which was approved by the Court. The above resolution of the Court was published in the Manila Bulletin issue of December 17, 1990 at the expense of said spouses. 22 On December 19, 1990 the said resolution and petition for review with annexes in G.R. Nos. 85494 and 85496 were transmitted to respondent Overseas, Grand Cayman Islands at its address c/o Cayman Overseas Trust Co. Ltd., through the United Parcel Services Bill of Lading 23 and it was actually delivered to said company on January 23, 1991. 24 On January 22, 1991, Choithram, et al., filed a motion to dissolve the writ of preliminary injunction alleging that there is no basis therefor as in the amended complaint what is sought is actual damages and not a

reconveyance of the property, that there is no reason for its issuance, and that acts already executed cannot be enjoined. They also offered to file a counterbond to dissolve the writ. A comment/opposition thereto was filed by spouses Ishwar that there is basis for the injunction as the alleged mortgage of the property is simulated and the other donations of the shares of Choithram to his children are fraudulent schemes to negate any judgment the Court may render for petitioners. No comment or answer was filed by Overseas despite due notice, thus it is and must be considered to be in default and to have lost the right to contest the representations of spouses Ishwar to declare the aforesaid alleged mortgage nun and void. This purported mortgage of the subject properties in litigation appears to be fraudulent and simulated. The stated amount of $3 Million for which it was mortgaged is much more than the value of the mortgaged properties and its improvements. The alleged mortgagee-company (Overseas) was organized only on June 26,1989 but the mortgage was executed much earlier, on June 20, 1989, that is six (6) days before Overseas was organized. Overseas is a "shelf" company worth only $100.00. 25 In the manifestation of spouses Ishwar dated April 1, 1991, the Court was informed that this matter was brought to the attention of the Central Bank (CB) for investigation, and that in a letter of March 20, 1991, the CB informed counsel for spouses Ishwar that said alleged foreign loan of Choithram, et al. from Overseas has not been previously approved/registered with the CB. 26 Obviously, this is another ploy of Choithram, et al. to place these properties beyond the reach of spouses Ishwar should they obtain a favorable judgment in this case. The Court finds and so declares that this alleged mortgage should be as it is hereby declared null and void. All these contemporaneous and subsequent acts of Choithram, et al., betray the weakness of their cause so they had to take an steps, even as the case was already pending in Court, to render ineffective any judgment that may be rendered against them. The problem is compounded in that respondent Ortigas is caught in the web of this bitter fight. It had all the time been dealing with Choithram as attorney-in-fact of Ishwar. However, evidence had been adduced that notice in writing had been served not only on Choithram, but also on Ortigas, of the revocation of Choithram's power of attorney by Ishwar's lawyer, on May 24, 1971. 27 A publication of said notice was made in the April 2, 1971 issue of The Manila Times for the information of the general public. 28 Such notice of revocation in a newspaper of general circulation is sufficient warning to third persons including Ortigas. 29 A notice of revocation was also registered with the Securities and Exchange Commission on March 29, 1 971. 30 Indeed in the letter of Choithram to Ishwar of June 25, 1971, Choithram was pleading that Ishwar execute another power of attorney to be shown to Ortigas who apparently learned of the revocation of Choithram's power of attorney. 31 Despite said notices, Ortigas nevertheless acceded to the representation of Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of petitioner Ishwar to Nirmla. While the primary blame should be laid at the doorstep of Choithram, Ortigas is not entirely without fault. It should have required Choithram to secure another power of attorney from Ishwar. For recklessly believing the pretension of Choithram that his power of attorney was still good, it must, therefore, share in the latter's liability to Ishwar. In the original complaint, the spouses Ishwar asked for a reconveyance of the properties and/or payment of its present value and damages. 32 In the amended complaint they asked, among others, for actual damages of not less than the present value of the real properties in litigation, moral and exemplary damages, attorneys fees, costs of the suit and further prayed for "such other reliefs as may be deemed just and equitable in the premises . 33 The amended complaint contain the following positive allegations: 7. Defendant Choithram Ramnani, in evident bad faith and despite due notice of the revocation of the General Power of Attorney, Annex 'D" hereof, caused the transfer of the rights over the said parcels of land to his daughter-in-law, defendant Nirmla Ramnani in connivance with defendant Ortigas & Co., the latter having agreed to the said transfer despite

receiving a letter from plaintiffs' lawyer informing them of the said revocation; copy of the letter is hereto attached and made an integral part hereof as Annex "H"; 8. Defendant Nirmla Ramnani having acquired the aforesaid property by fraud is, by force of law,considered a trustee of an implied trust for the benefit of plaintiff and is obliged to return the same to the latter: 9. Several efforts were made to settle the matter within the family but defendants (Choithram Ramnani, Nirmla Ramnani and Moti Ramnani) refused and up to now fail and still refuse to cooperate and respond to the same; thus, the present case;

10. In addition to having been deprived of their rights over the properties (described in par. 3 hereof), plaintiffs, by reason of defendants' fraudulent act, suffered actual damages by way of lost rental on the property which defendants (Choithram Ramnani, Nirmla Ramnani and Moti Ramnani have collected for themselves; 34
In said amended complaint, spouses Ishwar, among others, pray for payment of actual damages in an amount no less than the value of the properties in litigation instead of a reconveyance as sought in the original complaint. Apparently they opted not to insist on a reconveyance as they are American citizens as alleged in the amended complaint. The allegations of the amended complaint above reproduced clearly spelled out that the transfer of the property to Nirmla was fraudulent and that it should be considered to be held in trust by Nirmla for spouses Ishwar. As above-discussed, this allegation is well-taken and the transfer of the property to Nirmla should be considered to have created an implied trust by Nirmla as trustee of the property for the benefit of spouses Ishwar. 35 The motion to dissolve the writ of preliminary injunction filed by Choithram, et al. should be denied. Its issuance by this Court is proper and warranted under the circumstances of the case. Under Section 3(c) Rule 58 of the Rules of Court, a writ of preliminary injunction may be granted at any time after commencement of the action and before judgment when it is established: (c) that the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done, some act probably in violation of plaintiffs's rights respecting the subject of the action, and tending to render the judgment ineffectual. As above extensively discussed, Choithram, et al. have committed and threaten to commit further acts of disposition of the properties in litigation as well as the other assets of Choithram, apparently designed to render ineffective any judgment the Court may render favorable to spouses Ishwar. The purpose of the provisional remedy of preliminary injunction is to preserve the status quo of the things subject of the litigation and to protect the rights of the spouses Ishwar respecting the subject of the action during the pendency of the Suit 36 and not to obstruct the administration of justice or prejudice the adverse party. 37 In this case for damages, should Choithram, et al. continue to commit acts of disposition of the properties subject of the litigation, an award of damages to spouses Ishwar would thereby be rendered ineffectual and meaningless. 38 Consequently, if only to protect the interest of spouses Ishwar, the Court hereby finds and holds that the motion for the issuance of a writ of preliminary attachment filed by spouses Ishwar should be granted covering the properties subject of this litigation. Section 1, Rule 57 of the Rules of Court provides that at the commencement of an action or at any time thereafter, the plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered, in, among others, the following cases:

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; . . . Verily, the acts of Choithram, et al. of disposing the properties subject of the litigation disclose a scheme to defraud spouses Ishwar so they may not be able to recover at all given a judgment in their favor, the requiring the issuance of the writ of attachment in this instance. Nevertheless, under the peculiar circumstances of this case and despite the fact that Choithram, et al., have committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties in litigation, the Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the industrial partner in the acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint venture. The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They entrusted the money to Choithram to invest in a profitable business venture in the Philippines. For this purpose they appointed Choithram as their attorney-in-fact. Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question from Ortigas as attorney-in-fact of Ishwar- Instead of paying for the lots in cash, he paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two buildings. Although the buildings were burned later, Choithram was able to build two other buildings on the property. He rented them out and collected the rentals. Through the industry and genius of Choithram, Ishwar's property was developed and improved into what it is nowa valuable asset worth millions of pesos. As of the last estimate in 1985, while the case was pending before the trial court, the market value of the properties is no less than P22,304,000.00. 39 It should be worth much more today. We have a situation where two brothers engaged in a business venture. One furnished the capital, the other contributed his industry and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is thicker than water. However, the Court cannot just close its eyes to the devious machinations and schemes that Choithram employed in attempting to dispose of, if not dissipate, the properties to deprive spouses Ishwar of any possible means to recover any award the Court may grant in their favor. Since Choithram, et al. acted with evident bad faith and malice, they should pay moral and exemplary damages as well as attorney's fees to spouses Ishwar. WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the petition in G.R. No. 85496 is hereby given due course and GRANTED. The judgment of the Court of Appeals dated October 18, 1988 is hereby modified as follows: 1. Dividing equally between respondents spouses Ishwar, on the one hand, and petitioner Choithram Ramnani, on the other, (in G.R. No. 85494) the two parcels of land subject of this litigation, including all the improvements thereon, presently covered by transfer Certificates of Title Nos. 403150 and 403152 of the Registry of Deeds, as well as the rental income of the property from 1967 to the present. 2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and respondent Ortigas and Company, Limited Partnership (in G.R. No. 85496) are ordered solidarily to pay in cash the value of said onehalf (1/2) share in the said land and improvements pertaining to respondents spouses Ishwar and Sonya at their fair market value at the time of the satisfaction of this judgment but in no case less than their value as appraised by the Asian Appraisal, Inc. in its Appraisal Report dated August 1985 (Exhibits T to T-14, inclusive).

3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent Ortigas & Co., Ltd. Partnership shall also be jointly and severally liable to pay to said respondents spouses Ishwar and Sonya Ramnani one-half (1/2) of the total rental income of said properties and improvements from 1967 up to the date of satisfaction of the judgment to be computed as follows: a. On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to 1973, inclusive, based on the 1967 to 1973 monthly rentals paid by Eppie's Creation; b. Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to 1978, the rental incomes based on then rates prevailing as shown under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as indicated under Exhibit "Q"; c. On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental incomes based upon then prevailing rates shown under Exhibit "P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q"; d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the rentals based on the Lease Contract, Exhibit "P", and from 1979 to 1980, the rentals based on the Lease Contract, Exhibit "Q". and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be paid for the use and occupancy of the properties and all improvements totalling 10,048 sq. m., based on the rate per square meter prevailing in 1981 as indicated annually cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment, rentals shall be computed at ten percent (10%) annually of the fair market values of the properties as appraised by the Asian Appraisals, Inc. in August 1985. (Exhibits T to T-14, inclusive.) 4. To determine the market value of the properties at the time of the satisfaction of this judgment and the total rental incomes thereof, the trial court is hereby directed to hold a hearing with deliberate dispatch for this purpose only and to have the judgment immediately executed after such determination. 5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are also jointly and severally liable to pay respondents Ishwar and Sonya Ramnani the amount of P500,000.00 as moral damages, P200,000.00 as exemplary damages and attorney's fees equal to 10% of the total award. to said respondents spouses. 6. The motion to dissolve the writ of preliminary injunction dated December 10, 1990 filed by petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, is hereby DENIED and the said injunction is hereby made permanent. Let a writ of attachment be issued and levied against the properties and improvements subject of this litigation to secure the payment of the above awards to spouses Ishwar and Sonya. 7. The mortgage constituted on the subject property dated June 20, 1989 by petitioners Choithram and Nirmla, both surnamed Ramnani in favor of respondent Overseas Holding, Co. Ltd. (in G.R. No. 85496) for the amount of $3-M is hereby declared null and void. The Register of Deeds of Pasig, Rizal, is directed to cancel the annotation of d mortgage on the titles of the properties in question. 8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to Ishwar and Sonya Ramnani under this judgment, it shall be entitled to reimbursement from petitioners Choithram, Nirmla and Moti, all surnamed Ramnani. 9. The above awards shag bear legal rate of interest of six percent (6%) per annum from the time this judgment becomes final until they are fully paid by petitioners Choithram Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and Ortigas, Co., Ltd. Partnership. Said petitioners Choithram, et al. and respondent Ortigas shall also pay the costs.

SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

Footnotes 1 Exhibit A. 2 Exhibits B and C. 3 Exhibit 3. 4 Exhibit H. 5 Exhibit F. 6 Exhibits and J. 7 Pages 80 to 82, Rollo of G.R. No. 85496; pages 55 to 57, G.R. No. 85494; Associate Justice Rodolfo A- Nocon was the ponente, concurred in separate opinion by Justices Ricardo P. Tensuan and Manuel C. Herrera. Justices Felipe B. Kalalo and Venancio D. Aldecoa Jr., both dissented in separate the opinions and voted to affirm the decision of the trial court. 8 The five justices wrote separate opinions. 9 Pages 15 and 16, Rollo, G.R. No. 85494. 10 Pages 23 to 24, Rollo, G.R. No. 85496. 11 Pages 117 to 119, Rollo, G.R. No. 85496. 12 Pages 41 to 45, Rollo, G.R. No. 85494. 13 Exhibit R-1; emphasis supplied. 14 See Exhibit R to R-3. 15 Pages 45 to 50, Rollo, G.R. No. 85494; emphasis supplied. 16 Exhibits R to R-3. 17 TSN, July 18, 1985, page 12; and July 19, 1985, pages 8 to 9. 18 Annex A to Urgent Motion, etc. pages 438 to 450, Rollo, G.R. No. 85494. 19 Annex B, supra; page 451, supra. 20 Annex C, supra; pages 452 to 456, supra. 21 Pages 438 to 442, rollo, G.R. No. 85496; pages 413 to 417, rollo, G.R. No. 85494.

22 Page 450, rollo, G.R. No. 85496. 23 Annexes C, C-1 and C-2 to Manifestation and Complaint of petitioners Ishwar & Sonya filed on January 26, 1991. 24 Annex D to Manifestation, etc. 25 Annex A to Reply to Opposition filed by petitioners on December 7, 1990; Pages 383 to 384, Rollo;See also Manifestation of petitioners, December 11, 1990, pages 438 to 443 rollo, G.R. 85494. 26 See pages to of Rollo. 27 Exhibit B. 28 Exhibit F. 29 Article 1922, Civil Code. 30 Exhibit H. 31 Exhibit R-1; supra. 32 Annex C to Petition in G.R. No. 85494; pages 88 to 92, rollo. 33 Annex D, supra; Pages 93 to 97, Rollo. 34 Supra, pages 95 to 96, Rollo; emphasis supplied. 35 Annex C to Petition in G.R. No. 85494; pages 88 to 92, Rollo. 36 Calo vs. Roldan, 76 Phil. 445 (1946); De los Reyes v. Elepao, G.R. L-5282, May 29, 1959; De la Cruz vs. Tan Torres, G.R. L-14925, April 30, 1960, 37 Yu Tiong Tay vs. Barrios, 79 Phil. 597 (1947). 38 Calo vs. Roldan supra. 39 Exhibits T to T-14. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-28050 March 13, 1928

FEDERICO VALERA, plaintiff-appellant, vs. MIGUEL VELASCO, defendant-appellee.

Jose Martinez San Agustin for appellant. Vicente O. Romualdez, Crispulo T. Manubay and Placido P. Reyes for appellee. VILLA-REAL, J.: This is an appeal taken by Federico Valera from the judgment of the Court of First Instance of Manila dismissing his complaint against Miguel Velasco, on the ground that he has not satisfactorily proven his right of action. In support of his appeal, the appellant assigns the following alleged as committed by the trial court in its judgment, to wit: (1) The lower court erred in holding that one of the ways of terminating an agency is by the express or tacit renunciation of the agent; (2) the lower court erred in holding that the institution of a civil action and the execution of the judgment obtained by the agent against his principal is but renunciation of the powers conferred on the agent; (3) the lower erred in holding that, even if the sale by Eduardo Hernandez to the plaintiff Federico Valera be declared void, such a declaration could not prevail over the rights of the defendant Miguel Velasco inasmuch as the right redemption was exercised by neither Eduardo Hernandez nor the plaintiff Federico Valera; (4) the lower court erred in not finding that the defendant Miguel Velasco was, and at present is, an authorized representative of the plaintiff Federico Valera; (5) the lower court erred in not annulling the sale made by the sheriff at public auction to defendant Miguel Velasco, Exhibit K; (6) the lower court erred in failing to annul the sale executed by Eduardo Hernandez to the plaintiff Federico Valera, Exhibit C; (7) the lower court erred in not annulling Exhibit L, that is, the sale at public auction of the right to repurchase the land in question to Salvador Vallejo; (8) the lower court erred in not declaring Exhibit M null and void, which is the sale by Salvador Vallejo to defendant Miguel Velasco; (9) the lower court erred in not ordering the defendant Miguel Velasco to liquidate his accounts as agent of the plaintiff Federico Valera; (10) the lower court erred in not awarding plaintiff the P5,000 damages prayed for. The pertinent facts necessary for the solution of the questions raised by the above quoted assignments of error are contained in the decision appealed from and are as follows: By virtue of the powers of attorney, Exhibits X and Z, executed by the plaintiff on April 11, 1919, and on August 8, 1922, the defendant was appointed attorney-in-fact of the said plaintiff with authority to manage his property in the Philippines, consisting of the usufruct of a real property located of Echague Street, City of Manila. The defendant accepted both powers of attorney, managed plaintiff's property, reported his operations, and rendered accounts of his administration; and on March 31, 1923 presented exhibit F to plaintiff, which is the final account of his administration for said month, wherein it appears that there is a balance of P3,058.33 in favor of the plaintiff. The liquidation of accounts revealed that the plaintiff owed the defendant P1,100, and as misunderstanding arose between them, the defendant brought suit against the plaintiff, civil case No. 23447 of this court. Judgment was rendered in his favor on March 28, 1923, and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his claim. Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo Hernandez, for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser conveyed the same right of redemption, for the sum of P200, to the plaintiff himself, Federico Valera (Exhibit C). After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an execution upon a judgment against the plaintiff rendered in a civil case against the latter, levied upon said right of redemption, which was sold by the sheriff at public auction to Salvador Vallejo for P250 and was definitely adjudicated to him. Later, he transferred said right of redemption to the defendant Velasco. This is how the title to the right of usufruct to the aforementioned property later came to vest the said defendant.

As the first two assignments of error are very closely related to each other, we will consider them jointly. Article 1732 of the Civil Code reads as follows: Art. 1732. Agency is terminated: 1. By revocation; 2. By the withdrawal of the agent; 3. By the death, interdiction, bankruptcy, or insolvency of the principal or of the agent. And article 1736 of the same Code provides that: Art. 1736. An agent may withdraw from the agency by giving notice to the principal. Should the latter suffer any damage through the withdrawal, the agent must indemnify him therefore, unless the agent's reason for his withdrawal should be the impossibility of continuing to act as such without serious detriment to himself. In the case of De la Pea vs. Hidalgo (16 Phil., 450), this court said laid down the following rule: 1. AGENCY; ADMINISTRATION OF PROPERTY; IMPLIED AGENCY. When the agent and administrator of property informs his principal by letter that for reasons of health and medical treatment he is about to depart from the place where he is executing his trust and wherein the said property is situated, and abandons the property, turns it over to a third party, renders accounts of its revenues up to the date on which he ceases to hold his position and transmits to his principal statement which summarizes and embraces all the balances of his accounts since he began the administration to the date of the termination of his trust, and, without stating when he may return to take charge of the administration of the said property, asks his principal to execute a power of attorney in due form in favor of a transmit the same to another person who took charge of the administration of the said property, it is but reasonable and just to conclude that the said agent had expressly and definitely renounced his agency and that such agency duly terminated, in accordance with the provisions of article 1732 of the Civil Code, and, although the agent in his aforementioned letter did not use the words "renouncing the agency," yet such words, were undoubtedly so understood and accepted by the principal, because of the lapse of nearly nine years up to the time of the latter's death, without his having interrogated either the renouncing agent, disapproving what he had done, or the person who substituted the latter. The misunderstanding between the plaintiff and the defendant over the payment of the balance of P1,000 due the latter, as a result of the liquidation of the accounts between them arising from the collections by virtue of the former's usufructuary right, who was the principal, made by the latter as his agent, and the fact that the said defendant brought suit against the said principal on March 28, 1928 for the payment of said balance, more than prove the breach of the juridical relation between them; for, although the agent has not expressly told his principal that he renounced the agency, yet neither dignity nor decorum permits the latter to continue representing a person who has adopted such an antagonistic attitude towards him. When the agent filed a complaint against his principal for recovery of a sum of money arising from the liquidation of the accounts between them in connection with the agency, Federico Valera could not have understood otherwise than that Miguel Velasco renounced the agency; because his act was more expressive than words and could not have caused any doubt. (2 C. J., 543.) In order to terminate their relations by virtue of the agency the defendant, as agent, rendered his final account on March 31, 1923 to the plaintiff, as principal. Briefly, then, the fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the liquidation of the accounts between them arising from the agency, and renders and final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them.

If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his principal, suing him for the collection of the balance in his favor, resulting from the liquidation of the agency accounts, ceased ipso facto to be the agent of the plaintiff-appellant, said agent's purchase of the aforesaid principal's right of usufruct at public auction held by virtue of an execution issued upon the judgment rendered in favor of the former and against the latter, is valid and legal, and the lower court did not commit the fourth and fifth assignments of error attributed to it by the plaintiff-appellant. In regard to the third assignment of error, it is deemed unnecessary to discuss the validity of the sale made by Federico Valera to Eduardo Hernandez of his right of redemption in the sale of his usufructuary right made by the sheriff by virtue of the execution of the judgment in favor of Miguel Velasco and against the said Federico Valera; and the same thing is true as to the validity of the resale of the same right of redemption made by Eduardo Hernandez to Federico Valera; inasmuch as Miguel Velasco's purchase at public auction held by virtue of an execution of Federico Valera's usufructuary right is valid and legal, and as neither the latter nor Eduardo Hernandez exercised his right of redemption within the legal period, the purchaser's title became absolute. Moreover, the defendant-appellee, Miguel Velasco, having acquired Federico Valera's right of redemption from Salvador Vallejo, who had acquired it at public auction by virtue of a writ of execution issued upon the judgment obtained by the said Vallejo against the said Valera, the latter lost all right to said usufruct. And even supposing that Eduardo Hernandez had been tricked by Miguel Velasco into selling Federico Valera's right of repurchase to the latter so that Salvador Vallejo might levy an execution on it, and even supposing that said resale was null for lack of consideration, yet, inasmuch as Eduardo Hernandez did not present a third party claim when the right was levied upon for the execution of the judgment obtained by Vallejo against Federico Vallera, nor did he file a complaint to recover said right before the period of redemption expired, said Eduardo Hernandez, and much less Federico Valera, cannot now contest the validity of said resale, for the reason that the one-year period of redemption has already elapsed. Neither did the trial court err in not ordering Miguel Velasco to render a liquidation of accounts from March 31, 1923, inasmuch as he had acquired the rights of the plaintiff by purchase at the execution sale, and as purchaser, he was entitled to receive the rents from the date of the sale until the date of the repurchase, considering them as part of the redemption price; but not having exercised the right repurchase during the legal period, and the title of the repurchaser having become absolute, the latter did not have to account for said rents. Summarizing, the conclusion is reached that the disagreements between an agent and his principal with respect to the agency, and the filing of a civil action by the former against the latter for the collection of the balance in favor of the agent, resulting from a liquidation of the agency accounts, are facts showing a rupture of relations, and the complaint is equivalent to an express renunciation of the agency, and is more expressive than if the agent had merely said, "I renounce the agency." By virtue of the foregoing, and finding no error in the judgment appealed from, the same is hereby affirmed in all its parts, with costs against the appellant. So ordered. Johnson, Malcolm, Villamor, Ostrand and Johns, JJ., concur. Republic of the Philippines SUPREME COURT Manila G.R. No. L-24332 January 31, 1978 RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner, vs. FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.

Seno, Mendoza & Associates for petitioner. Ramon Duterte for private respondent.

MUOZ PALMA, J.: This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of the went to court to have the sale declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals uphold the validity of the sale and the complaint. Hence, this Petition for Review on certiorari. The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of Title No. 12989 was issued in the named of the vendee. On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued in the names of the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint was amended twice; defendant Corporation's Answer contained a crossclaim against its codefendant, Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While the case was pending in the trial court, both Simon and his sister Gerundia died and they were substituted by the respective administrators of their estates. After trial the court a quo rendered judgment with the following dispositive portion: A. On Plaintiffs Complaint (1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso share of Concepcion Rallos in the property in question, Lot 5983 of the Cadastral Survey of Cebu is concerned; (2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No. 12989 covering Lot 5983 and to issue in lieu thereof another in the names of FELIX GO CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos in the proportion of one-half (1/2) share each pro-indiviso; (3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and (5) Ordering both defendants to pay the costs jointly and severally. B. On GO CHANTS Cross-Claim: (1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45, representing the price of one-half (1/2) share of lot 5983; (2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the sum of P500.00. C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos, against Josefina Rallos special administratrix of the Estate of Gerundia Rallos: (1) Dismissing the third-party complaint without prejudice to filing either a complaint against the regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party complaint, at bar. (pp. 98-100, Record on Appeal) Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the appellant corporation sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved for a reconsider of the decision but the same was denied in a resolution of March 4, 1965. 2 What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly to the instant case, We have the query. is the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the agent after the death of his principal? What is the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and in behalf of the latter? Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an act performed after such death? Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter tinder consideration. 1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. 3 A contract entered into in the name of another by one who has no authority or the legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1) of the same Code also provides: ART. 1403. The following contracts are unenforceable, unless they are justified: (1) Those entered into in the name of another person by one who hi - been given no authority or legal representation or who has acted beyond his powers; ... Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, caged the principal (mandante), authorizes another, called the agent (mandatario), to act for and in

his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not for himself, and (4) the agent acts within the scope of his authority. 5 Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself". 6 2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish Civil Code provides: ART. 1919. Agency is extinguished. xxx xxx xxx 3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis supplied) By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the principal or the agent. This is the law in this jurisdiction. 8 Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in thejuridical basis of agency which is representation Them being an in. integration of the personality of the principal integration that of the agent it is not possible for the representation to continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of the nature of agency, death is a necessary cause for its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon the death of either without necessity for the heirs of the fact to notify the agent of the fact of death of the former. 9 The same rule prevails at common law the death of the principal effects instantaneous and absolute revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled that a power without an interest confer. red upon an agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding on the heirs or representatives of the deceased. 11 3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the agency, subject to any exception, and if so, is the instant case within that exception? That is the determinative point in issue in this litigation. It is the contention of respondent corporation which was sustained by respondent court that notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is valid and enforceable inasmuch as the corporation acted in good faith in buying the property in question. Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned. ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not coupled with an interest. Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable. In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of respondent appellate court when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. 14 On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made after the death of the principal because it was not shown that the agent knew of his principal's demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated: ... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the record, that the agent Luy Kim Guan was aware of the death of his principal at the time he sold the property. The death 6f the principal does not render the act of an agent unenforceable, where the latter had no knowledge of such extinguishment of the agency. (1 SCRA 406, 412) 4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out that there is no provision in the Code which provides that whatever is done by an agent having knowledge of the death of his principal is void even with respect to third persons who may have contracted with him in good faith and without knowledge of the death of the principal. 16 We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the general rule it follows a fortiorithat any act of an agent after the death of his principal is void ab initio unless the same fags under the exception provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the general rule, is to be strictly construed, it is not to be given an interpretation or application beyond the clear import of its terms for otherwise the courts will be involved in a process of legislation outside of their judicial function. 5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the power of attorney which was duly registered on the original certificate of title recorded in the Register of Deeds of the province of Cebu, that no notice of the death was aver annotated on said certificate of title by the heirs of the principal and accordingly they must suffer the consequences of such omission. 17 To support such argument reference is made to a portion in Manresa's Commentaries which We quote: If the agency has been granted for the purpose of contracting with certain persons, the revocation must be made known to them. But if the agency is general iii nature, without reference to particular person with whom the agent is to contract, it is sufficient that the principal exercise due diligence to make the revocation of the agency publicity known.

In case of a general power which does not specify the persons to whom represents' on should be made, it is the general opinion that all acts, executed with third persons who contracted in good faith, Without knowledge of the revocation, are valid. In such case, the principal may exercise his right against the agent, who, knowing of the revocation, continued to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo) The above discourse however, treats of revocation by an act of the principal as a mode of terminating an agency which is to be distinguished from revocation by operation of law such as death of the principal which obtains in this case. On page six of this Opinion We stressed that by reason of the very nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal or agent. Although a revocation of a power of attorney to be effective must be communicated to the parties concerned, 18 yet a revocation by operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an execution of the principal's continuing will. 19With death, the principal's will ceases or is the of authority is extinguished. The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What the Code provides in Article 1932 is that, if the agent die his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal 6. Holding that the good faith of a third person in said with an agent affords the former sufficient protection, respondent court drew a "parallel" between the instant case and that of an innocent purchaser for value of a land, stating that if a person purchases a registered land from one who acquired it in bad faith even to the extent of foregoing or falsifying the deed of sale in his favor the registered owner has no recourse against such innocent purchaser for value but only against the forger. 20 To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief: In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a coowner of lands with Agustin Nano. The latter had a power of attorney supposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power was registered in the Office of the Register of Deeds. When the lawyer-husband of Angela Blondeau went to that Office, he found all in order including the power of attorney. But Vallejo denied having executed the power The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the decision of the court a quo, the Supreme Court, quoting the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held: But there is a narrower ground on which the defenses of the defendantappellee must be overruled. Agustin Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been perpetuated. When Fernando de la Canters, a member of the Philippine Bar and the husband of Angela Blondeau, the principal plaintiff, searched the registration record, he found them in due form including the power of attorney of Vallajo in favor of Nano. If this had not been so and if thereafter the proper notation of the encumbrance could not have been made, Angela Blondeau would not have sent P12,000.00 to the defendant Vallejo.' An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a representation to a third party that the holder of the transfer is authorized to deal with the land. As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted with one who admittedly was an agent of his sister and who sold the property of the latter after her death with full knowledge of such death. The situation is expressly covered by a provision of law on agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in the same manner that the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land Registration Law which in part provides: xxx xxx xxx The production of the owner's duplicate certificate whenever any voluntary instrument is presented for registration shall be conclusive authority from the registered owner to the register of deeds to enter a new certificate or to make a memorandum of registration in accordance with such instruments, and the new certificate or memorandum Shall be binding upon the registered owner and upon all persons claiming under him in favor of every purchaser for value and in good faith: Provided however, That in all cases of registration provided by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the right, of any innocent holder for value of a certificate of title. ... (Act No. 496 as amended) 7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the death of the principal were held to be "good", "the parties being ignorant of the death". Let us take note that the Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the death of the principal. We quote from that decision the following: ... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the death is a good payment. in addition to the case in Campbell before cited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment after the death of principal is not good. Thus, a payment of sailor's wages to a person having a power of attorney to receive them, has been held void when the principal was dead at the time of the payment. If, by this case, it is meant merely to decide the general proposition that by operation of law the death of the principal is a revocation of the powers of the attorney, no objection can be taken to it. But if it intended to say that his principle applies where there was 110 notice of death, or opportunity of twice I must be permitted to dissent from it. ... That a payment may be good today, or bad tomorrow, from the accident circumstance of the death of the principal, which he did not know, and which by no possibility could he know? It would be unjust to the agent and unjust to the debtor. In the civil law, the acts of the agent, done bona fide in ignorance of the death of his principal are held valid and binding upon the heirs of the latter. The same rule holds in the Scottish law, and I cannot believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied) To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be made that the above represents the minority view in American jurisprudence. Thus in Clayton v. Merrett, the Court said. There are several cases which seem to hold that although, as a general principle, death revokes an agency and renders null every act of the agent thereafter performed, yet that where a payment has been made in ignorance of the death, such payment will be good. The leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view ii broadly announced. It is referred to, and seems to have been followed, in the case of Dick v. Page,17 Mo. 234, 57 AmD 267; but in this latter case it appeared that the estate of the deceased principal had received the benefit of the money paid, and therefore the representative of the estate might well have been held to be estopped from suing for it again. . . . These cases, in so far, at least, as they announce the doctrine under discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v.

McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in announcing the principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549) So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far as it related to the particular facts, was a mere dictum, Baldwin J. said: The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his views on the general subject, than as the adjudication of the Court upon the point in question. But accordingly all power weight to this opinion, as the judgment of a of great respectability, it stands alone among common law authorities and is opposed by an array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549) Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for the simple reason that our statute, the Civil Code, expressly provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) that the act of the agent was executed without knowledge of the death of the principal and the third person who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable requirement that the agent acted without knowledge or notice of the death of the principal In the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly, the agent's act is unenforceable against the estate of his principal. IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all instances. So Ordered. Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

Footnotes 1 p. 40, rollo 2 p, 42, Ibid. 3 Art. 1317, Civil Code of the Philippines 4 Ibid 5 Art. 1868, Civil Code. By the contract of the agency of a person blinds himself to render some service or to do something in representation or on behalf of another, with the consent of the authority of the latter. Art. 1881, Civil Code. The Agent must act within the scope of his authority. He may do acts as may be conductive to the accomplishment of the purpose of the agency. 11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 26 Scaevola, 243, 262; Tolentino, Comments, Civil Code of the Philippines, p.340, vol. 5, 1959 Ed. See also Columbia University Club v. Higgins, D.CN.Y., 23 f. Supp. 572, 574; Valentine Oil Co. v. Young 109 P. 2d 180, 185.

6 74 C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, 157 Neb. 87; Purnell v. City of Florence, 175 So. 417, 27 Ala. App. 516; Stroman Motor Co. v. Brown, 243 P. 133, 126 Ok. 36 7 See Art. 1919 of the Civil Code 8 Hermosa v. Longara, 1953, 93 Phil. 977, 983; Del Rosario, et al. v. Abad, et al., 1958, 104 Phil. 648, 652 9 11 Manresa 572-573; Tolentino, supra, 369-370 10 2 Kent Comm. 641, cited in Williston on Contracts, 3rd Ed., Vol. 2, p. 288 11 See Notes on Acts of agent after principal's death, 39 Am. Dec. 81,83, citing Ewell's Evans on Agency, 116; Dunlap's Paley on Agency, 186; Story on Agency, see. 488; Harper v. Little. 11 Am. Dec. 25; Staples v. Bradbury, 23 Id. 494; Gale v. Tappan 37 Id. 194; Hunt v. Rousmanier, 2 Mason, 244, S.C. 8 Wheat, 174; Boones Executor v. Clarke 3 Cranch C.C. 389; Hank of 'Washington v. Person, 2 'Rash. C.C. 6.85; Scruggs v. Driver's Executor, 31 Ala. 274; McGriff v. Porter, 5 Fla. 373; Lincoln v. Emerson, 108 Mass 87; 'Wilson v. Edmonds, 24 N.H 517; Easton v. Ellis, 1 Handy (Ohio), 70; McDonald v. Black's Administrators, 20 Ohio, 185; Michigan Ins. Co. v. Leavenworth, 30 Vt. 11; Huston v. Cantril, 11 Leigh, 136; Campanari v. 'Woodburn, 15 Com B 400 See also ',Williston on Contracts, 3rd Ed., Vol. 2, p. 289 12 see p. 15, 30-31 64 68-69, Record on Appeal 13 pp. 71-72, Ibid. 14 p. 7 of the Decision at page 14, rollo 15 105 Phil. 79:i, 798 16 p. 6 of Decision, at page 13, rollo 17 pp. 6-7 of Decision at pp, 13-14, Ibid. 18 See Articles 1921 & 1922 of the Civil Code 19 2 C.J.S. 1 174 citing American Jurisprudence in different States from Alabama to Washington; emphasis supplied. 20 p. 8, decision at Page 15, rollo Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11415 May 25, 1959

MANUEL BUASON and LOLITA M. REYES, plaintiffs-appellants, vs. MARIANO PANUYAS, defendant-appellee. Garcia and Jacinto, for appellants. Servando Cleto for appellee. PADILLA, J.: This is an appeal from a judgment of the Court of First Instance of Nueva Ecija dismissing an action brought by the spouses Manuel Buason and Lolita M. Reyes for annulment of a deed of sale in favor of the defendant, cancellation of transfer certificate of title No. 8419 issued in the name of the defendant and his wife, declaration that the sale in their favor is valid, recovery of possession of the parcel of land described in the complaint from the defendant, damages, attorney's fees and costs. (Civil No. 2144.) In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by homestead patent a parcel of land situated at barrio Gabaldon, municipality of Muoz, province of Nueva Ecija, containing an area of 14.8413 hectares covered by original certificate of title No. 1187 (Exhibit C). On 29 October 1930 they executed a power of attorney authorizing Eustaquio Bayuga to engage the services of an attorney to prosecute their case against Leonardo Gambito for annulment of a contract of sale of the parcel of land (civil No. 5787 of the same court) and after the termination of the case in their favor to sell it, and from the proceeds of the sale to deduct whatever expenses he had incurred in the litigation (Exhibit B). On 14 March 1934 Buenaventura Dayao died leaving his wife Eugenia Vega and children Pablo, Teodoro, Fortunata and Juliana, all surnamed Dayao. On 21 march 1939 his four children executed a deed of sale conveying 12.8413 hectares of the parcel of land to the appellants, the spouses Manuel Buason and Lolita M. Reyes (Exhibit A). Their mother Eugenia Vega affixed her thumbmark to the deed of sale as witness (Exhibit A). The appellants took possession of the parcel of land through their tenants in 1939. On 18 July 1944 Eustaquio Bayuga sold 8 hectares of the same parcel of land to the spouses Mariano Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D). Eustaquio Bayuga died on 25 March 1946 and Eugenia Vega in 1954. The appellants and the appellee claim ownership to the same parcel of land. In their complaint the appellants prayed that the appellee be ordered to deliver possession of the part of the parcel of land held by him; that the deed of sale of that part of the parcel of land held by the appellee executed by Eustaquio Bayuga in his favor and of his wife (Exhibit D) be declared null and void and that transfer certificate of title No. 8419 issued in their name be cancelled; that the deed of sale of the parcel of land executed by the children and heirs of Buenaventura Dayao in their favor (Exhibit A) be declared valid; that the appellee be ordered to pay them damages and attorney's fees in the sum of P9,600; and that he ordered to pay the costs of the suit. The appellees affirmative defenses are that he and his wife were buyers in good faith and for valuable consideration; that appellant's causes of action are barred by the statute of limitations; that the complaint states no cause of action; that the claim on which their action is based is unenforceable under the statute of frauds; and that the appellants are guilty of laches. By way of counterclaim, he prayed that for bringing a clearly unfounded suit against him which depreciated the value of the land and injured his good reputation, the appellants be ordered to pay him the sums of P5,000 as actual damages and P10,000 as moral damages. After trial on 20 August 1956 the Court rendered judgment holding that the appellants' action is barred by the statute of limitations and dismissing their complaint. Their motion for reconsideration filed on 23 August 1956. Hence this appeal upon questions of law. It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of land in question executed in their favor by the Dayao children on 21 March 1939 after the death of their father Buenaventura Dayao. On the other hand, the power of attorney executed by Buenaventura Dayao on 29 October 1930 authorizing Eustaquio Bayuga to sell the parcel of land (Exhibit B) was annotated or inscribed on the back of the original certificate of title No. 1187 (Exhibit C) as Entry No. 16836/H-1187, and the sale executed by Eustaquio Bayuga in favor of the appellee Mariano Panuyas and his wife Sotera B. Cruz under the aforesaid power of attorney was annotated or inscribed on the back of the same original certificate of title (Exhibit C) as Entry No 778/H-1187. It does not appear that the appellee and his wife had actual knowledge of the previous sale. In the absence of such knowledge, they had a right to rely on the face of the certificate of title of the

registered owners and of the authority conferred by them upon the agent also recorded on the back of the certificate of title. As this is a case of double sale of land registered under the Land Registration Act, he who recorded the sale in the Registry of Deeds has a better right than he who did not.1 As to the appellants' contention that, as the death of the principal on 14 March 1934 ended the authority of the agent,2 the sale of 8 hectares of the parcel of land by the agent to the appellee Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to state that is has not been shown that the agent knew of his principal's demise, and for that reason article 1738, old Civil code or 1931, new Civil Code, which provides: Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith is the law applicable to the point raised by the appellants. The judgment appealed from is affirmed, with costs against the appellants. Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.

Footnotes
1

Article 1473, old civil code; 1544, new civil code. Article 1732, old civil code; 1919, new civil code. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-58794 August 24, 1984 SPOUSES LYDIA TERRADO & MARTIN ROSARIO, and DOMINGO FERNANDEZ, petitioners, vs. HON. COURT OF APPEALS, HON. FELICIDAD CARANDANG VILLALON, Judge, CFI of Pangasinan, Deputy Sheriff OSCAR SIBUNA of Pangasinan, and GERUNCIO LACUESTA, respondents. G.R. No. L-64489 August 24, 1984 SPOUSES LYDIA TERRADO & MARTIN ROSARIO, DOMINGO FERNANDEZ, and EMILIANO GARLITOSpetitioners, vs. INTERMEDIATE APPELLATE COURT, DEPUTY SHERIFF OF PANGASINAN FELIPE M. AQUINO, and GERUNCIO LACUESTA, respondents. Gerry Calub and Ricardo Perez for petitioner in L-58794. Rogelio Terrado for petitioner in L-64489. Geruncio Lacuesta for and in his own behalf as private respondent in 58794 and 64489.

GUERRERO, J.: Pursuant to Act No. 4041 of the Philippine Legislature approved January 21, 1983, the Fisheries situated in the locality known as Mangabul, Bayambang, Pangasinan, and falling within Plan No. Ipd Ninety-two of the Bureau of Lands and recently declared by the courts as public land was reserved and the usufruct thereof ceded to the municipality of Bayambang, Province of Pangasinan, to be used or disposed of in accordance with the general municipal law relative to the letting of fisheries in municipal waters: Provided, That the timber and other forest products therein shall be placed under the administration and control of the forest service; Provided further, that the cession shall not be interpreted as limiting the power of the Secretary of Agriculture and Natural Resources to prescribe rules and regulations for the protection of game birds, mammals or fish within the area ceded to the municipality of Bayambang. (Section 1, Act 4041. This Act was declared enforced by Proclamation No. 545 (1933). On May 15, 1974, the Sanggunian Bayan of Bayambang, Pangasinan passed Resolution No. 35 enacting Ordinance NO. 8, series of 1974, establishing the Bayambang Fishery and Hunting Park and Municipal Water Shed embracing all the vast area of the Mangabul Fisheries consisting of about 2,061 hectares with 19 fishponds and not less than 1,500 hectares of watershed area. In the said ordinance, the municipality designated appointed and constituted private respondent Geruncio Lacuesta as Manager-Administrator for a period of 25 years, renewable for another 25 years, under the condition that said respondent shall pay the municipality. a sum equivalent to 10% of the annual gross income that may be derived from the sale of forest products, wild game and fish, which amount shall not be less than P200,000.00 annually. He was further required to post a bond in the amount of P200,000.00 to guaranty payment of the 10% due the municipality. Municipal Ordinance No. 8 was approved by the Provincial Board of Pangasinan on October 11, 1974 and thereafter was forwarded to the then Secretary of Agriculture and Natural Resources for approval pursuant to the provisions of the Fisheries Act, Act No. 4003. On April 4, 1975, the Secretary disapproved the Ordinance because it grants fishery privileges to respondent Lacuesta without the benefit of competitive public hearing in contravention of the provisions of Act 4003 as amended. Respondent Lacuesta interposed an appeal from the disapproval by the Secretary of Agriculture and Natural Resources to the Office of the President but the appeal was withdrawn by said respondent in his letter dated July 14, 1977. The Municipality then informed respondent Lacuesta of the disapproval of the Ordinance by the Secretary of Agriculture & Natural Resources and directed him to refrain and desist from acting as Administrator-Manager under the contract but the latter refused and insisted in maintaining possession of the fisheries. Inspite of such refusal, the Sanggunian Bayan of Bayambang, Pangasinan passed Resolution No. 31, series of 1977, resolving to advertise for public bidding all fisheries at the Mangabul area for four years and to direct the Municipal Treasurer to prepare the necessary notices of public bidding, and accordingly, the Municipal Mayor and the Municipal Treasurer caused to issue a Notice of Public Bidding scheduled July 5, 6, and 7, 1977. Among the winning bidders were the petitioners herein, the spouses Lydia Terrado and Martin Rosario and Domingo Fernandez who were immediately placed in possession of the Mangabul fisheries as of July 6, 1977. Private respondent Geruncio Lacuesta immediately filed on July 8, 1977 a petition for prohibition and mandamus with damages with the Court of First Instance of Pangasinan, Branch IX in San Carlos City, presided by Judge Augusto Saroca against the Municipal Mayor, the Municipal Treasurer, the Sanggunian Bayan and the members thereof, praying that the respondent municipal officials named therein be prohibited from executing any contract of lease with the winning bidders and from enforcing Resolution No. 31, series of 1977, and further asked that a temporary restraining order be issued against said respondent officials from performing the acts enjoined.

Pursuant to the prayer in the petition for prohibition in Civil Case No. 516, Judge Saroca issued a restraining order enjoining and prohibiting all the respondents, their agents, representatives and/or anybody acting for and on their own behalf, from executing any contract of lease with the winning bidders in the biddings conducted on July 5, 6, and 7, 1977 and from enforcing Resolution No. 31, series of 1977 until further orders from the court. Respondents in this Civil Case No. 516 filed a motion to dissolve the temporary restraining order but was denied on August 17, 1977. Upon ex-parte motion by Lacuesta asking that the Sheriff of the court be authorized to enforce the restraining order of July 11, 1977 and to arrest and keep in his custody all persons violating the same, Judge Saroca issued on October 7, 1977 an order directing Deputy Sheriff Alberto V. Soriano to proceed to the Mangabul fisheries and enforce the restraining order of July 11, 1977 against the respondent municipal officials, their agents and representatives and to arrest and keep in custody any and - all persons found to be violating said order. Thereafter, the Deputy Sheriff informed the court on October 26, 1977 that he served copies of the restraining order dated July 11, 1977 on all parties concerned and that they peacefully vacated and gave the possession of the fisheries without interposing any formal objection, to the plaintiffs, Geruncio Lacuesta, et al. Still in Civil Case No. 516, Lacuesta filed a petition dated September 16, 1977 asking that the defendants named in said petition including the spouses Lydia Terrado Rosario and Martin Rosario and others be ordered to explain why they should not be punished for contempt and that they be arrested immediately and kept in custody until they stop violating the restraining order of July 11, 1977, further alleging that said spouses employing misrepresentation, strategies, deceit, threat and force took over the Mayor fishery and illegally fished therein and are continuing to fish the same including the Manansan Alangigan, Tubor and Banawang na Dueg Fisheries which they had previously took over from the movant Lacuesta. The situation became serious as on October 10, 1977 the Sanggunian Bayan passed Resolution No. 34, series of 1977 "requesting the assistance from the Department of Natural Resources, the Philippine Constabulary, Department of Justice, the Provincial Fiscal, the Provincial Governor and other agencies, for them to enjoin respondent from disturbing and interfering with the administration by the Municipality of Mangabul Fisheries and other areas." In the meantime that these incidents were pending before Judge Saroca, the members of the Sanggunian Bayan as petitioners filed on November 15, 1977 a petition for certiorari with the defunct Court of Appeals against Judge Saroca, the INP Station Commander, Deputy Sheriff Soriano, and Geruncio Lacuesta and others assailing the order issued on July 11, 1977 as well as the order issued October 7, 1977 as null and void, the same having been issued without jurisdiction and with grave abuse of discretion, the case docketed as CAG.R. No. SP-07252-R. The appellate court denied the petition for certiorari and held that Judge Saroca did not act without or in excess of jurisdiction or with grave abuse of discretion in issuing the restraining order of July 11, 1977. The Sanggunian Bayan members elevated the case on a petition for review on certiorari, G.R. No. 49064 but was denied for lack of merit per Our resolution dated October 16, 1978. While the certiorari proceeding was pending before the Court of Appeals, the resolution on the motion for contempt before Judge Saroca was held in abeyance but upon final decision by the court, Lacuesta moved the court on July 15, 1979 to resolve the contempt motion as well as for the order of their arrest. After hearing, Judge Saroca issued the order dated August 30, 1979 holding that the continued possession of the spouses Lydia Terrado Rosario and Martin Rollo Rosario as winning bidders constituted disobedience to and unlawful interference with the temporary restraining order of July 11, 1977 and directed Deputy Sheriff Soriano to enforce the July 11 and October 7, 1977 orders, to cause the arrest of said Rosario spouses including their agents and representatives and any and all person representing themselves as winning bidders in the public bidding held on July v, 1977 and to hold them in custody until further orders of the court, unless said spouses and their agents and the winning bidders voluntarily refrain from disobeying and interfering with the process of the court, in which case they may be discharged from custody. In the same order, Judge Saroca set a pre-trial conference and hearing on the merits on September 25, 26, and 27, 1979. Having been adjudged in contempt of court and their immediate arrest ordered by Judge Saroca in the order mentioned above dated August 30, 1979, the spouses Lydia Terrado Rosario and Martin Rosario filed the petition for prohibition with the prayer for a writ of preliminary mandatory injunction assailing the questioned order as null and void, having been issued in grave abuse of discretion amounting to lack of jurisdiction and

praying that respondent Judge Saroca be restrained from implementing the same, the petition docketed as CAG.R. No. SP-09724. Resolving the petition (CA-G.R. No. SP-09724), the Court of Appeals, acting through the Former Eleventh Division with Justices Victoriano, J., ponente, and Reyes and Nocon, JJ., concurring, ruled and set aside the assailed order of August 30, 1979, holding that the Rosario spouses were not parties to the case, hence, they could not be bound by the restraining order of July 11, 1977 which enjoined and prohibited the parties: "(1) from executing any contract of lease with the winning bidders in the bidding conducted on July 5, 6, and 7, 1977; and/or (2) from enforcing resolution No. 31, series of 1977 of the Sangguniang Bayan of Bayambang, Pangasinan, until further orders from this court." The order of Judge Saroca dated August 30, 1979 was, therefore, ordered set aside as having been issued in excess of jurisdiction and with grave abuse of discretion. The decision of the Court of Appeals in CA-G.R. No. SP-09724 was promulgated January 24, 1980 thereby upholding the possession of the spouses Lydia Terrado and Martin Rosario. Meanwhile, the Municipality of Bayambang, represented by Mayor Jaime P. Junio and the Sangguniang Bayan of Bayambang represented by the members thereof, filed on September 5, 1979 Civil Case no. SCC-648 in the Court of First Instance of Pangasinan, Branch X, San Carlos City against Geruncio Lacuesta for annulment of the contract entered into between the Municipality and Lacuesta under Ordinance No. 8 hereinbefore mentioned, injunction and damages with prayer for the issuance of a writ of preliminary injunction. After the hearing of the incident for the issuance of the writ of preliminary injunction, Judge Saroca issued an order dated November 15, 1979 granted the writ as prayed for and ordered the defendant Lacuesta, his agents, lawyers, representatives, laborers and other person or persons under his employ to refrain and desist from interfering with and molesting the plaintiffs in the use of and in the exercise of plaintiffs' usufructury rights until further orders from the court. On November 16, 1979, the day Judge Saroca retired from the service, he issued another order to the sheriff to cause defendant Lacuesta to refrain from and desist from enforcing and implementing Resolution No. 35 enacting Ordinance No. 8, series of 1974 and the contract of management and administration, restraining them further from interfering with and molesting the plaintiffs in the use of and in the exercise of the latters' usufructuary rights until further orders from the court. On November 23, 1979, Lacuesta elevated to the Supreme Court the November 15 and 16 orders of Judge Saroca in a petition for certiorari with prayer for preliminary injunction docketed as G.R. No. 51984. In Our resolution of January 14, 1980, the petition for certiorari was denied for lack of merit. His motion for reconsideration was also denied in Our resolution of February 18, 1980. With the retirement of Judge Saroca, the case was transferred to Branch III, Court of First Instance of Pangasinan, Dagupan City, presided over by Judge Felicidad Carandang-Villalon, the case now docketed and numbered as D-5118. Lacuesta then filed a Motion to Dissolve the Injunction and to Order Plaintiffs to Vacate and Turn All the Fisheries to Defendants (the injunction previously issued by Judge Saroca dated November 15, 1979). The Motion was granted by Judge Carandang-Villalon on the ground that 6 4 after the plaintiffs have recognized and confirmed the validity of the resolution and the contract, and after the defendant had started to perform his duties and obligations under the contract, the legal and factual ground which led the court to issue the writ has ceased to exist, and consequently, the dissolution of the writ of preliminary mandatory injunction dated November 15, 1979 appears warranted by prevailing circumstances." Plaintiff Municipality moved for reconsideration which was denied in the court's order of March 9, 1981 which also ordered the issuance of the writ of execution after the approval of defendant Lacuesta's bond of P200,000.00. The plaintiff Municipality thereafter assailed the above orders of Judge Carandang-Villalon dated November 8, 1981 and March 9, 1981 in the former's petition for certiorari with prayer for writ of preliminary injunction, the petition filed in the Court of Appeals and docketed as CA-G.R. 12586, dated June 16, 1981. In the decision of the Court of Appeals, Seventh Division, promulgated September 29, 1981, the court held that "being bereft of merit, as shown above, the instant petition is hereby denied due course and outrightly dismissed. Accordingly, the temporary restraining order heretofore issued is hereby lifted and the urgent motion to lift restraining order filed on August 19, 1981 and on August 27, 1981 are hereby left unconsidered for having been rendered moot and academic by the resolution." The motion for reconsideration of the decision was denied by resolution of the appellate court on November 11, 1981.

Meanwhile, when the Court of First Instance of Pangasinan, Branch III, Judge Carandang-Villalon presiding, received copy of the decision in SP-12586 promulgated September 29, 1981, the court issued an order on October 5, 1981 for the ex-prosecution of its previous order to dissolve the preliminary injunction and place Lacuesta in possession of the contested fisheries and accordingly, a writ of execution was issued on October 7, 1981. Another petition for certiorari was filed by the spouses Lydia Terrado and Martin Rosario and Domingo Fernandez docketed as CA-G.R. No. SP-13175, assailing the issuance of the order and writ dated October 5 and 7, 1981 respectively for allegedly violating due process as they were issued before the lapse of the 15-day reglementary period. In this petition, SP-3175, the court required respondent Judge and Lacuesta to comment, the same time issuing a temporary restraining order against the assailed order and writ of October 5 and 7, 1981 of the respondent court. On November 7, 1981, the appellate court (through the Seventh Division and ponente who handled both SP12586 and SP-13175), rendered its resolution in SP-13175 dismissing the petition for lack of merit and setting aside the order of October 14, 1981 to include the lifting of the restraining order of even date. The appellate court ruled that: Our decision in said CA-G.R. No. SP-12586 held in effect that the impugned orders (like the order of January 8, 1981), were properly issued by the respondent court. Hence, those interlocutory orders, the effectivity of which were suspended by the certiorari proceedings in CA-G.R. No. SP-12586, presumed to be immediately executory upon the lifting of the restraining order as done in the decision of September 29, 1981. This must be so, notwithstanding the filing on October 21, 1981 of an "Urgent Ex-Parte Motion For Extension" to file motion for reconsideration of said decision because an injunction, once dissolved, cannot be revived except by a new exercise of judicial power, and no appeal by a dissatisfied party can of itself revive it. (Watcon vs. Enriquez, 1 Phil. 480; Sitia Teco vs. Venture, 9 Phil. 497; II Martin, Rules of Court, 1969 Ed., p. 84). Thus, when respondent court issued its herein impugned order of October 5, 1981 and the Writ of Execution pursuant thereto on October 7, 1981, it was merely putting into effect the immediately operative interlocutory order dissolving the injunction. There was therefore, no abuse of discretion. When the resolution in SP-13175 was received in the lower court, Judge Villalon issued on November 6, 1981 an "Alias Writ of Execution and Possession" which reiterated its writ of October 7, 1981. The alias writ was received by the Municipality, through counsel, on November 12, 1981. On November 16, 1981, the Municipality of Bayambang, represented by its Mayor, filed another certiorari petition to annul the alias writ of November 6, 1981, in CA-G.R. No. 13353 against Judge Carandang-Villalon and Geruncio Lacuesta, the petition being signed by Atty. Oliver O. Lozano. Since CA-G.R. No. SP-12586 and CA-G.R. No. SP-13353 involve the same subject matter, the Special Sixth Division of the Court of Appeals to which CA-G.R. No. SP-13353 was assigned or raffled, resolved in its Resolution of November 27, 1981 to consolidate the case with CA-G.R. No. SP-12586 then pending with the Seventh Division of the Court of Appeals as to the plaintiff Municipality's motion for reconsideration. The two certiorari petitions, CA-G.R. No. 12586 and CA G.R. No. SP-13353, now consolidated in the Seventh Division, were resolved in the Resolution dated December 4, 1981, thus: "WHEREFORE, the foregoing considered, the petition in 13353 is hereby dismissed for being a scrap of paper, the temporary restraining order heretofore issued is hereby lifted, and the scheduled hearing on December 10, 1981 hereby discontinued. The motion for reconsideration in SP-12586 is hereby denied for lack of merit. Since the Court of Appeals, Seventh Division, dismissed the petition in CA-G.R. No. SP-13353 as a mere scrap of paper because Atty. Oliver O. Lozano was not authorized to represent the petitioner Municipality, Atty. Lozano submitted the required authority in his Motion for Reconsideration of the resolution dismissing the

petition, further praying that the resolution of the Sixth Division giving due course to the petition as well as the temporary restraining order issued therein be reinstated or restored. Acting on the motion of the Municipality entitled "Ex-Parte Reiteration of Motion for Restoration of Temporary Restraining Order" filed on December 22, 1981 and the "Urgent Ex-Parte Motion to Stop Arrest of Petitioner's Laborers" filed on December 23, 198 1, the court in its Resolution of December 24, 1981 set the hearing of the first motion on January 15, 1982 and as to the second motion, the court deemed "it wise and proper in the spirit of love and compassion this Christmas time, to order that no arrests be ordered by the respondent court against persons involved in 'those fisheries in areas covered by existing lease contracts executed by plaintiff Municipality in favor of entities and/or persons before November 15, 1979' until after the results of the November 15 hearing are received. ... In effect, therefore, we are ordering, as it is hereby ordered that a partial temporary restraining order be issued only as involved the areas with existing lease contract entered into by the Municipality prior to November 15, 1979. After the hearing on January 15, 1982 as alluded to above, the court promulgated its Resolution dated January 28, 1982, holding that the pleadings signed by Atty. Oliver O. Lozano are deemed valid for purposes of considering the incidents therein and that the impugned alias writ of execution issued by respondent court on November 6, 1981 is hereby declared void only insofar as it has deleted the exception involving "those fisheries and areas covered by existing lease contract executed by the plaintiff Municipality in favor of entities and/or persons before November 15, 1979. Further, the respondent court was directed to conduct a factual determination of (a) who are the persons or what are the entities involved, and (b) the clearly specified areas covered by their contracts, and that prior to the holding of such factual determination however, the respondent court was ordered to settle the nature of those "lease contracts" i.e., whether ordinary lease contract over a fishery area or contract of lease of services. Finally, the Court of Appeals ordered that "in case the respondent court finds, after putting to rest the nature of those lease contracts referred to in the original order of dissolution and after making the factual determination herein ordered, that such contracts no longer exist, then the Partial Temporary Restraining Order above mentioned shall be deemed ineffective for having then become moot and academic The Motion for Contempt of Court filed by Lacuesta on January 13, 1982 was also denied by the court. Pursuant to the resolution of the Court of Appeals dated January 28, 1982 and in compliance therewith in conducting a factual determination of who are the persons or what are the entities involved and the clearly specified areas covered by their contracts, Judge Villalon, after conducting hearings, submitted to the appellate court in her Ist Indorsement dated April 30, 1982, stating that "it is definite that there are admittedly no areas covered by any existing lease contract executed by the plaintiff Municipality in favor of entities and/or persons before November 15, 1979 within the contemplation of the Order dated January 8, 1981 which order has ordered the dissolution of the writ of preliminary mandatory injunction dated November 15, 1979 issued by then retired Hon. Judge Augusto Saroca for reasons set forth in the Order. Acting upon the above report of Judge Villalon, the Court of Appeals promulgated its Resolution dated July 7, 1982, resolving that "in view of the above, the partial temporary restraining order has become ineffective for having then become moot and academic. WHEREFORE, the motion filed by private respondent is hereby granted (Motion Ex-Parte for Total Lifting of Partial Restraining Order). The Partial Temporary Restraining Order issued on December 24, 1981 is hereby lifted and set aside. Two other petitions for certiorari were also filed with the Court of Appeals assailing the October 8, 1982 Order of Judge Villalon which ordered the issuance of a writ of execution and implementation of the Order of January 8, 1981, the first being CA-G.R. No. 15033 entitled "Spouses Lydia Terrado and Martin Rosario, et al. vs. Hon. Felicidad Carandang-Villalon, et al.," filed October 18, 1982 and the second, CA-G.R. No. 13175, "Spouses Lydia Terrado, et al. vs. Hon. Felicidad Carandang-Villalon, et al." dated October 9, 1981. CA-G.R. No. 15033 was dismissed on March 22, 1983, while CA-G.R. G.R. No. 1317 5 on November 5, 1981. The five (5) cases relating to the same subject matter, which are CA-G.R. No. 15033-SP, CA-G.R. 14501-SP, CA-G.R. 13353- SP CA-G.R. No. 13175-SP and CA-G.R. No. 12586-SP, were then consolidated in the decision of the Court of Appeals promulgated March 22,1983.

The dismissal of the petition in CA-G.R. No. 13175 and the issuance of the alias writ of execution and possession issued by respondent Judge Villalon in Civil Case No. D-5118 is now elevated to Us in G.R. No. 58794. Likewise, the decision of the appellate court dismissing the petition in CA-G.R. No. 15033-SP and the Order issued by the trial court dated January 8, 1981 have been raised to Us in G.R. No. 64489. Both petitions at bar, G.R. No. 58794 and G.R. No. 64489, have been consolidated per Our Resolution of August 24, 1983. The records of the petition before Us in G.R. No. 64489 disclose that upon written request of Judge Felicidad Carandang-Villalon that she be relieved from taking further cognizance of Civil Case No. SCC-648 (D-5118) entitled "Geruncio Lacuesta, et al. vs. The Municipality of Bayambang, the Supreme Court in its Resolution en banc dated June 7, 1983 granted the request of the Judge and directed the Clerk of Court of the Regional Trial Court of Dagupan to transfer the records of the case to the Clerk of the Regional Trial Court of San Carlos City for raffling among the two branches thereat. Accordingly, Judge Carandang-Villalon issued an Order dated June 17, 1983 directing the Stenographer who took the proceedings 30 days to make complete transcript of the same and the Officer-in-Charge of the court to prepare the voluminous exhibits and thereafter effect the transmittal of the full records of the case. Notwithstanding her relief, the same Judge issued a further order dated September 2, 1983 commanding the Sheriff and the Commanding Officer of the 153rd PC Company to restore defendant Lacuesta and his men to possession of all the fisheries and areas covered by his contract pursuant to the Order of the court dated October 8, 1982. This Order was implemented according to the Sheriff's Return dated September 20, 1983. Through the maze and muddle of this protracted legal controversy, it is plain and clear that the complaints and petitions including all legal incidents and motions filed in the trial court, the appellate court and before this Tribunal are traceable. in origin to the enactment and implementation of Municipal Ordinance No. 8, series of 1974, of the Municipality of Bayambang, Pangasinan, establishing the Bayambang Fishery & Hunting Park and Municipal Watershed coveting the so-called Mangabul Fisheries. As stated in Section of the Ordinance, the purposes of the Park are: 1. To attract tourists to Bayambang and thus increase the income of the municipality and create new employment and new sources of income for the people; 2. To restore and conserve the natural environment of the area by means of reforestation of the forest or timberland reserved, thru engineering works, and other means within the Ipd-92 area; 3. To restore or improve, conserve and develop the fisheries, zones, and exploit the fish resources of all the fisheries therein; 4. To supply agro-industrial enterprises that may be established in Bayambang with raw materials from the area; and 5. To provide sports and recreation facilities and wholesome sports and recreational activities for the people. Further, under the Ordinance, the Municipality designated, appointed and constituted private respondent Lacuesta as Manager-Administrator for a period of twenty-five (25) years, renewable for another twenty-five (25) years upon mutual agreement (Section 4). Among the powers, duties and obligations of the ManagerAdministrator are: 1. To reforest with woods or economic value all the timberland portions indicated in Plan Ipd92 and those that need to be reforested for ecological purposes; 2. To stock the forest with wildlife or economic value, protect the forest products and wildlife and regulate their multiplication in accordance with existing laws; 3. To deepen the fisheries, swamps and tributary streams by dredging, employing modern scientific and technological methods to restore or improve and develop the fisheries to increase the fees yield; 4. To conduct and regulate sports fishing and hunting in the park and collect fees therefrom; 5. To use or dispose of the fisheries portion in accordance with the general law on municipal waters; 6. To establish in a suitable site within the park a fishing and hunting camp to be called "Camp Imelda." In Section 7 of the Ordinance, the ManagerAdministrator shall pay to the municipal government the sum equivalent to ten (10%) percent of the annual gross income derived from an fees charged for fishing and hunting in the park and entry into Camp Imelda, from the sale of forest products, wild games and fish from the area, but not less than P200,000.00. In accordance with the Ordinance, a Contract of Management and Administration was executed by the Municipality, represented by its Municipal Mayor as the Usufructuary and Atty. Geruncio Lacuesta as the Manager-Administrator, setting forth therein the terms and conditions laid down in the Ordinance as well as the mode and manner of the payment of the sum of P200,000.00 annually due to the Municipality including the posting of a surety bond and other details of the management and administration of the fisheries by the Manager-Administrator, which contract was executed on January 28, 1975 at Bayambang, Pangasinan.

Thus, the validity or legality of the Municipal Ordinance in question is the crucial and vital issue that must be resolved once and for all to put an end to this raging litigation that has become the tug-of-war between the Municipality and Lacuesta, together with other interested parties, over the vast and rich fishing grounds. In resolving said issue and ultimately the very root of the conflict, the following undisputed facts are controlling and decisive: 1. That Municipal Ordinance No. 8 has been disapproved by the Secretary of Agriculture and Natural Resources; and 2. That private respondent has since died as shown in the Return of the Postmaster of Bayambang as noted in Our Resolution of July 2, 1984. 1. Ordinance No. 8, having been submitted to the Provincial Board of Pangasinan and approved by it by virtue of Resolution No. 171 dated October 11, 1974, the same was submitted to the Secretary of Agriculture & Natural Resources as required by Section 4 of Act No. 4003, The Fisheries Act, as amended by Commonwealth Act No. 471 passed June 16, 1939, and further amended by RA No. 659 approved June 16, 1951, thus: Sec. 4. Instructions, orders, rules and regulations. The Secretary of Agriculture and Commerce shall from time to time issue instructions, orders, rules and regulations consistent with this Act, as may be necessary and proper to carry into effect the provisions thereof and for the conduct of proceedings arising under such provisions; and all licenses, permits, leases and contracts issued, granted or made herein shall be subject to the same. All ordinances, rules or regulations pertaining to fishing or fisheries promulgated or enacted by provincial boards, municipal boards or councils, or municipal district councils shall be submitted to the Secretary of Agriculture and Commerce for approval and shag have full force and effect unless notice in writing of their disapproval is communicated by the secretary to the board or council concerned within thirty days after submission of the ordinance, rule, or regulation. From the evidence on record, it appears that a Master Plan for the Bayambang Fishing and Hunting Park and Municipal Watershed (Mangabul Fisheries Reservation) of Atty. Geruncio Lacuesta, Manager-Administrator of the said park, was submitted to the Bureau of Fisheries and Aquatic Resources. In the Indorsement of the Director of Fisheries & Aquatic Resources to the Secretary, Department of Natural Resources, the Comments, among others, state: "2. Records of this bureau show that Resolution No. 171, s. 174 of the Provincial Board of Pangasinan, embodying Resolution No. 35, s. 1974, enacting Ordinance No. 8, s. 1974 of the Municipal Council of Bayambang, Pangasinan and Resolution No. 24, s. 1975 of the same council requesting reconsideration and rectification of the 5th Indorsement of that department dated April 4, 1975, were returned DISAPPROVED and denied, respectively, by the Secretary of Natural Resources to the Municipal Council of Bayambang, Pangasinan . Upon the recommendation of the Director of Fisheries and Aquatic Resources that "In the light, therefore, of the foregoing, the Master Plan for the Bayambang Fishing and Hunting Park and Municipal Watershed (Mangabul Fisheries Reservation), insofar as fishing and fisheries thereat are concerned should not be given due course and should be DISAPPROVED in the absence of adequate provisions thereon to the effect that the grant of the exclusive fishery privileges within its municipal waters shag be granted by the municipal council (now sangguniang bayan) to the highest bidder conformable with a fishery ordinance duly approved by the Secretary of Natural Resources, pursuant to Sections 5, 67 and 69 of Act No. 4003, as amended (now sections 4, 29 and 30 of Presidential Decree No. 704)," the Secretary of the Department of Natural Resources disapproved the Master Plan. The legal basis for the disapproval of the Ordinance No. 8 and the Master Plan mentioned above is clear and explicit in Sections 4, 67 and 69 of Act No. 4003 as amended by PD 704, Revising and Consolidating All Laws and Decrees Affecting Fishing and Fisheries. These Sections provide: Sec. 4. Jurisdiction of the Bureau. The Bureau shall have jurisdiction and responsibility in the management, conservation, development, protection, utilization and disposition of an fishery and aquatic resources of the country except municipal waters which shall be under the municipal or city government concerned: Provided, That fish pens and seaweed culture in municipal centers shall be under the jurisdiction of the Bureau: Provided, further, That all

municipal or city ordinances and resolutions affecting fishing and fisheries and any disposition thereunder shall be submitted to the Secretary for appropriate action and shall have full force and effect only upon his approval. The Bureau shall also have the authority to regulate and supervise the production, capture and gathering of fish and fishery/aquatic products. The Bureau shall prepare and implement, upon approval of the Fishery Industry Development Council, a Fishery Industry Development Program. Section 29. Grant of Fishery Privileges. A municipal or city council, conformably with an ordinance duly approved by the Secretary pursuant to section 4 hereof, may: (a) grant to the highest qualified bidder the exclusive privilege of construction and operating fish corrals, oyster culture beds, or of gathering "bangus" fry, or the fry of other species in municipal waters for a period not exceeding five (5) years: ... Section 30. Municipal concessions and leases concerning fisheries. lease or concession granted by a municipal or city council under authority of an ordinance approved pursuant to section 4 hereof, concerning fishing or fisheries in streams, lakes, rivers, in land and/or municipal waters, shall be valid and enforceable unless the Secretary, upon recommendation of the Director, approves the same. Indeed, the Ordinance is clearly against the provisions of the law for it granted exclusive fishery privileges to the private respondent without benefit of public bidding. Under the Fisheries Act, the Municipality may not delegate to a private individual as Manager-Administrator to "use or dispose of the fisheries portion in accordance with the general law on municipal waters" nor to charge foes for fishing and hunting in the park, much less sell forest products, wild games and fish from the area. Neither can the Municipality grant the exclusive privilege of fishing for a period more than five (5) years, whereas in the instant case, the period granted the Manager-Administrator was for twenty-five (25) years, renewable for another twenty-five years. Moreover, under the specific provision of Act No. 4041, there is the proviso that the timber and other forest products therein shall be placed under the administration and control of the forest service so that insofar as the ordinance relates to the timber and other forest products and the reforestation of the timberland portions indicated in Plan Ipd-92 including the powers, duties and responsibilities of the Manager-Administrator affecting the forestry portions are violative of Act No. 4041. It is of no moment that at the pre-trial hearing of Civil Case No. SCC-648 (which was transferred to Branch 111, CFI Dagupan and docketed as D-5118) the parties had admitted the legality of Ordinance No. 8. The issue as to the legality of Ordinance No. 8 is not a question of fact that the parties may stipulate and agree at the pretrial hearing of the case which is for annulment of the contract under Ordinance No. 8. Such is a question of law for if the Ordinance is illegal and contrary to law, the contract executed in pursuance thereto is consequently illegal. Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity. (Art. 5, New Civil Code). From Our jurisprudence, We cite a number of cases ruling that a public bidding is essential to the validity of the grant of exclusive privilege of fishery to a private party, thus: The law (Sec. 2323 of the Revised Administrative Code) requires that when the exclusive privilege of fishery or the right to conduct a fish-b reeding ground is granted to a private party, the same shall be let to the highest bidder in the same manner as is being done in exploiting a ferry, a market or a slaughter house belonging to the municipality (See Municipality of San Luis vs. Venture, et all 56 Phil. 329). The requirement of competitive bidding is for the purpose of inviting competition and to guard against favoritism, fraud and corruption in letting of fishery privileges (See 3 McQuillin, Municipal Corporations, 2nd Ed., p. 1170; Harles Gaslight Co. vs. New York, 83 N.Y. 309; and 2 Dillon, Municipal Corporations, p. 1219) (San Diego vs. The Municipality of Naujan Province of Mindoro, 107 Phil. 118).

It may thus be restated that the law that governs the award of fishery privileges in municipal waters is the provisions of Section 67 and 69 of Act No. 4003, as amended by Commonwealth Acts Nos. 115 and 471. The provisions of Sections 2321, 2323 and 2319 of the Revised Administrative Code of 1917 have thereby been modified by Act 4003, as amended. Under the applicable law the Municipal Council may lease fishery privileges for a period not exceeding five years to the highest bidder in a public bidding held, where the call for bid had specified the period for the lease. (San Buenaventura vs. Municipality of San Jose, Camarines Sur, et al, 121 Phil. 101, 114). The Municipal Council cannot extend the period of lease once it had been fixed on the basis of the period provided in the call for bids. In the lease of fishery privileges for a period not exceeding five years the previous approval of the provincial Board is not necessary. If the lease is for a period of more than five years, but not exceeding ten years, the previous approval of the Provincial Board is necessary. If the lease is for a period exceeding ten years, but not more than twenty years, the prior approval of the Secretary of Agriculture and Natural Resources is necessary. In all cases the lease must be based on a competitive public bidding. (San Buenaventura vs. Municipality of San Jose, Camarines Sur, et all supra p. 115). While the respondent appellate court in CA-G.R. No. 12586-SP made the pronouncement that: Besides, Sec. 4, Act No. 4003 (which was then the law in force before being superseded by PD 704 on May 16, 1975) provides that an ordinance affecting fishing and fisheries "shall have full force and effect unless notice in writing of (its) disapproval is communicated by the Secretary to the Board of council concerned, within thirty days after submission of the ordinance." The ordinance was submitted for approval on January 2, 1975 and the disapproval came only 102 days after such submission, on April 14, 1975. Paragraph (a) of the pretrial stipulation (Annex "6" of Respondent's Comment) states that "the said ordinance was submitted to the then Secretary of Natural Resources who disapproved the ordinance, insofar as fishing and fisheries are concerned after 30 days from submission." We cannot sustain the above holding in view of Our holding in the case of Nepomuceno, et al. vs. Ocampo, et al.,supra, wherein We held that the only purpose in the enactment of Republic Act 659 which required the Secretary of Agriculture and Natural Resources to approve municipal ordinances pertaining to fishing or fisheries within 30 days after submission of the ordinance, rule or regulation is simply to expedite prompt action by the Department Chief concerned. Since Ordinance No. 8 granted fishery privileges exclusively to the private respondent without benefit of public bidding and for a period exceeding five (5) years, the said ordinance and the contract of management executed in accordance therewith were null and void ab initio, such that the failure of the Secretary of Agriculture & Natural Resources to disapprove the same within 30 days from its submission does not render validity to the illegal legislation of the municipal council nor to the contract executed under the same. From the foregoing conclusion that the ordinance is illegal and void, per force the contract of management and administration between the Municipality and Lacuesta is likewise null and void. It also follows that the complaint filed by Lacuesta for prohibition in Civil Case No. 516 to enjoin the Municipal Council of Bayambang from leasing the Mangabul Fisheries upon public bidding as authorized in its Resolution' No. 31, series of 1977 is without legal basis and merit for Lacuesta has no right or interest under the void ordinance and contract. The suit must be dismissed and We hereby order its immediate dismissal. 2. We have noted earlier the death of Lacuesta in Our Resolution of July 2, 1984. His death is an irreversible fact that throws an entirely new bearing on the legal controversy at hand. For essentially, the contract of management and administration between the Municipality and Lacuesta is one of agency whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (Article 1868, New Civil Code). Here in the case at bar, Lacuesta bound himself as Manager-Administrator of the Bayambang Fishing & Hunting Park and Municipal Watershed to render service or perform duties and responsibilities in representation or on behalf of the Municipality of Bayambang, with the consent or authority of the latter pursuant to Ordinance No. 8. Under Article 1919, New

Civil Code, agency is extinguished by the death of the agent. His rights and obligations arising from the contract are not transmittable to his heirs. (Art. 1311 , New Civil Code). 3. Petitioners in both cases before Us, G.R. No. 58794 and G.R. No. 64489, anchor their claims to certain portions of the Mangabul Fisheries which they allege to have won in public bidding under the authority of Resolution No. 31, series of 1977 of the Municipal Council of Bayambang which leased the fisheries for a fouryear period. The period has already lapsed, hence their fishing privilege is no longer effective as of June 30, 1981. To restore and place petitioners in possession of the fisheries would be an extension of their four-year period lease which is not authorized under the ordinance cited above. Nonetheless, the assailed order of Judge Villalon dated September 3, 1983 restoring possession of the fisheries to Lacuesta and his men which was issued after her relief from the case upon her own request is clearly irregular and without authority. There should be and there ought to be full obedience and compliance by a subordinate court of the orders and resolutions of this Court. There cannot be any iota of discipline much less efficiency in the administration of justice if the lower echelons in the judicial hierarchy can freely act as they wish inspire of their relief. This should be a stem warning to all judges and personnel in all the courts. We brush aside the procedural aspects raised in the petitions before Us and in the interest of public welfare and speedy administration of justice, avoiding further multiplicity of suits, We consider the intrinsic merits of the controversy which as We pointed out previously, rest on the validity of the Municipal Ordinance in question. Thus, in sum and substance, We hereby pronounce the nullity of Ordinance No. 8, series of 1974 of the Municipal Council of Bayambang, Pangasinan and the contract of management and supervision executed between the Municipality of Bayambang and Geruncio Lacuesta as Manager-Administrator of the Bayambang Fishery & Hunting Park and Municipal Watershed. Since Ordinance No. 8 and the contract of management and supervision are both null and void, the Alias Writ of Execution and Possession dated November 6, 1981 and the Order of October 8, 1982 for the issuance of writ of execution and possession to place and restore possession of the Mangabul Fisheries, of portions thereof or fisheries therein to Geruncio Lacuesta, his agents, men and/or representatives under the said contract and by virtue of the ordinance are, including the writ also issued on October 8, 1982, without legal force and effect. WHEREFORE, IN VIEW OF ALL THE FOREGOING, the Alias Writ of Execution and Possession issued November 6, 1981 and assailed in G.R. No. 58794, as well as the Order and Writ dated October 8, 1982 raised in G.R. No. 64489, are hereby NULLIFIED and SET ASIDE. No costs. SO ORDERED. Concepcion, Jr., Escolin and Cuevas, JJ., concur. Aquino, J., concurs in the result. Abad Santos, J., reserves his vote. Makasiar, J., (Chairman), is on leave.

SEE http://www.scribd.com/doc/49624618/PARTNERSHIP-reviewer ADD

TRUSTS Definition Express Trust Implied Trust 1440 1441-1446 1441, 1447-1457

CASES
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 159810 October 9, 2006

ESTATE OF EDWARD MILLER GRIMM, represented by RAMON J. QUISUMBING and RANDY GLEAVE LAWYER, as Judicial Administrators, petitioners, vs. ESTATE OF CHARLES PARSONS and PATRICK C. PARSONS, G-P AND COMPANY and MANILA GOLF & COUNTRY CLUB, INC., respondents.

DECISION

GARCIA, J.: Because legal and situational ambiguities often lead to disagreements even between or amongst the most agreeable of persons, it behooves all concerned to put their financial affairs and proprietary interests in order before they depart for the great beyond. Leaving legal loose ends hanging or allowing clouds to remain on property titles when one can do something about them before the proverbial thief in the night suddenly comes calling only opens the door to bruising legal fights and similar distracting inconveniences. So it was here. In this petition for review under Rule 45 of the Rules of Court, the Estate of Edward Miller Grimm, represented by its judicial administrators, assails and seeks to set aside the Decision1 dated September 8, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 69990, reversing an earlier decision of the Regional Trial Court (RTC) of Makati City in its Civil Case No. 92-2452. At the core of the controversy is a stock certificate of the Manila Golf & Country Club, Inc. ("MGCC" or the "Club", for short) covered by Membership Certificate (MC) No. 1088 for 100 units, the playing rights over which the Rizal Commercial Banking Corporation (RCBC), the court-appointed receiver, had, in the meantime, leased out. The Club issued MC No. 1088 to replace MC No. 590. Asserting clashing ownership claims over MC No.1088, albeit recorded in the name of Charles Parsons ("Parsons", hereinafter) are petitioner Estate of Edward Miller Grimm and respondent G-P and Company ("G-P & Co.", hereinafter).

Parsons and Edward Miller Grimm (Grimm), together with Conrado Y. Simon (Simon), formed in 1952 a partnership for the stated purpose of engaging in the import/export and real estate business. Per SEC Certificate #3305,2 the partnership was registered under the name G - P and Company. Before September 1964, Parsons and Grimm each owned proprietary membership share in MGCC,3 as evidenced by MC No. 374 for 100 units in the name of Parsons, and MC No. 590, also for 100 units, in the name of Grimm. Per records, the Club issued MC No. 590 to Grimm on May 25, 1960.4 After Grimm's demise on November 27, 1977, Parsons and Simon continued with the partnership under the same name, G P and Company, as reflected in Articles of Partnership dated December 14, 1977. 5 The articles of the partnership would later undergo another amendment to admit Parsons' son, Patrick, in the partnership.6 After Parsons died on May 12, 1988, Amended Articles of Partnership of G-P and Company was executed onSeptember 23, 1988 by and among Parsons' heirs, namely, Patrick, Michael, Peter and Jose, all surnamed Parsons, albeit the amendment appeared to have been registered with the SEC only on March 18, 1993. 7 The herein legal dispute started when brothers Patrick and Jose, both surnamed Parsons, responding to a letter8from the Estate of Grimm, rejected the existence of a trust arrangement between their father and Grimm involving MC No. 1088. Thus spurned, the Estate of Grimm filed on August 31, 1992 before the RTC of Makati City, a suit for recovery of MC No. 1088 with damages against the Estate of Parsons, Patrick Parsons and MGCC. In its complaint,9 docketed as Civil Case No. 92-2452 and eventually raffled to Branch 135 of the court, the Estate of Grimm, represented by its judicial administrator, Ramon J. Quisumbing, alleged, among other things, the following: 1. That on September 7, 1964, Grimm transferred MC No. 590 in trust to Parsons; on the same day, MGCC cancelled MC No. 590 and issued MC No. 1088 in the name of Parsons; 2. That in separate letters dated February 28, 1968 addressed to MGCC, both Grimm and Parsons stated that the transfer of MC No. 590 was temporary. Enclosed in that Parsons' letter was MC No. 1088 which he was turning over for safekeeping to the Club, thru E.C. Von Kauffmann and Romeo Alhambra, then MGCC honorary secretary and assistant manager, respectively; 3. That on June 9, 1978, or after Mr. Kauffman' death and Mr. Alhambra's resignation, MGCC turned over the possession of MC No. 1088 to Parsons; 4. That in 1977, Grimm died; after a protracted proceedings, his estate was finally settled in 1988, the year Parsons also died; 5. That Patrick and Jose Parsons had, when reminded of the trust arrangement between their late father and Grimm, denied the existence of a trust over the Club share and refused to return the same; and 6. That MGCC had refused, despite demands, to cancel MC No. 1088 and issue a new certificate in the name of the Estate of Grimm. Attached to the complaint were the demand letters and other communications which, to the Estate of Grimm, document the Grimm-Parsons trust arrangement. In his Answer with counterclaim,10 Patrick Parsons averred that his father was, with respect to MC No. 1088, a mere trustee of the true owner thereof, G-P & Co., and alleged, by way of affirmative defense, that the claim set forth in the complaint is unenforceable, barred inter alia by the dead man's statute, prescription or had been waived or abandoned. Herein respondent G-P & Co., echoing Patrick Parsons' allegation respecting the ownership of MC No. 1088, moved to intervene and to implead Far East Bank & Trust Co. (FEBTC), as transfer agent of MGCC, as

defendant-in-intervention. Attached to its motion was its COMPLAINT In Intervention11 therein alleging (a) that on September 1, 1964, Parsons executed a Letter of Trust, infra, in which he acknowledged the beneficial ownership of G-P & Co. over MC No. 374 and MC No.1088; (b) that Parsons, as required by the partnership, endorsed both certificates in blank; and (c) that G-P & Co. carried said certificates amongst its assets in its books of accounts and financial statements and paid the monthly dues of both certificates to the Club when its membership privileges were not temporarily assigned to others. In the same complaint-in-intervention, G-P & Co. cited certain tax incidents as reasons why the transfer of MC No. 374 and MC No. 1088 from Parsons to the intervenor-partnership cannot as yet be accomplished. After the usual reply and answer to counterclaims had been filed, the Estate of Grimm filed an amended complaint to include Randy Gleave Lawyer, the other judicial co-administrator, as representative of the Estate. On April 28, 1993, the trial court admitted the amended complaint. After a lengthy trial, the trial court rendered its May 29, 2000 judgment12 finding for the Estate of Grimm, as plaintiff a quo, disposing as follows: 1. Ordering defendants ESTATE OF CHARLES PARSONS and PATRICK C. PARSONS: 1.1 to turn over [MC] No. 1088 to plaintiff ESTATE OF EDWARD MILLER GRIMM; 1.2 jointly and severally to pay damages to plaintiff ESTATE in the amount of P400,000.00 per annum from September 8, 1989 to November 12, 1998, with legal interest thereon from the date of this Decision until fully paid; 1.3 Jointly and severally, to pay plaintiff ESTATE attorney's fees in the amount of P1,000,000.00 and the costs; 2. Ordering defendant [MGCC] and defendant-in-intervention [FEBTC] to cancel [MC] No. 1088 and to issue a new Membership Certificate in lieu thereof in the name of plaintiff ESTATE . 3. Ordering Receiver RIZAL COMMERCIAL BANKING CORPORATION to turn over to plaintiff ESTATE all income derived from the lease of the playing rights of [MC] No. 1088, less Receiver's fees and charges. 4. Ordering the dismissal of the counterclaim of the defendants [Parsons]; and 5. Ordering the dismissal of the complaint-in-intervention and the supplemental counterclaim of intervenor G - P AND COMPANY. SO ORDERED. (Words in bracket added.) In gist, the trial court predicated its ruling on the postulate that the temporary transfer of Grimm's original share in MGCC - covered by MC No. 590 whence MC No. 1088 descended to Parsons, created a trust relationship between the two. Therefrom, only herein respondents G-P & Co., Patrick Parsons and the Parsons Estate appealed to the CA, albeit MGCC would, in its brief, reiterate its readiness to issue the corresponding replacement certificate to whosoever is finally adjudged owner of MC No. 1088. On September 8, 2003, in CA-G.R.CV No. 69990, the appellate court rendered its herein assailed Decision,13disposing as follows: WHEREFORE, the Decision of the lower court dated May 29, 2000 is hereby REVERSED and SET ASIDE, and another one rendered:

1. Dismissing the complaint filed by Estate of Edward Miller Grimm for lack of merit; 2. Ordering Manila Golf and Country Club, Inc., and defendant-in-intervention Far East Bank & Trust Company, as transfer agent, to immediately effect the reconveyance of [MC] No. 1088 to Intervenor-appellant G-P and Company; 3. Ordering Rizal Commercial Banking Corporation, as receiver, to immediately turn over to intervenorappellant G-P and Company all income derived from the lease of the playing rights of said Membership Certificate, less receiver's fees; 4. Ordering [the] Estate of Edward Miller Grimm to pay appellants the amount of P800,000.00 as attorney's fees; 5. Ordering Estate of Edward Miller Grimm to pay appellants the costs of suit. SO ORDERED. (Words in bracket added.) Hence, this petition for review on the lone submission that the CA erred in finding that respondent G-P & Co. is the beneficial owner of MC No. 1088. In their comment to the petition, the respondents urge the outright dismissal thereof on the ground that it raises only purely factual and evidentiary issues which are beyond the office of an appeal by certiorari. As argued further, the factual findings of the CA are conclusive on the parties. It should be made clear right off that respondent Patrick Parsons, in his individual capacity, and the Estate of Parsons (collectively, the Parsons) are not claiming beneficial ownership over MC No. 1088. The same goes for respondent MGCC which went to state on record that "[T]he ownership of [MC] No. 1088 (previously No. 590) does not belong to the Club and it does not stand to gain from the determination of its real owner."14 We GRANT the petition. The respondents' formulation of the grounds for the dismissal of the instant petition is a statement of the general rule. A resolution of the petition would doubtless entail a review of the facts and evidentiary matters against which the appealed decision is cast, a procedure which is ordinarily outside the province of the Court and the office of a certiorari review under Rule 45 of the Rules of Court. For, the rule of long standing is that the Court will not set aside the factual determinations of the CA lightly nor will it embark in the evaluation of evidence adduced during trial. This rule, however, admits of several exceptions. Among these are when the factual conclusions of the CA are manifestly erroneous; are contrary to those of the trial court; when the judgment of the CA is based on misapprehension of facts or overlooked certain relevant facts not disputed by the parties which, if properly considered, would justify a different conclusion.15 Decidedly, this case falls within the recognized exceptions to the rule on the finality of factual findings or conclusions of the CA. The principal issue tendered in this case turns on who between petitioner Estate of Grimm and respondent G.P. & Co. beneficially owns MC No. 1088. Corollary thereto - owing to the presentation by respondents of a LETTER OF TRUST that Parsons allegedly executed in favor of G-P and Company with respect to MC No. 1088 - is the question of whether or not the transfer of MC No. 590 effected on September 7, 1964 by Grimm in favor of Parsons resulted, as the petitioner would have it, in the formation of a trust relation between the two. Thus formed, the trust relationship would preclude the trustee from disposing of the trust property, save when repudiation of the trust had effectively supervened. The trial court found the September 7, 1964 Grimm- to- Parsons certificate transfer to be only temporary and without valuable consideration to accommodate a third person and thus adjudged Grimm to be the real owner of MC No. 590, as later replaced by MC No. 1088. According to the trial court, such transfer created a trust, with Parsons, as trustee, and Grimm, as the beneficial owner of the share thus transferred, adding that Parsons, as mere trustee, is without right to transfer the replacement certificate to G-P & Co.

On the other hand, the CA, while eschewing the alternative affirmative defenses interposed below by respondents, nonetheless ruled for respondent GP & Co. Citing Article 1448 of the Civil Code,16 the appellate court held that respondent GP & Co. pertains the beneficial ownership of MC No. 1088, an implied trust in its favor having been created when MC No. 590 and MC No. 374 were acquired for and placed in the names of Grimm and Parsons, respectively, albeit the partnership paid for the price therefor. To the appellate court, the fact that these certificates were carried, as of December 31, 1974, November 27, 1977 and December 31, 1978 in the books17 of G-P & Co. as investment assets only proves one thing: the company paid the acquisition costs for the membership certificates. If Grimm was the real owner of said share, he should have, according to the appellate court, objected to its inclusion in the partnership assets during his lifetime. Completing its ratiocination, the CA wrote: xxx. A trust, which derives its strength from the confidence one reposes on another especially between the partners and the company, does not lose that character simply because of what appears in a legal document. The transfer therefore of Grimm's [MC] No. 590 on September 7, 1964 in favor of Charles Parsons resulted merely in the change of the person of trustee but not of the beneficial owner, the G-P and Company. The CA's ruling does not commend itself for acceptance. As it were, the assailed decision started on the wrong foot and thus had to limp all along to arrive at a strained and erroneous conclusion. We shall explain. A party in whose favor a legal presumption exists may rely on and invoke such legal presumption to establish a fact in issue. He need not introduce evidence to prove that fact. For, a presumption is prima facie proof of the fact presumed and to the party against whom it operates rests the burden of overthrowing by substantial and credible evidence the presumption.18 Under the law on evidence, it is presumed that "there was sufficient consideration for a contract."19 Inasmuch as Grimm's name appeared on MC No. 590 as registered owner thereof, he is deemed to have paid sufficient consideration for it. The onus of proving otherwise would fall on respondents G-P & Co. and/or the Parsons. Without so much of an explanation, however, the CA minimized the value of MC No. 590 as arguably the best evidence of ownership. Corollarily, the appellate court devalued the rule on legal presumption and faulted petitioner Estate of Grimm for not presenting evidence to prove that Grimm paid for his original acquisition of MC No. 590. Wrote the CA: Contrary to the findings of the lower court, [petitioner] failed to establish [its] right over the said shares. xxx Not a single evidence of proof of payment for the said shares was ever presented by the [petitioner] to establish ownership. (Words in bracket added.)20 Ironically, while the CA held it against the petitioner for failing to adduce proof of payment by Grimm for his MC No. 590, it nonetheless proceeded to declare respondent G-P & Co. to be the beneficial owner of said certificate even if it, too, had not presented proof for such payment. Respondent G-P & Co., in its complaint-inintervention (should have been answer-in-intervention), did not allege paying for MC No. 590. Surely, payment cannot be validly deduced, as the CA did, from the bare fact of such membership certificate being listed in the books of respondent G -P & Co. as partnership investment assets. For one, the self-serving book entries in question are, as correctly dismissed by the trial court, not evidentiary of ownership. Else, anyone can lay a claim, or worse, acquire ownership over a share of stock by the simple expedience of listing, without more, the same in the partnership or corporate books. The sheer absurdity of the notion need no belaboring. For another, what appears or what respondent company uniformly entered as investments are: "Manila Golf & Country Club, Inc. 2 shares." No reference was made whatsoever in the books or financial statements about MC No. 590, (MC. No. 1088) and MC. No. 374. In the absence of the number reference or other similar identifying details, the CA's categorical conclusion that one of the "2 shares" referred to is MC No. 1088 is at best speculative. This observation becomes all the more valid given that Michael Parsons had in his name two (2) Club share certificates. Exhibit "X-4," a September 21, 1964 letter from Parsons to Mr. Kaufmann made specific reference to Michael's shares: Under the circumstance, please disregard the previous letter which Michael wrote in connection with the shares in his name .

In the case of the two shares in the name of Michael, please leave the two in his name . . . . As matter now stands, in summary, I shall retain my shares in my name and continue playing under such shares; Michael will retain two shares assigning one to Mr. Stoner; and Pete Grimm will assign his playing rights to Mr. Daikichi Yoshida.21 And for a significant third, respondent G-P & Co. is not the same G-P & Co. that Parsons, Grimm and Simon organized in 1952, the former being an entity that came into existence only on September 23, 1988. It is thus well-nigh impossible for respondent company to have participated in a transaction that occurred years before it acquired juridical personality. In the concrete, it is not physically possible for respondent G-P & Co. to have paid the price for the purchase of Grimm's MC No. 590, the same having been acquired in 1960 or some 28 years before the respondent company was established by the execution of the Articles of Partnership on September 23, 1988. The trial court depicted the incongruity of the situation in the following fashion: Intervenor [respondent G-P & Co.] is not the same partnership originally formed by Grimm, Parsons and Simon. When Grimm died on November 27, 1977, the original partnership was dissolved. The death of a partner causes dissolution of a partnership [Article 1829, Civil Code]. A new partnership was formed with Parsons and Simon as partners. Besides this new partnership formed after the death of Grimm, there were five (5) others formed [Exhibit DD, EE, FF, GG, HH and II] carrying the name, G-P and Company. 22 (Words in bracket in the original) Independent of the cited Article 1829 of the Civil Code on the matter of partnership dissolution, however, it bears to state that Parsons and Simon executed on December 13, 1977 a joint affidavit23 wherein they declared the dissolution of the original 3-man G-P & Co., owing to the death of Grimm. The registration on December 14, 1977 of a new Articles of Partnership of G-P & Co. followed the execution by Parsons and Simon of said affidavit. 24 It may be, as respondents rationalize, that the succeeding G-P & Co. partnerships merely continued with the business started by the original G-P & Co.25 This element of continuity, assuming to be true, does not, however, detract from the fact that the partnerships of the same name formed after Grimm's demise are entities altogether different and with personalities distinct from the original partnership. This brings us to the next issue of whether or not the transfer to Parsons of MC No. 590, as replaced by MC No. 1088, partook of the nature of a trust transaction. Trust is the legal relationship between one 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.26 Trust relations between parties may be express, as when the trust is created by the intention of the trustor.27 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.28 Implied trust comes into existence by operation of law, 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.29 Judging from their documented acts immediately before and subsequent to the actual transfer on September 7, 1964 of MC No. 590, Parsons, as transferee, and Grimm, as transferor, indubitably contemplated a trust arrangement. Consider: There can be no quibbling, owing to the letter exchanges between the Club, in particular its Honorary Secretary E. C. Von Kauffman, and Parsons, that the reason Grimm transferred his MC No. 590 to Parsons was because of the latter's wish to accommodate one Daikichi Yoshida. Earlier, Parsons recommended to Club management the approval of Mr. Yoshida's "Application For Waiting List Eligible To [Club] Proprietary Membership."30 In a letter of August 10, 196431 to the MGCC's Board of Directors, Parsons endorsed the application of Yoshida as Club member. While the Club's response does not appear in its files, it is quite apparent that Parsons addressed a letter to Kauffman requesting that Yoshida be taken in as a Company assignee. In his reply-

letter32 of August 29, 1964, Kauffman explained why he cannot, under Club rules, favorably act on Parsons' specific request, but suggested a viable solution, as follows: Reference to your letter dated August 25th, there is a hitch of assigning the playing rights to Mr. Daikichi Yoshida, as a company assignee. xxx xxx xxx The only solution that I see is that you transfer Pete Grimm's 100 units to your name and leave the other 100 units in your name, then you may assign the playing rights of one of the certificates for 100 units to Mr. Yoshida. Mr. Yoshida was approved by the Board but not as a Company assignee. (Emphasis added.) Parsons' response to Kauffman's August 29, 1964 letter partly reads as follows: Thank you for your letter of the 29th . Under the circumstances, please disregard the previous letter which I wrote with reference to Pete Grimm's and my shares . xxx xxx xxx As matter now stands, in summary, I shall retain in my name and continue playing under such shares . And Pete Grimm will assign his playing rights to Mr. Daikichi Yoshida. The conclusion easily deductible from the foregoing exchanges is that, given existing Club restrictions, the simplest way to accommodate and qualify Yoshida for Club membership was for Grimm to transfer his 100-unit share to Parsons who will then assign the playing rights of that share to Yoshida. 33 The RTC aptly described the relevant factual situation, viz.: With these exchanges between Parsons and Kauffman , it is apparent that since the shares held by Parsons and Grimm are individual shares and not company shares, their shares may not be assigned . The proposal of Parsons that "Pete Grimm will assign his playing rights to Yoshida" was rejected by Kauffman in his letter dated September 5, 1964 [Exhibit X-5 / 27] that "Pete Grimm's assignment to him (Yoshida) cannot be made as the rules are that only members who holds (sic) 200 units may assign 100 units to an individual." A letter of the same date [Exhibit X-6 / 28] was sent by Kauffman to Mr. Yoshida informing him of his election to the Club apologizing for the delay . Kauffman wrote further " Mr. Charles Parsons has made arrangement for to play (sic) as assignee of extra membership which he now holds." The election of Yoshida as assignee of a proprietary member and the resignation of Grimm were approved by the Club's Board on August 27, 1964. Kauffman and Parsons were still discussing the ways Mr Yoshida can be accommodated as of September 5, 1964, but the resignation of Grimm and election of Yoshida was already approved more than a week before. 34 (Words in bracket in the original; Underscoring added.) Even on the above factual perspective alone, it is not difficult to characterize, as did the trial court, the certificate transfer from Grimm to Parsons, as temporary, there being no evidence whatsoever that the transfer was for value. Such transfer was doubtless meant only to accommodate Yoshida whose stay in the country was obviously temporary. As it were, Yoshida's application35 for Club membership juxtaposed with the August 10, 1964 endorsement- letter36 of Parsons, yielded the information that he (Yoshida) is the manager of the Manila Liaison Office of Mitsubishi Shoji Kaisha desiring to acquire Company membership in the name of his employer Mitsubishi to enable future representatives to avail themselves of Club facilities. Since Club membership did not seem possible at the time, Yoshida had to come in as an assignee of a proprietary member.

Other compelling evidence attest to the temporary nature of the transfer in question. The trial court cited two in its Decision. Wrote that court: Even a witness for the (respondents) intervenor and the Parsons, Celso Jamias, Chief Accountant of G-P and Company, confirmed that the transfer of the share to Parsons was temporary. In a letter [Exhibit 7-GG] dated 10 August 1991 addressed to Atty. Patricia Cecilia B. Bisda, counsel for G-P and Company, Jamais wrote: ". . . please be informed that the accommodation for Mr. Yoshida to have playing rights has not bearing on the ownership of the share. The share of Grimm (EMG) was transferred to Mr. Charles Parsons (CP) to accommodate Mr. Yoshida due to Manila Golf club requirements. Atty. Patricia Cecilia B. Bisda echoed the view of Jamias, in a letter [Exhibit Y] dated 30 August 1991 addressed to (the) then General Manager of the Club: She wrote: "Also, we would like to clarify . That the accommodation of Mr. Yoshida to enjoy the playing rights has no bearing to the ownership of the shares. The share of Edward Grimm was transferred to Charles Parsons to accommodate D. Yoshida due to club requirements."37 Any lingering doubt, however, as to the temporary nature of the Grimm-to-Parsons transfer should, in our view, be put to rest by what MGCC records-file contained and the testimony of its former records custodian, Romeo Alhambra. In his affidavit of May 12, 1989,38 Alhambra stated that "[A]ccording to Club records, the transfer of [MC] # 580 was only temporary, and that Mr. Grimm was and, according to club records, is in fact the owner of [MC] # 1088" and that after the transfer, "Mr. Charles Parsons endorsed the share certificate and turned it over to Kauffmann for safekeeping." Forming parts of the same records were letters both dated February 28, 1968 the day the share certificate transfer was effected separately submitted by Grimm and Parsons, to inform MGCC of the temporary nature of the transfer. In his letter, Grimm stated that MC No. 1088 "is still my property and I wish it recorded as such in the Club's file."39 Parsons' letter40 was just as simple as it was revealing, thus: Reference to the transfer of [MC] #590 in the name of Mr. E.M. Grimm to my name, for which I now have the new Certification No. 1088 , please be advised that this transfer was made on a temporary basis and that said new certificate is still the property of Mr. E.M. Grimm and I enclose the certificate duly endorsed by me for safekeeping. At bottom then, documented events immediately before and after the February 28, 1968 share certificate conveyance in question veritably confirm the trust arrangement Parsons had or intended to have with Grimm andvice versa, vis--vis MC No. 1088. If, as herein respondent G-P & Co. posits at every turn, Parsons was its trustee, then the latter's act of endorsing MC No. 1088 in blank and then delivering the same to the Club for safekeeping instead of directly to the G-P & Co. was without sense. The trial court correctly described the relationship that was formed between Grimm and Parsons, and the consequence of such relationship, as follows: Since the transfer of Grimm's share to Parsons was temporary, a trust was created with Parsons as the trustee, and Grimm, the beneficial owner of the share. The duties of trustees have been said, in general terms, to be: "to protect and preserve the trust property, and to see to it that it is employed solely for the benefit of the cestui que trust." xxx Parsons as a mere trustee, it is not within his rights to transfer the share to G-P and Company (sic). The Court has, to be sure, considered the Letter of Trust41 dated September 1, 1964 largely because, in respondents' own words, it "provides the answer to the question of who the real owner of MC #1088 is."42 In the Letter he purportedly signed, Parsons declared holding MC No. 374 and MC No. 1088 as "NOMINEE IN TRUST for and in behalf of G-P AND COMPANY or its nominee." This piece of document is not, however, a winning card for the respondents. The trial court mentioned two compelling reasons why not, both reasons bearing on the due execution and genuineness of the document. Wrote the court:

This "LETTER OF TRUST" was purportedly signed by Parsons on September 1, 1964. But the transfer of [MC] No. 590 was recorded (and MC No. 1088 issued) only on September 7, 1964 in the Club's Proprietary Membership Card No. 144 [Exhibit 8]. With the testimony of Celso B. Jamias, a long time employee of G-P and Company, the doubt as to the genuineness of the signature of Parsons on the "LETTER OF TRUST" was brought to light. Jamias was cross-examined on the signatures of Parsons on several documents including the signature of the LETTER OF TRUST": Q: A: Q: A: How about the signature appearing on Exhibit CC-1 ? This is Charles Parsons, sir. You are familiar with the signature? Yes, sir.

Q: - I'm showing you Exhibit I which is a letter of trust dated September 1, 1964, comparing those signatures which you identified above the printed name C. Parsons there are, two signatures, the signatures you identified earlier and the one appearing on the letter of trust are similar in the sense that the "s" of Parsons is elevated and it slopes down, is that correct? xxx xxx xxx A: - Based on how I see, this doesn't seem to be the signature of Parsons, it looks like but it is not, sir. [TSN, May 4, 1999, pp 5-6]. (Words in parenthesis added.) And lest it be overlooked, Parsons had previously acknowledged Grimm to be the owner of MC No. 1088, after his earlier repeated declarations that the transfer of the replaced MC No. 580 was temporary. Parsons was thus in contextually in estoppel to deny, thru the Letter of Trust aforementioned, hypothetically assuming its authenticity, Grimm's ownership of the replacement certificate. Summing up, the Court finds the evidence adduced and admitted by the trial court more than adequately supporting a conclusion that MC No. 1088 was issued to and held by Parsons as the trustee thereof of Grimm or his estate. The fact that respondent G-P & Co. may have paid, starting 1992, as evidence discloses, the membership fees due on MC No. 1088 does not make Grimm less of a beneficial owner. Such payment, needless to stress, is not a mode of acquiring ownership. Parenthetically, the CA is observed to have said that in the settlement of the estate of Parsons, MC No. 1088 was not included in the list of stocks owned by him. And from this inconsequential event, the appellate court would conclude that the estate administrator recognized Parsons to be a mere trustee of such certificate. While the decision does quite say so, the implication is that Parsons was the trustee of G -P & Co. We cannot agree with this non-sequitur approach which, at bottom, clearly tends to lower the evidentiary bar for respondents. Needless to stress, it is not for the CA and all courts for that matter to compensate for a burden of proof not discharged or a quantum of evidence not met. The Court cannot, for two reasons, also lend cogency to the CA's observation that the heirs of Grimm may have had waived, abandoned or denounced their rights to the trust property when, for P100,000.00, they executed aDeed of Acknowledgment of Satisfaction of Partnership Interests.43 Firstly, the deed, as a quitclaim instrument, did not mention any share certificate at all, which is only logical since MC No. 1088 was not a partnership asset in the first place. Secondly, the intention to waive a known right must be clear and unequivocal. In this case, the intent to renounce beneficial ownership of MC No. 1088 cannot reasonably be drawn from the tenor of the quitclaim document. For perspective, what the heirs of Grimm stated in the Deed of Acknowledgment is that the amount of P100,000.00 they received "represents the total liquidation and complete settlement of the entire partnership interests pertaining to the late Edward Miller Grimm as partner in G-P AND COMPANY." If, to borrow from Thompson v. Court of Appeals,44 we apply the standard norm on

how a waiver must be formulated, then clearly the general terms of the aforementioned deed merely indicate a clearance from general accountability, not specifically an abandonment of ownership of the disputed share. For: xxx. Settled is the rule that a waiver to be valid and effective must, in the first place, be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him. xxx A waiver may not be attributed to a person when the terms thereof do not explicitly and clearly evidence an intent to abandon a right vested in such person. If we apply the standard rule that waiver must be cast in clear and unequivocal terms, then clearly the general terms of the cited release and quitclaim indicates merely a clearance from general accountability, not specifically a waiver of Amcham's beneficial ownership of the disputed shares. 45 In all, the facts and circumstances attendant militate against the CA's finding pointing to G-P & Co. as the beneficial owner of MC No. 1088. What the evidence adduced instead proved beyond cavil is that Grimm or his estate is such owner. We therefore reverse. WHEREFORE, the herein assailed decision of the Court of Appeals is REVERSED and SET ASIDE, and the Decision of the Regional Trial Court of Makati City in Civil Case No. 92-2452 is REINSTATED. Costs against the respondents. SO ORDERED. Puno, J., Chairperson, Sandoval-Gutierrez, Corona, and Azcuna, JJ., concur.

Footnotes
1

Per Associate Justice Eubulo G. Verzola, (ret.) concurred in by Associate Justices Remedios Salazar-Fernando and Edgardo F. Sundiam; Annex "A", Petition, Rollo, pp. 7 et seq.
2

Original Records, p. 2086.

Sec. 6 of the Club's By- Laws (Exh. "U") provides: Membership in the Club shall consist of only the Proprietary Members. A Proprietary Member is one owning one (1) full [MC] and who has been elected . A full [MC] shall consist of one hundred (100) units. No [MC] will be issued for more than one hundred (100) units, but may be issued for less. Subject to approval of the Board ., full Proprietary [MCs] may also be acquired by Companies . A Company Proprietary [MC] may only be utilized by a bona fide official of the Company .
4

Per the Club's index card #144; Exh. "7-I", Original Records, p. 2571. Id. at 2102. Id. at. 2106. Id. at 2110. Exh. "C," Id. at 2232.

Annex "B," Petition; Rollo, pp. 114 et seq. Annex "D," Petition; Id. at 142 et seq. Id. at 128 et seq. Penned by Judge Francisco B. Ibay; Annex "R," Petition; Id. at 797 et seq. Supra note 1. MGCCI's Comment on Petitioner's Petition for Review, Rollo, pp. 252 et seq.

10

11

12

13

14

15

Sampayan v. Court of Appeals, G.R. No. 156360, Jan. 14, 2005, 448 SCRA 220, citing cases. Reyes v. Court of Appeals, G.R. No. 110207, July 11, 1996, 258 SCRA 651.
16

Art. 1448. There is 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. xxx.
17

Exh. "13" and submarkings; Original Records, pp. 2610 -12.

18

Tison v. Court of Appeals, G.R. No. 121027, July 31, 1997, 276 SCRA 582; Angeles v. Maglaya, G.R. No. 153798, September 2, 2005, 469 SCRA 363.
19

Rule 131, Sec. 3[r], Rules of Court. CA Decision, p. 9; Rollo, p. 16. Original Records, p. 2427. RTC Decision, p. 10; Rollo, p. 2975. Id. at 2094. Id. at 2103 et seq. Comment to Petition for Review, p. 51; Id. at 140.

20

21

22

23

24

25

26

Tolentino, Commentaries & Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991 ed., p. 669, citing 54 Am Jur. 21.
27

Art. 1441, Civil Code; Vda. De Esconde v. Courts of Appeals, G.R. No. 103635, February 1, 1996, 253 SCRA 66.
28

Art. 1444, Civil Code. Valdez vs. Olarga, G.R. No. L-22571, May 25, 1973, 51 SCRA 71. Exh. "X-2"/ "24-a." Exh. "X-1"/ "24," Original Records, p. 2643.

29

30

31

32

Exh. "X-3"/"25."

33

Sec. 31 of the Club's 1968 By- Laws provides: "A member may own more than one (1) full Membership Certificate . The owner of more than one (1) full Membership Certificate shall be entitled to transfer such certificate, permanently or temporarily, to any person who has been duly elected to membership .
34

RTC Decision, pp. 5-6; Rollo, pp. 801-802. Supra note 30. Supra note 31. ----Pages 6-7; Rollo, pp. 802-803. Exh. "J," Original Records, pp. 2244-2245. Exh. "L," Id. at 2247. Exh. "M," Id. at 2248 Exh. "7-mm." Comment to Petition for Review, p. 41; Rollo, p. 130. Exh. "3-F," Original Records, pp. 2552 et seq. G.R. No. 116631, October 28, 1998, 298 SCRA 280. Ibid. at 293-294. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

35

36

37

38

39

40

41

42

43

44

45

G.R. No. L-19872 December 3, 1974 EMILIANO B. RAMOS, ET AL., plaintiffs-appellants, vs. GREGORIA T. RAMOS, ET AL., defendants-appellants. Humberto V. Quisumbing and Maximino M. San Diego for plaintiffs-appellants. Hilado and Hilado for defendants-appellants.

AQUINO, J.:p

The parties appealed from the decision of the Court of First Instance of Negros Occidental, dismissing plaintiffs' complaint and holding that the intestate estate of Martin Ramos was settled in Civil Case No. 217, which was terminated on March 4,1914, and that the judgment therein is res judicata and bars any litigation regarding the same estate (Civil Case no. 4522). The documentary evidence reveals the following facts: The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1888, respectively. They were survived by their three legitimate children named Jose, Agustin and Granada. Martin Ramos was also survived by his seven natural children named Atanacia, Timoteo, Modesto, Manuel, Emiliano, Maria and Federico. On December 10, 1906 a special proceeding was instituted in the Court of First Instance of Negros Occidental for the settlement of the intestate estate of the said spouses. The case was docketed as Civil Case No. 217 (itsexpediente is still existing). Rafael O. Ramos, a brother of Martin, was appointed administrator. The estate was administered for more than six years (Exh. F, G, H, I and J). A project of partition dated April 25, 1913 was submitted. It was signed by the three legitimate children, Jose, Agustin and Granada; by the two natural children, Atanacia and Timoteo, and by Timoteo Zayco in representation of the other five natural children who were minors. It was sworn to before the justice of the peace (Exh. 3). In the project of partition the conjugal hereditary estate was appraised at P74,984.93. It consisted of eighteen parcels of land, some head of cattle and the advances to the legitimate children(Exh. 3). Under that project of partition, the following adjudications were made to the heirs: Legitimate children: Value 1. To Jose Ramos: (a) Hacienda Calaza with an area of 328 hectares, (b) a one-hectare town lot, (c) a 23-hectare lot in Sitio Bingig, and (d) some head of cattle P25,291.66 2. To Granada Ramos: (a) a parcel of riceland with a capacity of 16 cavans of seedlings, located in Barrio Binicuel, Kabankalan, Negros Occidental and (b) some head of cattle 1,891.66 3. To Agustin Ramos: (a) the remaining fourteen (14) lots out of the eighteen lots described in the inventory, which included the Hacienda Ylaya with an area of 185 hectares and (b) some head of cattle 36,291.68 Natural children: 4. To each of the seven (7) natural children named Atanacia, Modesto, Timoteo, Federico, Manuel, Emiliano and Maria, were adjudicated personal

properties valued at P1,785.35 consisting of (a) cash amounting to P1,760.35 and (b) P25, representing a one-seventh (1/7) of a one-sixth (1/6) portion in certain head of cattle allegedly representing one-third of the free portion of the estate of Martin Ramos, with an aggregate value of 12,497.51 Total adjudications P75,972.51 It was agreed in the project of partition that Jose Ramos would pay the cash adjudications to Atanacia, Timoteo and Manuel, while Agustin Ramos would pay the cash adjudications to Modesto, Federico, Emiliano and Maria. It was further agreed that Jose Ramos and Agustin Ramos would pay their sister, Granada, the sums of P3,302.36 and P14,273.78, respectively (Exh. 3). The record does not show whether assessed or market values were used in appraising the eighteen parcels of land. By way of explanation, it may be stated that, inasmuch as the ganancial estate had an appraised value of P74,984.93, one-half thereof or the sum of P37,492.46 represented the estate of Martin Ramos. One-third thereof was the free portion or P12,497.48. The shares of the seven natural children were to be taken from that one-third free portion. Dividing P12,497.48 by seven gives a result of P1,783.35 which represented the oneseventh share of each natural child in the free portion of the estate of their putative father, Martin Ramos. The partition was made in accordance with the old Civil Code which provides: ART. 840. When the testator leaves legitimate children or descendants, and also natural children, legally acknowledged, each of the latter shall be entitled to one-half of the portion pertaining to each of the legitimate children not bettered, provided that it can be included within the third for free disposal, from which it must betaken, after deducting the burial and funeral expenses. The legitimate children may satisfy the portion pertaining to the natural children in cash, or in other property of the estate, at a fair valuation. The sum of P1,785.35, as the legal share of each natural child, was the amount which was indicated in the project of partition(Exh. 3) and which was to be satisfied in cash. The second paragraph of article 840 gives the legitimate children the right to satisfy in cash the hereditary portions of the natural children. (Article 840 was applied in the project of partition when it stated that each natural child had "una septima partede un sexto de semovientes" but the statement in the project of partition that each legitimate child was entitled to "un tercio delos cinco quintos de los semovientes" is erroneous. It should be "un tercii de los cinco sextos de los semovientes"). Judge Richard Campbell, in his "decision" dated April 28,1913, approved the project of partition as well as the intervention of Timoteo Zayco as guardian of the five heirs, who were minors. The court declared that the proceeding would be considered closed and the record should be archived as soon as proof was submitted that each heir had received the portion adjudicated to him (Exh. 4). In an order dated February 3, 1914 Judge V. Nepomuceno asked the administrator to submit a report, complete with the supporting evidence, showing that the shared of the heirs had been delivered to them as required in the decision of April 28,1913 (Exh. 5). In a manifestation dated February 24, 1914, which was signed by Jose, Agustin, Granada, Atanacia and Timoteo all surnamed Ramos, and by Timoteo Zayco, the guardian, and which was sworn to before the justice of the peace on March 2 (not 4), 1914 and filed in court on March 5,1914, they acknowledged: ... hemos recibido del Administrador Judicial Rafael O. Ramostodas y cada una de las participaciones a que respectivamente tenemos derecho en los bienes relictor de los finados esposos Martin Ramos y Candida Tanate, completo acuerto y conformidad con elproyecto de reparticion que nosotros mismo sometemos al Juzgado en 25 de Abril de 1913 ... . (Exh. 6).

Note that Granada Ramos and the natural children were assumed to have received their shares from the administrator although according to the object of partition, Jose Ramos and Agustin Ramos (not the administrator) were supposed to pay the cash adjudications to each of them. No receipts were attached to the manifestation, Exhibit 6. Apparently, the manifestation was not in strict conformity with the terms of judge Nepomuceno's order and with the project of partition itself. Lots Nos. 1370, 1371, 1372, 1375, 2158, 2159, 2161 and 2163(eight lots) of the Himamaylan cadastre (page 8 of the Record on Appeal does not mention Lot 1370), which are involved in this case were registered (as of 1958) in equal shares in the names of Gregoria Ramos and her daughter, Granada Ramos, as shown below (Exh. 8): Original Lot No Registration Present title Date 1370 Aug. 29, 1923 TCT No. RT-2238 Dec. 1, 1933 1371 do TCT No. RT-2235 do 1372 do TCT No. RT-2237 do 1375 do TCT No. RT-2236 do 2158 Sept. 10, 1923 TCT No. RT-2230 do 2159 do TCT No. RT-2233 do 2161 do TCT No. RT-2232 do 2163 do TCT No. RT-2231 do Plaintiffs' version of the case. A summary of plaintiffs' oral evidence is found in pages 4 to 13 of their wellwritten brief. It is reproduced below (omitting the citations of the transcript): Martin Ramos, who died in 1906 in the municipality of Himamaylan, Negros Occidental, left considerable real estate, the most valuable of which were the Hacienda Calaza and Hacienda Ylaya, both located in Himamaylay, Negros Occidental. Hacienda Calaza consists of sugar land, palay land and nipa groves with an area of 400 hectares and with a sugar quota allotment of 10,000 piculs, more or less, and having as its present actual value P500,000 more or less. "All the children of martin Ramos, whether legitimate or acknowledged natural, lived together in Hacienda Ylaya during his lifetime and were under his care. Even defendant Gregoria Ramos, widow of Jose Ramos, admitted that she dealt with plaintiffs as family relations, especially seeing them during Sundays in church as they lived with their father, and maintained close and harmonious relations with them even after the death of their father. All said children continued to live in said house of their father for years even after his death. "Upon their father's death, his properties were left under the administration of Rafael Ramos, the younger brother of their father and their uncle, Rafael Ramos continued to administer those properties of their father, giving plaintiffs money as their shares of the produce of said properties but plaintiffs not receiving any property or piece of land however, until 1913 when Rafael Ramos gathered all the heirs, including plaintiffs, in the house of their father, saying he would return the administration of the properties. He turned over Hacienda Ylaya to Agustin Ramos and Hacienda Calaza to Jose Ramos. "All said children, defendants and plaintiffs alike, continued to live in the same house of their father in Hacienda Ylaya, now under the support of Agustin Ramos. Plaintiff Modesto Ramos who 'could understand Spanish a little', only left said house in 1911; plaintiff Manuel stayed there for one year and lived later with Jose Ramos for four years. Plaintiff Maria Ramos, who herself testified that she has 'a very low educational attainment', lived there until 1916 when she got married. Plaintiff Emiliano lived there with Agustin, helping him supervise the work in Hacienda Ylaya, until he transferred to Hacienda Calaza where he helped Jose Ramos supervise the work in said hacienda. "Agustin Ramos supported plaintiffs, getting the money from the produce of Hacienda Ylaya, the only source of income of Agustin coming from said hacienda. Plaintiffs asked money from Agustin pertaining to their share in the produce of Hacienda Ylaya and received varied amounts, sometimes around P50 at a time, getting more when needed, and receiving P90 or P100 more or less a year.

"Jose Ramos gave plaintiffs also money as their shares from the products of Hacienda Calaza. Even Maria Ramos who upon her marriage in 1916 lived in La Cartota with her husband was given money whenever she went to Himamaylan. Plaintiffs received varied amounts or sums of money from Jose as their shares in the produce of Hacienda Ylaya more or less about P100 a year, mostly during the milling season every year while he was alive up to his death in 1930. Emiliano Ramos, now deceased and substituted by his widow, Rosario Tragico, moreover, received P300 from Jose Ramos in 1918 taken from the products of Hacienda Calaza when he went to the United States to study. "Upon Jose Ramos death his widow Gregoria Ramos, herself, his first cousin, their father and mother, respectively being brother and sister, continued to give plaintiffs money pertaining to their shares in the products of Hacienda Calaza. She however stopped doing so in 1951, telling them that the lessee Estanislao Lacson was not able to pay the lease rental. "There was never any accounting made to plaintiffs by Jose Ramos, plaintiffs reposing confidence in their elder brother, Nor was any accounting made by his widow, defendant Gregoria Ramos, upon his death, plaintiff Manuel Ramos moreover having confidence in her. "Before the survey of these properties by the Cadastral Court, plaintiff Modesto Ramos was informed by the Surveying Department that they were going to survey these properties. Plaintiffs then went to see their elder brother Jose to inform him that there was a card issued to them regarding the survey and gave him 'a free hand to do something as an administrator'. They therefore did not intervene in the said cadastral proceedings because they were promised that they(defendants Jose and Agustin) would 'be the ones responsible to have it registered in the names of the heirs'. Plaintiffs did not file and cadastral answer because defendants Jose and Agustin told them 'not to worry about it as they have to answer for all the heirs'. Plaintiffs were 'assured' by defendants brothers. "Plaintiffs did not know that intestate proceedings were instituted for the distribution of the estate of their father. Neither did plaintiffs Modesto, Manuel, Emiliano and Maria know (that) Timoteo Zayco, their uncle and brotherin-law of defendant widow Gregoria was appointed their guardian. There was an express admission by defendant Gregoria Ramos that Timoteo Zayco was her brother-in-law. "Plaintiffs did not know of any proceedings of Civil Case No. 217. They never received any sum of money in cash the alleged insignificant sum of P1,785.35 each from said alleged guardian as their supposed share in the estate of their father under any alleged project of partition. "Neither did Atanacia Ramos nor her husband, Nestor Olmedo, sign any project of partition or any receipt of share in(the) inheritance of Martin Ramos in cash. Nestor Olmedo did not sign any receipt allegedly containing the signatures of Atanacia assisted by himself as husband, Timoteo Ramos, and Timoteo Zayco as guardian ad-litemof the minors Modesto, Manual, Federico, Emiliano and Maria. As a matter of fact, plaintiffs Modesto and Manuel were in 1913 no longer minors at the time of the alleged project of partition of the estate being approved, both being of age at that time. No guardian could in law act on their behalf. "Plaintiffs only discovered later on that the property administered by their elder brother Jose had a Torrens Title in the name of his widow, Gregoria, and daughter, Candida, when plaintiff Modesto's children insisted and inquired from the Register of Deeds sometime in 1956 or 1957. Plaintiffs did not intervene in the intestate proceedings for (the) settlement of the estate of their brother Jose as they did not know of it. "Plaintiffs were thus constrained to bring the present suit before the Court of First Instance of Negros Occidental on September 5, 1957 seeking for the reconveyance in their favor by defendants Gregoria and daughter Candida and husband Jose Bayot of their corresponding participations in said parcels of land in accordance with article 840 of the old Civil Code and attorney's fees in the sum of P10,000 plus costs and expenses of this litigation". (4-13 Brief). Proceedings in the lower court. The instant action was filed on September 5, 1957 against defendants Agustin Ramos, Granada Ramos and the heirs of Jose Ramos for the purpose of securing a reconveyance of the supposed participations of plaintiffs Atanacia, Emiliano, Manuel, Maria and Modesto, all surnamed Ramos,

in the aforementioned eight (8) lots which apparently form part of Hacienda Calaza. (The plaintiffs did not specify that the said shares would amount to one-sixth of the said eight cadastral lots. One-sixth represented the one-third free portion of Martin Ramos' one-half shares in the said lots. And the said one-sixth portion was the share of his seven legally acknowledged natural children under article 840 of the old Civil Code). The action is really directed against the heirs of Jose Ramos, namely, his wife Gregoria and his daughter Candida in whose names the said eight lots are now registered as shown in Exhibit 8 and in page 4 hereof. It is predicated on the theory that plaintiffs' shares were held in trust by the defendants. No deed of trust was alleged and proven. The defendants denied the existence of a trust. They pleaded the defenses of (a) release of claim as shown in the project of partition, the decision and the receipt of shares forming part of the expediente of Civil Case No. 217 (Exh. 3, 4 and 6), (b) lack of cause of action, (c) res judicata and (d) prescription. Timoteo Ramos, who was joined as a co-plaintiff, manifested that he had already received his own share of the inheritance, that he did not authorized anyone to include him as a plaintiff and that he did not want to be a party in this case. He moved that his name be stricken out of the complaint (44-45 Rec. or Appeal; Exh. 7). Emiliano Ramos, who died in 1958, was substituted by his widow and their ten children (Exh. E, 61-64 Rec. on Appeal).The complaint is silent as to the fate of Federico Ramos, the seventh natural child of Martin Ramos. As already noted, after trial, the lower court dismissed the complaint on the ground of res judicata. The plaintiffs as well as the defendants appealed. Plaintiffs' appeal. The plaintiffs contend that the trial court erred (1) in dismissing their complaint, (2) in denying their right to share in their father's estate and (3) in holding that the action was barred by res judicata or the prior judgment in the special proceeding for the settlement of Martin Ramos' intestate estate, Civil Case No. 217 of the Court of First Instance of Negros Occidental, Abintesdado de los finados esposos Martin Ramos y Candida Tanate (Exh. F to J and 1 to 6). The plaintiffs vigorously press on this Court their theory that the plaintiffs, as acknowledged natural children, were grievously prejudiced by the partition and that the doctrine of res judicata should not bar their action. A preliminary issue, which should first be resolved, is the correctness of the trial court's "inexorable conclusion" that the plaintiffs were the legally acknowledged natural children of Martin Ramos. Plaintiffs' action is anchored on that premise. The defendants failed to impugn that conclusion in their appellants' brief. Not having done so, it may be regarded as conclusive against them. That is the proposition advanced by the plaintiffs in their reply-brief. The defendants in their appellees' brief assail that conclusion. It is true that an appellee may make an assignment of error in his brief but that rule refers to an appellee who is not an appellant (Saenz vs. Mitchell, 60 Phil. 69, 80). However, since an appellee is allowed to point out the errors committed by the trial court against him (Relativo vs. Castro, 76 Phil. 563; Lucero vs. De Guzman, 45 Phil. 852), defendants' contention that the plaintiffs were not legally acknowledged natural children may just as well be passed upon. The defendants, in contesting the lower court's finding that the plaintiffs were legally acknowledged children, assume that the legitimate children committed a mistake in conferring successional rights on the plaintiffs. We hold that the trial court's conclusion is correct. It is true that the acknowledgment of the plaintiffs is not evidenced by a record of birth, will or other public document (Art. 131, Old Civil Code). But the record of Civil Case No. 217, which is relied upon by the defendants to support their defense of res judicata, indubitably shows that the plaintiffs were treated as acknowledged natural children of Martin Ramos. The reasonable inference is that they were in the continuous possession of the status of natural children of Martin Ramos, as evidenced by his direct acts and the acts of his family (Art. 135, Old Civil Code).

Unacknowledged natural children have no rights whatsoever(Buenaventura vs. Urbano, 5 Phil. 1; Siguiong vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4 Phil. 738; Crisolo vs. Macadaeg, 94 Phil. 862). The fact that the plaintiffs, as natural children of Martin Ramos, received shares in his estate implies that they were acknowledged. Obviously, defendants Agustin Ramos and Granada Ramos and the late Jose Ramos accorded successional rights to the plaintiffs because martin Ramos and members of his family had treated them as his children. Presumably, that fact was well-known in the community. Under the circumstances, Agustin Ramos and Granada Ramos and the heirs of Jose Ramos are estopped from attacking plaintiffs' status as acknowledged natural children (See Arts. 283[4] and 2266[3], New Civil Code). Even the lower court, after treating the plaintiffs in 1913 in the intestate proceeding as acknowledged natural children, had no choice but to reaffirm that same holding in its 1961 decision in this case. The crucial issue is prescription. With it the question of res judicata and the existence of a trust are inextricably interwoven. Inasmuch as trust is the main thrust of plaintiffs' action, it will be useful to make a brief disgression of the nature of trusts (fideicomisos) and on the availability of prescription and laches to bar the action for reconveyance of property allegedly held in trust. "In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title to which is vested in another, but the words 'trust' is frequently employed to indicate duties, relations, and responsibilities which are not strictly technical trusts." (89 C.J.S. 712). "A person who establishes a trust is called the trust or; one in whom confidence is reposed is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary" (Art. 1440, Civil Code). There is a fiduciary relation between the trustee and the cestui que trust as regards certain property, real, personal, money or choses inaction (Pacheco vs. Arro, 85 Phil. 505). "Trusts are either express or implied. Express trusts are created by the intention of the trust or of the parties. Implied trusts come into being by operation of law." (Art. 1144, Civil Code). "No express trusts concerning an immovable or any interest therein may be proven by oral evidence. An implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457). "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 722). "Implied trust are those which, without being expressed, are deducible from the nature of the transaction asmatters of intent, or which are super induced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722). "A resulting trust is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples of resulting trusts are found in article 1448 to 1455 of the Civil Code. See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168,179). On the other hand, a constructive trust is a trust "raised by construction of law, or arising by operation of law". In a more restricted sense and as contra distinguished from a resulting trust, a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct intention to create a trust, but by the construction of equity in order to satisfy the demands of justice. It does not arise by agreement or intention but by operation of law." (89 C.J.S. 7260727). "If a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party." A

constructive trust is not a trust in the technical sense(Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil Code). There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action to compel a trustee to convey property registered in his name in trust for the benefit of the cestui qui trust does not prescribed (Manalang vs. Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil. 810), or that the defense of prescription cannot be set up in an action to recover property held by a person in trust for the benefit of another(Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered by the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126 Juan vs. Zuniga, 62 O.g. 1351; 4 SCRA 1221; Jacinto, L-17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37). That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee is not adverse. Not being adverse, he does not acquire by prescription the property held in trust. Thus, section 38 of Act 190 provides that the law of prescription does not apply "in the case of a continuing and subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261,266; Laguna vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691). The rule of imprescriptibility of the action to recover property held in trust may possibly apply to resulting trusts as long as the trustee has not repudiated the trust (Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Grano, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849). The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs. Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil. 403, 407). Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust where (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation have been made known to thecestui qui trust and(c) the evidence thereon is clear and conclusive (Laguna vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding co-owners found in the last paragraph of article 494, Civil Code; Casanas vs. Rosello, 50 Phil. 97; Gerona vs. De Guzman, L-19060, May 29, 1964, 11 SCRA 153,157). With respect to constructive trusts, the rule is different. The prescriptibility of an action for reconveyance based on constructive trust is now settled (Alzona vs. Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-19073, January 30, 1965, 13 SCRA 80; Bonaga vs. Soler, 112 Phil. 651; J. M. Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84). Prescription may supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371). And whether the trust is resulting or constructive, its enforcement may be barred by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra. Compare with Mejia vs. Gampona, 100 Phil. 277). The plaintiffs did not prove any express trust in this case. The expediente of the intestate proceeding, Civil Case No. 217, particularly the project of partition, the decision and the manifestation as to the receipt of shares (Exh. 3, 4 and 6)negatives the existence of an express trust. Those public documents prove that the estate of Martin Ramos was settled in that proceeding and that adjudications were made to his seven natural children. A trust must be proven by clear, satisfactory, and convincing evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations (De Leon vs. Peckson, 62 O. G. 994). As already noted, an express trust cannot be proven by parol evidence(Pascual vs. Meneses, L-18838, May 25, 1967, 20 SCRA 219, 228; Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21 SCRA 1192).

Neither have the plaintiffs specified the kind of implied trust contemplated in their action. We have stated that whether it is a resulting or constructive trust, its enforcement may be barred by laches. In the cadastral proceedings, which supervened after the closure of the intestate proceeding, the eight lots involved herein were claimed by the spouses Jose Ramos and Gregoria T. Ramos to the exclusion of the plaintiffs (Exh. 8 to 19). After the death of Jose Ramos, the said lots were adjudicated to his widow and daughter (Exh. 8). In 1932 Gregoria T. Ramos and Candida Ramos leased the said lots to Felix Yulo (Exh. 20).Yulo in 1934 transferred his lease rights over Hacienda Calazato Juan S. Bonin and Nestor Olmedo, the husband of plaintiff Atanacia Ramos (Exh. 22). Bonin and Olmedo in 1935 sold their lease rights over Hacienda Calaza to Jesus S. Consing (Exh. 23). Those transactions prove that the heirs of Jose Ramos had repudiated any trust which was supposedly constituted over Hacienda Calaza in favor of the plaintiffs. Under Act 190, whose statute of limitations applies to this case (Art. 116, Civil Code), the longest period of extinctive prescription was only ten years Diaz vs. Gorricho and Aguado, supra.). Atanacia, Modesto and Manuel, all surnamed Ramos, were already of age in 1914 (Exh. A to D). From that year, they could have brought the action to annul the partition. Maria Ramos and Emiliano Ramos were both born in 1896. They reached the age of twenty-one years in 1917. They could have brought the action from that year. The instant action was filed only in 1957. As to Atanacia, Modesto and Manuel, the action was filed forty-three years after it accrued and, as to Maria and Emiliano, the action was filed forty years after it accrued. The delay was inexcusable. The instant action is unquestionably barred by prescription and res judicata. This case is similar to Go Chi Gun vs. Co, 96 Phil. 622, where a partition judicially approved in 1916 was sought to be annulled in 1948 on the ground of fraud. it was contended that there was fraud because the real properties of the decedent were all adjudicated to the eldest son, while the two daughters, who were minors, were given only cash and shares of stocks. This Court, in upholding the petition, said: "In any case, the partition was given the stamp of judicial approval, and as a matter of principle and policy we should sustain its regularity, in the absence of such cause or reason that the law itself fixes as a ground for invalidity" (on page 634). "As the administration proceedings ended in the year 1916, the guardianship proceedings in 1931, and the action was brought only in the year 1948, more than 32 years from the time of the distribution and 27 years from the termination of guardianship proceedings", the action was barred by laches (on page 637). See Lopez vs. Gonzaga, L-18788, January 31, 1964, 10 SCRA 167; Cuaycong vs. Cuaycong, supra). The leading case of Severino vs. Severino, 44 Phil. 343, repeatedly cited by the plaintiffs, does not involve any issue of prescription or laches. In that case, the action for reconveyance was seasonably brought. The alleged trustee was an overseer who secured title in his name for the land of his brother which was under his administration. He could not have acquired it by prescription because his possession was not adverse. On certain occasions, he had admitted that he was merely the administrator of the land and not its true owner. More in point is the Cuaycong case, supra, where the action for the reconveyance of property held in trust accrued in 1936 and it was filed only in 1961 or after the lapse of twenty-five years. That action was barred. On its face, the partition agreement was theoretically correct since the seven natural children were given their full legitime, which under article 942 of the old Civil Code was their share as legal heirs. But is was possible that the lands were undervalued or were not properly appraised at their fair market value and, therefore, the natural children were short-changed in the computation of the value of their shares which the legitimate children could pay in case as allowed in article 840 of the old Civil Code. It is of common knowledge that anyone who received lands in the partition of a decedent's estate would ultimately have an advantage over the one who received cash because lands increase in value as time goes by while money is easily spent.

As pointed out in the statement if facts, it was anomalous that the manifestation, evidencing the alleged receipt by the natural children of their shares, should recite that they received their shares from the administrator, when in the project of partition itself, as approved by the probate court (Exh. 3 to 6),it was stipulated that Jose Ramos and Agustin Ramos would be the ones to pay the cash settlement for their shares. No receipts were submitted to the court to prove that Jose Ramos and Agustin Ramos paid to the plaintiffs the cash adjudicated to them in the project of partition. The plaintiffs pinpoint certain alleged irregularities in the intestate proceeding. The aver that Modesto Ramos and Manuel Ramos were already of age in 1913 and could not therefore have been represented by Timoteo Zayco as guardian ad litem and that, consequently, the two were denied due process. The plaintiffs accused Zayco of not having competently protected the interests of the minors, Maria Ramos and Emiliano Ramos. The allege that Atanacia Ramos signed the project of partition and the "receipt" of share (Exh. 3 and 6)without understanding those documents which were in Spanish. They assert that the lopsided and defective partition was not implemented. In short, the plaintiffs contend that the partition was not binding on them (Note that their brother, Timoteo, considered himself bound by that partition). They ask that the case be remanded to the lower court for the determination and adjudication of their rightful shares. All those contentions would have a semblance of cogency and would deserve serious consideration if the plaintiffs had not slept on their rights. They allowed more than forty years to elapse before they woke up and complained that they were much aggrieved by the partition. Under the circumstances, their claims can hardly evoke judicial compassion. Vigilantibus et non dormientibus jura subveniunt. "If eternal vigilance is the price of safety, one cannot sleep on one's right for more than a tenth of a century and except it to be preserved in its pristine purity" (Ozaeta, J. in Association Cooperativa de Credito Agricola de Miagao vs. Monteclaro, 74 Phil. 281, 283). The plaintiffs have only themselves to blame if the courts at this late hour can no longer afford them relief against the inequities allegedly vitiating the partition of their father's estate. In connection with the res judicata aspect of the case, it maybe clarified that in the settlement of a decedent's estate it is not de rigueur for the heirs to sign a partition agreement. "It is the judicial decree of distribution, once final, that vests title in the distributees" (Reyes vs. Barretto-Datu, L-17818, January 25,1967, 19 SCRA 85, 91) which in this case was Judge Campbell's decision (Exh. 4). A judgment in an intestate proceeding may be considered asa judgment in rem (Varela vs. Villanueva, 95 Phil. 248, 267. See Sec. 49[a], Rule 39, Rules of Court). There is a ruling that "if that decree of distribution was erroneous or not in conformity with law or the testament, the same should have been corrected by opportune appeal; but once it had become final; its binding effect is like that of any other judgment in rem, unless properly set aside for lack of jurisdiction or fraud". A partition approved by the court in 1939 could no longer be contested in 1956 on the ground of fraud. The action had already prescribed. "The fact that one of the distributees was a minor at the time the court issued the decree of distribution does not imply that the court had no jurisdiction to enter the decree of distribution." (Reyes vs. Barretto-Datu, supra, citing Ramos vs. Ortuzar, 89 Phil. 742). "A final order of distribution of the estate of a deceased person vests the title to the land of the estate in the distributes" (Syllabus, Santos vs. Roman Catholic Bishop of Nueva Caceres, 45 Phil. 895, 900). Parenthetically, it may be noted that the filing of the instant case long after the death of Jose Ramos and other persons involved in the intestate proceeding renders it difficult to determine with certitude whether the plaintiffs had really been defrauded. What Justice Street said in Sinco vs. Longa, 51 Phil. 507, 518-9 is relevant to this case. In passing upon controversies of this character experience teaches the danger of accepting lightly charged of fraud made many years after the transaction in question was accomplished, when death may have sealed the lips of the principal actors and changes effected by time may have given a totally different color to the cause of controversy. In the case before us the guardia, Emilio Tevez, is dead. The same is true of Trinidad Diago, mother of the defendant Agueda Longa; while Agapito Longa is now living in Spain. It will be borne in mind also that,

insofar as oral proof is concerned, the charge of fraud rests principally on the testimony of a single witness who, if fraud was committed, was a participant therein and who naturally would now be anxious, so far as practicable, to put the blame on others. In this connection it is well to bear in mind the following impressive language of Mr. Justice Story: ... But length of time necessarily obscures all human evidence; and as it thus removed from the parties all the immediate means to verify the nature of the original transactions, it operates by way of presumption, in favor of innocence, and against imputation of fraud. It would be unreasonable, after a great length of time, to require exact proof of all the minute circumstances of any transaction, or to expect a satisfactory explanation of every difficulty, real or apparent with which it may be incumbered. The most that can fairly be expected, in such cases, if the parties are living, from the frailty of memory, and human infirmity, is, that the material facts can be given with certainty to a common intent; and, if the parties are dead, and the cases rest in confidence, and in parol agreements, the most that we can hope is to arrive at probable conjectures, and to substitute general presumption of law, for exact knowledge. Fraud, or breach of trust, ought not lightly to be imputed to the living, for, the legal presumption is the other way; as to the dead, are not here to answer for themselves, it would be the height of injustice and cruelty, to disturb their ashes, and violate the sanctity of the grave, unless the evidence of fraud be clear, beyond a reasonable doubt (Prevost vs. Gratz, 6 Wheat. [U.S.],481, 498). Defendants' appeal. Defendants Granada Ramos, Gregoria T. Ramos, Candida Ramos, Jose Bayor and Agustin Ramos appealed from the lower court's decision insofar as it ignored their counterclaim for P50,000 as moral damages and P10,000 as attorney's fees. In their brief the claim for attorney's fees was increased to P20,000. They prayed for exemplary damages. The defendants argue that plaintiffs' action was baseless and was filed in gross and evident bad faith. It is alleged that the action caused defendants mental anguish, wounded feelings, moral shock and serious anxiety and compelled them to hire the service of counsel and incur litigation expenses. Articles 2219 and 2220 (also 1764 and 2206) of the Civil Code indicate the cases where morel damages may be recovered. The instant litigation does not fall within any of the enumerated cases. Nor can it be regarded as analogous to any of the cases mentioned in those articles. Hence, defendants' claim for moral damages cannot be sustained (Ventanilla vs. Centeno, 110 Phil. 811, 814). The worries and anxiety of a defendant in a litigation that was not maliciously instituted are not the moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887). "The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate, such right is so precious that moral damages may not be charged on those who may exercise it erroneously." (Barretto vs. Arevalo, 99 Phil. 771, 779). On the other hand, the award of reasonable attorney's fees is governed by article 2208 of the Civil Code which lays down the general rule that, in the absence of stipulation, attorney's fees and litigation expenses cannot be recovered. Article 2208 specifies eleven instances where attorney's fees may be recovered. The defendants did not point out the specific provision of article 2208 on which their counterclaim may be predicated. What may possibly apply to defendants' counterclaim are paragraphs four and eleven which respectively provide that attorney's fees may be recovered "in case of a clearly unfounded civil action or proceeding against the plaintiff"(defendant is a plaintiff in his counterclaim) or "in any other cases where the court deems it just and equitable" that attorney's fees should be awarded. We hold that, notwithstanding the dismissal of the action, no attorney's fees should be granted to the defendants. Under the facts of the case, it cannot be asseverated with dogmatic finality that plaintiffs' action was manifestly unfounded or was maliciously filed to harass and embarrass the defendants. All indications point to the fact that the plaintiffs honestly thought that they had a good cause of action. They acted in evident

good faith. (See Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61). Inasmuch as some of the plaintiffs were minors when the partition of their father's landed estate was made, and considering that they were not allotted even a few square meters out of the hundreds of hectares of lands, which belonged to him, they had reason to feel aggrieved and to seek redress for their grievances. Those circumstances as well as the marked contrast between their indigence and the affluence of the heirs of their half-brother, Jose Ramos, might have impelled them to ask the courts to reexamine the partition of their father's estate. It is not sound public policy to set a premium on the right to litigate. An adverse decision does not ipso facto justify the award of attorney's fees to the winning party (Herrera vs. Luy Kim, supra; Heirs of Justiva vs. Gustilo, 61 O. G. 6959. Cf. Lazatin vs. Twano and Castro, 112 Phil. 733, 741). Since no compensatory and moral damages have been awarded in this case, defendants' claim for exemplary damages, which was ventilated for the first time in their appellants' brief, may be as an afterthought, cannot be granted(Art. 2229, Civil Code). WHEREFORE, the trial court's judgment is affirmed with the clarification that defendants' counterclaim is dismissed. No costs. SO ORDERED. Makalintal, C.J., Barredo, Antonio and Fernandez, JJ., concur. Fernando, J., took no part. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 108525 September 13, 1994 SPOUSES RICARDO AND MILAGROS HUANG, petitioners, vs. COURT OF APPELAS, JUDGE, PEDRO N. LAGGUI, Presiding Judge, RTC, Makati, Br. 60, and SPOUSES DOLORES AND ANICETO SANDOVAL, respondents. Ponce Enrile, Cayetano, Reyes & Manalastas for petitioners. Quasha, Asperilla, Ancheta, Pea & Nolasco for private respondents.

BELLOSILLO, J.: Sometime in 1965 respondent Dolores Sandoval wanted to buy two (2) lots in Dasmarias Village, Makati, but was advised by petitioner Milagros Huang, wife of her brother, petitioner Ricardo Huang, that the policy of the subdivision owner forbade the acquisition of two (2) lots by a single individual. Consequently, Dolores purchased Lot 21 and registered it in her name. She also purchased the adjacent lot, Lot 20, but heading the

advice of Milagros, the deed of sale was placed in the name of Ricardo and Registered in his name under TCT No. 204783. Thereafter, Dolores constructed a residential house on Lot 21. Ricardo also requested her permission to construct a small residential house on Lot 20 to which she agreed inasmuch as she was then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo to mortgage Lot 20 to the Social Security System to secure the payment of his loan of P19,200.00 to be spent in putting up the house. However, she actualy financed the construction of the house, the swimming pool and the fence thereon on the understanding that the Huang spouses would merely hold title in trust for her beneficial interest. On 19 March 1968, to protect her rights and interests as the lawful owner of Lot 20 and its improvements, Dolores requested the Huangs to execute in her favor a deed of absolute sale with assumption of mortgage over the property. The letter obliged. On 15 March 1980, the Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its various executives as official quarters without first securing the permission of Dolores. Dolores tolerated the lease of the property as she did not need it at that time. But, after sometime, the lessees started prohibiting the Sandoval family from using the swimming pool and the Huangs then began challenging the Sandovals' ownership of the property. On 26 August 1980, Dolores lodged a complaint before the office of the Barangay Captain praying that the spouses Ricardo and Milagros Huang be made to execute the necessary request to the SSS for the approval of the deed of sale with assumption of mortgage, as well as for the release in her favor of the owner's duplicate certificate of title in its possession so that the deed could be duly annotated on the title and/or a new certificate of title issued in her name. But no amicable settlement was reached, so that on 16 December 1980 the Lupong Tagapayapa issued a certification that the controversy was ripe for judicial action. On 22 December 1980, Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto Sandoval in the then Court of First Instance of Rizal, docketed as Civil Case No. 39702, seeking the nullity of the deed of sale with assumption of mortgage and/or quieting of title to Lot 20. They alleged that the Sandovals made them sign blank papers which turned out to be a deed of sale with assumption of mortgage over Lot 20. Meanwhile, on 19 February 1981, Dolores paid the balance of Ricardo's loan to the SSS and requested the release to her of TCT No. 204783 and the real estate mortgage thereon, but SSS refused. On the same date, she filed a complaint against the Huang spouses and the SSS before the same trial court, docketed as Civil Case No. 40288, praying among other things that: (a) the SSS be restrained from releasing the owner's copy of TCT No. 204783 to the Huangs; (b) the SSS be ordered instead to release to her said title as well as the mortgaged thereon; and (c) the Registered of Deeds of Rizal be ordered to register the deed of sale, cancel TCT No. 204783 and issue another one in her name. Both cases were consolidated and jointly tried. On the basis of the evidence presented, the trial court found that it was indeed Dolores who brought Lot 20 but had it registered in the name of Ricardo; and, it was she who built the house and swimming pool thereon and the fence enclosing Lots 20 and 21. As regards the deed of sale with assumption of mortgage, the trial court found that it was signed voluntarily by the Huang spouses so much so that their claim that they were misled into signing it was unbelievable. Thus, on 23 November 1988, judgment was rendered in favor of the Sandoval spouses thus: In Civil Case No. 39702 (1) The complaint of the Huang spouses was dismissed; (2) The Sandovals were declared owners of Lot 20 and all the improvements thereon; (3) The deed of sale with assumption of mortgage was declared valid; (4) The Huang spouses and all persons acting in their behalf were ordered to vacate the property and turn over the possession to the Sandovals; (5) The Huang spouses were ordered jointly and severally to (a) deliver to the Sandoval spouses all the rentals and other income from Lot 20 which they received, and (b) pay to the Sandovals P5,000.00 as exemplary damages, P10,000.00 as attorney's fees, and the costs of suit; and, (6) The Register of Deeds of Rizal was ordered to (a) register the deed of sale with assumption of mortgage; (b) cancel TCT No. 204783, and (c) issue, in lieu thereof, a transfer certificate of title in the name of "Dolores Sandoval married to Aniceto Sandoval" upon compliance with all the legal requirements.

In Civil Case No. 40288 (1) Ricardo, Milagros or the SSS who has custody of the owner's copy of TCT No. 204783 was ordered to surrender it to the Registry of Deeds of Rizal within ten (10) days from the finality of the decision, otherwise, for failure to do so, the title shall be deemed annulled and the Register of Deeds shall issue another owner's copy thereof in favor of the Sandovals, and (2) SSS was ordered to execute a discharge of the mortgage annotated on TCT No. 204783 and deliver it to Dolores within ten (10) days from the finality of the decision. 1 The Huang spouses filed a motion for reconsideration and new trial and/or rehearing but it was denied by the trial court in its order of 26 July 1989. 2 On appeal to the Court of Appeals, the decision of the trial court was affirmed. 3 The motion to reconsider the decision was denied. 4 Hence the instant recourse. Petitioners assert that the finding of the Court of Appeals of a resulting or implied trust between them and Dolores is not supported by evidence. On the contrary, the deed of sale with assumption of mortgage has all the elements of an equitable mortgage. Granting arguendo that a resulting or implied trust exists between the parties, its enforcement is already barred by prescription. Petitioners argue that when the suit in the trial court was filed by Dolores on 19 February 1981 more than ten (10) years had already lapsed since TCT No. 204783 was issued on 11 October 1967. They also contend that jurisprudence has established the rule that the prescriptive period for an action for reconveyance based on fraud is ten (10) years, and that a resulting or implied trust is totally incompatible with the deed of sale with assumption of mortgage, hence, the existence of said deed cannot be vaguelly dismissed as a mere security. It is the position of petitioners that the terms of the contract are rendered conclusive upon the parties and evidence aliunde is not admissible to vary, contradict or dispute a complete and enforceable agreement embodied in a document. The exhaustive decision of the trial court based as it is on a painstaking review of the entire records deserves our affirmance. Indeed, we find no reason to disturb the factual conclusions therein. Ricardo claimed that he bought Lot 20 with his own money on installment: the first installment of P19,341.00 was paid on 5 November 1965, and the second installment of P39,279.75 was paid on 4 April 1966. He said that the money came from his salary as employee of the Universal Textile Mills, his commission as rice sales agent, his involvement in politics and other undeclared income. But Ricardo's pretense was easily unmasked by the following circumstances: (1) His annual income as employee of Textile Mills was only P6,795.05 in 1964, 5 P6,295.05 in 1965 6 and P7,154.15 in 1966; 7 as of 10 June 1967, he was only receiving a monthly salary of P600.00; 8 (2) His commission as rice sales agent of Dolores was earned in connection with a 1973 transaction, and so he could not have used this commission in 1965 and 1966 for the purchase of Lot 20; (3) He never bothered to explain how he made money out of politics and how much he realized from it; and, (4) There is no evidence on the source, nature and amount of his undeclared income. The only logical conclusion then is that the money which was used to buy Lot 20 did not belong to him. On the part of Dolores, she was able to prove by overwhelming evidence that she purchased Lot 20 with her own funds. She testified that Milagros informed her that she could not buy two (2) lots in the village in her name; instead, she suggested that one of the lots be bought in the name of Ricardo. This testimony we never refuted by Ricardo. Moreover, the Agreements to Purchase and Sell Lots 20 9 and 21 10 were both executed on 5 November 1965 and the first installments for both lots were paid on the same date, while the second installments were paid on 4 April 1966. These facts suggest that the lots were bought in a single transaction by only one person. Dolores also testified that she gave the amount corresponding to the first installments for both lots to Milagros. Dolores was able to establish that she withdrew P19,500.00 from her deposit at the National City Bank of New York11 and issued a Prudential Bank check for P19,341.00. 12 In payment of the second installments for the two lots, she withdrew P24,000.00 from the First National City Bank 13 and issued a check for P54,927.90. 14 Viewed together with the foregoing circumstances is the admission of Ricardo himself that

Dolores constructed the swimming pool on Lot 20 and enclosed Lots 20 and 21 with a fence at her own expense. Aside from Lot 20, Ricardo also asserted ownership of the house thereon which he claimed to have started constructing on 13 December 1967 and that it was "semi-accomplished" by 8 March 1968. Weighed against the testimony of Dolores that for the cost of labor alone in the construction of the house she spent P45,000.00 while the other expenses are listed in Exhs. "20," and "21" and "21-A" to "J," Ricardo could not have spent therefor because, as previously shown, his income was not sufficient enough. Neither could the P19,200.00 loan which he obtained from the SSS suffice. Dolores even had to shell out P5,062.68 on 7 May 1968 to pay for arrears in the rental of the apartment being occupied by the Huangs from November 1966 to February 1968; electric bills from March 1965 to December 1967; and, water bills up to February 1966, 15 to prevent the Huangs from being ejected from their apartment. Dolores' ownership of the house is confirmed further by the presence of her personal properties therein, e.g., chandelier, 16 furniture, 17 (c) Taiping rugs 18 and Sacred Heart statue. 19 As a whole, spouses Huang's evidence failed to help them in their bid to establish ownership over Lot 20 and its improvements. They should know the Chinese proverb that "one simply cannot attain his purpose of chewing food well if he were to do it by means of loose teeth." Regarding the deed of sale with assumption of mortgage, Ricardo alleged that Dolores and his cousin, Rene Javier, pressured and misled him into signing it because of his P30,000.00 indebtedness to Dolores; the deed was "blank" in the sense that it did not have a title when he signed it; he did not read it contents; and, he did not acknowledge it before a notary public. Ricardo's version of the circumstances under which he signed the deed of question is incredible. Human experience argues against the claim that a highly educated and mature man like Ricardo would sign a deed of sale without reading or knowing its contents. Ricardo graduated with the degree of Bachelor of Science in Architecture in 1955, and when he signed the deed he was about 39 years old. There is no evidence on record that Dolores "pressured" Ricardo to sign the deed. In fact, Milagros signed the document at the instance of Ricardo himself. The deed, which was duly notarized, enjoys the presumption of regularity in its execution. The claim of Ricardo that he was indebted to Dolores in the amount of P30,000.00, which he used in his pretense that he was coerced by her, was never established. On the contrary, the testimony of Dolores is more in accord with reason and clearly disproves Ricardo's gratuitous allegations. She testified that she asked Ricardo and Milagros to sign the deed of sale for her and her children's protection because time would come when they would want the property for themselves. Besides, according to her, the Huang spouses read the contents of the deed and signed it before the notary public without any compulsion from her. We are therefore drawn to the inevitable conclusion that the Huang spouses voluntarily signed the deed before the notary public with full knowledge of its contents and in recognition of Dolores' ownership over Lot 20 and its improvements. We shall discuss the merit, nay, the demerit of the Huang petition. First, there is need to define the basic concepts in a trust relationship. Trust is a fiduciary relationship with respect to property which 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. 20 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 21 or cestui que trust. Trust is either express or implied. Express trust is created by the intention of the trustor or of the parties. Implied trust comes into being by operation of law. 22 The latter kind or neither constructive or resulting trust. A constructive trust is imposed where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it. The duty to convey the property arises because it was acquired through fraud, duress, undue influence or mistake, or through breach of a fiduciary duty, or through the wrongful disposition of another's property. On the other hand, a resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest in the

property. 23 It is founded on the presumed intention of the parties, and as a general rule, it arises where, and only where such may be reasonably presumed to be the intention of the parties, as determined from the facts and circumstances existing at the time of the transaction out of which it is sought to be established. 24 In the present case, Dolores provided the money for the purchase of Lot 20 but the corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo Huang because she was advised that the subdivision owner prohibited the acquisition of two (2) lots by a single individual. Guided by the foregoing definitions, we are in conformity with the common finding of the trial court and respondent court that a resulting trust was created. Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner. The pertinent law is Art. 1448 of the New Civil Code which provides that 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 for the property. A resulting trust arises because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. 25 Petitioners' assertion that the deed of sale with assumption of mortgage has all the elements of an equitable mortgage must outrightly be rejected as it was apparently never brought to the attention of the trial court nor averred before respondent court. Well settled is the rule that, ordinarily, issues not raised in the trial court, let alone in the Court of Appeals, cannot be raised for the first time before this Court 26 as it would be offensive to the basic rule of fair play, justice and due process. 27 Petitioners raise the issue of prescription. But the action to compel the trustee to convey the property registered in his name for the benefits of the cestui que trust does not prescribe. 28 If at all, it is only when the trustee repudiates the trust that the period of prescription commences to run. 29 The prescriptive period is ten (10) years from the repudiation of the trust. It is ten (10) years because just as a resulting trust is an offspring of the law, so is the corresponding obligation to convey the property and the title thereto to the true owner. In this context, and vis-a-vis prescription, Art. 1144 of the New Civil Code, which is the law applicable, provides: "The following actions must be brought within ten years from the time the right of action accrues: (a) Upon a written contract; (b) Upon an obligation created by law; (c) Upon a judgment." 30 Thus, the reckoning point is repudiation of the trust by the trustee because from that moment his possession becomes adverse, which in the present case gave rise to a cause of action by Dolores against the Huang spouses. 31 However, before the period of prescription may start, 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. In Laguna v. Levantino 32 and Valdez v. Olorga, 33 we held that acts which may be adverse to strangers may not be sufficiently adverse to the cestui que trust. A mere silent possession of the trustee unaccompanied by acts amounting to an ouster of the cestui que trust cannot be construed as an adverse possession. Mere perception of rents and profits by the trustee, and erecting fences and buildings adapted for the cultivation of the land held in trust, are not equivalent to unequivocal acts of ouster of the cestui que trust. We agree with the trial court that the action filed by Dolores has not prescribed. Firstly, Ricardo has not performed any unequivocal act of repudiation amounting to an ouster of Dolores. The only acts which may be considered as indicative of his intention not to respect the trust anymore were his leasing the house without the prior knowledge of Dolores; his refusal to carry out the demand of Dolores that he must ask the lessees to vacate the house; and, his refusal to give the necessary papers to Dolores to enable her to get the title from the SSS. Secondly, the foregoing acts are not positive acts of repudiation; and, thirdly, the evidence on such acts is unclear and inconclusive. But even if the foregoing acts were manifest acts of repudiation made known to Dolores, the fact remains that they were done at the earliest only on 15 March 1980 when Ricardo leased Lot 20 and its improvements to Deltron. Dolores' complaint before the trial court was filed on 19 February 1981, or within the 10-year prescriptive period. Petitioners are of the mistaken notion that the 10-year prescriptive period is counted from the date of issuance of the Torrens certificate of title. This rule applies only to the remedy of reconveyance which has its basis on Sec. 53,

par. 3, P.D. No. 1529, otherwise known as the Property Registration Decree, 34 and Art. 1456 of the Civil Code. 35Reconveyance is available in case of registration of property procured by fraud thereby creating a constructivetrust between the parties, a situation which does not obtain in this case. Without expressly stating so, petitioners' line of argument invokes Rule 130, Sec. 7, of the Rules of Court then prevailing which states: "When the terms of an agreement have been reduced to writing, it is to be considered as containing all such terms and, therefore, there can be, between the parties and their successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing." The Huangs were less than candid to the Court when they merely invoked the general rule and completely ignoring the exceptions that are also explicitly provided therein: (a) where a mistake or imperfection of the writing or its failure to express the true intent and agreement of the parties, or the validity of the agreement is put in issue by the pleadings; and, (b) when there is an intrinsic ambiguity in the writing. In the present case, parol evidence is admissible because the deed of sale with assumption of mortgage failed to express the true intent and agreement of the parties. We concur with the finding of the appellate court that the deed was executed by the parties as security for the protection of the rights and interest of Dolores as the true and lawful owner of Lot 20 and its improvements. Petitioners state prefatorily in their petition that this case involves sibling oppression. It does not. Rather, it is a battle between greed and thirst for justice, between a fortunate sister and a less fortunate brother, with the latter taking advantage of the former's bounty. WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 28 September 1992 and its resolution dated 8 January 1993, both sustaining the decision of the Regional Trial Court, are AFFIRMED, with costs against petitioners. SO ORDERED. Davide, Jr., Quiason and Kapunan, JJ., concur. Cruz, J., is on leave.

#Footnotes

1 Penned by Judge Pedro N. Laggui, RTC, Makati, Br. 60; Records, pp. 237-238. 2 Id., pp. 374-378. 3 Rollo, p. 41. 4 Id., p. 43. 5 Exh. "7." 6 Exh. "8." 7 Exh. "9." 8 Exh. "6." 9 Exh. "A."

10 Exh. "14." 11 Exh. "18." 12 Exh. "13." 13 Exh. "17." 14 Exh. "15." 15 Exh. "10." 16 Exh. "23." 17 Exhs. "12," "12-A" to "12-D." 18 Exh. "24." 19 Exh. "22." 20 Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, 1991 Reprinting, p. 669. 21 Art. 1440, New Civil Code. 22 Art. 1441, New Civil Code. 23 Tolentino, op. cit., at p. 672. 24 Gaston v. Republic Planters Bank, G.R. No. 77194, 15 March 1988, 158 SCRA 626. 25 Heirs of Emilio Candelaria v. Romero, 109 Phil. 500 (1960). 26 Elido v. Court of Appeals, G.R. No. 95441, 16 December 1992, 216 SCRA 637. 27 Medida v. Court of Appeals, G.R. NO. 98334, 8 May 1992, 208 SCRA 887. 28 Caladiao v. Santos Vda. de Blas, No. L-19063, 29 April 1964, 10 SCRA 691; Diaz v. Gorricho, 103 Phil., 261 (1958); Ramos v. Ramos, No. L-19872, 3 December 1974, 61 SCRA 284. 29 Enriquez v. Court of Appeals, No. L-49878, 27 May 1981, 104 SCRA 656; Heirs of Maria de la Cruz v. Court of Appeals, G.R. No. 76590, 26 February 1990, 182 SCRA 638. 30 Applying by analogy the leading case of Amerol v. Bagumbaran, No. L-33261, 30 September 1987, 154 SCRA 396, where this Court elucidated on the prescriptive period of constructive trust. 31 As is well known, prior to repudiation, the possession of a trustee is in law possession of the cestui que trust and, therefore, prescription does not begin to run. 32 71 Phil. 566 (1941).

33 No. L-22571, 25 May 1973, 51 SCRA 1971. 34 It provides that in all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud. 35 It provides that if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 73733 December 16, 1986 EPIFANIA MAGALLON, petitioner, vs. HON. ROSALINA L. MONTEJO, in her Official Capacity as Presiding Judge of Regional Trial Court of Davao del Sur, Branch XXI, CONCEPCION LACERNA, ELECERIA LACERNA and PURITA LACERNA,respondents. Latasa, Cagas and Aranune Law & Surveying Office for petitioner. Alberto Lumakang for private respondents.

NARVASA, J.: The petition before this Court sinks the annulment of a writ of execution issued by the respondent Judge in Civil Case No. 727 of her court (RTC Davao del Sur). Said case was instituted by the plaintiffs (private respondents herein) against Martin Lacerna to compel partition of parcel of land located in Barrio Kasuga Municipality of Magsaysay, Davao del Sur, to which said defendant had perfected a claim by homestead. The plaintiffs, claiming to be the common children of Martin Lacerna and his wife, Eustaquia Pichan, who died in 1953, asserted a right to one-half of the land as their mother's share in her conjugal partnership with Martin. While said defendant denied having contracted marriage with Eustaquia Pichan although he admitted living with her without benefit of marriage until she allegedly abandoned him as well as paternity of two of the plaintiffs who, he claimed, were fathered by other men, the Trial Court gave his denials no credence. Said Court, on the basis of the evidence presented to it, found that Martin had in fact been married to Eustaquia, and that the plaintiffs were his children with her. The Trial Court further found that Martin had begun working the homestead, and his right to a patent to the land accrued, during his coverture with Eustaquia. On the basis of these findings, the plaintiffs were declared entitled to the half of the land claimed by them. 1 Martin Lacerna appealed to the Intermediate Appellate Court AC-G.R. No. 59900-R). That Court affirmed, in a Decision promulgated on August 31, 1984 which has since become final. 2 It appears that at the time the case was brought, and while it was being heard in the Trial Court, no certificate of title to the land had yet been issued to Martin Lacerna, although he had already complied with all the conditions necessary to a grant thereof. Original Certificate of Title No. P-11 568 (issued on the basis of Homestead Patent No. 148869) was issued only on November 22, 1978, while Lacerna's appeal was pending in the Intermediate Appellate Court. While it is not disputed that said certificate of title refers to the same land homesteaded by Lacerna during his coverture with Eustaquia Pichan, for reasons to which the record before

the Court offers no clear clue, it states on its face that it is issued in the name of " ... MARTIN LACERNA, Filipino, of legal age, married to Epifania Magallon ... ," the latter being the present petitioner. 3 It appears further that on November 26, 1985, after the confirmative Decision of the Intermediate Appellate Court had become final and executory, the respondent Judge, on motion of the plaintiffs issued an alias writ of execution commanding the Provincial Sheriff::

... to order the defendant Martin Lacerna to divide and partition the property located at Casuga, Magsaysay, Davao del Sur, consisting of 10 hectares designated as Lot No. 5098 Cad. No. 275 covered by H.A. No. 20-13378 (E-20-12748), of which is the share of Eustaquia Pichan in the conjugal property, and plaintiffs being Pichan's children are also entitled thereto; and deliver portion of 5 hectares of the aforedescribed lot to the plaintiffs as their share to satisfy the said judgment and your fees thereon. 4
Apparently, said writ was served on both Martin Lacerna and petitioner herein, for on December 17, 1985, the latter filed with the Trial Court a "Motion for Intervention and to Stay Execution" alleging that the land subject of the writ was conjugal property of herself and Martin Lacerna under a certificate of title (OCT No. P-11568) ... issued way back 1978 (sic) without legal impediments, and ... now incontestable," as well as ... valid, binding and legal unless declared otherwise in an independent proceedings, ... and praying that ... the property of herein intervenor be excluded from the enforcement of the writ of execution." 5 Said motion was denied, as also was a motion for reconsideration of the order of denial. Hence, the present petition. The facts found by the lower courts which, in view of the finality of the latter's decisions, are binding upon this Court and can no longer be controverted, as wen as the pertinent allegations of the petition, leave no doubt that the land in question, which rightfully pertained to the conjugal partnership of Martin Lacerna and Eustaquia Pichan, the plaintiff's mother, and should have been titled in the names of said spouses, was, through fraud or mistaken, registered in the names of Martin Lacerna and petitioner herein, Epifania Magallon In such a situation, the property should be regarded as impressed with an implied, or a constructive, trust for the party rightfully entitled thereto. The Civil Code provides that:

If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. 6
The provision restates one of the principles upon which the general law of trust is founded, expressed in equity jurisprudence thus: A constructive trust is a creature of equity, defined supra (sec. 15) as a remedial device by which the holder of legal title is held to be a trustee for the benefit of another who in good conscience is entitled to the beneficial interest. So. the doctrine of constructive trust is an instrument of equity for the maintenance of justice, good faith, and good conscience, resting on a sound public policy requiring that the law should not become the instrument of designing persons to be used for the purpose of fraud. In this respect constructive trusts have been said to arise through the application of the doctrine of equitable estoppel or under the broad doctrine that equity regards and treats as done what in good conscience ought to be done. Where, through a mistake of fact, title to, and apparent ownership of, property rightfully belonging to one person is obtained by another, a constructive trust ordinarily arises in favor of the rightful owner of such property

It is a general principle that one who acquires land or other property by fraud, misrepresentation, imposition, or concealment, or under any such other circumstances as to render it inequitable for him to retain the property, is in equity to be regarded as a trustee ex maleficio thereof for a person who suffers by reason of the fraud or other wrong, and is equitably entitled to the property, even though such beneficiary may never

have any legal estate therein. It is to be observed, however, that in the absence of equitable considerations or a fiduciary relationship, fraud alone, either actual or constructive, will not give rise to a trust, since, as has been pointed out, if it were otherwise all persons claiming property under defective titles would be trustee for the 'true' owners. 7 Under proper circumstances, mistake, although unconnected with fraud, will warrant relief under the Code providing that one who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act is, unless he has come better title thereto, an involuntary trustee of the thing gained for the benefit of the person who would otherwise have had it. 8 As stated by Justice Cardozo, a constructive trust is the formula through which the conscience of equity finds expression and when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest; equity converts him into a trustee. 9
In an early case in this jurisdiction, land of the plaintiff had, by mistake, been included in the title of an adjoining owner who was afterwards sued by his creditors, the latter obtaining writs of execution and procuring their annotation on said title. In an action by the plaintiff to enjoin the sale of his property, annul the levies thereon and secure a new title without those encumbrances, this Court affirmed judgment of the lower court in the plaintiff's favor, despite the fact that he had done nothing to protect his interests in the land during a period of almost six years following the issuance of the decree of registration in favor of the adjoining owner. The Court, noting that the titular (ostensible) owner had never laid claim to the property mistakenly registered in his name and that he had in fact acquiesced to judgment in a separate action declaring the plaintiff the real owner of the property, refused to apply the one-year limitation period for disputing the title and held that in the circumstances, the former merely held title to the property in trust for the plaintiff. 10 In Bueno vs. Reyes, 11 where property belonging to an ancestor of whom plaintiffs' parents were the intestate heirs was, though mistake or in bad faith, registered in cadastral proceedings in the name of other parties who had no right thereto, this Court reaffirmed the principles already cited, holding that:

If any trust can be deduced at all from the foregoing facts it was an implied one, arising by operation of law not from any presumed intention of the parties but to satisfy the demands of justice and equity and as a protection against unfair dealing or downright fraud. Indeed, in this kind of implied trust, commonly denominated constructive, as distinguished from resulting, trust, there exists a certain antagonism between the cestui que trust and the trustee. Thus, for instance, under Article 1456 of the Civil Code, '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.' In a number of cases this Court has held that 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. 12
Clearly, therefore, the petitioner herein, as the trustee of a constructive trust, has an obligation to convey to the private respondents that part of the land in question to which she now claims an ostensible title, said portion rightfully pertaining to the respondents' deceased mother as her share in the conjugal partnership with Martin Lacerna. The question is whether that obligation may be enforced by execution in the action at bar, which was brought and prosecuted to judgment against Martin Lacerna only, without impleading the petitioner. 13 Stated otherwise, is petitioner bound by final judgment rendered in an action to which she was not made a party?

There are no clear precedents on the matter in our law. Reference to American law for any persuasive ruling shows that even there the question seems to be an open one. "The authorities are in conflict as to whether a wife, not a party to an action is bound by a judgment therein for or against her husband with respect to community or homestead property or property held as an estate in entirety. Community property. It has been held that a judgment against the husband in an action involving community property, is conclusive on the wife even if she is not a party, but it has also been held that a judgment against either husband or wife with respect to community property in an action to which the other spouse is not a party does not prevent the other spouse from subsequently having his or her day in court, although, of course, a judgment against both husband and wife is binding on both. Estate by entirety. It has been both affirmed and denied that a wife is in such privity with her husband in respect of property held by them as an estate in entirety that a judgment for or against him respecting such property in a suit to which she is not a party is binding on her. Homestead. A judgment affecting a homestead is, according to some authorities, not binding on a spouse who is not a party to the action in which it is rendered, unless the homestead is community property or the homestead claim or interest would not defeat the action; but, according to other authorities, where the husband sets up and litigates a claim for the homestead, an adjudication for or against him is binding on the wife. 14

As to her community interest in real property, a wife is in privity with her husband and is represented by him in an action as fully as though she had expressly been made a party thereto. Cutting vs. Bryan, 274 P. 326, 206 Cal. 254, certiorari denied 50 S. Ct. 16, 280 U.S. 556,74 L.Ed 611. 15
In the particular circumstances obtaining here, the Court can as it does in good conscience and without doing violence to doctrine, adopt the affirmative view and hold the petitioner bound by the judgment against Martin Lacerna, despite her not having in fact been impleaded in the action against the latter. This ruling presumes that petitioner is, as she claims, the legal wife of Lacerna though, as observed by the Intermediate Appellate Court, no marriage contract was presented by Lacerna to prove his marriage to the petitioner either before or after the death of Eustaquia Pichan. Indeed, it is clear that the petitioner cannot assert any claim to the land other than by virtue of her supposed marriage to Lacerna. As a mere mistress, she cannot pretend to any right thereto. But whether the petitioner is a lawful wife or a mere "live-in" partner, the Court simply cannot believe that she never became aware of the litigation concerning the land until presented with the writ of execution. What is far more probable and credible is that she has known of the lawsuit since 1956 when Martin Lacerna "married" her. 16Her silence and inaction since then and until barely a year ago bespeak more than anything else, a confession that she had and has no right to the land and no defense to offer to the action, either on her part or on the part of Martin Lacerna. Had she even the semblance of a right, there is no doubt she would have lost no time asserting it. From the averments of the petition, it is evident that the petitioner relies mainly, if not solely, on the fact that the certificate of title to the land carries her name as the "wife" of the owner named therein, Martin Lacerna. As already observed, such entry on the certificate of title has been established by evidence no longer disputable as resulting from a mistake if, indeed, it was not procured through fraud. Moreover, on the authority of Litam vs. Rivera 17 and Stuart vs. Yatco, 18 the phrase "married to Epifania Magallon written after the name of Martin Lacerna in said certificate of title is merely descriptive of the civil status of Martin Lacerna, the registered owner, and does not necessarily prove that the land is "conjugal" property of Lacerna and petitioner hereyn. Neither can petitioner invoke the presumption established in Article 160 of the Civil Code that property acquired during the marriage belongs to the conjugal partnership, there being no proof of her alleged marriage to Martin Lacerna except that which arises by implication from the aforestated entry in the certificate of title and for the far more compelling reason that the homestead claim on the land was shown to have been perfected during Martin Lacerna's marriage to Eustaquia Pichan, mother of the private respondents. The ruling in Maramba vs.

Lozano 19that the presumption does not operate where there is no showing as to when property alleged to be conjugal was acquired applies with even greater force here. The writ of execution, however, must be set aside, though not for the reasons urged in the petition. The judgment of the respondent Trial Court which was affirmed by the Intermediate Appellate Court merely declared the private respondents entitled to one-half of the land in question, without specifically ordering partition and delivery to them of said half portion. A writ of execution cannot vary the terms of the judgment it is issued to satisfy, or afford relief different from, or not clearly included in, what is awarded by said judgment. Even if the judgment in question is construable as authorizing or directing a partition of the land, the mechanics of an actual partition should follow the procedure laid down in Rule 69 of the Rules of Court which does not contemplate or provide for the intervention of the sheriff in the manner prescribed in the writ complained of. Both the Trial Court, in rendering the judgment in question, and the Intermediate Appellate Court, in affirming the same, appear to have overlooked the fact that the surviving spouse is the legal and compulsory heir of the deceased husband or wife; otherwise, consistent with the finding that the half portion of the land sued for pertained to the late Eustaquia Pichan as her share in the conjugal partnership with Martin Lacerna, they should have ruled that Martin Lacerna concurred with the three private respondents in the succession to said portion, each of them taking an equal share. 20 Unfortunately, said error is beyond review because Martin Lacerna allowed the judgment to become final and executory without raising that point of law, even on appeal. WHEREFORE, the writ of execution complained of is set aside and annulled. Instead of enforcing said writ, the respondent Trial Court is ordered to effect the partition of the land in question in accordance with the terms of its now final and executory decision and the provisions of Rule 69 of the Rules of Court. No pronouncement as to costs in this instance. SO ORDERED. Yap (Chairman), Melencio-Herrera, Cruz and Feliciano, JJ., concur.

Footnotes 1 Annex A, Petition, pp. 10-23, Rollo. 2 Annex B, Petition, pp. 24-29, Rollo. 3 Annex C, Petition, p. 30, Rollo. 4 Annex D, Petition, pp. 31-32, Rollo. 5 Annex E, Petition, pp. 33-34, Rollo. 6 Art. 1456. 7 89 C.J. S. pp. 10 1 5-1020, 1029, 1031-1033. 8 Hewett v. Linstead 122 P. 2d 352, 49 Cal. App. 2d, 607. 9 Beatty v. Guggenheim Exploration Co., 225 NY 380, 122 NE 378, cited in 76 Am, Jur. 2d p. 446. 10 Laureano vs. Stevenson, 45 PhiL 252.

11 27 SCRA 1179. 12 Citing De Ocampo v. Zaporteza 53 PhiL 442; Gayondato vs. Treasurer of P.I., 49 PhiL 244; Gemora, et al, vs. F.M. Yap Tico & Co., et al, 52 Phil. 616; and Fabian vs. Fabian, G.R. No. L-20449, January 29, 1968, 22 SCRA 23 1. 13 At the time the action was filed no certificate of title to the land had been issued, and the plaintiffs private respondents) could not have foreseen that it would later issue in the name of Martin Lacerna and the petitioner. 14 50 CJS 344-345. The term "homestead" in the citation appears to be used in the general sense of referring to the house and land constituting the family home, not in the restricted sense in which it is used in our Public Land Act as referring to public land to which a grant from the state may be acquired by occupation and cultivation for the prescribed period of time. Cases cited holding wife bound by judgment against husband include Yearout v. American Pipe & Steel Corp. App. 168 P. 2d 174; Starr v. Schoelikopf Co., 113 S.W. 2d 1227, 131 Tex. 263; Brokaw v. Collett Com. App., 1 SS 2d 1090; Hall v. Aloco Oil Co., Civ App., 164 S.W. 2d 464; qqqChildress v. Robinson, Civ App. 161, S.W. 78; Faust v. Carson, 148 P. 2d 504, 158 Kan. 479; and others. 15 Id., Footnote at p. 344. 16 As found by the Trial Court; Decision, p. 21, Rollo. 17 100 phil. 364. 18 4 SCRA 1143. 19 20 SCRA 474. 20 Arts. 887 and 999, Civil Code.

UNSURE IF IT IS THE RIGHT CASE

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 116631 October 28, 1998 MARSH THOMSON, petitioner, vs. COURT OF APPEALS and THE AMERICAN CHAMPER OF COMMERCE OF THE PHILIPPINES, INC,respondents.

QUISUMBING, J.:

This is a petition for review on certiorari seeking the reversal of the Decision 1 of the Court of Appeals on May 19, 1994, disposing as follows: WHEREFORE, THE DECISION APPEALED FROM IS HEREBY SET ASIDE. ANOTHER JUDGMENT IS ENTERED ORDERING DEFENDANT-APPELLEE MARSH THOMSON TO TRANSFER THE SAID MPC [Manila Polo Club] SHARE TO THE NOMINEE OF THE APPELLANT. The facts of the case are: Petitioner Marsh Thomson (Thomson) was the Executive Vice-President and, later on, the Management Consultant of private respondent, the American Chamber of Commerce of the Philippines, Inc. (AmCham) for over ten years, 1979-1989. While petitioner was still working with private respondent, his superior, A. Lewis Burridge, retired as AmCham's President. Before Burridge decided to return to his home country, he wanted to transfer his proprietary share in the Manila Polo Club (MPC) to petitioner. However, through the intercession of Burridge, private respondent paid for the share but had it listed in petitioner's name. This was made clear in an employment advice dated January 13, 1986, wherein petitioner was informed by private respondent as follows: xxx xxx xxx

11. If you so desire, the Chamber is willing to acquire for your use a membership in the Manila Polo Club. The timing of such acquisition shall be subject to the discretion of the Board based on the Chamber's financial position. All dues and other charges relating to such membership shall be for your personal account. If the membership is acquired in your name, you would execute such documents as necessary to acknowledge beneficial ownership thereof by the Chamber. 2
xxx xxx xxx On April 25, 1986, Burridge transferred said proprietary share to petitioner, as confirmed in a letter 3 of notification to the Manila Polo Club. Upon his admission as a new member of the MPC, petitioner paid the transfer fee of P40,000.00 from his own funds; but private respondent subsequently reimbursed this amount. On November 19, 1986, MPC issued Proprietary Membership Certificate Number 3398 in favor of petitioner. But petitioner, however, failed to execute a document recognizing private respondent's beneficial ownership over said share. Following AmCham's policy and practice, there was a yearly renewal of employment contract between the petitioner and private respondent. Separate letters of employment advice dated October 1, 1986 4, as well March 4, 1988 5 and January 7, 1989 6, mentioned the MPC share. But petitioner never acknowledged that private respondent is the beneficial owner of the share as requested in follow-up requests, particularly one dated March 4, 1988 as follows: Dear Marsh: xxx xxx xxx All other provisions of your compensation/benefit package will remain the same and are summarized as follows:

xxx xxx xxx

9) The Manila Polo Club membership provided by the Chamber for you and your family will continue on the same basis, to wit: all dues and other charges relating to such membership shall be for your personal account and, if you have not already done so, you will execute such documents as are necessary to acknowledge that the Chamber is the beneficial owner of your membership in the Club. 7
When petitioner's contract of employment was up for renewal in 1989, he notified private respondent that he would no longer be available as Executive Vice President after September 30, 1989. Still, the private respondent asked the petitioner to stay on for another six (6) months. Petitioner indicated his acceptance of the consultancy arrangement with a counter-proposal in his letter dated October 8, 1989, among others as follows:

11.) Retention of the Polo Club share, subject to my reimbursing the purchase price to the Chamber, or one hundred ten thousand pesos (P110,000.00). 8
Private respondent rejected petitioner's counter-proposal. Pending the negotiation for the consultancy arrangement, private respondent executed on September 29, 1989 a Release and Quitclaim, 9 stating that "AMCHAM, its directors, officers and assigns, employees and/or representatives do hereby release, waive, abandon and discharge J. MARSH THOMSON from any and all existing claims that the AMCHAM, its directors, officers and assigns, employees and/or representatives may have against J. MARSH THOMSON." 10 The quitclaim, expressed in general terms, did not mention specifically the MPC share. On April 5, 1990, private respondent, through counsel sent a letter to the petitioner demanding the return and delivery of the MPC share which "it (AmCham) owns and placed in your (Thomson's) name." 11 Failing to get a favorable response, private respondent filed on May 15, 1990, a complaint against petitioner praying, inter alia, that the Makati Regional Trial Court render judgment ordering Thomson "to return the Manila Polo Club share to the plaintiff and transfer said share to the nominee of plaintiff." 12 On February 28, 1992, the trial court promulgated its decision, 13 thus: The foregoing considered judgment is rendered as follows: 1) The ownership of the contested Manila Polo Club share is adjudicated in favor of defendant Marsh Thomson; and; 2) Defendant shall pay plaintiff the sum of P300,000.00

Because both parties thru their respective faults have somehow contributed to the birth of this case, each shall bear the incidental expenses incurred. 14
In said decision, the trial court awarded the MPC share to defendant (petitioner now) on the ground that the Articles of Incorporation and By-laws of Manila Polo Club prohibit artificial persons, such as corporations, to be club members, ratiocinating in this manner: An assessment of the evidence adduced by both parties at the trial will show clearly that it was the intention of the parties that a membership to Manila Polo Club was to be secured by plaintiff [herein private respondent] for defendant's [herein petitioner] use. The latter was to

execute the necessary documents to acknowledge ownership of the Polo membership in favor of plaintiff. (Exh. C par 9) However, when the parties parted ways in disagreement and with some degree of bitterness, the defendant had second thoughts and decided to keep the membership for himself. This is evident from the exhibits (E & G) where defendant asked that he retained the Polo Club membership upon reimbursement of its purchase price; and where he showed his "profound disappointment, both at the previous Board's unfair action, and at what I consider to be harsh terms, after my long years of dedication to the Chamber's interest." xxx xxx xxx Notwithstanding all these evidence in favor of plaintiff, however, defendant may not be declared the owner of the contested membership be compelled to execute documents transferring the Polo Membership to plaintiff or the latter's nominee for the reason that this is prohibited by Polo Club's Articles & By-Laws. . . .

It is for the foregoing reasons that the Court rules that the ownership of the questioned Polo Club membership be retained by defendant. 15 . . . .
Not satisfied with the trial court's decision, private respondent appealed to the Court of Appeals. On May 19, 1994, the Court of Appeals (Former Special Sixth Division) promulgated its decision 16 in said CAG.R. CV No. 38417, reversing the, trial court's judgment and ordered herein petitioner to transfer the MPC share to the nominee of private respondent, reasoning thus: xxx xxx xxx

The significant fact in the instant case is that the appellant [herein private respondent] purchased the MPC share for the use of the appellee [herein petitioner] and the latter expressly conformed thereto as shown in Exhibits A-1, B, B-1, C, C-1, D, D-1. By such express conformity of the appellee, the former was bound to recognize the appellant as the owner of the said share for a contract has the force of law between the parties. (Alim vs. CA, 200 SCRA 450; Sasuhura Company, Inc., Ltd. vs. IAC, 205 SCRA 632) Aside from the foregoing, the appellee conceded the true ownership of the said share to the appellant when (1) he offered to buy the MPC share from the appellant (Exhs. E and E-1) upon the termination of his employment; (2) he obliged himself to return the MPC share after his six month consultancy contract had elapsed, unless its return was earlier requested in writting (Exh. I); and (3) on cross-examination, he admitted that the proprietary share listed as one of the assets of the appellant corporation in its 1988 Corporate Income Tax Return, which he signed as the latter's Executive Vice President (prior to its filing), refers to the Manila Polo Club Share (tsn., pp. 19-20, August 30, 1991). . . . 17
On 16 June 1994, petitioner filed a motion for reconsideration 18 of said decision. By resolution 19 promulgated on August 4, 1994, the Court of Appeals denied the motion for reconsideration. In this petition for review, petitioner alleges the following errors of public respondent as grounds for our review: I. The respondent Court of Appeals erred in setting aside the Decision dated 28 February 1992 of the Regional Trial Court, NCJR, Branch 65, Makati, Metro Manila, in its Civil Case No. 90-1286, and in not confirming petitioner's ownership over the MPC membership share. II. The respondent Court of Appeals erred in ruling that "the Quitclaim executed by AmCham in favor of petitioner of September 29, 1989 was

superseded by the contractual agreement entered into by the parties on October 13, 1989 wherein again the appellee acknowledged that the appellant owned the MPC share, there being absolutely no evidence to support such a conclusion and/or such inference is manifestly mistaken.

III. The respondent Court of Appeals erred in rendering judgment ordering petitioner to transfer the contested MPC share to a nominee of respondent AmCham notwithstanding that: (a) AmCham has no standing in the Manila Polo Club (MPG), and being an artificial person, it is precluded under MPC's Articles of Incorporation and governing rules and regulations from owning a proprietary share or from becoming a member thereof: and (b) even under AmCham's Articles of Incorporation, the purposes for which it is dedicated, becoming a stockholder or shareholder in other corporation is not one of the express implied powers fixed in AmCham's said corporate franchise. 20
As posited above, these assigned errors show the disputed matters herein are mainly factual. As such they are best left to the trial and appellate courts' disposition. And this Court could have dismissed the petition outright, were it not for the opposite results reached by the courts below. Moreover, for the enhanced appreciation of the jural relationship between the parties involving trust, this Court has given due course to the petition, which we now decide. After carefully considering the pleadings on record, we find there are two main issues to be resolved: (1) Did respondent court err in holding that private respondent is the beneficial owner of the disputed share? (2) Did the respondent court err in ordering petitioner to transfer said share to private respondent's nominees? Petitioner claims ownership of the MPC share, asserting that he merely incurred a debt to respondent when the latter advanced the funds for the purchase of the share. On the other hand, private respondent asserts beneficial ownership whereby petitioner only holds the share in his name, but the beneficial title belongs to private respondent. To resolve the first issue, we must clearly distinguish a debt from a trust. The beneficiary of a trust has beneficial interest in the trust property, while a creditor has merely a personal claim against the debtor. In trust, there is a fiduciary relation between a trustee and a beneficiary, but there is no such relation between a debtor and creditor. While a debt implies merely an obligation to pay a certain sum of money, a trust refers to a duty to deal with a specific property for the benefit of another. If a creditor-debtor relationship exists, but not a fiduciary relationship between the parties, there is no express trust. However, it is understood that when the purported trustee of funds is entitled to use them as his or her own (and commingle them with his or her own money), a debtor-creditor relationship exists, not a trust. 21 In the present case, as the Executive Vice-President of AmCham, petitioner occupied a fiduciary position in the business of AmCham. AmCham released the funds to acquire a share in the Club for the use of petitioner but obliged him to "execute such document as necessary to acknowledge beneficial ownership thereof by the Chamber". 22 A trust relationship is, therefore, manifestly indicated. Moreover, petitioner failed to present evidence to support his allegation of being merely a debtor when the private respondent paid the purchase price of the MPC share. Applicable here is the rule that a trust arises in favor of one who pays the purchase money of property in the name of another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. 23 Although petitioner initiated the acquisition of the share, evidence on record shows that private respondent acquired said share with its funds. Petitioner did not pay for said share, although he later wanted to, but according to his own terms, particularly the price thereof. Private respondent's evident purpose in acquiring the share was to provide additional incentive and perks to its chosen executive, the petitioner himself. Such intention was repeated in the yearly employment advice prepared by AmCham for petitioner's concurrence. In the cited employment advice, dated March 4, 1988,

private respondent once again, asked the petitioner to execute proof to recognize the trust agreement in writing:

The Manila Polo membership provided by the Chamber for you and your family will continue on the same basis, to wit: all dues and other charges relating to such membership shall be for your personal account and, if you have not already done so, you will execute such documents as are necessary to acknowledge that the Chamber is the beneficial owner of your membership in the Club. 24
Petitioner voluntarily affixed his signature to conform with the employment advice, including his obligation stated therein for him to execute the necessary document to recognize his employer as the beneficial owner of the MPC share. Now, we cannot hear him claiming otherwise, in derogation of said undertaking, without legal and equitable justification. For private respondent's intention to hold on to its beneficial ownership is not only presumed; it was expressed in writing at the very outset. Although the share was placed in the name of petitioner, his title is limited to the usufruct, that is, to enjoy the facilities and privileges of such membership in the club appertaining to the share. Such arrangement reflects a trust relationship governed by law and equity. While private respondent paid the purchase price for the share, petitioner was given legal title thereto. Thus, a resulting trust is presumed as a matter of law. The burden then shifted to the transferee to show otherwise, that it was just a loan. Such resulting trust could have been rebutted by proof of a contrary intention by a showing that, in fact, no trust was intended. Petitioner could have negated the trust agreement by contrary, consistent and convincing evidence on rebuttal. However, on the witness stand, petitioner failed to do so persuasively. On cross-examination, the petitioner testified as follows: ATTY. AQUINO (continuing) Q. Okay, let me go to the cash advance that you mentioned Mr. Witness, is there any document proving that you claimed cash advance signed by an officer of the Chamber? A. I believe the best evidence is the check. Q. Is there any document? COURT Other than the Check? MR. THOMSON Nothing more. ATTY. AQUINO Is there any application filed in the Chamber to avail of this cash advance? A. Verbal only. Q. Nothing written, and can you tell to this Honorable Court what are the stipulations or conditions, or terms of this transaction of securing this cash advance or loan?

xxx xxx xxx COURT How are you going to repay the cash advance? MR. THOMSON

The cash advance, we never stipulate when I have to repay it, but I presume that I would, when able to repay the money. 25
In deciding whether the property was wrongfully appropriated or retained and what the intent of the parties was at the time of the conveyance, the court must rely upon its impression of the credibility of the witnesses. 26 Intent is a question of fact, the determination of which is not reviewable unless the conclusion drawn by the trier is one which could not reasonably be drawn. 27 Petitioner's denial is not adequate to rebut the trust. Time and again, we have ruled that denials, if unsubstantiated by clear and convincing evidence, are deemed negative and self-serving evidence, unworthy of credence. 28 The trust between the parties having been established, petitioner advanced an alternative defense that the private respondent waived the beneficial ownership of MPC share by issuing the Release and Quitclaim in his favor. This argument is less than persuasive. The quitclaim executed by private respondent does not clearly show the intent to include therein the ownership over the MPC share. Private respondent even asserts that at the time the Release and Quitclaim was executed on September 29, 1989, the ownership of the MPC share was not controversial nor contested. Settled is the rule that a waiver to be valid and effective must, in the first place, be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him. 29 A waiver may not be attributed to a person when the terms thereof do not explicitly and clearly evidence an intent to abandon a right vested in such person. 30 If we apply the standard rule that waiver must be cast in clear and unequivocal terms, then clearly the general terms of the cited release and quitclaim indicates merely a clearance from general accountability, not specifically a waiver of AmCham's beneficial ownership of the disputed shares. Additionally, the intention to waive a right or advantage must be shown clearly and convincingly, and when the only proof of intention rests in what a party does, his act should be so manifestly consistent with, and indicative of, an intent to voluntarily relinquish the particular right or advantage that no other reasonable explanation of his conduct is possible. 31 Considering the terms of the quitclaim executed by the President of private respondent, the tenor of the document does not lead to the purported conclusion that be intended to renounce private respondent's beneficial title over its share in the Manila Polo Club. We, therefore, find no reversible error in the respondent Court's holding that private respondent, AmCham, is the beneficial owner of the share in dispute. Turning now to the second issue, the petitioner contends that the Articles of Incorporation and By-laws of Manila Polo Club prohibit corporate membership. However, private respondent does not insist nor intend to transfer the club membership in its name but rather to its designated nominee. For as properly ruled by the Court of Appeals: The matter prayed for does not involve the transfer of said share to the appellant, an artificial person. The transfer sought is to the appellant's nominee. Even if the MPC By-Laws and Articles prohibit corporate membership, there would be no violation of said prohibition for the appellant's nominee to whom the said share is sought to be transferred would certainly be a natural person. . . .

As to whether or not the transfer of said share the appellant's nominee would be disapproved by the MPC, is a matter that should be raised at the proper time, which is only if such transfer is disapproved by the MPC. 32

The Manila Polo Club does not necessarily prohibit the transfer of proprietary shares by its members. The Club only restricts membership to deserving applicants in accordance with its rules, when the amended Articles of Incorporation states that: "No transfer shall be valid except between the parties, and shall be registered in the Membership Book unless made in accordance with these Articles and the By-Laws". 33 Thus, as between parties herein, there is no question that a transfer is feasible. Moreover, authority granted to a corporation to regulate the transfer of its stock does not empower it to restrict the right of a stockholder to transfer his shares, but merely authorizes the adoption of regulations as to the formalities and procedure to be followed in effecting transfer. 34 In this case, the petitioner was the nominee of the private respondent to hold the share and enjoy the privileges of the club. But upon the expiration of petitioner's employment as officer and consultant of AmCham, the incentives that go with the position, including use of the MPC share, also ceased to exist. It now behooves petitioner to surrender said share to private respondent's next nominee, another natural person. Obviously this arrangement of trust and confidence cannot be defeated by the petitioner's citation of the MPC rules to shield his untenable position, without doing violence to basic tenets of justice and fair dealing. However, we still have to ascertain whether the rights of herein parties to the trust still subsist. It has been held that so long as there has been no denial or repudiation of the trust, the possession of the trustee of an express and continuing trust is presumed to be that of the beneficiary, and the statute of limitations does not run between them. 35 With regard to a constructive or a resulting trust, the statute of limitations does not begin to run until the trustee clearly repudiates or disavows the trust and such disavowal is brought home to the other party, "cestui que trust". 36 The statute of limitations runs generally from the time when the act was done by which the party became chargeable as a trustee by operation of law or when the beneficiary knew that he had a cause of action, 37 in the absence of fraud or concealment. Noteworthy in the instant case, there was no declared or explicit repudiation of the trust existing between the parties. Such repudiation could only be inferred as evident when the petitioner showed his intent to appropriate the MPC share for himself. Specifically, this happened when he requested to retain the MPC share upon his reimbursing the purchase price of P110,000, a request denied promptly by private respondent. Eventually, petitioner refused to surrender the share despite the written demand of private respondent. This act could then be construed as repudiation of the trust. The statute of limitation could start to set in at this point in time. But private respondent took immediate positive action. Thus, on May 15, 1990, private respondent filed an action to recover the MPC share. Between the time of implicit repudiation of the trust on October 9, 1989, as evidenced by petitioner's letter of said date, and private respondent's institution of the action to recover the MPC share on May 15, 1990, only about seven months bad lapsed. Our laws on the matter provide that actions to recover movables shall prescribe eight years from the time the possession thereof is lot, 38 unless the possessor has acquired the ownership by prescription for a less period of four years if in good faith. 39 Since the private respondent filed the necessary action on time and the defense of good faith is not available to the petitioner, there is no basis for any purported claim of prescription, after repudiation of the trust, which will entitle petitioner to ownership of the disputed share. As correctly held by the respondent court, petitioner has the obligation to transfer now said share to the nominee of private respondent. WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court of Appeals of May 19, 1994, is AFFIRMED. COSTS against petitioner. SO ORDERED. Davide, Jr., Vitug and Panganiban, JJ., concur. Bellosillo, J., is on leave. Footnotes

1 Penned by Associate Justice Gloria C. Paras and concurred in by Associate Justice Ramon Mabutas, Jr. and Associate Justice Hector L. Hofilena; rollo, pp. 46-52. 2 RTC records, p. 39. 3 Annex "L", Petition; rollo, p. 106. 4 RTC records, pp. 41-42. 5 RTC records, pp. 43-45. 6 RTC records, pp. 46-48. 7 Supra, note 5. (Emphasis supplied) 8 RTC records, p. 50. 9 RTC records, p. 61. 10 Ibid. 11 RTC records, p. 18. 12 RTC records, p. 3. 13 Rollo, pp. 127-128. 14 Ibid. 15 Ibid. 16 Supra, note 1. 17 Rollo, p. 50. 18 Rollo, pp. 55-70. 19 Rollo, p. 54. 20 All caps in the original; rollo, p. 21. 21 76 Am Jur 2d, Trusts, Sec. 16. 22 Supra, note 2. 23 Tolentino, Civil Code of the Philippines, Vol. IV, 1985 ed., p. 679; citing Larisey vs. Larisey, 93 S.C. 450, 77 S.E. 129. 24 Supra, note 4. (Emphasis supplied) 25 TSN, August 30, 1991, pp. 612 - 613.

26 76 Am Jur, Trusts, Sec. 185. 27 Ibid. 28 People vs. Villas, 277 SCRA 391, 403. 29 Gatchalian vs. Delim, 203 SCRA 126, 132; citing Fernandez vs. Sebido, 70 Phil. 151 (1940): Lang vs. Provincial Sheriff of Surigao, et al., 93 Phil. 661 (1953); Andres vs. Crown Life Insurance Co., 102 Phil. 919 (1958); Yepes and Susaya vs. Samar Express Transit, 17 SCRA 91 (1966). 30 Ibid. 31 Clemente Fernandez vs. Engracia Sebido et al., 70 Phil. 151, 159; citing 67 C.J., 311. 32 Rollo, p. 51. 33 Annex "J", Petition; rollo, p. 98. (Emphasis supplied) 34 18 Am Jur 2d, Corporation, Sec. 383; citing Victor G. Bloede Co. vs. Bloede, 84 MD 129, 34 A 1127. 35 Supra, note 21; Sec. 712. 36 Ibid., Sec. 718. 37 Ibid. 38 Civil Code, art. 1140. 39 Civil Code, art. 1132.

ESTATE MISSING
Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 133047 August 17, 1999

HEIRS OF LORENZO YAP, namely SALLY SUN YAP, MARGARET YAP-UY and MANUEL YAP, petitioners, vs. THE HONORABLE COURT OF APPEALS, RAMON YAP and BENJAMIN YAP, respondents. VITUG, J.: What in essence petitioners seek is the enforcement of an alleged trust agreement between Lorenzo Yap, now deceased, and his brothers Ramon and Benjamin, herein co-respondents, covering a piece of land and its improvement. The case and factual settings found by the Court of Appeals do not appear to deviate significantly from that priority made by the trial court.
1wphi1.nt

Sometime in February 1966, Ramon Yap purchased a parcel of land situated at 123 (formerly 75) Batanes Street, Galas, Quezon City, covered by Transfer Certificate of Title No. 82001/T-414, from the spouses Carlos and Josefina Nery. The lot was thereupon registered in the name of Ramon Yap under Transfer Certificate of Title No. 102132; forthwith, he also declared the property in his name for tax purposes and paid the real estate taxes due thereon from 1966 to 1992. In 1967, Ramon Yap constructed a two-storey 3-door apartment building for the use of the Yap family. One-fifth (1/5) of the cost of the construction was defrayed by Ramon Yap while the rest was shouldered by Chua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon its completion, the improvement was declared for real estate tax purposes in the name of Lorenzo Yap in deference to the wishes of the old woman. Lorenzo Yap died on 11 July 1970. A few months later, his heirs (herein petitioners) left their family dwelling in Lucena City to reside permanently in Manila. Ramon Yap allowed petitioners to use one unit of the apartment building. On 18 March 1992, Ramon Yap sold the land and his share of the 3-door apartment to his brother, his herein co-respondent Benjamin Yap, for the sum of P337,500.00 pursuant to a Deed of Sale, recorded on even date in the Memorandum of Encumbrances of the title to said property. Transfer Certificate of Title No. 73002 was in due time issued in the name of Benjamin Yap. The controversy started when herein petitioners, by a letter of 08 June 1992, advised respondents of the former's claim of ownership over the property and demanded that respondents execute the proper deed necessary to transfer the title to them. At about the same time, petitioners filed a case for ejectment against one of the bonafidetenants of the property. On 29 July 1992, respondents filed an action with the Regional Trial Court ("RTC") of Quezon City, docketed Civil Case No. Q-92-12899, for quieting of title against petitioners. In their answer, petitioners averred that sometime in 1966 the spouses Carlos and Josefina Nery offered to sell the disputed parcel of land to their predecessor-in-interest, Lorenzo Yap, for the sum of P15,000.00. Since Lorenzo and his wife Sally Yap were at that time Chinese citizens, Lorenzo requested his brother Ramon to allow the use of the latter's name in the purchase, registration, and declaration for tax purposes of the subject lot to which Ramon Yap consented. It was agreed that the property would remain registered in the name of Ramon Yap until such time as Lorenzo would have acquired Philippine citizenship but that, should Lorenzo predecease, the lot would then be transferred to Lorenzo's heirs upon the latter's naturalization. Petitioners contended that it was Lorenzo who had caused the construction of the 3-door apartment on the property, merely entrusting the money therefor to Ramon Yap. The death of Lorenzo in 1970 prompted petitioners to move in and occupy the apartment and the lot, without any objection from Ramon and Benjamin, although the latter were allowed to stay in the premises since they had no other place to live in. In 1991, petitioners acquired Philippine citizenship and, forthwith, they requested Ramon Yap to have the title to the lot transferred to their names but to their chagrin they discovered that Ramon had sold the lot to his co-respondent Benjamin. Assessing the evidence before it, the trial court found for the respondents and adjudged Benjamin Yap to be the true and lawful owner of the disputed property. On appeal, the Court of Appeals affirmed the decision of the trial court and debunked the claim of petitioners that Ramon Yap was merely so used as a dummy by Lorenzo Yap. Giving full weight and credit to the Deed of Sale executed by the Nery spouses in favor of Ramon Yap, the appellate court stressed that to overcome the presumption of regularity in the execution of a public document, the evidence to the contrary should be clear and convincing even as it was equally incumbent upon petitioners to show that the subsequent sale of the property to Benjamin had only been simulated and fictitious. The appellate court, however, deleted the award of attorney's fees in favor of respondents for, in its view, it was not adequately shown that petitioners had acted in bad faith in pursuing their case. Petitioners are now before this Court seeking a reversal of the decision of the Court of Appeals and contending that I

THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT DEFENDANTS-APPELLANTS FATHER, LORENZO YAP, BEING CHINESE CAN NOT ENTER INTO A TRUST AGREEMENT AND THE EXISTENCE OF A TRUST AGREEMENT CAN NOT BE PROVEN BEING CHINESE. II THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT THE FAILURE TO SHOW WRITTEN TRUST AGREEMENT RENDERS THE ALLEGED AGREEMENT UNENFORCEABLE BY NOT CONSIDERING THE SAME AS ONE UNDER IMPLIED TRUST. III THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT PAROL EVIDENCE AND/OR STATUTE OF FRAUDS APPLIED IN THE CASE AT BAR. IV THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT HOLDS THAT APPELLANTS HAVE TO REFUTE THE DEED OF SALE EXECUTED BY THE NERY SPOUSES IN FAVOR OF RAMON YAP BY CLEAR AND CONVINCING EVIDENCE NOTWITHSTANDING ADMISSION OF THE SAID DEED OF SALE. V THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT DID NOT CONSIDER THAT IN TRUST THE TITLE IS IN THE NAME OF THE TRUSTEE AND NOT IN THE NAME OF THE NAKED OWNER. VI THE RESPONDENT COURT OF APPEALS ERRED WHEN IT HOLDS THAT RAMON YAP CAN NOT BE A DUMMY OF LORENZO YAP BEING ALIEN AND DISQUALIFIED TO OWN REAL PROPERTY. VII THE RESPONDENT COURT OF APPEALS ERRED IN NOT DECLARING THE TITLE IN THE NAME OF RAMON YAP VOID BEING ACQUIRED AS DUMMY. VIII THE RESPONDENT COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT BENJAMIN YAP HAS POSSESSION OF APARTMENT UNIT 123 LIKEWISE OWNERSHIP PERSONAL PROPERTIES THEREIN ON THE BASIS OF THE INVENTORY OF THE SHERIFF OF THE COURT A QUO BY WAY OF A SUBSEQUENT MANDATORY INJUNCTION WHICH WAS DENIED.1 The Court finds no merit in the appeal. To begin with, a brief discussion on the trust relation between two parties could be helpful. A trust may either be express or implied.2 Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words evincing an intention to create a trust.3 Implied trusts are those which, without being express, are deducible from the nature of the transaction as matters of intent or, independently of the particular intention of the parties, as being superinduced on the transaction by operation of law basically by reason of equity.4 These species of implied trust are ordinarily subdivided into resulting and

constructive trusts.5 A resulting trust is one that arises by implication of law and presumed always to have been contemplated by the parties, the intention as to which can be found in the nature of their transaction although not expressed in a deed or instrument of conveyance.6 Resulting trusts are based on the equitable doctrine that it is the more valuable consideration that the legal title that determines the equitable interest in property. 7 Upon the other hand, a constructive trust is a trust not created by any word or phrase, either expressly or impliedly, evincing a direct intention to create a trust, but one that arises in order to satisfy the demands of justice. It does not come about by agreement or intention but in main by operation of law8 construed 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.9 One basic distinction between an implied trust and an express trust is that while the former may be established by parol evidence, the latter cannot. Even then, in order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document.10 An implied trust, in fine, cannot be established upon vague and inconclusive proof.11 Unfortunately for petitioners, the issues they submit in the case at bar boil down to the appreciation of the evidence presented. The Court of Appeals, sustaining the court a quo, has found the evidence submitted by petitioners to be utterly wanting,12 consisting mainly of the self-serving testimony of Sally Yap. She herself admitted that the business establishment of her husband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that he indeed had the means to purchase the subject land about two years later from the Nery spouses. Upon the other hand, Ramon Yap was by then an accountant with apparent means to buy the property himself. At all events, findings of fact by the Court of Appeals, particularly when consistent with those made by the trial court, should deserve utmost regard when not devoid of evidentiary support. No cogent reason had been shown by petitioners for the Court to now hold otherwise. Not to be dismissed, furthermore, is the long standing and broad doctrine of clean hands that will not allow the creation or the use of a juridical relation, a trust whether express or implied included, to perpetrate fraud or tolerate bad faith nor to subvert, directly or indirectly, the law. The trust agreement between Ramon and Lorenzo, if indeed extant, would have been in contravention of, in fact the fundamental law. Then Section 5, Article XIII, of the 1935 Constitution has provided that Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations, qualified to acquire or hold lands of the public domain in the Philippines. The mandate has also been adopted in Section 14, Article XIV, of the 1973 Constitution and now reiterated under Section 7, Article XII, of the 1987 Constitution. A trust or a provision in the terms of a trust would be invalid if the enforcement of the trust or provision is against the law even though its performance does not involve the commission of a criminal or tortuous act. It likewise must follow that what the parties are not allowed to do expressly is one that they also may not do impliedly as, for instance, in the guise of a resulting trust. 13 The foregoing disquisition renders unnecessary the resolution of the incidental issues raised in the petition. WHEREFORE, the instant petition is DENIED, and the decision of the respondent Court of Appeals of 08 January 1998 in C.A.-G.R. CV No. 46838 is AFFIRMED. Costs against petitioners. SO ORDERED. Melo, Panganiban and Purisima, JJ., concur. Gonzaga-Reyes, J., no part. Member of the Court of Appeals Division that rendered the decision.
1w phi 1.nt

Footnotes

Rollo, pp. 25-27. See Article 1441, New Civil Code.

Rizal Surety and Insurance Company vs. Court of Appeals, 261 SCRA 69; O'Laco vs. Co Cho Chit, 220 SCRA 656; citing Ramos vs. Ramos, 61 SCRA 284.
4

Salao vs. Salao, 70 SCRA 65; 89 C.J.S. 724. 89 C.J.S. 722. Ramos vs. Ramos, supra, citing 89 C.J.S. 725. O'Laco vs. Co Cho Chit, supra. 89 C.J.S. 726-727. O'Laco vs. Co Cho Chit, supra, citing 76 Am. Jur. 2d 446. Santa Juana vs. Del Rosario, 50 Phil. 110; O'Laco vs. Co Cho Chit, supra. Suarez vs. Tirambulo, 59 Phil. 303.

10

11

12

Calculated to render applicable Article 1448 of the Civil Code to the effect that 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."
13

Ramos vs. Court of Appeals, 232 SCRA 348. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 103635

February 1, 1996

CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DE PERALTA, ELENITA ESCONDE and BENJAMIN ESCONDE, petitioners, vs. HONORABLE COURT OF APPEALS and PEDRO ESCONDE, respondents. DECISION ROMERO, J.: This petition for review on certiorari seeks the reversal of the January 22, 1992 decision1 in CA G.R. CV No. 26795 of the Court of Appeals affirming the Decision of the Regional Trial Court of Bataan, Branch 2.2 The

lower court declared that petitioners' action for reconveyance of real property based on an implied trust has been barred by prescription and laches. Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the children of the late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde was one of the children 3 and heirs of Andres Esconde. Andres is the brother of Estanislao Esconde, the original owner of the disputed lot who died without issue on April 1942. Survived by his only brother, Andres, Estanislao left an estate consisting of four (4) parcels of land in Samal, Bataan, namely: (a) Lot No. 1865 with 22,712 square meters; (b) Lot No. 1902 with 54,735 square meters; (c) Lot No. 1208 with 20,285 square meters; and (d) Lot No. 1700 with 547 square meters. Eulogio died in April, 1944 survived by petitioners and private respondent. At that time, Lazara and Ciriaca, Eulogio's sisters, had already died without having partitioned the estate of the late Estanislao Esconde. On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed a deed of extrajudicial partition, 4 with the heirs of Lazara identified therein as the Party of the First Part, that of Ciriaca, the Party of the Second Part and that of Eulogio, the Party of the Third Part. Since the children of Eulogio, with the exception of Constancia, were then all minors, they were represented by their mother and judicial guardian, petitioner Catalina Buan vda. de Esconde who renounced and waived her usufructuary rights over the parcels of land in favor of her children in the same deed. Salient provisions of the deed state as follows: 1. TO ARTURO DOMINGUEZ, minor, Party of the First Part is adjudicated: (a) Lot No. 1865 of Samal Cadastre; (b) Portion of Lot no. 1208, Samal Cadastre, which portion has an area of FIVE (5) Luang; 2. TO JOVITA BUAN, RICARDO BUAN, and MELODY and LEOPOLDO OCONER, are adjudicated Lot No. 1902 Samal Cadastre, and to de (sic) divided as follows: (a) Jovita Buan - undivided one-third (1/3) share; (b) RicardoBuan - Undivided one-third (1/3) share; (c) Melody Oconer - Undivided one-sixth (1/6) share; (d) Leopoldo Oconer - Undivided one-sixth (1/6) share; 3. TO CONSTANCIA, PEDRO, BENJAMIN and ELENITA, all Surnamed ESCONDE, are adjudicated, in undivided equal shares each, the following: (a) Lot No. 1208 Samal Cadastre, subject to the encumbrance of the right of ownership of Arturo Dominguez on the FIVE LUANG; 4. TO PEDRO ESCONDE is adjudicated exclusively Lot No. 1700 of the Cadastral Survey of Samal; (Emphasis supplied.) The deed bears the thumbmark of Catalina Buan and the signature of Constancia Esconde, as well as the approval and signature of Judge Basilio Bautista.5 Pursuant to the same deed, transfer certificates of title were issued to the new owners of the properties.6 Transfer Certificate of Title No. 394 for Lot No. 1700 was issued on February 11, 1947 in the name of private respondent but Catalina kept it in her possession until she delivered it to him in 1949 when private respondent got married.

Meanwhile, Benjamin constructed the family home on Lot No. 1698-B7 which is adjacent to Lot No. 1700. A portion of the house occupied an area of twenty (20) square meters, more or less, of Lot No. 1700. Benjamin also built a concrete fence and a common gate enclosing the two (2) lots, as well as an artesian well within Lot No. 1700. Sometime in December, 1982, Benjamin discovered that Lot No. 1700 was registered in the name of his brother, private respondent. Believing that the lot was co-owned by all the children of Eulogio Esconde, Benjamin demanded his share of the lot from private respondent. 8 However, private respondent asserted exclusive ownership thereof pursuant to the deed of extrajudicial partition and, in 1985 constructed a "buho" fence to segregate Lot No. 1700 from Lot No. 1698-B. Hence, on June 29, 1987, petitioners herein filed a complaint before the Regional Trial Court of Bataan against private respondent for the annulment of TCT No. 394. They further prayed that private respondent be directed to enter into a partition agreement with them, and for damages (Civil Case No. 5552). In its decision of July 31, 1989, the lower court dismissed the complaint and the counterclaims. It found that the deed of extrajudicial partition was an unenforceable contract as far as Lot No. 1700 was concerned because petitioner Catalina Buan vda. de Esconde, as mother and judicial guardian of her children, exceeded her authority as such in "donating" the lot to private respondent or waiving the rights thereto of Benjamin and Elenita in favor of private respondent. Because of the unenforceability of the deed, a trust relationship was created with private respondent as trustee and Benjamin and Elenita as beneficiaries. The court said: Although the parties to the partition did not either contemplate or express it in said document, the resulting trust arose or was created by operation of Article 1456 of the new Civil Code, which reads: "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 persons from whom the two-thirds portion of Lot 1700 came are plaintiffs Benjamin and Elenita Esconde and the trustee was defendantPedro Esconde, who acquired such portion through mistake by virtue of the subject partition. The mistake was the allotment or assignment of such portion to Pedro Esconde although it had rightfully belonged to said two plaintiffs more than two (2) years before.9 However, the lower court ruled that the action had been barred by both prescription and laches. Lot No. 1700 having been registered in the name of private respondent on February 11, 1947, the action to annul such title prescribed within ten (10) years on February 11, 1957 or more than thirty (30) years before the action was filed on June 29, 1987. Thus, even if Art. 1963 of the old Civil Code providing for a 30-year prescriptive period for real actions over immovable properties were to be applied, still, the action would have prescribed on February 11, 1977. Hence, petitioners elevated the case to the Court of Appeals which affirmed the lower court's decision. The appellate court held that the deed of extrajudicial partition established "an implied trust arising from the mistake of the judicial guardian in favoring one heir by giving him a bigger share in the hereditary property." It stressed that "an action for reconveyance based on implied or constructive trust" prescribes in ten (10) years "counted from the registration of the property in the sole name of the co-heir." 10 Petitioners are now before this Court charging the Court of Appeals with having erred in: (a) denying their appeal by reason of prescription and laches, and (b) not reversing the decision of the lower court insofar as awarding them damages is concerned. 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. 11 Trusts are either express or implied. 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. 12 No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. 13

On the other hand, 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. 14 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 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. 15 While the deed of extrajudicial partition and the registration of Lot No. 1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet in force, we hold that the trial court correctly applied Article 1456. In Diaz et al. v. Gorricho and Aguado, 16 the Court categorically held that while it is not a retroactive provision of the new Civil Code, Article 1456 "merely expresses a rule already recognized by our courts prior to the Code's promulgation." This article 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. 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 thecestui 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. 17 In the case at bench, petitioner Catalina Buan vda. de Esconde, as mother and legal guardian of her children, appears to have favored her elder son, private respondent, in allowing that he be given Lot No. 1700 in its entirety in the extrajudicial partition of the Esconde estate to the prejudice of her other children. Although it does not appear on record whether Catalina intentionally granted private respondent that privileged bestowal, the fact is that, said lot was registered in private respondent's name. After TCT No. 394 was handed to him by his mother, private respondent exercised exclusive rights of ownership therein to the extent of even mortgaging the lot when he needed money. If, as petitioners insist, a mistake was committed in allotting Lot No. 1700 to private respondent, then a trust relationship was created between them and private respondent. However, private respondent never considered himself a trustee. If he allowed his brother Benjamin to construct or make improvements thereon, it appears to have been out of tolerance to a brother. Consequently, if indeed, by mistake, 18 private respondent was given the entirety of Lot No. 1700, the trust relationship between him and petitioners was a constructive, not resulting, implied trust. Petitioners, therefore, correctly questioned private respondent's exercise of absolute ownership over the property. Unfortunately, however, petitioners assailed it long after their right to do so had prescribed. The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts 19 and resulting implied trusts. 20 However, in constructiveimplied trusts, prescription may supervene 21 even if the trustee does not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period.

Since the action for the annulment of private respondent's title to Lot No. 1700 accrued during the effectivity of Act No. 190, Section 40 of Chapter III thereof applies. It provides: Sec. 40. Period of prescription as to real estate. - An action for recovery of title to, or possession of, real property, or an interest therein, can only be brought within ten years after the cause of such action accrues. Thus, in Heirs of Jose Olviga v. Court of Appeals, 22 the Court ruled that the ten-year prescriptive period for an action for reconveyance of real property based on implied or constructive trust which is counted from the date of registration of the property, applies when the plaintiff is not in possession of the contested property. In this case, private respondent, not petitioners who instituted the action, is in actual possession of Lot No. 1700. Having filed their action only on June 29, 1987, petitioners' action has been barred by prescription. Not only that. Laches has also circumscribed the action for, whether the implied trust is constructive or resulting, this doctrine applies. 23 As regards constructive implied trusts, the Court held in Diaz, et al. v. Gorricho and Aguado 24 that: . . . in constructive trusts (that are imposed by law), there is neither promise nor fiduciary relation; the so-called trustee does not recognize any trust and has no intent to hold for the beneficiary; therefore, the latter is not justified in delaying action to recover his property. It is his fault if he delays; hence, he may be estopped by his own laches. It is tragic that a land dispute has once again driven a wedge between brothers. However, credit must be given to petitioner Benjamin Esconde 25 for resorting to all means possible in arriving at a settlement between him and his brother in accordance with Article 222 of the Civil Code. 26 Verbally and in two letters, 27 he demanded that private respondent give him and his sisters their share in Lot No. 1700. He even reported the matter to the barangay authorities for which three conferences were held. 28 Unfortunately, his efforts droved fruitless. Even the action he brought before the court was filed too late. On the other hand, private respondent should not be unjustly enriched by the improvements introduced by his brother on Lot No. 1700 which he himself had tolerated. He is obliged by law to indemnify his brother, petitioner Benjamin Esconde, for whatever expenses the latter had incurred. WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned decision AFFIRMED subject to the modification that private respondent shall indemnify petitioner Benjamin Esconde the expenses the latter had incurred for the improvements on Lot No. 1700. No costs. SO ORDERED. Regalado, Puno and Mendoza, JJ., concur.

Footnotes
1

Penned by Associate Justice Minerva P. Gonzaga-Reyes and concurred in by Associate Justices Arturo B. Buena and Quirino D. Abad Santos, Jr.
2

Presided by Judge Romeo G. Maglalang. Andres had two other children namely: Lazara and Ciriaca. Exh. "B."

Page 3 of Exh. "B;" Record, p. 11.

TCT No. 391 for Lot 1865 was issued to Arturo Dominguez; TCT No. 392 for Lot 1902 to the heirs of Ciriaca, and TCT No. 393 for Lot 1208 to the heirs of Eulogio: Constancia, Pedro, Benjamin and Elenita Esconde.
7

This lot, which used to be part of Lot No. 1698 and co-owned by Eulogio and his sister Lazara, became the property of the former's heirs after Lot No. 1698 was extrajudicially partitioned on March 3, 1963 (Exh. "1").
8

TSN, March 10, 1988, pp. 23-25; Exh. "E." RTC Decision, p. 29. CA Decision, p. 5. TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. IV, 1991 ed., p. 669 citing 54 Am. Jur. 21.

10

11

12

Sotto v. Teves, L-38018, October 31, 1978, 86 SCRA 154, 171 citing Cuaycong, et al. v. Cuaycong, et al., L-21616, December 11, 1967, 21 SCRA 1192, 1196.
13

Art. 1443, Civil Code; Heirs of Maria de la Cruz y Gutierrez v. Court of Appeals, G.R. No. 76590, February 26, 1990, 182 SCRA 638, 643 citing Vda. de Mapa v. Court of Appeals, L-38972, September 28, 1987, 154 SCRA 294, 300.
14

Philippine National Bank v. Court of Appeals, G.R. No. 97995, January 21, 1993, 217 SCRA 347, 353.
15

O'Laco v. Co Cho Chit, G.R. No. 58010, March 31, 1993, 220 SCRA 656, 663. 103 Phil. 261, 264 (1958). Supra at pp. 353-354.

16

17

18

This appears to have a factual basis as Catalina Buan vda. de Esconde joined the other petitioners in filing the action for annulment of title against private respondent.
19

See: Ramos v. Ramos, L-19872, December 3, 1974, 61 SCRA 284, 299.

20

O'Laco v. Co Cho Chit, supra at p. 668. See: Huang v. Court of Appeals, G.R. No. 108525, September 13, 1994, 236 SCRA 420, 429-430.
21

Ibid. G.R. No. 104813, October 21, 1993, 227 SCRA 330, 334-335. Philippine National Bank v. Court of Appeals, supra at pp. 357-358. Supra at p. 266.

22

23

24

25

He was granted by the other petitioners a special power of attorney to appear for them in Civil Case No. 5552 and to enter into any agreement regarding the case (Record, p. 34).

26

"Art. 222. No suit shall be filed or maintained between members of the same family unless it should appear that earnest efforts toward a compromise have been made, but that the same have failed, subject to the limitations in article 2035."
27

Exhs. "E" & "F." RTC Decision, p. 7. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

28

G.R. No. 73564 March 25, 1988 CORNELIA CLANOR VDA. DE PORTUGAL, FRANCISCO C. PORTUGAL, PETRONA C. PORTUGAL, CLARITA PORTUGAL, LETICIA PORTUGAL, and BENEDICTO PORTUGAL, JR., petitioners, vs. INTERMEDIATE APPELLATE COURT and HUGO C. PORTUGAL, respondents.

SARMIENTO, J.: Seeking the reversal of the decision 1 dated October 21, 1985 of the former Intermediate Appellate Court in CAG.R. CV No. 70247, entitled "Cornelia Clanor Vda. de Portugal, et al. vs. Hugo Portugal, and the reinstatement of the decision 2 in their favor, dated June 30, 1980, of the Court of First Instance of Cavite in Civil Case No. NC-699 entitled "Cornelia Vda. de Portugal, et al. vs. Hugo Portugal," the petitioners now come to us by way of this petition for review by certiorari. The factual background that gave rise to the present controversy is summarized as follows: Petitioner Cornelia Clanor and her late husband Pascual Portugal, during the lifetime of the latter, were able to accumulate several parcels of real property. Among these were a parcel of residential land situated in Poblacion, Gen. Trias, Cavite, designated as Lot No. 3201, consisting of 2,069 square meters, more or less, and covered by T.C.T. No. RT-9355, in their names, and an agricultural land located at Pasong Kawayan, Gen. Trias, Cavite, with an area of 43,587 square meters, more or less, known as Lot No. 2337, and also registered in their names under T.C.T. No. RT-9356 of the Registry of Deeds for the Province of Cavite. Sometime in January, 1967, the private respondent Hugo Portugal, a son of the spouses, borrowed from his mother, Cornelia, the certificates of title to the above-mentioned parcels of land on the pretext that he had to use them in securing a loan that he was negotiating. Cornelia, the loving and helpful mother that she was, assented and delivered the titles to her son. The matter was never again brought up until after Pascual Portugal died on November 17, 1974. (Cornelia herself died on November 12, 1987.) When the other heirs of the deceased Pascual Portugal, the petitioners herein, for the purposes of executing an extra-judicial partition of Pascual's estate, wished to have all the properties of the spouses collated, Cornelia asked the private respondent for the return of the two titles she previously loaned, Hugo manifested that the said titles no longer exist. When further questioned, Hugo showed the petitioners Transfer Certificate of Title T.C.T. No. 23539 registered in his and his brother Emiliano Portugal's names, and which new T.C.T. cancelled the two previous ones. This falsification was triggered by a deed of sale by which the spouses Pascual Portugal and Cornelia Clanor purportedly sold for P8,000.00 the two parcels of land adverted to earlier to their two sons, Hugo and Emiliano. Confronted by his mother of this fraud, Emiliano denied any participation. And to show his good faith, Emiliano caused the reconveyance of Lot No. 2337 previously covered by TCT No. RT-9356 and which was conveyed to him in the void deed of sale. Hugo, on the other hand, refused to make the necessary restitution

thus compelling the petitioners, his mother and his other brothers and sisters, to institute an action for the annulment of the controversial deed of sale and the reconveyance of the title over Lot No. 3201 (the residential land). After hearing, the trial court rendered its decision, the dispositive portion of which reads: xxx xxx xxx WHEREFORE, under our present perspectives, judgment is hereby rendered; and the Court hereby declares inoperative the Deed of Sale (Exhibit A and Exhibit 1) and all its appertaining and subsequent documents corresponding with Transfer Certificate of Title No. T-23539 of the Register of Deeds for the Province of Cavite, as well as all subsequent Transfer Certificates of Title which may have been produced corresponding to the parcels of land, subject matter hereof. SO ORDERED. 3 From this decision, Hugo Portugal, the private respondent herein and the defendant in the trial court, appealed to the respondent appellate court which reversed, hence the present petition. The issues raised by the petitioners are: 1. Whether or not the present action has prescribed; 2. Whether or not the respondent court was justified in disturbing the trial court's findings on the credibility of the witnesses presented during the trial; and 3. Whether or not the appellate court could entertain the defense of prescription which was not raised by the private respondents in their answer to the complaint nor in a motion to dismiss. We find the petition meritorious. There is really nothing novel in this case as an the issues raised had been, on several occasions, ruled upon by the Court. Apropos the first issue, which is the timeliness of the action, the trial court correctly ruled that the action instituted by the petitioners has not yet prescribed. Be that as it may, the conclusion was reached through an erroneous rationalization, i.e., the case is purely for reconveyance based on an implied or constructive trust. Obviously, the trial court failed to consider the lack of consideration or cause in the purported deed of sale by which the residential lot was allegedly transferred to the private respondent by his parents. On the other hand, the respondent Intermediate Appellate Court held that since the action for reconveyance was fathered by a fraudulent deed of sale, Article 1391 of the Civil Code which lays down the rule that an action to annul a contract based on fraud prescribes in four years, applies. Hence, according to the respondent court, as more than four years had elapsed from January 23, 1967 when the assailed deed was registered and the petitioners' cause of action supposedly accrued, the suit has already become stale when it was commenced on October 26, 1976, in the Court of First Instance of Cavite. For reasons shortly to be shown, we can not give our imprimatur to either view. The case at bar is not purely an action for reconveyance based on an implied or constructive trust. Neither is it one for the annullment of a fraudulent contract. A closer scrutiny of the records of the case readily supports a finding that fraud and mistake are not the only vices present in the assailed contract of sale as held by the trial court. More than these, the alleged contract of sale is vitiated by the total absence of a valid cause or consideration. The petitioners in their complaint, assert that they, particularly Cornelia, never knew of the existence of the questioned deed of sale. They claim that they came to know of the supposed sale only after the private respondent, upon their repeated entreaties to produce and return the owner's duplicate copy of the transfer certificate of title covering the two parcels of land, showed to them the controversial deed. And their claim was immeasurably bolstered when the private respondent's co-defendant below, his brother Emiliano Portugal, who was allegedly his co-vendee in the transaction, disclaimed any knowledge or participation therein. If this is so, and this is not contradicted by the decisions of the courts below, the inevitable implication of the allegations is that contrary to the recitals found in the assailed deed, no consideration was ever paid at all by the private respondent. Applying the provisions of Articles 1350, 1352, and 1409 of the new Civil Code in

relation to the indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely voidable. And it is provided in Article 1410 of the Civil Code, that '(T)he action or defense for the declaration of the inexistence of a contract does not prescribe. But even if the action of the petitioners is for reconveyance of the parcel of land based on an implied or constructive trust, still it has been seasonably filed. For as heretofore stated, it is now settled that actions of this nature prescribe in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of titIe over the property. 4 In this case, the petitioner commenced the instant action for reconveyance in the trial court on October 26, 1976, or less than ten years from January 23, 1967 when the deed of sale was registered with the Register of Deeds. 5 Clearly, even on this basis alone, the present action has not yet prescribed. On the credibility of witnesses presented in court, there is no doubt that the trial court's findings on this score deserves full respect and we do not have any reason to disturb it here now. 6 After all, the trial court judge is in a better position to make that appreciation for having heard personally the witnesses and observed their deportment and manner of testifying during the trial. 7 The exceptions to this time honored policy are: when the trial court plainly overlooked certain facts of substantial import and value which if only correctly considered by the court might change the outcome of the case; 8 and, if the judge who rendered the decision was not the one who heard the evidence. 9 Neither of these exceptions is present here. Therefore, the respondent appellate court's ruling questioning the credibility of petitioner Cornelia Clanor Vda. de Portugal must be reversed. Anent the last issue raised by the petitioner, we have already ruled that the defense of prescription although not raised by the defendant may nevertheless be passed upon by the court when its presence is plainly apparent on the face of the complaint itself. 10 At any rate, in view of our earlier finding that the deed of sale in controversy is not simply fraudulent but void ab initio or inexistent our ruling on this third issue would not have any material bearing on the overall outcome of this petition. The petitioner's action remains to be seasonably instituted. WHEREFORE, the petition is hereby GRANTED; the Decision dated October 21, 1985 and the Resolution dated January 24, 1986 of the Intermediate Appellate Court are hereby REVERSED and SET ASIDE; the deed of sale dated January 23, 1967 evidencing the sale of Lot No. 3201 to private respondent Hugo Portugal is declared VOID AB INITIO; and the private respondent is ORDERED to reconvey to petitioners the title over the said Lot No. 3201 which is now under TCT No. T-23539. Costs against the private respondent. SO ORDERED. Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur. Footnotes 1 Ejercito Bienvenido, J., Coquia, Jorge, Zosa, Mariano, and Castro- Bartolome, Floreliana JJ., concurring. 2 Rendered by Judge Pablo D. Suarez. 3 Decision of the Court of First Instance; Record on Appeal (to the Court of Appeals), Annex 'D' of Petition, 28. 4 Amerol v. Bagumbaran, No. L,33261, September 30,1987. 5 Decision of the Intermediate Appellate Court, 10, Rollo, 31. 6 People vs. Villeza, No. L-56113, January 31, 1984, 127 SCRA 349 (1984); People vs. Palong, No. L-33271, February 20, 1984, 127 SCRA 529 (1984); People vs. De Leon, No. L-

36443, March 8,1984,128 SCRA 121 (1984); People vs. Cabanit No. L-62030-31, October 4, 1985,139 SCRA 94 (1985). 7 People vs. Olalia Jr., No L-50669, March 12,1984,128 SCRA 139 (1984); People vs. Pelias Jones, No. L-61165, June 24, 1985, 137 SCRA 166 (1985). 8 People vs, Olalia, Jr. supra. 9 People vs. Escalante No. L,37147, August 22, 1984, 131 SCRA 237 (1984). 10 Garcia vs. Mathis, No. L-48577, September 30, 1980, 100 SCRA 250 (1980) citing: Philippine National Bank vs. Pacific Commission House, No. L-22675, March 28, 1969, 27 SCRA 766 (1969). Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-38972 September 28, 1987 PAZ GARCIA vda. de MAPA, * SEGUNDO MAPA, PRISCILLA M. MONZON, TERESA MAPA, IGNACIO SALAZAR AND JOSE SALAZAR, petitioners, vs. COURT OF APPEALS, LUIS HIDROSOLLO and TEODORO HIDROSOLLO, in their own behalf and as Joint Administrators of the testate estate of Ludovico Hidrosollo, and VICTORIA ** HIDROSOLLO, CORAZON HIDROSOLLO, ROSARIO HIDROSOLLO and MAGDALENA HIDROSOLLO, respondents.

FERNAN, J.: This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 40448-R entitled "Paz Garcia Vda. de Mapa, et al. vs. Luis Hidrosollo, et al." reversing the decision of the then Court of First Instance of Manila in Civil Case No. 59566, bearing the same title. The antecedent facts of the case are as follows: On January 16, 1965, petitioners Paz Garcia Vda. de Mapa, et al. instituted Civil Case No. 59566 before the then Court of First Instance of Manila to recover from the estate of the late Ludovico Hidrosollo, then the subject of Special Proceedings No. 52229 of the same court, the properties left by the late Concepcion Mapa de Hidrosollo. They claimed that the deceased Concepcion Mapa de Hidrosollo, in her last will and testament dated June 2, 1951 and admitted to probate in Special Proceedings No. 46015, instituted Ludovico Hidrosollo as universal heir to the residue of her estate with the obligation as trustee to hold the same in trust for petitioners herein who are nephews and nieces of the deceased Concepcion Mapa de Hidrosollo and for respondents Luis, Teodoro, Victorina, Corazon, Violets, *** Rosario and Magdalena, all surnamed Hidrosollo, who are nephews and nieces of Ludovico Hidrosollo; that Ludovico, however, died without fulfilling the obligation so that the estate of Concepcion formed part of the estate of Ludovico. They prayed in the alternative that judgment be rendered either a) declaring a trust to have been created in their favor and their cobeneficiaries over the residue of the estate of Concepcion Mapa de Hidrosollo and ordering therein defendants Luis and Teodoro Hidrosollo as administrators of the estate of Ludovico Hidrosollo, to deliver to them 6/13 of the said properties; or b) declaring the institution of Ludovico Hidrosollo as universal heir with a provision for fideicommissary substitution in their favor and their co- beneficiaries as null and void, declaring the residue of the estate of Concepcion Mapa de Hidrosollo to have been subject to intestate succession, declaring them to

be the sole heirs to said residue and ordering therein defendants Luis and Teodoro Hidrosollo to turn over to them the said properties. Respondents, in their Answer, denied the existence of a trust and alleged that Ludovico Hidrosollo, being the surviving spouse of the deceased Concepcion Mapa de Hidrosollo became the latter's universal heir when she died without descendants or ascendants; that as such universal heir, Ludovico stepped into the rights, title and claims of the deceased Concepcion Mapa de Hidrosollo, so that the controverted properties became part of his own estate subject of settlement in Special Proceedings No. 52229. They further claimed that Civil Case No. 59566 was barred by the order of the same court sitting as a probate court in Special Proceedings No. 52229 which denied petitioners' motion for intervention, and that petitioners, in having instituted Civil Case No. 59566 had forfeited any benefits under the will. In disposing of the case, the lower court ruled that a trust was created over the properties of petitioners' claim, however, respondents had forfeited their rights thereto; and that the denial of petitioners' motion to intervene in Special Proceedings No. 52229 did not deprive the petitioners of their right to institute a separate action to recover what pertains to them in their own right. Thus, the lower court ordered respondents Luis and Teodoro Hidrosollo or whoever of the rest of therein defendants had disposition of the properties to reconvey the same in favor of petitioners, to render an accounting of the income of said properties and to deliver to petitioners the net proceeds of such income. Respondents moved for a reconsideration of the decision, but were denied the relief sought. Their appeal to the Court of Appeals proved fruitful as the appellate court reversed the decision of the lower court and ruled instead that no trust nor fideicommissary substitution was created in Concepcion Mapa de Hidrosollo's Will and that petitioners' claim was barred by a final judgment, i.e., the order denying their motion to intervene in Special Proceedings No. 52229 from which no appeal was taken. Hence, this present recourse, petitioners maintaining that the will of Concepcion Mapa de Hidrosollo created a trust in their favor, not a fideicommissary substitution, and that the denial of their motion to intervene in Special Proceedings No. 52229 did not constitute a bar to Civil Case No. 59566. We find both contentions meritorious. A careful perusal and scrutiny of the pertinent provisions of Concepcion Mapa de Hidrosollo's Will reveal that she intended to create a trust in favor of both petitioners and private respondents. These provisions read: OCTAVA: Del resto de todos mis bienes parafernales y ganaciales, instituyo por mi unico y universal heredero, a mis esposo Ludovico Hidrosollo, a quien, al mismo tiempo, nombro como mi Abacea (sic) testamentario con relvacin (sic) de fianza. NOVENA: Encargo a mi esposo que en el caso de que me abreviva (sic), disponga de los bienes que le queden a favor de nuestros sobrinos, todos en partes iguales, a saber:
1. Jose Agustin Mapa

8. Victorina Hidrosollo 9. Corazon Hidrosollo 10. Luis Hidrosollo 11. Violeta Hidrosollo 12. Rosario

2. Segundo Mapa 3. Priscilla Mapa 4. Teresa Mapa 5. Ignacio

Salazar 6. Jose Salazar 7. Teodoro Hidrosollo

Hidrosollo 13. Magdalena Hidrosollo

DECIMA: Los beneficiarios nombrados en la clausula que antecede tendran la obligacion de entregar, cada ano a Salvador Genova, centras esta viva, doce cavanes de palay, con la condicion de que dicho Salvador ayude a Luis Hidrosollo en la recoleccion de cada cosecha. Dichos beneficiarios tendran iqualmente la obligacion de permitir al menciado Salvador Genova a tener su casa en nuestro solar en I laud, dentro de la poblacion de Dumarao, sin pago alguno. UNDECIMA: Encargo igualmente a mi esposo, como heredero universal mio que, si a su muerte, hubiese alguna dueda contraida por el durante su supervivencia sobre mi dicha deuda sea cargada a la parte que corresponda a sus sobrinos por consagunidad todos appellidados Hidrosollo, y no debera en mio alguno afectar la participacion de mis sobrinos, cuatro de ellos appellidados Mapa y dos appellidados Salazar. xxx xxx xxx DECIMA TERCERA: Es tambien mi voluntad la desque los bienes permanezcan en todo tiempo en comunidad, y que los beneficiarios se abstengan an absoluto de venderos o gravarlos en cualquier forma, en respeto a la memoria de sus tios que solo miran el proprio bien de sus dichos sobrinos. xxx xxx xxx DECIMA QUINTO: Encargo a mis sobrinos nombrados en esta testamento que la administracion de los bienes de la comunidad sea encomendada a Ignacio Salazar y a Luis Hidrosollo conjuntamente, y en el caso de que ambos o cualquiera de ellos no pudiere por cualquier motive, complier con el cometido, que dicha administracion se ponga en manos de los sobrinos, uno del groupo Mapa o Salazar y el otro del grupo Hidrosollo. (pp. 58-59, Rollo). Thus, under paragraph 8 of the Will, Ludovico Hidrosollo was instituted as sole and universal heir to the rest of the properties not covered by the legacies in the preceding paragraphs. Under paragraph 9, however, said Ludovico Hidrosollo was charged (encargo) with the obligation to deliver the rest of the estate in equal parts to the Mapa, Salazar and Hidrosollo nephews and nieces, who, as beneficiaries, were directed to deliver annually to one Salvador Genova, during his lifetime, 12 cavans of palay on the condition that the latter assist Luis Hidrosollo in each harvest. Said beneficiaries were likewise required to allow said Salvador Genova to maintain his house on a parcel of land situated at Ilaud, Municipality of Dumarao, without payment of any compensation (Par. 10 of the Will). In paragraph 11 of the same Will, the testatrix expressly provided that any obligations which her husband might incur after her death, shall be charged against the share corresponding to the Hidrosollo nephews and nieces and in no case shall the participation of her own nephews and nieces be charged with said obligations. She likewise expressed the wish that all her properties should always remain in co-ownership among her beneficiaries, who should abstain from selling or encumbering the same in any manner whatsoever (par. 13) and that the same be administered jointly by Ignacio Salazar and Luis Hidrosollo, or in case of their inability, by a nephew or niece from each of the two groups (par. 15). Although the word "trust" itself does not appear in the Will, the testatrix's intent to create one is nonetheless clearly demonstrated by the stipulations in her Will. In designating her husband Ludovico Hidrosollo as

universal and sole heir with the obligation to deliver the properties to petitioners and private respondents, she intended that the legal title should vest in him, and in significantly referring to petitioners and private respondents as "beneficiarios," she intended that the beneficial or equitable interest to these properties should repose in them. To our mind, these designations, coupled with the other provisions for co-ownership and joint administration of the properties, as well as the other conditions imposed by the testatrix effectively created a trust in favor of the parties over the properties adverted to in the Will. "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. " (Art. 1443, Civil Code of the Philippines). However, we must not lose sight of the fact that as the surviving spouse of the testatrix, Ludovico Hidrosollo was entitled to a legitime of one-half (1/2) of her hereditary estate. As that portion is reserved by law for the compulsory heirs, no burden, encumbrance, condition or substitution of any kind whatsoever may be imposed upon the legitime by the testator. (Art. 904, second paragraph, Ibid) The trust created by Concepcion Mapa should therefore be, as it is hereby declared to be effective only on the free portion of her estate, i.e., that portion not covered by Ludovico Hidrosollo's legitime. Anent the issue of res judicata, We rule that the order denying petitioners' motion for intervention in Special Proceedings No. 52229 did not constitute an adjudication on the merits and therefore could not operate as a bar to Civil Case No. 59566. The reason given by the probate court for denying petitioners 'motion for intervention is as follows: ... that there is no fideicommissary substitution because the testatrix did not impose upon her spouse the absolute obligation to deliver the property to said petitioners. When the testatrix provided in her will that her husband dispose of in favor of the petitioners his remaining properties it only shows that he was not absolutely obligated to preserve and transmit to the petitioners the properties by him acquired under the will of his deceased wife. If the testatrix intended to entrust the property to her husband with the obligation to preserve and to transmit the remaining properties to the petitioners, she could have said so in an express manner. However, even assuming that Clause 9 could be interpreted to he a fideicommissary substitution, such substitution can not be given effect in the face of an opposition and in view of Art, 863 of the Civil Code of the Philippines, requiring that substitution must not go beyond one degree from the heir originally instituted. It will be noticed that the second heirs instituted are merely "sobrinos" of the fiduciary or first heir (surviving spouse). Upon these facts, the Court is of the opinion that the movants for intervention do not have a legal interest in the estate under the present administration. (pp. 50-51, Record on Appeal, p. 101, Rollo). Since the denial order was anchored primarily on the nonexistence of, or the ineffectivity of a fideicommissary substitution, and did not resolve the issue of trust alleged by petitioners, said order cannot be considered an adjudication on the merits of petitioners' claim against the estate. WHEREFORE, the decision of the Court of Appeals in CA G.R. No. 40448-A is hereby reversed. Private respondents Luis and Teodoro Hidrosollo or their successors as administrators of the estate of Ludovico Hidrosollo are hereby ordered to deliver to petitioners their lawful shares in the trust constituted over the free portion of the estate of Concepcion Mapa. Said Luis and Teodoro Hidrosollo or their successors are further ordered to render an accounting of the income of the properties pertaining to petitioners and to deliver to the latter the net proceeds of such income. No pronouncement as to costs. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

Footnotes * Petitioner Paz Garcia vda. de Mapa died during the pendency of the petition, survived by her co-petitioners Segundo Mapa, Priscilla M. Monzon and Teresa Mapa. ** Should be Victorina. *** Her name does not appear in the title of the petition as one of the respondents, but she is a defendant in the original complaint as well as a defendant-appellee in the appellate court. The omission might have been an oversight Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 148180 December 19, 2001

CATALINA VDA. DE RETUERTO AS SURVIVING WIDOW OF THE LATE PANFILO RETUERTO; LORETO RETUERTO, REPRESENTED BY HIS SURVIVING HEIRS NAMELY: ROMEO RETUERTO; ANTONIA RETUERTO, NARCISA RETUERTO, CORAZON RETUERTO, AND PATROCINIA RETUERTO; GAUDENCIO, FRANCISCA, CRUZ, FRANCISCO, EFIGENIA AND GUILLERMO, ALL SURNAMED RETUERTO; AND SPOUSES JOSE AND ROSA GESALEM, petitioners, vs. ANGELO P. BARZ AND MERLINDA BARZ, respondents. KAPUNAN, J.: This is a petition for review on certiorari of the decision of the Court of Appeals, dated December 29, 2000 in CA-GR CV No. 59975, affirming the decision of the Regional Trial Court, Branch 55, of Mandaue City in a case for quieting of title with damages filed by herein respondents Angelo and Melinda Barz against petitioners, as surviving heirs of the late Panfilo Retuerto. The RTC's decision declared respondents as the absolute owners of the lot subject of the litigation. The facts as found by the Court of Appeals and admitted by herein petitioners are as follows: During the period from September to October, 1911, a survey was made of a parcel of land, located in Mandaue, Cebu, identified as "Lot No. 896" of Plan No. II-5121, a part of the "Hacienda de Mandaue" occupied by the Spouses Esteban Perez and Lorenza Sanchez. The survey was amended during the period from November, 1926 to March 21, 1927, identified as Amendment No. 2, Ap-6243, with an area of 20,486 square meters, bearing the following boundaries: "Northwest Southeast Southwest Northwest Lots 1251 and 1252 (Remigio Judilla and Manuel Judilla); Lot 894 (Gregorio Perez); Lot 895; Lots 897 and 898 (Juan Perez)"

When the Spouses Esteban Perez and Lorenza Sanchez died intestate, their rights over the property were inherited by their daughter, Juana Perez, married to Numeriano Barz, who then declared the properly, for taxation purposes, under her name, under Tax Declaration No. 21969, but with an area of only 13,160 square meters, more or less, bounded on the north, by a piece of land, under the name of Pampila (sic) Retuerto, as follows:

North South East West

Pampila Retuerto Vidal Judilla and Catalina Ceniza Paula Perez Felipe Berdijo

On April 16, 1929, Juana Perez, widow of Numeriano Barz, executed a deed confirming her execution of a "Deed of Absolute Sale," in favor of Panfilo Retuerto, married to Catalina Ceniza, over a parcel of land, located in Barrio Pagsabungan, Mandaue, Cebu, identified as Lot No. 896-A, a portion of the "Hacienda de Mandaue," Cebu, with an approximate area of 2,505 square meters, described as follows: On the North On the East On the South On the West Remegio Judilla, measuring 29.72 sq.m. Paula Perez, measuring 85.35 sq.m. Juana Perez, measuring 29.72 sq.m. Teofista Perez, measuring 84.32 sq.m.

However, on April 26, 1935, Panfilo Retuerto purchased the aforementioned parcel of land, this time, from the Archbishop of Cebu, under a "Deed of Absolute Sale," for the price of P150.00 (Exhibit "4") and declared the same for taxation purposes under Tax Declaration No. 34652, effective 1937 (Exhibit "2"). In the meantime, the San Carlos Seminary in Cebu filed a Petition with the then Juzgado de Primera Instancia in Cebu (now the Regional Trial Court) entitled and docketed "El Seminario de San Carlos de Cebu," Solicitante, Expediente No. 3, G.L.R.O. Record 4030 for the issuance of titles over several parcels of land in "Hacienda de Mandaue," including Lot No. 896-A, earlier purchased by Panfilo Retuerto from Juana Perez and from the Archbishop of Cebu. In August, 1937, the Court promulgated a Decision finding and declaring Panfilo Retuerto the owner of the said lot (Exhibit "9"). On July 22, 1940, the Court issued an Order directing the General del Registro de Terrenos (later the Land Registration Commission) for the issuance of the appropriate Decree in favor of Panfilo Retuerto over the said parcel of land. However, no such Decree was issued as directed by the Court because, by December 8, 1941, the Second World War ensued in the Pacific. However, Panfilo Retuerto failed to secure the appropriate decree after the war. Two (2) decades elapsed. In the meantime, Juana Perez Barz died intestate and was survived by her son, Pedro Barz, who filed an application, with the then Court of First Instance of Cebu, sometime in 1966, for the confirmation of his title over Lot 896 of Plan No. II-5121, entitled and docketed as "IN THE MATTER OF THE REGISTRATION OF TITLE, Pedro Barz, Applicant," Land Registration Case No. N-529, LRC Record No. N24736. The Spouses Panfilo Retuerto did not file any opposition to the application. After appropriate proceedings, the Court promulgated a decision in favor of Pedro Barz declaring him the lawful owner of the said property. On August 18, 1966, Decree No. N-110287 was issued over the property, in favor of Pedro Barz, on the basis of which Original Certificate of Title No. 521 was issued, on November 13, 1968, by the Register of Deeds over the property (Exhibit "A"). The property was then subdivided into four (4) lots namely, Lot 896-A, with an area of 507 square meters (Exhibit "B-5"), Lot 896-B, with an area of 2,142 square meters (Exhibit "B-6"), Lot 896-C, with an area of 5,580 square meters (Exhibit "B-7"), and Lot 896-D, with an area of 12,253 square meters (Exhibit B-8"). On October 18, 1967, Pedro Barz executed a "Deed of Absolute Sale" over subdivision Lot 896C in favor of Jose Gesalem for P7,000.00. On the basis of the said deed, Original Certificate of Title was partially cancelled and, in lieu thereof, Transfer Certificate of Title No. 7509 was issued over said lot in favor of the vendee. In the interim, Panfilo Retuerto declared the property covered by Tax Declaration No. 34652, under his name, under Tax Declaration No. 54960, effective 1974 (Exhibit "3"). Subsequently, Panfilo Retuerto died intestate, on December 29, 1975, and was survived by his widow, Catalina Retuerto and their children, namely Gaudencio Retuerto, Loreto Retuerto, Francisca Retuerto, Francisco Retuerto,

Efigenia Retuerto and Guillerma Retuerto. The said heirs executed, on January 4, 1976, "Extrajudicial Settlement and Sale of the Estate of Panfilo Retuerto" adjudicating unto themselves, as owners, the said property and deeding the same unto Loreto Retuerto a portion thereof, with an area of 1,703 square meters, and the rest of the property, with an area of 440 square meters, to Efigenia Retuerto, as follows: "FOR OR TO LORETO RETUERTO: 'a portion of the above described parcel of land containing an area of ONE THOUSAND SEVEN HUNDRED TWO (1,702) SQUARE METERS and bounded by the following: on the Northeast by Pagsabungan Road; on the Southeast by Lot 896; on the Northwest by Lot 897; and on the Southwest by the portion sold to Efigenia Retuerto; FOR OR TO EFIGENIA RETUERTO: 'a portion of the parcel of land described in paragraph no. 7 hereof containing an area of FOUR HUNDRED FORTY (440) SQUARE METERS and bounded as follows: on the Northeast by the portion sold to Loreto Retuerto; on the Southeast by Lot 896; on the Northwest by Lot 897 and on the Southwest by Lot 896." (at page 38, Records) Loreto Retuerto and Efigenia Retuerto then declared the property, for taxation purposes, under their names, under Tax Declaration No. 69084, effective 1976 (Exhibit "7"). The property covered by Tax Declaration No. 69084 was subdivided into two (2) lots, one with an area of 440 square meters, and the other, with an area of 1,702 square meters. Efigenia Retuerto declared the property, with an area of 440 square meters, under her name, under Tax Declaration No. 69083, effective 1976 (Exhibit "7A") while Loreto Retuerto declared the property, with an area of 1,702 square meters, for taxation purposes, under his name, under Tax Declaration No. 01298 effective 1976. (Exhibit "7-B"). In the meantime, Pedro Barz died intestate and was survived by his heirs, Angelo P. Barz and Merlinda Barz. Loreto Retuerto likewise, died intestate and was survived by his heirs, namely, Romeo Retuerto, Antonia Retuerto, Narcisa Retuerto, Corazon Retuerto and Patrocinia Retuerto. Ominously, the heirs of Panfilo Retuerto claimed ownership over subdivision Lot 896-B and a part of subdivision Lot 896-A, covered by Original Certificate of Title No. 521 under the name of Teofilo Barz. As it was, subdivision Lot 896-B was subdivided by the heirs of Panfilo Retuerto, one of which subdivision lots, with an area of 440 square meters, was forthwith sold to the Spouses Jose Gesalem and Rosa Gesalem. When apprised of the aforementioned events, Angelo Barz and Merlinda Barz, the heirs of Teofilo Barz, and the heirs of Panfilo Retuerto, including the Spouses Jose Gesalem had a confrontation during which the Spouses Jose Gesalem admitted having purchased a portion of subdivision Lot 896-B with an area of 440 square meters. On September 5, 1989, Angelo P. Barz and Merlinda Barz filed a complaint against Catalina Retuerto and the other heirs of Panfilo Retuerto, including Loreto, who the Plaintiffs believed, was still alive, and the Spouses Jose Gesalem, with the Regional Trial Court of Mandaue for "Quieting of Title, Damages and Attorney's Fees." The Plaintiffs alleged, inter alia, that subdivision Lots 896-A and 896-B were portions of Lot 896 subject of LRC 529 and covered by Original Certificate of Title No. 521 under the name of Teofilo Barz after whose death, the Plaintiffs inherited the property, despite which the Defendants claimed ownership over Lots 896-A and 896-B covered by Original Certificate of Title No. 521. x x x Romeo Retuerto, Antonia Retuerto, Narcisa Retuerto, Corazon Retuerto, Patrocinia Retuerto, the heirs of Loreto Retuerto, filed an Answer to the complaint alleging, inter alia, by way of affirmative defense, that their father, Loreto Retuerto, was already dead and was survived, by them as his heirs; what was sold to the Defendants Spouses Jose Gesalem was a portion of Lot 896, with an area of 440 square meters, which was conveyed to Efigenia Retuerto and not that portion of Lot 896-B deeded to Loreto Retuerto under the "Extrajudicial Settlement of Real Property of Panfilo Retuerto, who was the lawful owner of the said property, "that they were not aware of LRC Case No. 529 and/or that the property, sold by Juana Perez to Panfilo Retuerto, had been included in Original Certificate of Title No. 521 under the name of Teofilo Barz. x x x

In their Answer to the complaint, the Defendants Spouses Jose Gesalem averred, inter alia, by way of affirmative defense, that they purchased a portion of subdivision Lot 896-B, with an area of 440 square meters, more or less; Lot 896-B (formerly Lot 896-A) which had been sold by Juana Perez Barz to Panfilo Retuerto had been the subject of LRC Case No. 3 wherein Panfilo Retuerto was declared the lawful owner of the property; that the inclusion of the subject property in Original Certificate of Title No. 521 issued to and under the name of Teofilo Barz did not vest ownership over the title in favor of Pedro Barz but constituted the latter merely as a trustee under a constructive trust with the concomitant obligation to convey the said property to the Defendants Heirs of Panfilo Retuerto and to the Defendants Spouses, as vendees of the said property; Plaintiffs' action was barred by laches. x x x On April 3, 1997, the Regional Trial Court of Mandaue City promulgated its decision declaring herein respondents as the absolute owners in fee simple of Lots 896-A and Lot 896-B; declaring the documents adduced by herein petitioners unenforceable and ineffective against OCT No. 521; nullifying the deed of sale between herein petitioners and the spouses Gesalem; and ordering herein petitioners to vacate the premises of Lots 896-A and 896-B.1 The Court of Appeals, on December 29, 2000, affirmed the decision of the trial court except as to the award of attorney's fees which was deleted.2 Hence, this appeal by the heirs of Panfilo Retuerto and the spouses Gesalem, assigning the following errors: I The Court of Appeals gravely erred in concluding that petitioners had only ten years from the date of issuance of OCT No. 521, which erroneously included their Lot No. 896-A, within which to ask for its reconveyance, in the light of their judicially declared and recognized possession thereof since time immemorial. II The Court of Appeals erred in not finding that it was respondents' right to question petitioners' ownership and possession over the subject property that has been lost thru laches. III The Court of Appeals erred in concluding that petitioners could not ventilate their claim of title over the subject property by way of affirmative defense as this would constitute collateral attack on respondents' original certificate of title. We do not find merit in the petition. Both the Court of Appeals and the Regional Trial Court correctly applied the principles of the Torrens system of land registration to the present case. It is a fundamental principle in land registration that a certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. 3 Such indefeasibility commences after the lapse or expiration of one year from the date of entry of the decree of registration.4 The act of registration is considered a constructive notice to all persons5 respecting title to property; hence, after the lapse of one year, title to the property can no longer be contested. This system was so effected in order to quiet title to land. Records show that in 1966, an application for confirmation of title over Lot 896 was filed by Pedro Barz, herein respondents' predecessor-in-interest, with the Court of First Instance of Cebu docketed as LRC Case No. N529. Thereafter, a decision declaring Pedro Barz as the lawful owner of the said property was rendered by the court and consequently, an original certificate of title, OCT No. 521, was issued in his name on November 13, 1968. Thus, after the lapse of one year, which was November 13, 1969, private respondent's title to the property already became indefeasible and can no longer be controverted.

Petitioners contest such title and claim that as early as 1929, their predecessor-in-interest, Panfilo Retuerto, bought the property from Juana Perez Barz and that in 1937, the then Juzgado de Primera Instancia de Cebu adjudicated said property to Panfilo Retuerto in GLRO Record No. 4030. However, nowhere has it been shown that a decree of registration was ever issued affecting the property The alleged earlier sale of the subject property by petitioners' predecessor-in-interest to respondents' predecessor-in-interest was not registered. Also, despite the alleged decision in 1937 by the Juzgado de Primero Justancia in favor of Panfilo Retuerto, the latter failed to intervene and introduce the said decision in the petition for confirmation of title filed by Pedro Barz in 1966. Also, since the issuance of OCT No. 521 in the name of Pedro Barz in 1968, no action had been taken by petitioners directly attacking said title and seeking reconveyance of the property. It was only sometime in 1989 or twenty-one (21) years later, when they were finally impleaded by private respondents in an action for quieting of title that petitioners actively asserted ownership of the subject property in their answer to the complaint. Petitioners insist that despite the indefeasibility of private respondents' title, they can still maintain an action for reconveyance of the said property on the ground of fraud pursuant to Section 32 of Presidential Decree No. 1529. It is alleged that respondents' predecessor-in-interest, Pedro Barz misrepresented with the land registration court that he inherited the whole of Lot 896 when in truth and in fact a portion thereof designated as Lot 896-A had already been disposed of to Panfilo Retuerto; hence, a constructive trust was created over the property for and in behalf of Panfilo Retuerto and his heirs. The contention is bereft of merit. Constructive trusts are created in equity to prevent unjust enrichment, arising 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.6 Petitioners failed to substantiate their allegation that their predecessor-in-interest had acquired any legal right to the property subject of the present controversy. Nor had they adduced any evidence to show that the certificate of title of Pedro Barz was obtained through fraud. Even assuming arguendo that Pedro Barz acquired title to the property through mistake or fraud, petitioners are nonetheless barred from filing their claim of ownership. An action for reconveyance based on an implied or constructive trust prescribes within ten years from the time of its creation or upon the alleged fraudulent registration of the property.7 Since registration of real property is considered a constructive notice to all persons, then the ten-year prescriptive period is reckoned from the time of such registering, filing or entering.8 Thus, petitioners should have filed an action for reconveyance within ten years from the issuance of OCT No. 521 in November 16, 1968. This, they failed to do so. Relying on the case of Heirs of Jose Olviga vs. Court of Appeals,9 petitioners argue that the ten-year period for filing an action for reconveyance of property arising from an implied or constructive trust applies only when the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner is in actual possession of the property, the action to seek reconveyance or to quiet title does not prescribe. Petitioners claim that they and their predecessors-in-interest were the ones in actual possession of the subject property alleging that in the survey made by Geodetic Engineer Leopoldo Tuastumban, it was reported that there were "nine houses and one rattan shop owned by the heirs of Loreto Retuerto constructed thereon." 10 Again, the contention does not persuade us. In the 1966 decision of the Land Registration Court in LRC No. 529, it was found that Pedro Barz, private respondents' predecessor-in-interest, was the lawful owner of the subject property as he and his predecessors-in-interest had been in peaceful, continuous and open possession thereof in the concept of owner since 1915. Said court declared that: Lot 896: This lot is covered by Tax Declaration No. 21969 in the name of Juana Perez, Exh. "O-Pedro Barz," containing an area of 20,486 sq. meters. It originally belonged to the spouses Esteban Perez and Lorenza Sanchez. After their death, the same was inherited by Juana Perez who died in 1942 and was succeeded by her lone heir son Pedro Barz, Filipino citizen, married to Teofila Pedroza and resident of Mandaue, Cebu. Juana Perez owned and possessed this lot since 1915 up to her death in 1942 when Pedro Barz reached the age of consciousness or when he was around 8 years old; that her possession had been peaceful, continuous, open and in concept of owner. From 1942 up to the present, the possession of Pedro Barz over this property had been likewise peaceful, continuous and

in concept of owner as he was religious in the payment of real estate taxes, as shown in Exh. "N-2 Pedro Barz."11 As previously stated, no action for reconveyance has been filed by herein petitioners. They interposed their claim of ownership for the first time in their Answer and by way of Affirmative Defenses to the complaint for quieting of title filed by herein respondents in 1989. This cannot be allowed. Under Section 48 of PD 1529 or the Property Registration Decree, "a certificate of title cannot be subject to collateral attack; it cannot be altered, modified or cancelled except in a direct proceeding."12 The issue of the validity of title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly instituted for that purpose. 13 WHEREFORE, the Decision of the Court of Appeals dated December 29, 2000 in CA-GR CV No. 59975 is hereby AFFIRMED. SO ORDERED. Davide, Jr., C .J ., Pardo and Ynares-Santiago, JJ ., concur. Puno, J ., on official leave.

Footnotes
1

Dispositive portion of the Court of Appeals' decision, pp. 40-41 of Rollo.

Penned by Hon. Justice Romeo Callejo, Sr. and concurred in by Hon. Justices Martin Villarama, Jr. and Juan Enriquez, Jr.
3

Brusas vs. Court of Appeals, 313 SCRA 176 (1999). David vs. Malay, 318 SCRA 711 (1999); Eduarte vs. Court of Appeals, 311 SCRA 18 (1999). Serna vs. Court of Appeals, 308 SCRA 527 (1999). Marquez vs. Court of Appeals, 300 SCRA 653 (1998). Serna vs. Court of Appeals, supra note 5; Manangan vs. delos Reyes, 308 SCRA 139 (1999). Ibid. 227 SCRA 330 (1999). Court of Appeals' decision, p. 7; Rollo, p. 40. Id., at 15, Id., at 48. Section 48, P. D. 1529 (Property Registration Decree). Eduarte vs. Court of Appeals, supra note 4; Lagrosa vs. Court of Appeals, 312 SCRA 298 (1999).

10

11

12

13

EN BANC

[G.R. No. 144516. February 11, 2004]

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COMMISSION ON AUDIT, respondent. DECISION
CARPIO, J.:

The Case In this special civil action for certiorari,[1] the Development Bank of the Philippines (DBP) seeks to set aside COA Decision No. 98-403[2]dated 6 October 1998 (COA Decision) and COA Resolution No. 2000-212[3] dated 1 August 2000 issued by the Commission on Audit (COA). The COA affirmed Audit Observation Memorandum (AOM) No. 93-2,[4] which disallowed in audit the dividends distributed under the Special Loan Program (SLP) to the members of the DBP Gratuity Plan.

Antecedent Facts The DBP is a government financial institution with an original charter, Executive Order No. 81,[5] as amended by Republic Act No. 8523[6](DBP Charter). The COA is a constitutional body with the mandate to examine and audit all government instrumentalities and investment of public funds.[7] The COA Decision sets forth the undisputed facts of this case as follows:

xxx [O]n February 20, 1980, the Development Bank of the Philippines (DBP) Board of Governors adopted Resolution No. 794 creating the DBP Gratuity Plan and authorizing the setting up of a retirement fund to cover the benefits due to DBP retiring officials and employees under Commonwealth Act No. 186, as amended. The Gratuity Plan was made effective on June 17, 1967 and covered all employees of the Bank as of May 31, 1977. On February 26, 1980, a Trust Indenture was entered into by and between the DBP and the Board of Trustees of the Gratuity Plan Fund, vesting in the latter the control and administration of the Fund. The trustee, subsequently, appointed the DBP Trust Services Department (DBP-TSD) as the investment manager thru an Investment Management Agreement, with the end in view of making the income and principal of the Fund sufficient to meet the liabilities of DBP under the Gratuity Plan.

In 1983, the Bank established a Special Loan Program availed thru the facilities of the DBP Provident Fund and funded by placements from the Gratuity Plan Fund. This Special Loan Program was adopted as part of the benefit program of the Bank to provide financial assistance to qualified members to enhance and protect the value of their gratuity benefits because Philippine retirement laws and the Gratuity Plan do not allow partial payment of retirement benefits. The program was suspended in 1986 but was revived in 1991 thru DBP Board Resolution No. 066 dated January 5, 1991. Under the Special Loan Program, a prospective retiree is allowed the option to utilize in the form of a loan a portion of his outstanding equity in the gratuity fund and to invest it in a profitable investment or undertaking. The earnings of the investment shall then be applied to pay for the interest due on the gratuity loan which was initially set at 9% per annum subject to the minimum investment rate resulting from the updated actuarial study. The excess or balance of the interest earnings shall then be distributed to the investor-members. Pursuant to the investment scheme, DBP-TSD paid to the investor-members a total of P11,626,414.25 representing the net earnings of the investments for the years 1991 and 1992. The payments were disallowed by the Auditor under Audit Observation Memorandum No. 93-2 dated March 1, 1993, on the ground that the distribution of income of the Gratuity Plan Fund (GPF) to future retirees of DBP is irregular and constituted the use of public funds for private purposes which is specifically proscribed under Section 4 of P.D. 1445.
[8]

AOM No. 93-2 did not question the authority of the Bank to set-up the [Gratuity Plan] Fund and have it invested in the Trust Services Department of the Bank. [9] Apart from requiring the recipients of the P11,626,414.25 to refund their dividends, the Auditor recommended that the DBP record in its books as miscellaneous income the income of the Gratuity Plan Fund (Fund). The Auditor reasoned that the Fund is still owned by the Bank, the Board of Trustees is a mere administrator of the Fund in the same way that the Trust Services Department where the fund was invested was a mere investor and neither can the employees, who have still an inchoate interest [i]n the Fund be considered as rightful owner of the Fund.[10] In a letter dated 29 July 1996,[11] former DBP Chairman Alfredo C. Antonio requested then COA Chairman Celso D. Gangan to reconsider AOM No. 93-2. Chairman Antonio alleged that the express trust created for the benefit of qualified DBP employees under the Trust Agreement[12] (Agreement) dated 26 February 1980 gave the Fund a separate legal personality. The Agreement transferred legal title over the Fund to the Board of Trustees and all earnings of the Fund accrue only to the Fund. Thus, Chairman Antonio contended that the income of the Fund is not the income of DBP. Chairman Antonio also asked COA to lift the disallowance of the P11,626,414.25 distributed as dividends under the SLP on the ground that the latter was simply a

normal loan transaction. He compared the SLP to loans granted by other gratuity and retirement funds, like the GSIS, SSS and DBP Provident Fund.

The Ruling of the Commission on Audit On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:

The Gratuity Plan Fund is supposed to be accorded separate personality under the administration of the Board of Trustees but that concept has been effectively eliminated when the Special Loan Program was adopted. xxx The Special Loan Program earns for the GPF an interest of 9% per annum, subject to adjustment after actuarial valuation. The investment scheme managed by the TSD accumulated more than that as evidenced by the payment of P4,568,971.84 in 1991 and P7,057,442,41 in 1992, to the member-borrowers. In effect, the program is grossly disadvantageous to the government because it deprived the GPF of higher investment earnings by the unwarranted entanglement of its resources under the loan program in the guise of giving financial assistance to the availing employees. xxx Retirement benefits may only be availed of upon retirement. It can only be demanded and enjoyed when the employee shall have met the last requisite, that is, actual retirement under the Gratuity Plan. During employment, the prospective retiree shall only have an inchoate right over the benefits. There can be no partial payment or enjoyment of the benefits, in whatever guise, before actual retirement. xxx PREMISES CONSIDERED, the instant request for reconsideration of the disallowance amounting to P11,626,414.25 has to be, as it is hereby, denied.

[13]

In its Resolution of 1 August 2000, the COA also denied DBPs second motion for reconsideration. Citing the Courts ruling in Conte v. COA,[14] the COA concluded that the SLP was actually a supplementary retirement benefit in the guise of financial assistance, thus:

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

This Commission may now draw authority from the case of Conte, et al. v. Commission on Audit (264 SCRA 19 [1996]) where the Supreme Court declared that financial assistance granted to retiring employees constitute supplementary retirement or pension benefits. It was there stated: xxx Said Sec. 28 (b) as amended by R.A. 4968 in no uncertain terms bars the creation of any insurance or retirement plan other than the GSIS for government officers and employees, in order to prevent the undue and iniquitous proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is therefore, invalid, void and of no effect. To ignore this and rule otherwise would be tantamount to permitting every other government office or agency to put up its own supplementary retirement benefit plan under the guise of such financial assistance.
[15]

Hence, the instant petition filed by DBP.

The Issues The DBP invokes justice and equity on behalf of its employees because of prevailing economic conditions. The DBP reiterates that the income of the Fund should be treated and recorded as separate from the income of DBP itself, and charges that COA committed grave abuse of discretion:

1. IN CONCLUDING THAT THE ADOPTION OF THE SPECIAL LOAN PROGRAM CONSTITUTES A CIRCUMVENTION OF PHILIPPINE RETIREMENT LAWS; 2. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT; 3. IN CONCLUDING THAT THE SPECIAL LOAN PROGRAM CONSTITUTES A SUPPLEMENTARY RETIREMENT BENEFIT.
[16]

The Office of the Solicitor General (OSG), arguing on behalf of the COA, questions the standing of the DBP to file the instant petition. The OSG claims that the trustees of the Fund or the DBP employees themselves should pursue this certiorari proceeding since they would be the ones to return the dividends and not DBP. The central issues for resolution are: (1) whether DBP has the requisite standing to file the instant petition for certiorari; (2) whether the income of the Fund is income of DBP; and (3) whether the distribution of dividends under the SLP is valid.

The Ruling of the Court The petition is partly meritorious.

The standing of DBP to file this petition for certiorari As DBP correctly argued, the COA en banc implicitly recognized DBPs standing when it ruled on DBPs request for reconsideration from AOM No. 93-2 and motion for reconsideration from the Decision of 6 October 1998. The supposed lack of standing of the DBP was not even an issue in the COA Decision or in the Resolution of 1 August 2000. The OSG nevertheless contends that the DBP cannot question the decisions of the COA en banc since DBP is a government instrumentality. Citing Section 2, Article IX-D of the Constitution,[17] the OSG argued that:

Petitioner may ask the lifting of the disallowance by COA, since COA had not yet made a definitive and final ruling on the matter in issue. But after COA denied with finality the motion for reconsideration of petitioner, petitioner, being a government instrumentality, should accept COAs ruling and leave the matter of questioning COAs decision with the concerned investor-members.
[18]

These arguments do not persuade us. Section 2, Article IX-D of the Constitution does not bar government instrumentalities from questioning decisions of the COA. Government agencies and government-owned and controlled corporations have long resorted to petitions for certiorari to question rulings of the COA.[19]These government entities filed their petitions with this Court pursuant to Section 7, Article IX of the Constitution, which mandates that aggrieved parties may bring decisions of the COA to the Court on certiorari.[20] Likewise, the Government Auditing Code expressly provides that a government agency aggrieved by a COA decision, order or ruling may raise the controversy to the Supreme Court on certiorari in the manner provided by law and the Rules of Court.[21] Rule 64 of the Rules of Court now embodies this procedure, to wit:

SEC 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided.
The novel theory advanced by the OSG would necessarily require persons not parties to the present case the DBP employees who are members of the Plan or the trustees of the Fund to avail of certiorari under Rule 65. The petition for certiorari under Rule 65, however, is not available to any person who feels injured by the decision of a tribunal, board or officer exercising judicial or quasi-judicial

functions. The person aggrieved under Section 1 of Rule 65 who can avail of the special civil action of certiorari pertains only to one who was a party in the proceedings before the court a quo,[22] or in this case, before the COA. To hold otherwise would open the courts to numerous and endless litigations.[23] Since DBP was the sole party in the proceedings before the COA, DBP is the proper party to avail of the remedy of certiorari. The real party in interest who stands to benefit or suffer from the judgment in the suit must prosecute or defend an action.[24] We have held that interest means material interest, an interest in issue that the decision will affect, as distinguished from mere interest in the question involved, or a mere incidental interest.[25] As a party to the Agreement and a trustor of the Fund, DBP has a material interest in the implementation of the Agreement, and in the operation of the Gratuity Plan and the Fund as prescribed in the Agreement. The DBP also possesses a real interest in upholding the legitimacy of the policies and programs approved by its Board of Directors for the benefit of DBP employees. This includes the SLP and its implementing rules, which the DBP Board of Directors confirmed.

The income of the Gratuity Plan Fund The COA alleges that DBP is the actual owner of the Fund and its income, on the following grounds: (1) DBP made the contributions to the Fund; (2) the trustees of the Fund are merely administrators; and (3) DBP employees only have an inchoate right to the Fund. The DBP counters that the Fund is the subject of a trust, and that the Agreement transferred legal title over the Fund to the trustees. The income of the Fund does not accrue to DBP. Thus, such income should not be recorded in DBPs books of account.[26] A trust is a fiduciary relationship with respect to property which 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.[27] A trust is either express or implied. Express trusts are those which the direct and positive acts of the parties create, by some writing or deed, or will, or by words evincing an intention to create a trust. [28] In the present case, the DBP Board of Governors (now Board of Directors) Resolution No. 794 and the Agreement executed by former DBP Chairman Rafael Sison and the trustees of the Plan created an express trust, specifically, an employees trust. An employees trust is a trust maintained by an employer to provide retirement, pension or other benefits to its employees.[29] It is a separate taxable entity[30] established for the exclusive benefit of the employees.[31] Resolution No. 794 shows that DBP intended to establish a trust fund to cover the retirement benefits of certain employees under Republic Act No. 1616 [32] (RA 1616). The principal and income of the Fund would be separate and distinct from the funds of DBP. We quote the salient portions of Resolution No. 794, as follows:

2. Trust Agreement designed for in-house trustees of three (3) to be appointed by the Board of Governors and vested with control and administration of the funds appropriated annually by the Board to be invested in selective investments so that the income and principal of said contributions would be sufficient to meet the required payments of benefits as officials and employees of the Bank retire under the Gratuity Plan; xxx The proposed funding of the gratuity plan has decided advantages on the part of the Bank over the present procedure, where the Bank provides payment only when an employee retires or on pay as you go basis: 1. It is a definite written program, permanent and continuing whereby the Bank provides contributions to a separate trust fund, which shall be exclusively used to meet its liabilities to retiring officials and employees; and 2. Since the gratuity plan will be tax qualified under the National Internal Revenue Code and RA 4917, the Banks periodic contributions thereto shall be deductible for tax purposes and the earnings therefrom tax free. (Emphasis supplied)
[33]

In a trust, one person has an equitable ownership in the property while another person owns 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.[34] A person who establishes a trust is the trustor. One in whom confidence is reposed as regards property for the benefit of another is the trustee. The person for whose benefit the trust is created is the beneficiary.[35] In the present case, DBP, as the trustor, vested in the trustees of the Fund legal title over the Fund as well as control over the investment of the money and assets of the Fund. The powers and duties granted to the trustees of the Fund under the Agreement were plainly more than just administrative, to wit:

1. The BANK hereby vests the control and administration of the Fund in the TRUSTEES for the accomplishment of the purposes for which said Fund is intended in defraying the benefits of the PLAN in accordance with its provisions, and the TRUSTEES hereby accept the trust xxx 2. The TRUSTEES shall receive and hold legal title to the money and/or property comprising the Fund, and shall hold the same in trust for its beneficiaries, in accordance with, and for the uses and purposes stated in the provisions of the PLAN. 3. Without in any sense limiting the general powers of management and administration given to TRUSTEES by our laws and as supplementary thereto, the

TRUSTEES shall manage, administer, and maintain the Fund with full power and authority: xxx b. To invest and reinvest at any time all or any part of the Fund in any real estate (situated within the Philippines), housing project, stocks, bonds, mortgages, notes, other securities or property which the said TRUSTEES may deem safe and proper, and to collect and receive all income and profits existing therefrom; To keep and maintain accurate books of account and/or records of the Fund xxx. To pay all costs, expenses, and charges incurred in connection with the administration, preservation, maintenance and protection of the Fund xxx to employ or appoint such agents or employees xxx. To promulgate, from time to time, such rules not inconsistent with the conditions of this Agreement xxx. To do all acts which, in their judgment, are needful or desirable for the proper and advantageous control and management of the Fundxxx. (Emphasis supplied)
[36]

c. d.

e. f.

Clearly, the trustees received and collected any income and profit derived from the Fund, and they maintained separate books of account for this purpose. The principal and income of the Fund will not revert to DBP even if the trust is subsequently modified or terminated. The Agreement states that the principal and income must be used to satisfy all of the liabilities to the beneficiary officials and employees under the Gratuity Plan, as follows:

5.

The BANK reserves the right at any time and from time to time (1) to modify or amend in whole or in part by written directions to the TRUSTEES, any and all of the provisions of this Trust Agreement, or (2) to terminate this Trust Agreement upon thirty (30) days prior notice in writing to the TRUSTEES; provided, however, that no modification or amendment which affects the rights, duties, or responsibilities of the TRUSTEES may be made without the TRUSTEES consent; and provided, that such termination, modification, or amendment prior to the satisfaction of all liabilities with respect to eligible employees and their beneficiaries, does not permit any part of the corpus or income of the Fund to be used for, or diverted to, purposes other than for

the exclusive benefit of eligible employees and workers as provided for in the PLAN. In the event of termination of this Trust Agreement, all cash, securities, and other property then constituting the Fund less any amounts constituting accrued benefits to the eligible employees, charges and expenses payable from the Fund, shall be paid over or delivered by the TRUSTEES to the members in proportion to their accrued benefits. (Emphasis supplied)
[37]

The resumption of the SLP did not eliminate the trust or terminate the transfer of legal title to the Funds trustees. The records show that the Funds Board of Trustees approved the SLP upon the request of the DBP Career Officials Association. [38] The DBP Board of Directors only confirmed the approval of the SLP by the Funds trustees. The beneficiaries or cestui que trust of the Fund are the DBP officials and employees who will retire under Commonwealth Act No. 186[39](CA 186), as amended by RA 1616. RA 1616 requires the employer agency or government instrumentality to pay for the retirement gratuity of its employees who rendered service for the required number of years.[40] The Government Service Insurance System Act of 1997[41] still allows retirement under RA 1616 for certain employees. As COA correctly observed, the right of the employees to claim their gratuities from the Fund is still inchoate. RA 1616 does not allow employees to receive their gratuities until they retire. However, this does not invalidate the trust created by DBP or the concomitant transfer of legal title to the trustees. As far back as in Government v. Abadilla,[42] the Court held that it is not always necessary that the cestui que trustshould be named, or even be in esse at the time the trust is created in his favor. It is enough that the beneficiaries are sufficiently certain or identifiable.[43] In this case, the GSIS Act of 1997 extended the option to retire under RA 1616 only to employees who had entered government service before 1 June 1977.[44] The DBP employees who were in the service before this date are easily identifiable. As of the time DBP filed the instant petition, DBP estimated that 530 of its employees could still retire under RA 1616. At least 60 DBP employees had already received their gratuities under the Fund.[45] The Agreement indisputably transferred legal title over the income and properties of the Fund to the Funds trustees. Thus, COAs directive to record the income of the Fund in DBPs books of account as the miscellaneous income of DBP constitutes grave abuse of discretion. The income of the Fund does not form part of the revenues or profits of DBP, and DBP may not use such income for its own benefit. The principal and income of the Fund together constitute the res or subject matter of the trust. The Agreement established the Fund precisely so that it would eventually be sufficient to pay for the retirement benefits of DBP employees under RA 1616 without additional outlay from DBP. COA itself acknowledged the authority of DBP to set up the Fund. However, COAs subsequent directive would divest the Fund of income, and defeat the purpose for the Funds creation.

The validity of the Special Loan Program and the disallowance of P11,626,414.25 In disallowing the P11,626,414.25 distributed as dividends under the SLP, the COA relied primarily on Republic Act No. 4968 (RA 4968) which took effect on 17 June 1967. RA 4968 added the following paragraph to Section 28 of CA 186, thus:

(b) Hereafter no insurance or retirement plan for officers or employees shall be created by any employer. All supplementary retirement or pension plans heretofore in force in any government office, agency, or instrumentality or corporation owned or controlled by the government, are hereby declared inoperative or abolished: Provided, That the rights of those who are already eligible to retire thereunder shall not be affected.
Even assuming, however, that the SLP constitutes a supplementary retirement plan, RA 4968 does not apply to the case at bar. The DBP Charter, which took effect on 14 February 1986, expressly authorizes supplementary retirement plans adopted by and effective in DBP, thus:

SEC. 34. Separation Benefits. All those who shall retire from the service or are separated therefrom on account of the reorganization of the Bank under the provisions of this Charter shall be entitled to all gratuities and benefits provided for under existing laws and/or supplementary retirement plans adopted by and effective in the Bank: Provided, that any separation benefits and incentives which may be granted by the Bank subsequent to June 1, 1986, which may be in addition to those provided under existing laws and previous retirement programs of the Bank prior to the said date, for those personnel referred to in this section shall be funded by the National Government; Provided, further, that, any supplementary retirement plan adopted by the Bank after the effectivity of this Chapter shall require the prior approval of the Minister of Finance. xxx. SEC. 37. Repealing Clause. All acts, executive orders, administrative orders, proclamations, rules and regulations or parts thereof inconsistent with any of the provisions of this charter are hereby repealed or modified accordingly. (Emphasis supplied)
[46]

Being a special and later law, the DBP Charter[47] prevails over RA 4968. The DBP originally adopted the SLP in 1983. The Court cannot strike down the SLP now based on RA 4968 in view of the subsequent DBP Charter authorizing the SLP. Nevertheless, the Court upholds the COAs disallowance of the P11,626,414.25 in dividends distributed under the SLP.

According to DBP Board Resolution No. 0036 dated 25 January 1991, the SLP allows a prospective retiree to utilize in the form of a loan, a portion of their outstanding equity in the Gratuity Plan Fund and to invest [the] proceeds in a profitable investment or undertaking.[48] The basis of the loanable amount was an employees gratuity fund credit,[49] that is to say, what an employee would receive if he retired at the time he availed of the loan. In his letter dated 26 October 1983 proposing the confirmation of the SLP, then DBP Chairman Cesar B. Zalamea stated that:

The primary objective of this proposal therefore is to counteract the unavoidable decrease in the value of the said retirement benefits through the following scheme: I. To allow a prospective retiree the option to utilize in the form of a loan, a portion of his standing equity in the Gratuity Fund and to invest it in a profitable investment or undertaking. The income or appreciation in value will be for his own account and should provide him the desired hedge against inflation or erosion in the value of the peso. This is being proposed since Philippine retirement laws and the Gratuity Plan do not allow partial payment of retirement benefits, even the portion already earned, ahead of actual retirement. (Emphasis supplied)
[50]

As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws on retirement allow the partial payment of retirement benefits ahead of actual retirement. It appears that DBP sought to circumvent these restrictions through the SLP, which released a portion of an employees retirement benefits to him in the form of a loan. Certainly, the DBP did this for laudable reasons, to address the concerns of DBP employees on the devaluation of their retirement benefits. The remaining question is whether RA 1616 and the Gratuity Plan allow this scheme. We rule that it is not allowed. The right to retirement benefits accrues only upon certain prerequisites. First, the conditions imposed by the applicable law in this case, RA 1616 must be fulfilled.[51] Second, there must be actual retirement.[52] Retirement means there is a bilateral act of the parties, a voluntary agreement between the employer and the employees whereby the latter after reaching a certain age agrees and/or consents to severe his employment with the former.[53] Severance of employment is a condition sine qua non for the release of retirement benefits. Retirement benefits are not meant to recompense employees who are still in the employ of the government. That is the function of salaries and other emoluments.[54] Retirement benefits are in the nature of a reward granted by the State to a government employee who has given the best years of his life to the service of his country.[55] The Gratuity Plan likewise provides that the gratuity benefit of a qualified DBP employee shall only be released upon retirement under th(e) Plan. [56] As the COA

correctly pointed out, this means that retirement benefits can only be demanded and enjoyed when the employee shall have met the last requisite, that is, actual retirement under the Gratuity Plan.[57] There was thus no basis for the loans granted to DBP employees under the SLP. The rights of the recipient DBP employees to their retirement gratuities were still inchoate, if not a mere expectancy, when they availed of the SLP. No portion of their retirement benefits could be considered as actually earned or outstanding before retirement. Prior to retirement, an employee who has served the requisite number of years is only eligible for, but not yet entitled to, retirement benefits. The DBP contends that the SLP is merely a normal loan transaction, akin to the loans granted by the GSIS, SSS and the DBP Provident Fund. The records show otherwise. In a loan transaction or mutuum, the borrower or debtor acquires ownership of the amount borrowed.[58] As the owner, the debtor is then free to dispose of or to utilize the sum he loaned,[59] subject to the condition that he should later return the amount with the stipulated interest to the creditor.[60] In contrast, the amount borrowed by a qualified employee under the SLP was not even released to him. The implementing rules of the SLP state that:

The loan shall be available strictly for the purpose of investment in the following investment instruments: a. b. c. 182 or 364-day term Time deposits with DBP 182 or 364-day T-bills /CB Bills 182 or 364-day term DBP Blue Chip Fund

The investment shall be registered in the name of DBP-TSD in trust for availeeinvestor for his sole risk and account. Choice of eligible terms shall be at the option of availee-investor. Investments shall be commingled by TSD and Participation Certificates shall be issued to each availee-investor. xxx IV. LOANABLE TERMS xxx e. Allowable Investment Instruments Time Deposit DBP T-Bills/CB Bills and DBP Blue Chip Fund. TSD shall purchase new securities and/orallocate existing securities portfolio of GPF depending on liquidity position of the Fund xxx.

xxx g. Security The loan shall be secured by GS, Certificate of Time Deposit and/or BCF Certificate of Participation which shall be registered in the name of DBPTSD in trust for name of availee-investor and shall be surrendered to the TSD for safekeeping. (Emphasis supplied)
[61]

In the present case, the Fund allowed the debtor-employee to borrow a portion of his gratuity fund credit solely for the purpose of investing it in certain instruments specified by DBP. The debtor-employee could not dispose of or utilize the loan in any other way. These instruments were, incidentally, some of the same securities where the Fund placed its investments. At the same time the Fund obligated the debtoremployee to assign immediately his loan to DBP-TSD so that the amount could be commingled with the loans of other employees. The DBP-TSD the same department which handled and had custody of the Funds accounts then purchased or reallocated existing securities in the portfolio of the Fund to correspond to the employees loans. Simply put, the amount ostensibly loaned from the Fund stayed in the Fund, and remained under the control and custody of the DBP-TSD. The debtor-employee never had any control or custody over the amount he supposedly borrowed. However, DBPTSD listed new or existing investments of the Fund corresponding to the loan in the name of the debtor-employee, so that the latter could collect the interest earned from the investments. In sum, the SLP enabled certain DBP employees to utilize and even earn from their retirement gratuities even before they retired. This constitutes a partial release of their retirement benefits, which is contrary to RA 1616 and the Gratuity Plan. As we have discussed, the latter authorizes the release of gratuities from the earnings and principal of the Fund only upon retirement. The Gratuity Plan will lose its tax-exempt status if the retirement benefits are released prior to the retirement of the employees. The trust funds of employees other than those of private employers are qualified for certain tax exemptions pursuant to Section 60(B) formerly Section 53(b) of the National Internal Revenue Code.[62] Section 60(B) provides:

Section 60. Imposition of Tax. (A) Application of Tax. The tax imposed by this Title upon individuals shall apply to the income of estates or of any kind of property held in trust, including: xxx (B) Exception. The tax imposed by this Title shall not apply to employees trust which forms part of a pension, stock bonus or profit-sharing plan of an employer for

the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees: xxx (Emphasis supplied)
The Gratuity Plan provides that the gratuity benefits of a qualified DBP employee shall be released only upon retirement under th(e) Plan. If the earnings and principal of the Fund are distributed to DBP employees prior to their retirement, the Gratuity Plan will no longer qualify for exemption under Section 60(B). To recall, DBP Resolution No. 794 creating the Gratuity Plan expressly provides that since the gratuity plan will be tax qualified under the National Internal Revenue Code xxx, the Banks periodic contributions thereto shall be deductible for tax purposes and the earnings therefrom tax free. If DBP insists that its employees may receive the P11,626,414.25 dividends, the necessary consequence will be the non-qualification of the Gratuity Plan as a taxexempt plan. Finally, DBP invokes justice and equity on behalf of its affected employees. Equity cannot supplant or contravene the law.[63] Further, as evidenced by the letter of former DBP Chairman Zalamea, the DBP Board of Directors was well aware of the proscription against the partial release of retirement benefits when it confirmed the SLP. If DBP wants to enhance and protect the value of xxx (the) gratuity benefits of its employees, DBP must do so by investing the money of the Fund in the proper and sound investments, and not by circumventing restrictions imposed by law and the Gratuity Plan itself. We nevertheless urge the DBP and COA to provide equitable terms and a sufficient period within which the affected DBP employees may refund the dividends they received under the SLP. Since most of the DBP employees were eligible to retire within a few years when they availed of the SLP, the refunds may be deducted from their retirement benefits, at least for those who have not received their retirement benefits. WHEREFORE, COA Decision No. 98-403 dated 6 October 1998 and COA Resolution No. 2000-212 dated 1 August 2000 are AFFIRMEDwith MODIFICATION. The income of the Gratuity Plan Fund, held in trust for the benefit of DBP employees eligible to retire under RA 1616, should not be recorded in the books of account of DBP as the income of the latter. SO ORDERED. Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.

[1]

Under Rule 65 of the Rules of Court. Signed by Chairman Celso D. Gangan, Commissioners Sofronio B. Ursal and Emmanuel M. Dalman. Commissioner Raul C. Flores replaced Commissioner Ursal. Signed by Director Bernarda C. Lavisores, the corporate auditor assigned to DBP. Providing for the 1986 Revised Charter of the Development Bank of the Philippines. An Act Strengthening the Development Bank of the Philippines, Amending for the Purpose Executive Order No. 81. CONST. art. IX-D, sec. 2; Presidential Decree No. 1455, Government Auditing Code of the Philippines. Rollo, p. 20. Ibid., p. 68. Ibid. Ibid., p. 82. Ibid., p. 34. Supra, see note 8. 332 Phil. 20 (1996). Rollo, p. 24. Ibid., p. 163. Section 2, Article IX-D of the 1987 Constitution states:

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, inexpensive, extravagant, or unconscionable expenditures, or uses of government funds and properties.
[18]

Rollo, p. 197 For instance, in Philippine International Trading Corporation v. COA, 368 Phil. 478 (1999); National Center For Mental Health Management v. COA, G.R. No. 114864, 6 December 1996, 265 SCRA 390; Philippine Ports Authority v. COA, G.R. No. 100773, 16 October 1992, 214 SCRA 653. Article IX, Section 7 of the 1987 Constitution states:

[19]

[20]

Each Commission shall decide by a majority vote of all its Members any case or matter brought before it within sixty days from the date of its submission for decision or resolution. A case or matter is deemed submitted for decision or resolution upon the filing of the last pleading, brief, or memorandum required by the rules of the Commission or by the Commission itself. Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof. (Emphasis supplied)
[21]

Section 50 of P.D. No. 1445 states:

SECTION 50. Appeal from decisions of the Commission. The party aggrieved by any decision, order or ruling of the Commission may within thirty days from his receipt of a copy thereof appeal

on certiorari to the Supreme Court in the manner provided by law and the Rules of Court. When the decision, order, or ruling adversely affects the interest of any government agency, the appeal may be taken by the proper head of that agency.
[22]

Tang v. Court of Appeals, 382 Phil. 277 (2000). Ibid. Rule 3, Section 2 of the Rules of Court. Ortigas & Co. Ltd. v. Court of Appeals, G.R. No. 126102, 4 December 2000, 346 SCRA 748. Rollo, p. 3. Tala Realty Services Corporation v. Banco Filipino Savings and Mortgage Bank, G.R. No. 137533, 22 November 2002; Huang v. CA, G.R. No. 108525, 236 SCRA 420 (1994) citing A. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, Vol. IV, 669 (1991). Heirs of Yap v. Court of Appeals, 371 Phil. 523 (1999). Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 95022, 22 March 1992, 207 SCRA 487; Commissioner of Internal Revenue v. Visayan Electric Co., 132 Phil. 203 (1968). Commissioner of Internal Revenue v. Visayan Electric Co.,132 Phil. 203 (1968). Employees trusts are also exempted from certain taxes under Section 60 (B) of the National Internal Revenue Code, as amended. Commissioner of Internal Revenue v. Court of Appeals, supra, see note 29. An Act Further Amending Section Twelve of Commonwealth Act Numbered One Hundred Eighty-Six, as Amended, by Prescribing Two Other Modes of Retirement and for Other Purposes. Rollo, p. 27. Spouses Rosario v. Court of Appeals, 369 Phil. 729 (1999), citing Tolentino, see note 22. Civil Code, art. 1440. Rollo, p. 34. Ibid. Ibid., p. 60. The Government Service Insurance Act (1936). Section 12 (c) of Commonwealth Act No. 186, as amended by RA 1616, was further amended by Republic Act No. 3096 (1961) and Republic Act No. 4968 (1967) to read:

[23]

[24]

[25]

[26]

[27]

[28]

[29]

[30]

[31]

[32]

[33]

[34]

[35]

[36]

[37]

[38]

[39]

[40]

(c) Retirement is likewise allowed to any official or employee, appointive or elective, regardless of age and employment status, who has rendered a total of twenty years of service, the last three years of which are continuous. The benefit shall, in addition to the return of his personal contributions with interest compounded monthly and the payment of the corresponding employers premiums described in subsection (a) of Section five hereof, without interest, be only a gratuity equivalent to one months salary for every year of the first twenty years of service, plus one and one-half months salary for every year of service over twenty but below thirty years and two months salary for every year of service over thirty years in case of employees based on the highest rate received and in case of elected officials on the rates of pay as provided by law. This gratuity is payable by the employer or office concerned which is hereby authorized to provide the necessary appropriation or pay the same from any unexpended items of appropriation or savings in its appropriation. (Emphasis supplied)
[41]

Section 49 (b) of Republic Act No. 8291 (1997) provides:

(b) The GSIS shall discontinue the processing and adjudication of retirement claims under R.A. No. 1616 except refund of retirement premium and R.A. No. 910. Instead,all agencies concerned shall process and pay the gratuities of their employees. The Board shall adopt the proper rules and procedures for the implementation of this provision. (Emphasis supplied)
[42]

46 Phil. 642 (1924). Rizal Surety & Insurance Company v. Court of Appeals, G.R. No. 96727, 28 August 1996, 261 SCRA 69. Section 2.4.2(5) of the Rules and Regulations Implementing the GSIS Act of 1997 states: Retirement Benefit - Those in the service before June 1, 1977 shall have the option to choose among the modes of retirement under R.A. 660, R.A. 1616 or P.D. 1146. Rollo, p. 163. E.O. No. 81, as amended. See notes 5 and 6. Rollo., p. 55. Ibid. Ibid., p. 50 See note 40. The pertinent portions of Sections 11 and 12 of CA 186, as amended state:

[43]

[44]

[45]

[46]

[47]

[48]

[49]

[50]

[51]

[52]

Sec. 11. (a) Amount of Annuity. Upon retirement after faithful and satisfactory service a member shall be automatically entitled to a life annuity xxx Sec. 12. Conditions for Retirement. (a) xxx (b) xxx (c) Retirement is likewise allowed to any official or employee, appointive or elective, regardless of age and employment status, who has rendered a total of at least twenty years of service, the last three years of which are continuous. xxx More recently, RA 8291 (The Government Service Insurance System Act of 1997) provides: Sec. 13-A. Conditions for Entitlement. A member who retires from the service shall be entitled to the benefits enumerated in paragraph (a) of Section 13 hereof:Provided That: (1) (2) (3)
[53]

he has rendered at least fifteen (15) years of service; he is at least sixty (60) years of age at the time of retirement; and he is not receiving a monthly pension benefit from permanent total disability. (Emphasis supplied)

Pantranco North Express, Inc. v. NLRC, G.R. No. 95940, 24 July 1996, 259 SCRA 161, citing Soberano v. Clave, Nos. L-43753-56 and L-50991, 29 August 1980, 99 SCRA 549. In Santos v. Court of Appeals, G.R. No. 139792, 22 November 2000, 345 SCRA 553, this Court held that retirement benefits do not constitute compensation. A person who has retired but is later appointed to another position may continue receiving his retirement annuity and a salary for his new appointment. This is not double compensation. Ibid. Article V of the DBP Gratuity Plan Rules and Regulations states:

[54]

[55]

[56]

Upon retirement under this Plan, an Employee shall receive, in addition to the return of personal contributions to the GSIS, with interest compounded monthly and the payment of the Banks premiums on his behalf to the GSIS, without interest, a gratuity benefit equivalent to one months Salary for every year of the first twenty years of Service xxx (Emphasis supplied).
[57]

Rollo, p. 20. Article 1953 of the Civil Code. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. Tanzo v. Drilon, 385 Phil. 790 (2000), citing Yam vs. Malik, No. L-50550-52, 31 October 1979, 94 SCRA 30. Article 1953 in relation to Article 1933 of the Civil Code which states in part that a [s]imple loan may be gratuitous or with a stipulation to pay interest. Rollo, p. 38. BIR Revenue Memorandum Order No. 9-93 (15 October 1992) states:

[58]

[59]

[60]

[61]

[62]

Other employees trust funds adverted to in this Order shall refer to the trust funds of employees other than those of private employers/companies, the tax exempt qualification of which had been determined/adjudicated by the BIR under then Section 56(b) [now Section 53(b)] of the Tax Code and not under RA 4917 or Section 28(b) (7) (A) of the Tax Code, e.g., PNB Provident Fund, CB Provident Fund, Land Bank of the Philippines Provident Fund, GSIS Provident Fund, NPC Employees Savings & Welfare Plan, NHA Provident Fund, xxx. (Underscoring provided by BIR)
[63]

Tankiko v. Cezar, 362 Phil. 184 (1999).

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 116211 March 7, 1997 MEYNARDO POLICARPIO, petitioner, vs. COURT OF APPEALS and ROSITO PUECHI S. UY, respondents.

PANGANIBAN, J.: The Court finds occasion to apply the general principles of constructive trust as authorized by the Civil Code in granting this petition and in compelling private respondent to implement his trust relationship with petitioner. This is a petition under Rule 45 of the Rules of Court to reverse the Decision 1 of public respondent 2 in CAG.R. CV No. 32821 promulgated on March 21, 1994, and the Resolution 3 promulgated on July 5, 1994, denying petitioner's motion for reconsideration.

The dispositive portion of the assailed Decision reads: 4 WHEREFORE, in view of the foregoing, judgment is hereby rendered: 1. REVERSING and SETTING ASIDE the appealed decision dated 10 September 1990; 2. DISMISSING the Complaint; and 3. Without pronouncement as to costs. The Facts The facts of the case, as culled from the challenged Decision, are simple. Petitioner (along with his co-plaintiffs in the antecedent cases, namely, Rodolfo Gayatin, Jose Villacin and Jocelyn Montinola 5) and private respondent were former tenants of the 30-door Barretto Apartments formerly owned by Serapia Realty, Inc.. Sometime in April 1984, private respondent was elected President of the Barretto Tenants Association (hereafter referred to as the "Association") which was formed, among others, "to promote, safeguard and protect the general interest and welfare of its members." 6 In a letter dated July 30, 1984, private respondent as president of the Association sought the assistance of the then Minister of Human Settlements to cause the expropriation of the subject property under the Urban Land Reform Program for subsequent resale to its tenants. The matter was endorsed to the Human Settlements Regulatory Commission, which in a letter dated November 5, 1984, signed by Commissioner and Chief Executive Officer Ernesto C. Mendiola, rejected the tenant's request for expropriation. The letter stated in part: At the moment, the effects of the provisions of PD 1517, otherwise known as the Urban Land Reform Decree, are limited only to the proclaimed 245 APD's and/or ULRZ's. Be informed further that, pursuant to Rule VIII & IX of the Rules and Regulations of the abovementioned Decree, expropriation will be availed of only as a last resort as there are various modes of Land Acquisition/Disposition techniques which the Ministry can avail of to help bonafide (sic) tenants/residents of a certain area. Failing to get the assistance of the government, the tenants undertook to negotiate directly with the owners of the Barretto Apartments. Initially, Private Respondent Rosito Uy orally expressed to Mrs. Rosita Barretto Ochoa the tenants' desire to purchase their respective units. Later, in a letter dated May 29, 1985, signed by thirty (30) tenants of the commercial and residential units, the tenants formally expressed to Mrs. Ochoa their intent to purchase. On July 27, 1985, Serapia Real Estate, Inc., sent to Rosito Uy, in his capacity as president of the Association, the following letter: 8 Sir: This is in response to your letter regarding your intent to buy our property together with its improvements located at corners Haig and Romualdez Streets and along Gen. Kalentong Street, Mandaluyong, Metro Manila. We would like to inform you that we are offering to sell the said property at a price of FOUR MILLION FIVE HUNDRED THOUSAND (P4,500,000.00) PESOS ONLY, under the following Terms and Conditions: AREA: 2,237 square meters Manner of Payment: An earnest money of P100,000.00 within 30 days. Full payment payable within 60 days.

This offer is on a "FIRST COME FIRST SERVED BASIS" and our price is good only within 60 days or until September 30, 1985 only. Thank You. In addition, Serapia Realty, Inc., sent to spouses Gayatin a mimeographed letter stating: 9 N o v e m b e r 1 5 , 1 9 8 5 Mr./Mrs. Gayatin SIR/MADAM: Please be informed that we are intending to sell the unit you are now occupying. We are therefore giving you the first priority to purchase the same, if you desire. We are giving you a period of ten (10) days from receipt hereof to see us(,) otherwise, we will consider your inaction a waiver in (sic) your part to purchase the same. V e r y t r u l y y o u r s , S E

R A F I A R E A L T Y I N C . B y : S / M r s . R o s a B . O c h o a T / M r s . R o s a B .

O c h o a K a l e n t o n g M a n d a l u y o n g , M e t r o M a n i l a ( A u t h o r i z e ( s i c )

r e p r e s e n t a t i v e ) On November 20, 1985, Rodolfo Gayatin acknowledged receipt of the said letter with a request that he be furnished with the following information: 10 a. Consideration of the sale; b. Terms and conditions of the sale; and c. Plan indicating the areas and boundaries of each unit. Letters acknowledging receipt of Mrs. Ochoa's letter of intent to sell the apartment unit occupied by the tenants were sent by Dionisio Enriquez and Elena J. Baares. The tenants designated and appointed private respondent as their president to negotiate with Serapia Realty, Inc.. But the negotiations apparently did not ripen into a perfected sale. One and a half years later, on March 12, 1987, petitioner and his co-plaintiffs were notified that private respondent was the new owner of the apartment units occupied by them. Believing that they had been betrayed by their Association president, petitioner sued for "Redemption and Damages with Prayer For Preliminary Injunction." Private respondent counter-sued for Damages and Accion Publiciana with Preliminary Attachment. Joint trial of the two cases ensued. The trial court found that private respondent had been designated and entrusted by plaintiffs to negotiate with the Barretto family for the sale of the units. It also found that a constructive trust was created between the private respondent as "the cestui que trust [should be trustee] and plaintiffs as beneficiaries [or cestuis que trust] vis-a-vis the subject units." 11 The dispositive portion of the trial court decision reads: 12 WHEREFORE, judgment is hereby rendered in the above-entitled cases in favor of plaintiffs Rodolfo Gayatin, Jose Villacin, Jocelyn Montinola and Meynardo Policarpio, and against defendant, Rosito Puechi S. Uy, 1. Ordering said defendant to execute the corresponding deeds of conveyance in favor of plaintiffs Meynardo Policarpio, Jocelyn Montinola, Jose Villacin and Rodolfo Gayatin covering Door 8, Lot 14; Door 3, Lot 9; Door 2, Lot 9; and Door 1, Lot 9, upon refund by the plaintiffs to the defendant of the sums of P35,200.00; P35,520.00; P35,600.00 and P47,200.00 respectively, without any interest. Should defendant Uy fail to so execute the deeds of conveyance herein ordered within fifteen (15) days from finality of judgment, the Clerk of this Court will execute the same

and the Register of Deeds will be ordered to nullify the certificates of title in the name of said defendant and to issue other certificates of title in favor of the four abovenamed plaintiffs, respectively; and to pay to the plaintiffs the following sums: a) P15,000.00 as attorney's fees; b) P40,000.00 as moral damages; and c) P20,000.00 as exemplary damages, all with interest at 12% per annum from date of this decision; 2. Dismissing the Complaint in Civil Case No. 54444 as far as defendant Serapia Real Estate Inc. is concerned; 3. Dismissing defendants' counterclaims in Civil Case No. 54444; and 4. Dismissing Rosito Puechi Uy's complaint in Civil Case No. 55739. Costs against defendant Uy. Private respondent appealed the decision to public respondent which as earlier stated reversed the decision and denied the subsequent motion for reconsideration. Hence, this petition only by Meynardo Policarpio. His co-plaintiff in the antecedent case, Jose Villacin, filed a Petition for Intervention 13 on March 28, 1995, which the First Division of this Court in a Resolution dated June 26, 1995, denied for lack of merit, because Villacin's earlier petition docketed as G.R. No. 116137 (Jose Villacin vs. Court of Appeals, et al.) had already been dismissed for failure to attach an affidavit of service. 14 The Issue The sole issue raised by petitioner in this appeal is:
15

The respondent Court erred in reversing the finding of the trial court that a constructive trust existed between the plaintiffs and the defendant. Public respondent, in finding that a constructive trust had not been created, ruled:
16

The contemporary and subsequent acts of the parties herein fail to convince Us that a constructive trust exists for the benefit of the appellees (tenants). A reading of the Articles of Incorporation of Barretto Apartment Tenants Association, Inc. (Exh. "J") shows that the purpose for its formation is couched in general terms without specifically stipulating the proposed purchase and sale of the apartment units. While it may be conceded that the sale to the tenants was a general concern that would have redounded to their benefit, still it cannot be denied that the transaction could not have been effected unless the tenants and the owners came to terms regarding the sale. The record reveals that appellant (herein private respondent) did in fact send several communications, first to the Ministry of Human Settlements and when this avenue did not prosper, to the Barretto family in an effort to pursue their common desire to own their respective unit(s). The letter to the Minister of Human Settlements is dated July 30, 1984 (Exh. "J") about a year before the execution of the Articles of Incorporation on 06 August 1985. Incidentally, no evidence appears on record to show that the Association filed the requisite documents for incorporation with the Securities and Exchange Commission.

The Deeds of Absolute Sale in favor of appellant over appellees' unit appear to have been executed on 05 August 1986 (Exhs. "B" to "F") or about two (2) years after appellant was designated President of the Association and approximately one (1) year after the Articles of Incorporation were drawn up and signed by the parties. (Exhibit "S") Public respondent contended that plaintiffs were informed of the negotiations for the purchase and sale of property. Further, public respondent said:

it appears incumbent upon the tenants to verify from time to time on (sic) the progress of the negotiations not only from Mrs. Ochoa but also from appellant who live (sic) in the same apartment complex. Their inaction leads to the impression that they lacked interest to pursue their original plan to purchase the property or they could not agree on the terms and conditions for the sale. 17
Before us, petitioner argues that public respondent erred in stating that "there was no common interest on the pan of the members of the association to purchase units they were occupying." 18 He also maintains that it is immaterial whether the intent to buy the units was specifically stated in the purposes of the Association. What is important is that the "contemporary and subsequent acts of parties indicated such a purpose." Petitioner insists that the tenants had authorized and private respondent had agreed to negotiate with the owners regarding the terms of the sale, precisely to conform to the desire of the owners to deal with only one person. Petitioner vehemently denies that the co-tenants of private respondent "had revoked or withdrawn the authority and trust reposed on the private respondent to act as negotiator in their behalf." 19 Private respondent rebuts by saying that the entire property consisting of thirty (30) doors was not sold on one particular date. Rather, there were actually two batches of sale. He asserts that petitioner, in feigning ignorance of the two batches of sale and siting private respondent, had created an alibi to suspend payment of rental for years. 20 It should also be considered, states private respondent, that upon denial of the tenants' request for expropriation by the Ministry of Human Settlements, and the revelation that Barretto's apartments were heavily encumbered, tenants "completely abandoned the plan to organize a formal association." Assuming for the sake of argument, adds private respondent, that the informal Association created a relationship among the parties, "the same ceased and expired by virtue of the act of the owners of the apartment who directly deal with the tenants" under Article 1924 21 of the Civil Code. 22 The Court's Ruling We find for petitioner. As a rule, the jurisdiction of this Court in cases brought before it from the Court of Appeals is limited to the review and revision of errors of law allegedly committed by the appellate court. However, when there is conflict between the factual findings of the Court of Appeals and the trial court, 23 the Court may review such findings and conclusions, as we now do. We hold that an implied trust was created by the agreement between petitioner (and the other tenants) and private respondent. 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. 24 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. 25 It is not necessary that the intention of the tenants to purchase their apartments units be categorically stated in the purposes of their Association. A constructive trust as invoked by petitioner can be implied from the nature of the transaction as a matter of equity, regardless of the absence of such intention in the purposes of their Association. During his negotiations with Serapia Realty, Inc.,

private respondent admitted that he was not only representing himself but also the other tenants as president of the Association. This admission recognized the confidence reposed in him by his cotenants. He testified: 26 Q Apart from the Regulatory Commission, and from the First Lady Imelda Marcos, you did not make any communication to any person or body in your capacity as President of the Association anymore? A We also tried to negotiate with Mr. Ochoa. Q What was your purpose of attempting to communicate with Mr. Ochoa? A So that those who cannot afford to pay in cash can be allowed to pay in installment. Q You used the word "we", to whom are you referring to? A My co-tenants in the apartment. Q And when you made representations with the owner of the apartment, you were doing this in your capacity as President? A Both as individual member and as President. Q In your capacity as both individual member and President? A Yes, sir. Alfonso Barretto, president of Serapia Real Estate Corporation, testified that the owners wanted to deal with one "spokesman." 27 Hence, the tenants authorized private respondent to negotiate on their behalf. Unfortunately, private respondent negotiated for himself only, and successfully purchased eight (8) apartment units and secured an authority to sell the remaining twenty-two (22) units. Private respondent alleges that, after being informed by the owner, petitioner, together with the latter's co-plaintiffs in the action for redemption, did not want to contribute funds to redeem the encumbered apartment. (Such redemption was required before the units could be sold.) The trial court debunked this allegation thus: 28 . . . . It taxes the mind no end to accept defendant's claim that when the units which the tenants have for years been dreaming of owning one day were ready to be sold to them, all of them would suddenly become "reluctant," to quote his word, to buy them. Considering the virtually (sic) give-away considerations (P42,200.00, P35,600.00, P35,520.00 and P35,200.00) for the subject units all of which were uniformly two-storey apartments with "2 bedrooms, living and dining rooms and kitchen" (citing TSN, January 12, 1990, p. 7) situated in a strategic and prime area, it is unbelievable and inconsistent with the ordinary imperatives of human experience for the plaintiffs to suddenly show reluctance towards the opportunity they have been expecting and preparing for all along. If only the tenants had been informed by private respondent of this predicament of the owners, surely they would have raised the required amount to redeem the property and, in turn, acquired the units being rented by them. The incriminating admission of private respondent that he had not informed the plaintiffs in the redemption case of the prices at which the apartment units were sold demonstrated beyond cavil his betrayal of their trust: 29

Q Did you inform vergally (sic) these 4 plaintiffs that their apartments were being bought at P47,200.00, P35,600, P35,520 and P35,200? A I did not. Q As President of the association who got the trust and confidence of the members including the 4 plaintiffs, did you not consider it in keeping with trust and confidence to officially inform them that these apartments is (sic) being sold at that (sic) prices and if you could buy this (sic), you pay this (sic) amount. You did not inform them, is it not? ATTY. BALLELOS (counsel for private respondent): Already answered. He did not inform them but as far as the amount is concerned as a matter of discretion. The ability of the tenants to pay the purchase price for their units was clearly found by trial court to be sufficient; and this finding was not contested by private respondent, to wit: 30 The ability of the plaintiffs to pay for their respective apartment units in question is demonstrated when they promptly complied with the Court's Order of March 15, 1990 "to pay to the Branch Clerk of this Court all the rentals due on their respective units from the time they stopped paying up to this month of March, which amounts were ordered to be deposited "with the Philippine National Bank, Pasig Branch, Shaw Blvd., Pasig, in self-renewing 120-day time deposits," which now stands at P126,434.84 (including "the monthly rentals in the same amount that they were last paying to defendant Serapia Real Estate, Inc.," from the month of April 1990 to July 1990) per PNB Certificates of Time Deposit Nos. 713637-C, 713638-C, 713639-C, 713640-C and 6713641-C, all dated August 30, 1990, now in the possession of the Branch Clerk of this Court. The tenants could not be faulted for not inquiring into the status of private respondent's negotiation with the owners of the apartments. They had a right to expect private respondent to be true to his duty as their representative and to take the initiative of informing them of the progress of his negotiations. The sale of the apartments in favor of private respondent was on August 6, 1986. Yet, it was only on March 27, 1987, that he informed the tenants of such sale. If he was in good faith, why the delay? Obviously, he hid the perfection of the sale from them. Why did he not inform the tenants that he was the owner as soon as the sale was consummated if, according to him, his co-tenants were unwilling to share the expenses of redemption? His co-tenants could not have blamed him for acquiring the entire property; after all, they supposedly did not have the money to contribute. Truly, the actuations of private respondent show nothing but greed on his part; he purchased the units for himself at bargain prices so he could resell them at a profit at the expense of the tenants. This violation of the trust reposed in him warrants the sanction provided by the equitable rule on which constructive trust is founded. Unfortunately, however, not all the plaintiffs in the original redemption case will be able to avail of this award because a party who has not appealed from the decision may not obtain any affirmative relief from the appellate court other than what he had obtained from the lower court, if any, whose decision is brought up on appeal. 31 The conclusion we thus reach in this case, finding constructive trust under Article 1447 32 of the New Civil Code, rests on the general principles on trust which, by Article 1442, have been adopted or incorporated into our civil law, to the extent that such principles are not inconsistent with the Civil Code, other statutes and the Rules of Court. This Court has ruled in the case of Sumaoang vs. Judge, RTC, Br. XXXI, Guimba, Nueva Ecija 33 that:

A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or retentions of property of which equity, in accordance with its fundamental principles and the traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust. And specifically applicable to the case at bar is the doctrine that "A constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where although acquired originally without fraud, it is against equity that it should be retained by the person holding it." The above principle is not in conflict with the New Civil Code, Codes of Commerce, Rules of Court and special laws. And since We are a court of law and of equity, the case at bar must be resolved on the general principles of law on constructive trust which basically rest on equitable considerations in order to satisfy the demands of justice, morality, conscience and fair dealing and thus protect the innocent against fraud. As the respondent court said, "It behooves upon the courts to shield fiduciary relations against every manner of chicanery or detestable design cloaked by legal technicalities." Although the citations in the said case originated from American jurisprudence, they may well be applied in our jurisdiction. "(S)ince the law of trust has been more frequently applied in England and in the United States than it has been in Spain, we may draw freely upon American precedents in determining the effects of trusts, especially so because the trusts known to American and English equity jurisprudence are derived from the fidei commissa of the Roman Law and are based entirely upon civil law principles." 34 Having concluded that private respondent willfully violated the trust reposed in him by his co-tenants, we consider it a serious matter of "justice, morality, conscience and fair dealing" that he should not be allowed to profit from his breach of trust. "Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." 35 Thus, petitioner is granted the opportunity to purchase the property which should have been his long ago had private respondent been faithful to his trust. We only regret that we cannot grant the same opportunity to the other beneficiaries or cestuis que trust for their failure to perfect their petitions for review of the respondent Court's Decision. WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution are hereby REVERSED and SET ASIDE. Consistent with the trial court's decision, Private Respondent Rosito Puechi S. Uy is ORDERED to EXECUTE a deed of conveyance covering Door 8, Lot 14, in favor of Petitioner Meynardo Policarpio upon the latter's payment of P35,200.00 without any interest. No costs.

SO ORDERED. Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur. Footnotes 1 Rollo, pp. 30-42. 2 Sixteenth Division composed of Justice Pacita Caizares-Nye, ponente, and Justices Jorge S. Imperial and Eduardo G. Montenegro, concurring. 3 Rollo, p. 44. 4 Ibid., p. 41-42. 5 In Civil Case Nos. 54444 for Redemption and Damages with Prayer for Preliminary Injunction and 55739 for Damages, Accion Publiciana with Preliminary Attachment filed before Branch CLI (151) of the Regional Trial Court in Pasig. 6 Rollo, p. 32. 7 Ibid., pp. 32-33. 8 Ibid., p. 33. 9 Ibid., p. 34. 10 Ibid., p. 34. 11 Ibid., p. 84. 12 Ibid., pp. 30-31. 13 Ibid., pp. 197-230. 14 Ibid., p. 249. 15 Ibid., p. 20. 16 Ibid., p. 40. 17 Ibid., p. 41. 18 Ibid., p. 21. 19 Ibid., pp. 20-23. 20 Ibid., pp. 135-141. 21 "Article 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons."

22 Rollo, p. 138. 23 Quebral vs. Court of Appeals, 252 SCRA 353, 364, January 25, 1996; Co vs. Court of Appeals, 247 SCRA 195, 200, August 11, 1994 citing Gaw vs. Intermediate Appellate Court, 220 SCRA 405, March 24, 1993. See also Florentino Reyes, et al. vs. Court of Appeals, G.R. No. 110207, July 11, 1996, for the ten exceptions to the rule that findings of facts of the Court of Appeals are binding to this Court. 24 Cuaycong vs. Cuaycong, 21 SCRA 1192, 1196-1197, December 11, 1967, citing 89 C.J.S. 722, 724. 25 Vda. de Esconde vs. Court of Appeals, 253 SCRA 66, 73-74, February 1, 1996, citingO'Laco vs. Co Cho Chit, 220 SCRA 656, 663, March 31, 1993. See also 89 C.J.S. 726-727 and 76 Am Jur 2d 446. 26 TSN, May 15, 1990, pp. 11-12. 27 TSN, January 12, 1990, p. 3. 28 Rollo, pp. 82-83. 29 TSN, May 15, 1990, p. 17. 30 Rollo, pp. 83-84. 31 Atlantic Gulf and Pacific Company of Manila, Inc. vs. Court of Appeals, 247 SCRA 606, August 23, 1995; Santos vs. Court of Appeals, 221 SCRA 42, 46, April 6, 1993 citing De Lima vs. Laguna Tayabas Co., 160 SCRA 70, 76, April 15, 1988. 32 Article 1447 of the Civil Code provides: "Art. 1447. The enumeration of the following cases of implied trust does not exclude others established by the general law of trust, but the limitation laid down in Article 1442 shall be applicable." 33 215 SCRA 136, 147, October 26, 1992, citing Roa, Jr. vs. Court of Appeals, 123 SCRA 3, June 28, 1983. 34 Miguel vs. Court of Appeals, 29 SCRA 760, 775, October 30, 1969, citing Government of the Philippine Islands vs. Abadilla, 46 Phil. 642 (1924). 35 Article 22 of the Civil Code. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 126437 March 6, 2002

JOSUE ARLEGUI, petitioner, vs. HON. COURT OF APPEALS and SPOUSES GIL AND BEATRIZ GENGUYON, respondents.

YNARES-SANTIAGO, J.: This is a petition for review of the decision rendered by the Court of Appeals in CA-G.R. CV No. 32833, which reversed the ruling of the Pasig Regional Trial Court, Branch 67, in Civil Case No. 58185, and disposing as follows: WHEREFORE, in view of the foregoing, the decision appealed from is hereby ANNULLED and SET ASIDE. Accordingly, judgment is rendered as follows: 1) Annulling the sale of the apartment unit at issue between Mateo Tan Lu and Josue Arlegui; 2) Ordering Josue Arlegui to execute a corresponding Deed of Conveyance in favor of spouses Gil and Beatriz Genguyon, involving Transfer Certificate of Title (TCT) No. 1286 covering the apartment unit at issue, upon payment by spouses Genguyons (sic) of the sum of P55,000.00, without any interest, to Arlegui; Should defendant Arlegui fail to so execute the Deed of Conveyance herein ordered within fifteen (15) days from finality of judgment, the Branch Clerk of the court a quo shall execute the same and the Register of Deeds shall nullify the certificate of title in the name of Arlegui and shall issue another certificate of title in favor of spouses Gil and Beatriz Genguyon; 3) Ordering Mateo Tan Lu and Josue Arlegui to pay the Genguyons, jointly and solidarily, the amount of P35,000.00, as damages inclusive of attorneys fees; 4) Ordering a Permanent Injunction upon the Metropolitan Trial Court of Mandaluyong, Branch 60, from hearing Civil Case No. 12647 entitled "Josue Arlegui, plaintiff, versus Spouses Gil and Beatriz Genguyon, defendants," and for the said Metropolitan Trial Court to dismiss the same; 5) Dismissing the charges as to defendants-appellees Barrettos; and 6) Costs against Mateo Tan Lu and Josue Arlegui, jointly and severally. SO ORDERED.1 Gleaned from the records are the following undisputed facts: The object of the controversy is a residential apartment unit (no. 15) located at the corner of Romualdez and Kalentong Streets in Mandaluyong City. The said property was formerly owned by Serafia Real Estate, Incorporated (hereinafter referred to as Serafia), a company owned by Alberto, Alfonso and Simeon, all surnamed Barretto, and their siblings Rosa B. Ochoa and Teresita B. Alcantara. For more than twenty (20) years, unit no. 15 was leased by Serafia to the spouses Gil and Beatriz Genguyon. In a letter dated March 26, 1984, the Genguyon spouses, along with the other tenants in the apartment building were informed by Alberto Barretto that Serafia and its assets had already been assigned and transferred to A.B. Barretto Enterprises. Apprehensive that they were about to be ejected from their respective units, the tenants formed an organization called the Barretto Apartment Tenants Association. They elected officers from among themselves to represent them in the negotiations with A.B. Barretto Enterprises for the purchase of their respective apartment units. Among those elected were Josue Arlegui as vice-president and Mateo Tan Lu as auditor of the association. Sometime thereafter, believing that negotiations were still ongoing, the Genguyons were surprised to learn on January 23, 1987 that the unit they were leasing had already been sold to Mateo Tan Lu. This notwithstanding, the Genguyons continued to occupy the subject premises and paid the rentals therefor.
1wphi 1.nt

The following year, or on July 7, 1988, the Genguyons were informed that Mateo Tan Lu had sold the subject apartment unit to Josue Arlegui. Not long thereafter, they received a letter from Arleguis lawyer demanding that they vacate the premises. When they failed to accede to Arleguis demand, the latter filed an action for ejectment against the Genguyons before the Metropolitan Trial Court of Mandaluyong City, Branch 60, docketed as Civil Case No. 12647. For their part, the Genguyon spouses filed Civil Case No. 58185 against the Barrettos, Mateo Tan Lu and Josue Arlegui before the Regional Trial Court of Pasig City, Branch 67, for annulment of sale, specific performance, redemption and damages with preliminary injunction. The Genguyons raised therein the following issues: 1) Whether or not they were denied their right of first preference to purchase the subject apartment unit; and 2) Whether or not failure to exercise such right is jurisdictional, the absence of such jurisdiction rendering the sale from the Barrettos to Mateo Tan Lu, as well as the subsequent sale to Josue Arlegui, null and void. On January 11, 1990, the RTC ordered the issuance of a writ of preliminary injunction directing the MTC to desist from taking further action in the ejectment case pending before it.2 On March 22, 1991, the RTC rendered judgment, disposing as follows: WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in the above-entitled case in favor of defendant Josue Arlegui and against the plaintiffs ordering the plaintiffs to pay to the defendant Arlegui the sum P3,000.00 as attorneys fees. In view of the fact that the plaintiffs "acted in gross and evident bad faith by refusing to satisfy the defendants plainly valid, just and demandable claim" (see Article 2208, No. 5, Civil Code); and to pay the cost. Moreover, moral damages are not to be awarded to the defendant Josue Arlegui for while plaintiffs has already acted fraudulently or in bad faith their failure to vacate the premises is not in this Courts opinion, the "breach of contract" referred to in Art. 2220 of the Civil Code. Dismissing the complaint as against defendants Alberto Barretto, Alfonso Barretto, Simeon Barretto, Rosa B. Ochoa, Teresita B. Alcantara and Mateo Tan Lu. Lifting the preliminary mandatory injunction issued in the instant case as against the Metropolitan Trial Court of Mandaluyong, Branch 60, docketed as Civil Case No. 12647. Conformably, with what has been stated in the above-mentioned paragraphs, the claims of the plaintiffs is hereby DISMISSED, as being purely without merit. SO ORDERED.3 Not satisfied with the above-quoted disposition of the RTC, the Genguyons filed their appeal before the Court of Appeals.4 While the appeal was pending, the ejectment case against the Genguyons proceeded and, on October 6, 1992, the MTC of Mandaluyong City, Branch 60, rendered judgment5 ordering the Genguyons to: (1) vacate the subject premises; (2) pay the accrued monthly rentals from September of 1989 to September of 1992, and the succeeding monthly rentals thereafter until they shall have finally surrendered possession of the premises; and (3) pay attorneys fees and costs of suit. The Genguyons appealed the decision to the RTC of Pasig, Branch 166, which affirmed the MTC judgment in toto in a Decision6 dated January 25, 1993.

Thereafter, or on February 14, 1996, the Court of Appeals rendered judgment in CA-G.R. CV No. 32833, annulling and setting aside the RTC decision. The Court of Appeals made the following conclusions: 1) There existed between the Genguyons and the officers of the tenants association, particularly Mateo Tan Lu and Josue Arlegui, a fiduciary relationship; 2) Mateo Tan Lu and Josue Arlegui committed a breach of trust when they purchased the apartment unit leased by the Genguyons; 3) Josue Arlegui is not an innocent-purchaser for value nor a buyer in good faith; 4) The RTC erred in finding that the Genguyons action was premised on their right of first preference under the Urban Land Reform Law; and 5) The Genguyons are not estopped from denying Arleguis ownership of the subject property for no lessor-lessee relationship was established between them. Josue Arleguis motion for reconsideration was denied by the Court of Appeals in an Order7 dated September 12, 1996. Hence, the instant petition for review, assigning the following errors: I THE RESPONDENT COURT ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS DID NOT BASE THEIR ALLEGED RIGHT OF FIRST PREFERENCE ON P.D. 1517, THE URBAN LAND REFORM LAW. II THE RESPONDENT COURT ERRED IN HOLDING THAT A CONSTRUCTIVE TRUST EXISTED BETWEEN THE PRIVATE RESPONDENTS AND MATEO TAN LU. III THE RESPONDENT COURT ERRED, ASSUMING THAT A CONSTRUCTIVE TRUST EXISTED, IN HOLDING THAT THE PETITIONER IS NOT INSULATED FROM THE EFFECTS THEREOF. IV THE RESPONDENT COURT ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO DAMAGES INSTEAD OF THE PETITIONER. V THE RESPONDENT COURT ERRED IN ENJOINING THE METROPOLITAN TRIAL COURT OF MANDALUYONG FROM HEARING THE EJECTMENT CASE FILED BY PETITIONER AGAINST THE PRIVATE RESPONDENTS AND IN ORDERING THE DISMISSAL OF THE SAID CASE, NOTWITHSTANDING THE FACT THAT THE SAID CASE HAD LONG BEEN DECIDED. VI THE RESPONDENT COURT ERRED IN NOT RECONSIDERING ITS DECISION, CONSIDERING THAT THE ISSUES RAISED BEFORE IT HAVE BECOME MOOT AND ACADEMIC AFTER THE PRIVATE RESPONDENTS VOLUNTARILY VACATED AND/OR ABANDONED THE SUBJECT UNIT THEY WERE OCCUPYING.8

There are four (4) essential matters involved in this controversy. The first one is whether or not the private respondents, spouses Gil and Beatriz Genguyon, are entitled to claim the right of first refusal or, as stated otherwise, the right of first preference, to purchase the residential apartment unit they were leasing first from Serafia Realty, then from A.B. Barretto Enterprises. It appears that while the Genguyons complaint did not specifically allege that their supposed right of first refusal was by virtue of the provisions of P.D. No. 1517, also known as the Urban Land Reform Law,9 Beatriz Genguyon testified on cross-examination that: Q: Your contention is, being an occupant for more than ten (10) years of the premises, you should have been given the right of first refusal under the Urban Land Reform Law. Is that correct? A: Yes, sir.10

Indeed, it would seem that the Genguyons action is premised on the fact that they are long-time tenants of the apartment unit, a right accorded to legitimate tenants in urban zones who have resided on the land for ten (10) years or more and who have built their homes on the land, as well as residents who have legally and continuously occupied the lands by contract for the last ten (10) years.11 Although there is no mention of P.D. No. 1517 in their complaint, the Genguyons nevertheless assert their alleged right of first refusal as provided by the said law. However, the Regional Trial Court found that the Genguyons failed to present any factual or legal basis for its application. The Court of Appeals, on the other hand, found that although the Genguyons claimed the right of first refusal, their assertion was not anchored on P.D. No. 1517. And yet, the Genguyons have not shown during these entire proceedings any other statutory or jurisprudential source of said right of first refusal which would support their contentions. Hence, the trial court correctly concluded that the Genguyons claims were founded on P.D. No. 1517. However, the said court ruled that P.D. No. 1517 cannot benefit the Genguyons, citing the Supreme Court ruling in Santos v. Court of Appeals,12 to the effect that "P.D. No. 1517, in referring to the pre-emptive or redemptive right of a lease, speaks only of urban land under lease on which a tenant has built his home and in which he has resided for ten years or more. If both land and the building belong to the lessor, the right referred to hereinabove does not apply." In the parallel case of Nidoy v. Court of Appeals,13 we held that: Clearly, the right of first refusal applies only to tenants who have resided for ten (10) years or more on the leased land declared as within the Urban Land Reform Zone, and who have built their homes on that land. It does not apply to apartment dwellers. (Underscoring ours) This Court went on to declare that P.D. No. 2016, which amended P.D. No. 1517, likewise did not extend its benefits to apartment dwellers. Clearly, then, as lessees of the residential apartment unit, the Genguyons have no right of first refusal to speak of. Apartment dwellers are excluded from the protective mantle of the Urban Land Reform Law. The said law grants the right of first refusal only to legitimate tenants who have built their homes on the land they are leasing. The Genguyons did not lease the land only. Neither did they build a home thereon. There is no question that both the land and the building are owned by the lessor. Consequently, the Genguyons action for annulment of the sale to herein petitioner and reconveyance cannot prosper if based only on the ground that they were denied their right of first refusal under P.D. No. 1517. Be that as it may, on the second matter of whether or not Mateo Tan Lu and petitioner Josue Arlegui, after him, breached the trust reposed on them as officers of, and negotiators for, the tenants association, we are constrained to affirm the findings and conclusions of the Court of Appeals. By acquiring for themselves the subject property without informing the respondent spouses of the progress of the negotiations, or of their desire to purchase the said property, Mateo Tan Lu and the petitioner did not act with the candor and honesty expected of them. Their successful, albeit clandestine, ploy to appropriate the apartment unit that they knew fully well the Genguyons had every intention to buy from A.B. Barretto Enterprises violated the trust and confidence so willingly and without reservation reposed on them.

The arguments advanced by the petitioner cannot detract from the cogency of the Court of Appeals findings in this regard, to wit: x x x They had a right to expect that because of their fiduciary dependence on the officers who were conducting the negotiations in their behalf, the same would act with good faith in relation to the trust and confidence reposed in them. But when Mateo Tan Lu later turned out to have purchased the residential unit occupied by the appellants (aside from the unit he commercially leased from the Barrettos), he committed a breach of trust in utter disregard of the existing fiduciary relationship between the trusted officers of the Association and the tenants-members thereof. Without doubt, Mateo Tan Lu had breached the confidence reposed in him by the Association members, and a trust was created by force of law in favor of spouses Genguyons, long time occupants of the apartment unit (24 years: TSN, September 6, 1990, p. 4) which he surreptitiously bought. The Supreme Court has long stated that: If a person obtains legal title to property by fraud and concealment, Courts of equity will impress upon the title a so called constructive trust in favor of the defrauded party. (Gayondato v. The Treasurer of the Philippines Islands, 49 Phil. 244, 249). In a similar vein, Tolentino opined: "a receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property of persons, is utterly disabled from acquiring for his own benefit the property committed to his custody x x x. No fraud in fact need be shown and no excuse will be heard the trustee. x x x. The rule stands on the moral obligation to refrain from placing ones self in positions which ordinarily excite conflicts between self interest and integrity. It seeks to remove the temptation that might arise out of such a relation to serve ones self interest at the expense of ones integrity and duty to another, by making it impossible to profit by yielding to temptation x x x (Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1973, pp. 638-639, citing Gilbert v. Hemston, 79 Mich. 326 and Severino v. Severino, 44 Phil. 343).14 (Underscoring ours) The petitioner cannot claim to be innocent or unaware of Mateo Tan Lus underhanded method of acquiring the subject property. He himself bought the said apartment unit in a manner that cannot be countenanced by the courts. We agree with the following pronouncements of the Court of Appeals: x x x Like Mateo Tan Lu, Arlegui was one of the trusted officers of the Association charged with negotiating for the purchase of the apartment units. In fact, he was the First Vice-President thereof. Thus, he was privy to all the discussions that took place within and between both sides. Arlegui knew that like all the other bona fide tenants of the apartment, the Genguyons had the right to purchase their apartment unit in accordance with the Associations original agreement with the Barrettos. And so knowing the negotiation terms firsthand and employing the same to his own benefit and profit, Arlegui could not be considered as an innocent purchaser for value, or a buyer in good faith (See TSN, November 22, 1990, pp. 5-6 citing Exhs. B and C, Records, pp. 139-142). Corollarily, he is not and cannot be insulated from the legal effects of the Genguyons right of first preference over the unit.15 (Underscoring ours) The facts and evidence on record, as carefully perused by the Court of Appeals, conclusively show that Mateo Tan Lu surreptitiously purchased the subject property from the original owners, and that the Genguyons were not aware of his secret machinations to acquire the property for himself. In fact, Mateo Tan Lu did not inform the Genguyons of the sale to him. It was Simeon Barretto, Jr. who wrote the Genguyons telling them that the apartment unit had been sold to Mateo Tan Lu and that they had six (6) months within which to vacate the premises.16 Clearly, Mateo Tan Lu abused the confidence and trust that the Genguyons bestowed on him. Petitioner, fully aware of the questionable circumstances attending Mateo Tan Lus acquisition, added insult to injury when he in turn purchased the said property from Mateo Tan Lu. The Genguyons had no inkling that Mateo Tan Lu or petitioner Arlegui were even interested to buy the subject property. They trusted Mateo Tan Lu and the petitioner to negotiate in behalf of the other tenants, themselves included. They never suspected that Mateo Tan Lu and the petitioner would appropriate for themselves the apartment unit they were leasing. That there was abuse of confidence cannot be denied.

The petitioner denies that a constructive trust was created and maintains that there was no fraud committed. He neither received money from the Genguyons, nor was he unjustly enriched. However, the records show that the Genguyons, along with the other tenants and members of the association, contributed money to enable the officers to negotiate with the Barrettos. Besides, constructive trusts do not only arise out of fraud or duress,17 but also by abuse of confidence, in order to satisfy the demands of justice.18 The petitioner also argues that the Genguyons failed to prove the existence of an implied or constructive trust. We disagree. There is ample documentary and testimonial evidence to establish the existence of a fiduciary relationship between them, and that petitioners subsequent acts betrayed the trust and confidence reposed on him. Petitioner points out that his lawyer wrote a letter informing the Genguyons that he had already bought the property and telling them to vacate the premises. This cannot be taken as evidence of good faith. Moreover, it is rather too late for petitioner to argue that the Genguyons could and should have negotiated directly with the Barrettos after he had already accepted the responsibility and authority to negotiate in their behalf. Petitioner suggests that the Genguyons were not financially capable of buying the subject property anyway so they have no reason to complain. We are not persuaded by petitioners contentions. The Court of Appeals findings in this regard is more than convincing, to wit: It is appellees contention that the Genguyons never tendered the amount to make the payments for the unit, and that their indication of a willingness to make the purchase does not really show a capacity to make the necessary payment. However, we note that as early was 1987, when hearsay was preponderant among the tenants that some of the apartment units were purchased by some officers of the Association who were entrusted with the negotiations, the Genguyons, through Atty. Eriberto Guerrero, sent Mateo Tan Lu a letter verifying with him the truth to the information that he, Tan Lu, had bought their unit from the Barrettos; they also stated that they were not defaulting from the monthly rental payments, but since they did not know the true status of the negotiations, and since rumors were rife about the purchase of the different units, they had put the payment for that month in the bank, after which they informed Tan Lu of their continuing desire to buy their unit (in line with the Associations agreement with the Barrettos) if it is indeed true that he had bought it from the same. They also told him that they await communications from him regarding the amount of the purchase price. A xerox copy of their bank account accompanied their letter as proof of their capacity to pay (Records, Exh. H, p. 153). We found no written response from Tan Lu who sold the unit to Josue Arlegui after one year. Defendants-appellees claim that Tan Lu had offered to sell the unit to Beatriz Genguyon (TSN, Ex Parte Proceedings of May 15, 1990, pp. 11-12). Yet, such allegation is self-serving and is corroborated only by the self-serving testimony of Josue Arlegui (Ibid., p. 21), which was in fact controverted by Beatriz Genguyon in her own testimony (TSN, September 6, 1990, p. 13).19 It is further argued that no implied trust, as defined under Article 1456 of the New Civil Code, was created because the petitioner did not acquire the subject property through mistake or fraud. Nevertheless, the absence of fraud or mistake on the part of the petitioner does not prevent the court from ruling that an implied or constructive trust was created nonetheless. In the case of Roa, Jr. v. Court of Appeals,20 the Court held that: While it is Our ruling that the compromise agreement between the parties did not create an express trust not an implied trust under Art. 1456 of the New Civil Code, We may, however, make recourse to the principles of the general law of trusts, insofar as they are not in conflict with the New Civil Code, Code of Commerce, the Rules of Court and special laws which under Art. 1442 of the New Civil Code are adopted. While Articles 1448 to 1456 of the New Civil Code enumerates cases of implied trust, Art. 1447 specifically stipulates that the enumeration of the cases of implied trust does not exclude others established by the general law of trusts, but the limitations laid down in Art. 1442 shall be applicable. In American law and jurisprudence, We find the following general principles: A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or

abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or retentions of property of which equity, in accordance with its fundamental principles and the traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust. (76 Am. Jr. 2d, Sec. 221, pp. 446-447). And specifically applicable to the case at bar is the doctrine that "A constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it." (76 Am. Jur. 2d, Sec. 222, p. 447).
1w phi1.nt

The above principle is not in conflict with the New Civil Code, Code of Commerce, Rules of Court and special laws. And since We are a court of law and of equity, the case at bar must be resolved on the general principles of law on constructive trust which basically rest on equitable considerations in order to satisfy the demands of justice, morality, conscience and fair dealing and thus protect the innocent against fraud. As the respondent court said, "It behooves upon the courts to shield fiduciary relations against every manner of chickanery or detestable design cloaked by legal technicalities." (Underscoring ours) Thirdly, it is of no moment that the Genguyons filed the action for reconveyance more than a year after the subject property was registered in favor of the petitioner. An action for reconveyance of registered land on an implied trust prescribes in ten (10) years even if the decree of registration is no longer open to review.21 Besides, when the Genguyons filed the action for reconveyance, they were at that time in possession of the subject property. This Court has held that the 10-year prescription period applies only "when the plaintiff or the person enforcing the trust is not in possession of the property since if a person claiming to be the owner thereof is in actual possession of the property the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe."22 Even though the Genguyons filed the action for reconveyance after the case for ejectment against them was instituted, the same was not rendered stale or improper. 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. 23 Petitioner also assails the award of damages to the Genguyons, arguing that he should be the one awarded damages. The Court of Appeals ordered Mateo Tan Lu and the petitioner to pay the Genguyons, jointly and solidarily, the amount of P35,000.00 as damages inclusive of attorneys fees. The award was justified by the appellate court thus: There is no doubt that because of Tan Lu and Arleguis violation of the trust and confidence reposed in them as officers and negotiators in behalf of the tenants-members of the Association, damages have accrued upon spouses Genguyons for which they must be indemnified. Article 19 of the New Civil Code of the Philippines exhorts the citizens in the correct exercise of rights and performance of duties in this wise: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

This principle of abuse of rights is based upon the famous maxim suum jus summa injuria (the abuse of a right is the greatest possible wrong). The acts of Tan Lu and Arlegui directly violate the principles enunciated in Art. 19 which declares that every person must practice justice, honesty and good faith in his dealings with his fellowmen. That there was a valid pact or agreement among the Association members and their entrusted officers charged with the negotiations, is an accepted fact. As two of the three entrusted officers charged with the negotiations, Tan Lu and Arlegui fall within the purview of Art. 19 which is also implemented by Art. 21, New Civil Code, a sequent of Art. 19, which declares that "[A]ny person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage."24 In addition, Articles 2221 and 2222 of the New Civil Code provide that the Court may award nominal damages: (1) in order that a right of the plaintiff, which has been violated or invaded, may be vindicated or recognized; or (2) in every case where any property right has been invaded. Under the circumstances, whether as compensatory or nominal damages, the amount of P35,000.00, inclusive of attorneys fees, is just and reasonable. Finally, in the assailed Decision, the Court of Appeals ordered a permanent injunction directing the MTC of Mandaluyong, Branch 60 to dismiss the ejectment case25 against the Genguyons. The records show that three (3) years before the Court of Appeals rendered its Decision, the ejectment case had already been decided with finality. Consequently, the Court of Appeals can no longer interfere in the said case. Besides, the outcome of the ejectment case has no adverse effect on the action for reconveyance which concerns title to the subject property. Neither will the said judgment be held conclusive of the facts therein found since the ejectment case between the same parties is based on a different cause of action involving possession.26 For being moot and academic, it is no longer necessary to indulge in academic discussion on this matter.27 During these proceedings, counsel for the Genguyon spouses notified the Court of their untimely demise: Gil on April 16, 2001 and Beatriz on October 18, 2000, as evidenced by the Death Certificates 28 submitted by their surviving heirs. The said heirs moved that they be substituted as parties-respondents in this case.29 There being no opposition on the part of petitioner Arlegui, this Court granted the motion for substitution in accordance with Rule 3, Section 17 of the Revised Rules of Court. WHEREFORE, in view of all the foregoing, the petition is DENIED and the Decision of the Court of Appeals in CA-G.R. No. 32833 is hereby AFFIRMED and MODIFIED, as follows: 1) Annulling the sale of the apartment unit at issue between Mateo Tan Lu and Josue Arlegui; 2) Ordering Josue Arlegui to execute a corresponding Deed of Conveyance in favor of the heirs of Gil and Beatriz Genguyon (Gilda G. Genguyon, Ira G. Genguyon, Reylan G. Genguyon, Edwin G. Genguyon, Marilou Genguyon-Rodriguez, and Rosemarie Genguyon-Iwafe) involving Transfer Certificate of Title (TCT) No. 1286 covering the apartment unit at issue, upon payment by said heirs of the sum of P55,000.00, without any interest, to Arlegui; Should Josue Arlegui fail to so execute the Deed of Conveyance herein ordered within fifteen (15) days from finality of judgment, the Branch Clerk of the court a quo shall execute the same and the Register of Deeds shall nullify the certificate of title in the name of Arlegui and shall issue another certificate of title in favor of the heirs; 3) Ordering Mateo Tan Lu and Josue Arlegui to pay the heirs jointly and solidarily, the amount of P35,000.00, as nominal damages inclusive of attorneys fees; 4) Dismissing the charges as to defendants-appellees Barrettos; and 5) Costs against Mateo Tan Lu and Josue Arlegui, jointly and severally.

SO ORDERED. Davide, Jr., C.J., Puno, and Kapunan, JJ., concur.

Footnote
1

Court of Appeals Decision, penned by Justice Bennie Adefuin-De la Cruz and concurred in by Justices Jorge Imperial and Lourdes Tayao-Jaguros, pp. 10-11; Records, pp. 33-34, Annex "A".
2

Records, pp. 65-68. Annex "C", Rollo, pp. 37-43. CA-G.R. CV No. 32833. Decision in Civil Case No. 12647-(1654), Rollo, pp. 54-60. Decision in Special Civil Action No. 225, Rollo, pp. 60-68. Annex "B", Records, p. 393. Rollo, pp. 14-15. Records, pp. 178-179. TSN, September 19, 1990, p. 2. Section 6, P.D. No. 1517. 128 SCRA 428, 433 (1984). 214 SCRA 394, 398 (1992), citing Nieves v. Court of Appeals, 198 SCRA 63, 72 (1991). Rollo, pp. 27-28. Ibid., at 28. Annex "E", Letter dated January 27, 1987, Record, p. 145. Marquez v. Court of Appeals, 300 SCRA 653, 658 (1999). Vda. de Esconde v. Court of Appeals, 253 SCRA 66, 73 (1996). Rollo, pp. 31-32. 123 SCRA 1, 15-16 (1983). Salvatierra v. CA, 261 SCRA 45, 59 (1996); Manangan v. De los Reyes, 308 SCRA 139, 143 (1999).

10

11

12

13

14

15

16

17

18

19

20

21

22

Reyes v. Court of Appeals, 315 SCRA 626, 632 (1999). Reyes, supra. Rollo, pp. 32-33. Civil Case No. 12647. Del Rosario v. Court of Appeals, 241 SCRA 519, 525 (1995). Pepsi-Cola Products Phils., Inc. v. Sec. of Labor, 312 SCRA 104, 114 (1999). Records, pp. 123-124. Records, pp. 119-122. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

23

24

25

26

27

28

29

G.R. No. L-26699 March 16, 1976 BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO ALCURIZA, ARTURO ALCURIZA, OSCAR ALCURIZA and ANITA ALCURIZA, the latter two being minors are represented by guardian ad litem, ARTURO ALCURIZA, plaintiffs-appellants, vs. JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the Intestate of JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL SALAO DE SANTOS, and PABLO P. SALAO, as successors-in-interest of the late JUAN S. SALAO, together with PABLO P. SALAO, Administrator, defendants-appellants. Eusebio V. Navarro for plaintiffs-appellants. Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants.

AQUINO, J.:
This litigation regarding a forty-seven-hectare fishpond located at Sitio Calunuran, Hermosa, Bataan involves the law of trusts and prescription. The facts are as follows: The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot four children named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio, died in 1886 survived by his only child. Valentin Salao. There is no documentary evidence as to what, properties formed part of Manuel Salao's estate, if any. His widow died on May 28, 1914. After her death, her estate was administered by her daughter Ambrosia.

It was partitioned extrajudicially in a deed dated December 29, 1918 but notarized on May 22, 1919 (Exh. 21). The deed was signed by her four legal heirs, namely, her three children, Alejandra, Juan and Ambrosia, and her grandson, Valentin Salao, in representation of his deceased father, Patricio. The lands left by Valentina Ignacio, all located at Barrio Dampalit were as follows: Nature of Land

(1) One-half interest in a fishpond which she had inherited from her parents, Feliciano Ignacio and Damiana Mendoza, and the other half of which was owned by her co-owner, Josefa Sta. Ana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700 (2) Fishpond inherited from her parents . . . . . . . . . . . . 7,418 (3) Fishpond inherited from her parents . . . . . . . . . . . . . 6,989 (4) Fishpond with a bodega for salt . . . . . . . . . . . . . . . . 50,469 (5) Fishpond with an area of one hectare, 12 ares and 5 centares purchased from Bernabe and Honorata Ignacio by Valentina Ignacio on November 9, 1895 with a bodega for salt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205 (6) Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 (7) One-half interest in a fishpond with a total area of 10,424 square meters, the other half was owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . . . . 5,217 (8) Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,454 (9) Riceland purchased by Valentina Ignacio from Eduardo Salao on January 27, 1890 with a house and two camarins thereon . . . . . . . . . . . . . . . . . . 8,065

(10) Riceland in the name of Ambrosia Salao, with an area of 11,678 square meters, of which 2,173 square meters were sold to Justa Yongco . . . . . . . . . .9,505 TOTAL . . . . . . . . . . . . .. 179,022 square

To each of the legal heirs of Valentina Ignacio was adjudicated a distributive share valued at P8,135.25. In satisfaction of his distributive share, Valentin Salao (who was then already forty-eight years old) was given the biggest fishpond with an area of 50,469 square meters, a smaller fishpond with an area of 6,989 square meters and the riceland with a net area of 9,905 square meters. Those parcels of land had an aggregate appraised value of P13,501 which exceeded Valentin's distributive share. So in the deed of partition he was directed to pay to his co-heirs the sum of P5,365.75. That arrangement, which was obviously intended to avoid the fragmentation of the lands, was beneficial to Valentin. In that deed of partition (Exh. 21) it was noted that "desde la muerte de Valentina Ignacio y Mendoza, ha venido administrando sus bienes la referida Ambrosia Salao" "cuya administracion lo ha sido a satisfaccion de todos los herederos y por designacion los mismos". It was expressly stipulated that Ambrosia Salao was not obligated to render any accounting of her administration "en consideracion al resultado satisfactorio de sus gestiones, mejoradas los bienes y pagodas por ella las contribusiones (pages 2 and 11, Exh. 21). By virtue of the partition the heirs became "dueos absolutos de sus respectivas propiedadas, y podran inmediatamente tomar posesion de sus bienes, en la forma como se han distribuido y llevado a cabo las adjudicaciones" (page 20, Exh. 21). The documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT No. 185 of the Registry of Deeds of Pampanga, in their names for a forty-seven-hectare fishpond located at Sitio Calunuran, Lubao, Pampanga (Exh. 14). It is also known as Lot No. 540 of the Hermosa cadastre because that part of Lubao later became a part of Bataan. The Calunuran fishpond is the bone of contention in this case. Plaintiffs' theory is that Juan Y. Salao, Sr. and his sister Ambrosia had engaged in the fishpond business. Where they obtained the capital is not shown in any documentary evidence. Plaintiffs' version is that Valentin Salao and Alejandra Salao were included in that joint venture, that the funds used were the earnings of the properties supposedly inherited from Manuel Salao, and that those earnings were used in the acquisition of the Calunuran fishpond. There is no documentary evidence to support that theory. On the other hand, the defendants contend that the Calunuran fishpond consisted of lands purchased by Juan Y. Salao, Sr. and Ambrosia Salao in 1905, 1906, 1907 and 1908 as, shown in their Exhibits 8, 9, 10 and 13. But this point is disputed by the plaintiffs. However, there can be no controversy as to the fact that after Juan Y. Salao, Sr. and Ambrosia Salao secured a Torrens title for the Calunuran fishpond in 1911 they exercised dominical rights over it to the exclusion of their nephew, Valentin Salao. Thus, on December 1, 1911 Ambrosia Salao sold under pacto de retro for P800 the Calunuran fishpond to Vicente Villongco. The period of redemption was one year. In the deed of sale (Exh19) Ambrosia confirmed that she and her brother Juan were the dueos proindivisos of the said pesqueria. On December 7, 1911

Villongco, the vendee a retro, conveyed the same fishpond to Ambrosia by way of lease for an anual canon of P128 (Exh. 19-a). After the fishpond was redeemed from Villongco or on June 8, 1914 Ambrosia and Juan sold it under pacto de retro to Eligio Naval for the sum of P3,360. The period of redemption was also one year (Exh. 20). The fishpond was later redeemed and Naval reconveyed it to the vendors a retro in a document dated October 5, 1916 (Exh. 20-a). The 1930 survey shown in the computation sheets of the Bureau of Lands reveals that the Calunuran fishpond has an area of 479,205 square meters and that it was claimed by Juan Salao and Ambrosia Salao, while the Pinanganacan fishpond (subsequently acquired by Juan and Ambrosia) has an area of 975,952 square meters (Exh. 22). Likewise, there is no controversy as to the fact that on May 27, 1911 Ambrosia Salao bought for four thousand pesos from the heirs of Engracio Santiago a parcel of swampland planted to bacawan and nipa with an area of 96 hectares, 57 ares and 73 centares located at Sitio Lewa, Barrio Pinanganacan, Lubao, Pampanga (Exh. 17d). The record of Civil Case No. 136, General Land Registration Office Record No. 12144, Court of First Instance of Pampanga shows that Ambrosia Salao and Juan Salao filed an application for the registration of that land in their names on January 15, 1916. They alleged in their petition that "han adquirido dicho terreno por partes iguales y por la compra a los herederos del finado, Don Engracio Santiago" (Exh. 17-a). At the hearing on October 26, 1916 before Judge Percy M. Moir, Ambrosia testified for the applicants. On that same day Judge Moir rendered a decision, stating, inter alia, that the heirs of Engracio Santiago had sold the land to Ambrosia Salao and Juan Salao. Judge Moir "ordena la adjudicacion y registro del terreno solicitado a nombre de Juan Salao, mayor de edad y de estado casado y de su esposa Diega Santiago y Ambrosia Salao, de estado soltera y mayor de edad, en participaciones iguales" (Exh. 17-e). On November 28, 1916 Judge Moir ordered the issuance of a decree for the said land. The decree was issued on February 21, 1917. On March 12, 1917 Original Certificate of Title No. 472 of the Registry of Deeds of Pampanga was issued in the names of Juan Salao and Ambrosia Salao. That Pinanganacan or Lewa fishpond later became Cadastral Lot No. 544 of the Hermosa cadastre (Exh. 23). It adjoins the Calunuran fishpond (See sketch, Exh. 1). Juan Y. Salao, Sr. died on November 3, 1931 at the age of eighty years (Exh. C). His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty years according to the death certificate (Exh. A. However, if according to Exhibit 21, he was forty-eight years old in 1918, he would be sixty-three years old in 1933). The intestate estate of Valentin Salao was partitioned extrajudicially on December 28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza (Exh. 32). His estate consisted of the two fishponds which he had inherited in 1918 from his grandmother, Valentina Ignacio. If it were true that he had a one-third interest in the Calunuran and Lewa fishponds with a total area of 145 hectares registered in 1911 and 1917 in the names of his aunt and uncle, Ambrosia Salao and Juan Y. Salao, Sr., respectively, it is strange that no mention of such interest was made in the extrajudicial partition of his estate in 1934. It is relevant to mention that on April 8, 1940 Ambrosia Salao donated to her grandniece, plaintiff Benita Salao, three lots located at Barrio Dampalit with a total area of 5,832 square meters (Exit. L). As donee Benita Salao signed the deed of donation.

On that occasion she could have asked Ambrosia Salao to deliver to her and to the children of her sister, Victorina, the Calunuran fishpond if it were true that it was held in trust by Ambrosia as the share of Benita's father in the alleged joint venture. But she did not make any such demand. It was only after Ambrosia Salao's death that she thought of filing an action for the reconveyance of the Calunuran fishpond which was allegedly held in trust and which had become the sole property of Juan Salao y Santiago (Juani). On September 30, 1944 or during the Japanese occupation and about a year before Ambrosia Salao's death on September 14, 1945 due to senility (she was allegedly eighty-five years old when she died), she donated her one-half proindiviso share in the two fishponds in question to her nephew, Juan S. Salao, Jr. (Juani) At that time she was living with Juani's family. He was already the owner of the the other half of the said fishponds, having inherited it from his father, Juan Y. Salao, Sr. (Banli) The deed of denotion included other pieces of real property owned by Ambrosia. She reserved for herself the usufruct over the said properties during her lifetime (Exh. 2 or M). The said deed of donation was registered only on April 5, 1950 (page 39, Defendants' Record on Appeal). The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January 26, 1951 informed Juan S. Salao, Jr. that his clients had a one-third share in the two fishponds and that when Juani took possession thereof in 1945, he refused to give Benita and Victorina's children their one-third share of the net fruits which allegedly amounted to P200,000 (Exh. K). Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin Salao did not have any interest in the two fishponds and that the sole owners thereof his father Banli and his aunt Ambrosia, as shown in the Torrens titles issued in 1911 and 1917, and that he Juani was the donee of Ambrosia's one-half share (Exh. K-1). Benita Salao and her nephews and niece filed their original complaint against Juan S. Salao, Jr. on January 9, 1952 in the Court of First Instance of Bataan (Exh. 36). They amended their complaint on January 28, 1955. They asked for the annulment of the donation to Juan S. Salao, Jr. and for the reconveyance to them of the Calunuran fishpond as Valentin Salao's supposed one-third share in the 145 hectares of fishpond registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao. Juan S. Salao, Jr. in his answer pleaded as a defense the indefeasibility of the Torrens title secured by his father and aunt. He also invoked the Statute of Frauds, prescription and laches. As counter-claims, he asked for moral damages amounting to P200,000, attorney's fees and litigation expenses of not less than P22,000 and reimbursement of the premiums which he has been paying on his bond for the lifting of the receivership Juan S. Salao, Jr. died in 1958 at the age of seventy-one. He was substituted by his widow, Mercedes Pascual and his six children and by the administrator of his estate. In the intestate proceedings for the settlement of his estate the two fishponds in question were adjudicated to his seven legal heirs in equal shares with the condition that the properties would remain under administration during the pendency of this case (page 181, Defendants' Record on Appeal). After trial the trial court in its decision consisting of one hundred ten printed pages dismissed the amended complaint and the counter-claim. In sixty-seven printed pages it made a laborious recital of the testimonies of plaintiffs' fourteen witnesses, Gregorio Marcelo, Norberto Crisostomo, Leonardo Mangali Fidel de la Cruz, Dionisio Manalili, Ambrosio Manalili, Policarpio Sapno, Elias Manies Basilio Atienza, Benita Salao, Emilio Cagui Damaso de la Pea, Arturo Alcuriza and Francisco Buensuceso, and the testimonies of defendants' six witnesses, Marcos Galicia, Juan Galicia, Tiburcio Lingad, Doctor Wenceslao Pascual, Ciriaco Ramirez and Pablo P. Salao. (Plaintiffs presented Regino Nicodemus as a fifteenth witness, a rebuttal witness). The trial court found that there was no community of property among Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao when the Calunuran and Pinanganacan (Lewa) lands were acquired; that a co-ownership over the real properties of Valentina Ignacio existed among her heirr after her death in 1914; that the co-ownership

was administered by Ambrosia Salao and that it subsisted up to 1918 when her estate was partitioned among her three children and her grandson, Valentin Salao. The trial court surmised that the co-ownership which existed from 1914 to 1918 misled the plaintiffs and their witnesses and caused them to believe erroneously that there was a co-ownership in 1905 or thereabouts. The trial court speculated that if valentin had a hand in the conversion into fishponds of the Calunuran and Lewa lands, he must have done so on a salary or profit- sharing basis. It conjectured that Valentin's children and grandchildren were given by Ambrosia Salao a portion of the earnings of the fishponds as a reward for his services or because of Ambrosia's affection for her grandnieces. The trial court rationalized that Valentin's omission during his lifetime to assail the Torrens titles of Juan and Ambrosia signified that "he was not a co-owner" of the fishponds. It did not give credence to the testimonies of plaintiffs' witnesses because their memories could not be trusted and because no strong documentary evidence supported the declarations. Moreover, the parties involved in the alleged trust were already dead. It also held that the donation was validly executed and that even if it were void Juan S. Salao, Jr., the donee, would nevertheless be the sole legal heir of the donor, Ambrosia Salao, and would inherit the properties donated to him. Both parties appealed. The plaintiffs appealed because their action for reconveyance was dismissed. The defendants appealed because their counterclaim for damages was dismissed. The appeals, which deal with factual and legal issues, were made to the Court of Appeals. However, as the amounts involved exceed two hundred thousand pesos, the Court of Appeals elevated the case to this Court in its resolution of Octoter 3, 1966 (CA-G.R. No. 30014-R). Plaintiffs' appeal. An appellant's brief should contain "a subject index index of the matter in the brief with a digest of the argument and page references" to the contents of the brief (Sec. 16 [a], Rule 46, 1964 Rules of Court; Sec. 17, Rule 48, 1940 Rules of Court). The plaintiffs in their appellants' brief consisting of 302 pages did not comply with that requirement. Their statements of the case and the facts do not contain "page references to the record" as required in section 16[c] and [d] of Rule 46, formerly section 17, Rule 48 of the 1940 Rules of Court. Lawyers for appellants, when they prepare their briefs, would do well to read and re-read section 16 of Rule 46. If they comply strictly with the formal requirements prescribed in section 16, they might make a competent and luminous presentation of their clients' case and lighten the burden of the Court. What Justice Fisher said in 1918 is still true now: "The pressure of work upon this Court is so great that we cannot, in justice to other litigants, undertake to make an examination of the voluminous transcript of the testimony (1,553 pages in this case, twenty-one witnesses having testified), unless the attorneys who desire us to make such examination have themselves taken the trouble to read the record and brief it in accordance with our rules" (Palara vs. Baguisi 38 Phil. 177, 181). As noted in an old case, this Court decides hundreds of cases every year and in addition resolves in minute orders an exceptionally considerable number of petitions, motions and interlocutory matters (Alzua and Arnalot vs. Johnson, 21 Phil. 308, 395; See In re Almacen, L-27654, February 18, 1970, 31 SCRA 562, 573). Plaintiffs' first assignment of error raised a procedural issue. In paragraphs 1 to 14 of their first cause of action they made certain averments to establish their theory that Valentin Salao had a one-third interest in the two fishponds which were registrered in the names of Juan Y. Salao, Sr. (Banli) and Ambrosia Salao. Juan S. Salao, Jr. (Juani) in his answer "specifically" denied each and all the allegations" in paragraphs I to 10 and 12 of the first cause of action with the qualification that Original certificates of Title Nos. 185 and 472 were issued "more than 37 years ago" in the names of Juan (Banli) and Ambrosia under the circumstances set forth in Juan S. Salao, Jr.'s "positive defenses" and "not under the circumstances stated in the in the amended complaint".

The plaintiffs contend that the answer of Juan S. Salao, Jr. was in effect tin admission of the allegations in their first cause of action that there was a co-ownership among Ambrosia, Juan, AIejandra and Valentin, all surnamed Salao, regarding the Dampalit property as early as 1904 or 1905; that the common funds were invested the acquisition of the two fishponds; that the 47-hectare Calunuran fishpond was verbally adjudicated to Valentin Salao in the l919 partition and that there was a verbal stipulation to to register "said lands in the name only of Juan Y. Salao". That contention is unfounded. Under section 6, Rule 9 of the 1940 of Rules of Court the answer should "contain either a specific dinial a statement of matters in accordance of the cause or causes of action asserted in the complaint". Section 7 of the same rule requires the defendant to "deal specificaly with each material allegation of fact the truth of wihich he does not admit and, whenever practicable shall set forth the substance of the matters which he will rely upon to support his denial". "Material averments in the complaint, other than those as to the amount damage, shall be deemed admitted when specifically denied" (Sec. 8). "The defendant may set forth set forth by answer as many affirmative defenses as he may have. All grounds of defenses as would raise issues of fact not arising upon the preceding pleading must be specifically pleaded" (Sec. 9). What defendant Juan S. Salao, Jr. did in his answer was to set forth in his "positive defenses" the matters in avoidance of plaintiffs' first cause of action which which supported his denials of paragraphs 4 to 10 and 12 of the first cause of action. Obviously, he did so because he found it impracticable to state pierceneal his own version as to the acquisition of the two fishponds or to make a tedious and repetitious recital of the ultimate facts contradicting allegations of the first cause of action. We hold that in doing so he substantially complied with Rule 9 of the 1940 Rules of Court. It may be noted that under the present Rules of Court a "negative defense is the specific denial of t the material fact or facts alleged in the complaint essential to plaintiff's cause of causes of action". On the other hand, "an affirmative defense is an allegation of new matter which, while admitting the material allegations of the complaint, expressly or impliedly, would nevertheless prevent or bar recovery by the plaintiff." Affirmative defenses include all matters set up "by of confession and avoidance". (Sec. 5, Rule 6, Rules of Court). The case of El Hogar Filipino vs. Santos Investments, 74 Phil. 79 and similar cases are distinguishable from the instant case. In the El Hogar case the defendant filed a laconic answer containing the statement that it denied "generally ans specifically each and every allegation contained in each and every paragraph of the complaint". It did not set forth in its answer any matters by way of confession and avoidance. It did not interpose any matters by way of confession and avoidance. It did not interpose any affirmative defenses. Under those circumstances, it was held that defendant's specific denial was really a general denial which was tantamount to an admission of the allegations of the complaint and which justified judgment on the pleadings. That is not the situation in this case. The other nine assignments of error of the plaintiffs may be reduced to the decisive issue of whether the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao. That issue is tied up with the question of whether plaintiffs' action for reconveyance had already prescribed. The plaintiffs contend that their action is "to enforce a trust which defendant" Juan S. Salao, Jr. allegedly violated. The existence of a trust was not definitely alleged in plaintiffs' complaint. They mentioned trust for the first time on page 2 of their appelants' brief. To determine if the plaintiffs have a cause of action for the enforcement of a trust, it is necessary to maek some exegesis on the nature of trusts (fideicomosis). Trusts in Anglo-American jurisprudence were derived from thefideicommissa of the Roman law (Government of the Philippine Islands vs. Abadilla, 46 Phil. 642, 646). "In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title to which is vested in another, but the word 'trust' is frequently employed to indicate duties, relations, and responsibilities which are not strictly technical trusts" (89 C.J.S. 712).

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" (Art. 1440, Civil Code). There is a fiduciary relation between the trustee and thecestui que trust as regards certain property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505). "Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No express trusts concerning an immovable or any interest therein may be proven by parol evidence. An implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457). "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 72). "Implied trusts are those which, without being expressed, are deducible from the nature of the transaction asmatters of intent, or which are superinduced on the transaction by operation of law as matter of equity,independently of the particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722). "A resulting trust. is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance (89 C.J.S. 725). Examples of resulting trusts are found in articles 1448 to 1455 of the Civil Code. (See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs. Grao 42 Phil. 35). On the other hand, a constructive trust is -a trust "raised by construction of law, or arising by operation of law". In a more restricted sense and as contra-distinguished from a resulting trust, a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct intension to create a trust, but by the construction of equity in order to satisfy the demands of justice." It does not arise "by agreement or intention, but by operation of law." (89 C.J.S. 726-727). Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes" (Art. 1456, Civil Code). Or "if a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party". Such a constructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the P. I., 49 Phil. 244). Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there was an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol evidence was offered by them to prove the alleged trust. Their claim that in the oral partition in 1919 of the two fishponds the Calunuran fishpond was assigned to Valentin Salao is legally untenable. It is legally indefensible because the terms of article 1443 of the Civil Code (already in force when the action herein was instituted) are peremptory and unmistakable: parol evidence cannot be used to prove an express trust concerning realty. Is plaintiffs' massive oral evidence sufficient to prove an implied trust, resulting or constructive, regarding the two fishponds? Plaintiffs' pleadings and evidence cannot be relied upon to prove an implied trust. The trial court's firm conclusion that there was no community of property during the lifetime of Valentina; Ignacio or before 1914 is

substantiated by defendants' documentary evidence. The existence of the alleged co-ownership over the lands supposedly inherited from Manuel Salao in 1885 is the basis of plaintiffs' contention that the Calunuran fishpond was held in trust for Valentin Salao. But that co-ownership was not proven by any competent evidence. It is quite improbable because the alleged estate of Manuel Salao was likewise not satisfactorily proven. The plaintiffs alleged in their original complaint that there was a co-ownership over two hectares of land left by Manuel Salao. In their amended complaint, they alleged that the co-ownership was over seven hectares of fishponds located in Barrio Dampalit, Malabon, Rizal. In their brief they alleged that the fishponds, ricelands and saltbeds owned in common in Barrio Dampalit had an area oftwenty-eight hectares, of which sixteen hectares pertained to Valentina Ignacio and eleven hectares represented Manuel Salao's estate. They theorized that the eleven hectares "were, and necessarily, the nucleus, nay the very root, of the property now in litigation (page 6, plaintiffs-appellants' brief). But the eleven hectares were not proven by any trustworthy evidence. Benita Salao's testimony that in 1918 or 1919 Juan, Ambrosia, Alejandra and Valentin partitioned twenty-eight hectares of lands located in Barrio Dampalit is not credible. As noted by the defendants, Manuel Salao was not even mentioned in plaintiffs' complaints. The 1919 partition of Valentina Ignacio's estate covered about seventeen hectares of fishponds and ricelands (Exh. 21). If at the time that partition was made there were eleven hectares of land in Barrio Dampalit belonging to Manuel Salao, who died in 1885, those eleven hectares would have been partitioned in writing as in the case of the seventeen hectares belonging to Valentina Ignacio's estate. It is incredible that the forty-seven-hectare Calunuran fishpond would be adjudicated to Valentin Salao mere by by word of mouth. Incredible because for the partition of the seventeen hectares of land left by Valentina Ignacio an elaborate "Escritura de Particion" consisting of twenty-two pages had to be executed by the four Salao heirs. Surely, for the partition of one hundred forty-five hectares of fishponds among three of the same Salao heirs an oral adjudication would not have sufficed. The improbability of the alleged oral partition becomes more evident when it is borne in mind that the two fishponds were registered land and "the act of registration" is "the operative act" that conveys and affects the land (Sec. 50, Act No. 496). That means that any transaction affecting the registered land should be evidenced by a registerable deed. The fact that Valentin Salao and his successors-in-interest, the plaintiffs, never bothered for a period of nearly forty years to procure any documentary evidence to establish his supposed interest ox participation in the two fishponds is very suggestive of the absence of such interest. The matter may be viewed from another angle. As already stated, the deed of partition for Valentina Ignacio's estate wag notarized in 1919 (Exh. 21). The plaintiffs assert that the two fishponds were verbally partitioned also in 1919 and that the Calunuran fishpond was assigned to Valentin Salao as his share. Now in the partition of Valentina Ignacio's estate, Valentin was obligated to pay P3,355.25 to Ambrosia Salao. If, according to the plaintiffs, Ambrosia administered the two fishponds and was the custodian of its earnings, then it could have been easily stipulated in the deed partitioning Valentina Ignacio's estate that the amount due from Valentin would just be deducted by Ambrosia from his share of the earnings of the two fishponds. There was no such stipulation. Not a shred of documentary evidence shows Valentin's participation in the two fishponds. The plaintiffs utterly failed to measure up to the yardstick that a trust must be proven by clear, satisfactory and convincing evidence. It cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations (De Leon vs. Molo-Peckson, 116 Phil. 1267, 1273). Trust and trustee; establishment of trust by parol evidence; certainty of proof. Where a trust is to be established by oral proof, the testimony supporting it must be sufficiently strong to prove the right of the alleged beneficiary with as much certainty as if a document proving the trust were shown. A trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof. (Syllabus, Suarez vs. Tirambulo, 59 Phil. 303).

Trusts; evidence needed to establish trust on parol testimony. In order to establish a trust in real property by parol evidence, the proof should be as fully convincing as if the act giving rise to the trust obligation were proven by an authentic document. Such a trust cannot be established upon testimony consisting in large part of insecure surmises based on ancient hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110). The foregoing rulings are good under article 1457 of the Civil Code which, as already noted, allows an implied trust to be proven by oral evidence. Trustworthy oral evidence is required to prove an implied trust because, oral evidence can be easily fabricated. On the other hand, a Torrens title is generally a conclusive of the ownership of the land referred to therein (Sec. 47, Act 496). A strong presumption exists. that Torrens titles were regularly issued and that they are valid. In order to maintain an action for reconveyance, proof as to the fiduciary relation of the parties must be clear and convincing (Yumul vs. Rivera and Dizon, 64 Phil. 13, 17-18). The real purpose of the Torrens system is, to quiet title to land. "Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting in the mirador de su casa, to avoid the possibility of losing his land" (Legarda and Prieto vs. Saleeby, 31 Phil. 590, 593). There was no resulting trust in this case because there never was any intention on the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was no constructive trust because the registration of the two fishponds in the names of Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case where to satisfy the demands of justice it is necessary to consider the Calunuran fishpond " being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao. And even assuming that there was an implied trust, plaintiffs' action is clearly barred by prescription or laches (Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Quiniano vs. Court of Appeals, L-23024, May 31, 1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro, 9, February 29, 1972, 43 SCRA 503; Alzona vs. Capunitan and Reyes, 114 Phil. 377). Under Act No. 190, whose statute of limitation would apply if there were an implied trust in this case, the longest period of extinctive prescription was only ten year (Sec. 40; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266). The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its reconveyance was made by the plaintiffs in 1951. Their action was filed in 1952 or after the lapse of more than forty years from the date of registration. The plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if they had any rights at all. Vigilanti prospiciunt jura or the law protects him who is watchful of his rights (92 C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521). "Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim, since it is human nature for a person to assert his rights most strongly when they are threatened or invaded". "Laches or unreasonable delay on the part of a plaintiff in seeking to enforce a right is not only persuasive of a want of merit but may, according to the circumstances, be destructive of the right itself." (Buenaventura vs. David, 37 Phil. 435, 440-441). Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of the Calunuran fishpond, it is no longer n to Pass upon the validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her one-half share in the two fishponds The plaintiffs have no right and personality to assil that donation. Even if the donation were declared void, the plaintiffs would not have any successional rights to Ambrosia's share. The sole legal heir of Ambrosia was her nephew, Juan, Jr., her nearest relative within the third degree. Valentin Salao, if living in 1945 when Ambrosia died, would have been also her legal heir, together with his first cousin, Juan, Jr. (Juani). Benita Salao, the daughter of Valentin, could not represent him in the succession to the estate of Ambrosia since in the collateral line, representation takes place only in favor of the children of

brothers or sisters whether they be of the full or half blood is (Art 972, Civil Code). The nephew excludes a grandniece like Benita Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde 5 Phil. 176). The trial court did not err in dismissing plaintiffs' complaint. Defendants' appeal. The defendants dispute the lower court's finding that the plaintiffs filed their action in good faith. The defendants contend that they are entitled to damages because the plaintiffs acted maliciously or in bad faith in suing them. They ask for P25,000 attorneys fees and litigation expenses and, in addition, moral damages. We hold that defemdamts' appeal is not meritorious. The record shows that the plaintiffs presented fifteen witnesses during the protracted trial of this case which lasted from 1954 to 1959. They fought tenaciously. They obviously incurred considerable expenses in prosecuting their case. Although their causes of action turned out to be unfounded, yet the pertinacity and vigor with which they pressed their claim indicate their sincerity and good faith. There is the further consideration that the parties were descendants of common ancestors, the spouses Manuel Salao and Valentina Ignacio, and that plaintiffs' action was based on their honest supposition that the funds used in the acquisition of the lands in litigation were earnings of the properties allegedly inherited from Manuel Salao. Considering those circumstances, it cannot be concluded with certitude that plaintiffs' action was manifestly frivolous or was primarily intended to harass the defendants. An award for damages to the defendants does not appear to be just and proper. The worries and anxiety of a defendant in a litigation that was not maliciously instituted are not the moral damages contemplated in the law (Solis & Yarisantos vs. Salvador, L-17022, August 14, 1965, 14 SCRA 887; Ramos vs. Ramos, supra). The instant case is not among the cases mentioned in articles 2219 and 2220 of the Civil Code wherein moral damages may be recovered. Nor can it be regarded as analogous to any of the cases mentioned in those articles. The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously. (Barreto vs. Arevalo, 99 Phil. 771. 779). The defendants invoke article 2208 (4) (11) of the Civil Code which provides that attorney's fees may be recovered "in case of a clearly unfounded civil action or proceeding against the plaintiff" (defendant is a plaintiff in his counterclaim) or "in any other case where the court deems it just and equitable" that attorney's fees should he awarded. But once it is conceded that the plaintiffs acted in good faith in filing their action there would be no basis for adjudging them liable to the defendants for attorney's fees and litigation expenses (See Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61). It is not sound public policy to set a premium on the right to litigate. An adverse decision does not ipso facto justify the award of attorney's fees to the winning party (Herrera vs. Luy Kim Guan, 110 Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O. G. 6959). The trial court's judgment is affirmed. No pronouncement as to costs. SO ORDERED. Barredo (Chairman), Antonio, Concepcion, Jr. and Martin, JJ., concur.

Fernando (Chairman, Second Division), J., took no part. Martin, J., was designated to sit in the Second Division. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21334 December 10, 1924

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, petitioner, vs. ANASTASIA ABADILLA, ET AL., claimants. THE MUNICIPALITY OF TAYABAS, ET AL., claimants-appellees, MARIA PALAD, ET AL., claimants-appellants. Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for appellants. Attorney-General Villa-Real for municipality as appellee. No appearance for the other appellees.

OSTRAND, J.: This is an appeal from a judgment in cadastral and land registration case No. 3 of the Court of First Instance of Tayabas (G. L. R. O. Record No. 213) in which case lots Nos. 3464, 3469, and 3470 are claimed by the municipality of Tayabas and the governor of the province on one side, and by Maria, Eufemio, Eugenia, Felix, Caridad, Segunda, and Emilia Palad on the other. Lot No. 3470 is also claimed by Dorotea Lopez. The court below ordered the registration of the three lots in the name of the governor of the Province of Tayabas in trust for a secondary school to be established in the municipality of Tayabas. The claimants Palad and Dorotea Lopez appealed. It appears from the evidence that the lands in question were originally owned by one Luis Palad, a school teacher, who obtained titled to the land by composicion gratuita in 1894. On January 25, 1892, Palad executed a holographic will party in Spanish and partly in Tagalog. Palad died on December 3, 1896, without descendants, but leaving a widow, the appellant Dorotea Lopez, to whom he had been married since October 4, 1885. On July 27, 1987, the Court of First Instance of Tayabas ordered the protocolization of the will over the opposition of Leopoldo and Policarpio Palad, collateral heirs of the deceased and of whom the appellants Palad are descendants. The will contained a clause in Tagalog which, translated into English, reads: That the cocoanut land in Colongcolong, which I have put under cultivation, be used by my wife after my death during her life or until she marries, which property is referred to in the inventory under No. 5, but from this cocoanut land shall be taken what is to be lent to the persons who are to plant cocoanut trees and that which is to be paid to them as their share of the crop if any should remain; and that she try to earn with the product of the cocoanut trees of which those bearing fruit are annually increasing; and if the times aforementioned should arrive, I prepare and donate it to secondary college to be erected in the capital of Tayabas; so this will be delivered by my wife and the executors to the Ayuntamiento of this town, should there be any, and if not, to the civil governor of this province in order to cause the manager thereof to comply with my wishes for the good of many and the welfare of the town.

After the death of Luis Palad the widow Dorotea Lopez remained in possession of the land and in the year 1900 married one Calixto Dolendo. On April 20, 1903, the aforesaid collateral heirs of Luis Palad brought an action against the widow for the partition of the lands here in question on the ground that she, by reason of her second marriage, had lost the right to their exclusive use and possession. In the same action the municipality of Tayabas intervened claiming the land under the clause of the Palad will above quoted. During the pendency of the action an agreement was arrived at by the parties under which the land which now constitutes lots Nos. 3464 and 3469 were turned over to the municipality as its share of the inheritance under the will, and the remaining portion of the land in controversy and which now forms lot No. 3470 was left in the possession of Dorotea Lopez. On the strength of the agreement the action was dismissed on November 9, 1904, upon motion by the counsel for the municipality and concurred in by all the parties, reserving to the collateral heirs the right to bring another action. The municipality of Tayabas has been in possession of said lots Nos. 3464 and 3469 ever since and Dorotea Lopez has likewise held uninterrupted possession of lot No. 3470. In regard to lots Nos. 3464 and 3469, claimed by the appellants Palad and the appellees, the case presents several problems not directly covered by statutory provisions or by Spanish or local precedents and, for the solution of which, we must resort to the underlying principles of the law on the subject. As it is doubtful whether the possession of the municipality of Tayabas can be considered adverse within the meaning of section 41 of the Code of Civil Procedure, the case as to these lots turns upon the construction and validity of the clause quoted from the will of Luis Palad, rather than upon the question of prescription of title. The clause is very unskillfully drawn; its language is ungrammatical and at first blush seems somewhat obscure, but on closer examination it sufficiently reveals the purpose of the testator. And if its provisions are not in contravention of some established rule of law or public policy, they must be respected and given effect. It may be observed that the question as to the sufficiency of the form of the will must be regarded as settled by the protocolization proceedings had in the year 1897. It is a well-known rule that testamentary dispositions must be liberally construed so as to give effect to the intention of the testator as revealed by the will itself. Applying this rule of construction it seems evident that by the clause in question the testator proposed to create a trust for the benefit of a secondary school to be established in the town of Tayabas, naming as trustee the ayuntamiento of the town or if there be no ayuntamiento, then the civil governor of the Province of Tayabas. As the law of trusts has been much more frequently applied in England and in the United Stated than it has in Spain, we may draw freely upon American precedents in determining the effect of the testamentary trust here under consideration, especially so as the trusts known to American and English equity jurisprudence are derived from the fidei commissa of the Roman law and are based entirely upon Civil Law principles. In order that a trust may become effective there must, of course, be a trustee and a cestui que trust, and counsel for the appellants Palad argues that we here have neither; that there is no ayuntamiento, no Gobernador Civil of the province, and no secondary school in the town of Tayabas. An ayuntamiento corresponds to what in English is termed a municipal corporation and it may be conceded that the ordinary municipal government in these Island falls short of being such a corporation. But we have provincial governors who like their predecessors, the civil governors, are the chief executives of their respective provinces. It is true that in a few details the function and power of the two offices may vary somewhat, but it cannot be successfully disputed that one office is the legal successor of the other. It might as well be contended that when under the present regime the title of the chief executive of the Philippine was changed from Civil Governor to that of Governor-General, the latter was not the legal successor of the former. There can therefore be but very little doubt that the governor of the Province of Tayabas, as the successor of the civil governor of the province under the Spanish regime, may acts as trustee in the present case. In regard to private trust it is not always necessary that the cestui que trust should be named, or even be in esseat the time the trust is created in his favor. (Flint on Trusts and Trustees, section 25; citing Frazier vs. Frazier, 2 Hill Ch., 305; Ashurt vs. Given, 5 Watts & S., 329; Carson vs. Carson, 1 Wins. [N. C.] 24.) Thus a devise to a father in trust for accumulation for his children lawfully begotten at the time of his death has been held to be good although the father had no children at the time of the vesting of the funds in him as

trustees. In charitable trust such as the one here under discussion, the rule is still further relaxed. (Perry on Trusts, 5th ed., section 66.) This principle is in harmony with article 788 of the Civil Code which reads as follows: Any disposition which imposes upon an heirs the obligation of periodically investing specified sums in charitable works, such as dowries for poor maidens or scholarships for students, or in favor of the poor, or any charitable public educational institution, shall be valid under the following conditions: If the charge is imposed on real property and is temporary, the heir or heirs may dispose of the encumbered estate, but the lien shall continue until the record thereof is canceled. If the charge is perpetual, the heir may capitalize it and invest the capital at interest, fully secured by first mortgage. The capitalization and investment of the principal shall be made with the intervention of the civil governor of the province after hearing the opinion of the prosecuting officer. In any case, if the testator should not have laid down any rules for the management and application of the charitable legacy, it shall be done by the executive authorities upon whom this duty devolves by law. It is true that minor distinctions may possibly be drawn between the case before us and that presupposed in the article quoted, but the general principle is the same in both cases. Here the trustee, who holds the legal title, as distinguished from the beneficial title resting in the cestui que trust, must be considered the heirs. The devise under consideration does not in terms require periodical investments of specified sums, but it is difficult to see how this can affect the general principle involved, and unless the devise contravenes some other provision of the Code it must be upheld. We have been unable to find any such provision. There is no violation of any rule against perpetuities: the devise does not prohibit the alienation of the land devised. It does not violate article 670 of the Code: the making of the will and the continuance or quantity of the estate of the heir are not left in the discretion of the third party. The devisee is not uncertain and the devise is therefore are repugnant to article 750 of the Civil Code. The provincial governor can hardly be regarded as a public establishment within the meaning of article 748 and may therefore receive the inheritance without the previous approval of the Government. But counsel argues that assuming all this to be true the collateral heirs of the deceased would nevertheless be entitled to the income of the land until the cestui que trust is actually in esse. We do not think so. If the trustee holds the legal title and the devise is valid, the natural heirs of the deceased have no remaining interest in the land except their right to the reversion in the event the devise for some reason should fail, an event which has not as yet taken place. From a reading of the testamentary clause under discussion it seems quite evident that the intention of the testator was to have income of the property accumulate for the benefit of the proposed school until the same should be established.
lawphi 1.net

From what has been said it follows that the judgment appealed from must be affirmed in regard to lots Nos. 3464 and 3469. As to lot No. 3470 little need be said. It may be noted that though the Statute of Limitation does not run as between trustee and cestui que trust as long as the trust relations subsist, it may run as between the trust and third persons. Contending that the Colongcolong land was community property of her marriage with Luis Palad and that lot No. 3470 represented her share thereof, Dorotea Lopez has held possession of said lot, adverse to all other claimants, since the year 1904 and has now acquired title by prescription.

The judgment appealed from is affirmed in regard to lots Nos. 3464 and 3469 and is reversed as to lot No. 3470, and it is ordered that said lot No. 3470 be registered in the name of the claimant Dorotea Lopez. No costs will be allowed. So ordered. Street, Avancea, Villamor and Romualdez, JJ., concur. Separate Opinions

MALCOLM, J., concurring and dissenting: I concur in regard to lots Nos. 3464 and 3469 and dissent in regard to lot No. 3470. As to the last mentioned lot, it will be recalled that title to it is adjudicated to Dorotea Lopez, the widow of Luis Palad who, in his will, transmitted the usufructuary rights to the land to his widow "during her life or until she marries," after which the property was to be delivered to the ayuntamiento of Tayabas, Tayabas, or if there should not be any, to the civil governor of the Province of Tayabas, for the benefit of a secondary college. Dorotea Lopez having remarried, the property should have been turned over to the municipality of Tayabas. The alleged agreement of 1904 cannot alter there basic and controlling facts. The possession of Dorotea Lopez has been in contravention of the terms of the trust and in bad faith. Whatever may be the rule elsewhere, in civil law jurisdictions including the Philippines, it is settled that to perfect title by adverse possession, such possession must have been held in good faith on the part of the claimant. (Arriola vs. Gomez de la Serna [1909], 14 Phil., 627; Santiago vs. Cruz [1911], 19 Phil., 145; Cuaycong vs.Benedicto [1918], 37 Phil., 781; Tolentino vs. Vitug [1918], 39 Phil., 126; Ochoa vs. Hernandez [1913], 230 U. S., 139; Kennedy vs. Townsley [1849], 16 Ala., 239; Abshire vs. Lege [1913], 133 La., 254; 2 C. J., 199.) The doctrines announced in the Tolentino vs. Vitug, supra, are particularly applicable to the facts. For these reason, I would prefer to see the judgment appealed from affirmed in all respects.

January 29, 1968 G.R. No. L-20449 ESPERANZA FABIAN, BENITA FABIAN and DAMASO PAPA Y FABIAN, plaintiffs-appellants, vs. SILBINA FABIAN, FELICIANO LANDRITO, TEODORA FABIAN and FRANCISCO DEL MONTE, defendants-appellees. Felix Law Office for plaintiffs-appellants. J.G. Mendoza for defendants-appellees. Castro, J.: Before us is the appeal taken by Esperanza Fabian, Benita I Fabian and Damaso Papa y Fabian from the decision of the Court of First Instance of Rizal which dismissed their complaint for reconveyance, in civil case 295-R, filed against the defendants spouses Silbina Fabian and Feliciano Landrito and Teodora Fabian and Francisco del Monte, upon the ground that the latter had acquired a valid and complete title to the land in question by acquisitive prescription. This case traces its origin way back to January 1, 1909 when Pablo Fabian bought from the Philippine

Government lot 164 of the Friar Lands Estate in Muntinlupa, Rizal, of an area 1 hectare, 42 ares and 80 centares, for the sum of P112 payable in installments. By virtue of this purchase, he was issued sale certificate 547. He died on August 2, 1928, survived by four children, namely, Esperanza, Benita I, Benita II, 1 and Silbina. On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the deceased, executed an affidavit, reciting, among other things, Que el finado Pablo Fabian, no dejo ningun otro heredero sino los declarantes, con derecho a heredar el lote No. 164 de la hacienda Muntinlupa, relicto por dicho finado Pablo Fabian y para la aprobacion de traspaso a nosotros el referido lote No. 164, prestamos esta declaracion para todos los efectos que pueden covenir a la Oficina de Terenos a defender por nuestro mayor derecho de heredar dicho lote contra las reclamaciones juntas de quien las presentare. On the strength of this affidavit, sale certificate 547 was assigned to them. On November 14, 1928 the acting Director of Lands, on behalf of the Government, sold lot 164, under deed 17272, to Silbina Fabian, married to Feliciano Landrito, and to Teodora Fabian, married to Francisco del Monte, for the sum of P120. The vendees spouses forthwith in 1929 took physical possession thereof, cultivated it, and appropriated the produce therefrom (and concededly have up to the present been appropriating the fruits from the land exclusively for themselves). In that same year, they declared the lot in their names for taxation purposes under tax declaration 3374. This tax declaration was later cancelled, and in lieu thereof two tax declarations (2418 and 2419) were issued in favor of Teodora Fabian and Silbina Fabian, respectively. Since 1929 up to the present, they have been paying the real estate taxes thereon. In 1937 the Register of Deeds of Rizal issued TCT 33203 over lot 164 in their names. And on May 4, 1945, they subdivided the lot into two equal parts; TCT 33203 was then cancelled and TCT 38095 was issued over lot 164-A in the name of Silbina Fabian, married to Feliciano Landrito, and 38096 was issued over lot 164-B in the name of Teodora Fabian, married to Francisco del Monte. On July 18, 1960 the plaintiffs filed the present action for reconveyance against the defendants spouses, averring that Silbina and Teodora, through fraud perpetrated in their affidavit aforesaid, made it appear that "el finado Pablo Fabian no dejo ningun otro heredero sino los declarantes con derecho a heredar el lote No. 164 de la hacienda de Muntinlupa", which is a false narration of facts because Silbina knew that she is not the only daughter and heir of the deceased Pablo Fabian, and Teodora likewise knew all along that, as a mere niece of the deceased, she was precluded from inheriting from him in the presence of his four surviving daughters; that by virtue of this affidavit, the said defendants succeeded in having sale certificate 547 assigned to them and thereafter in having lot 164 covered by said certificate transferred in their names; and that by virtue also of these assignment and transfer, the defendants succeeded fraudulently in having lot 164 registered in their names under TCT 33203. They further allege that the land has not been transferred to an innocent purchaser for value. A reconveyance thereof is prayed for, aside from P3,000 attorney's fees and costs MsMA. In their answer of August 31, 1960, 2 the defendants spouses claim that Pablo Fabian was not the owner of lot 164 at the time of his death on August 2, 1928 because he had not paid in full the amortizations on the lot; that they are the absolute owners thereof, having purchased it from the Government for the sum of P120, and from that year having exercised all the attributes of ownership thereof up to the present; and that the present action for reconveyance has already prescribed. The dismissal of the complaint is prayed for. On the basis of a partial stipulation of facts together with annexes, the lower court rendered judgment on June 28, 1962, declaring that the defendants spouses had acquired a valid and complete title to the property by acquisitive prescription, and accordingly dismissed the complaint, with costs against the

plaintiffs. The latter's motion for reconsideration was thereafter denied. Hence, the present recourse. The three resulting issues of law tendered for resolution in this appeal, by the formulation of the parties are: (1) Was Pablo Fabian the owner of lot 164 at the time of his death, in the face of the fact, admitted by the defendants-appellees, that he had not then paid the entire purchase price thereof? (2) May laches constitute a bar to an action to enforce a constructive trust? (3) Has title to the land vested in the appellees through the mode of acquisitive prescription? 1. Lot 164 was a part of the Friar Lands Estate of Muntinlupa, Rizal; its sale to Pablo Fabian was therefore governed by Act 1120, otherwise known as the Friar Lands Act. While under section 15 of the said Act, title to the land sold is reserved to the Government until the purchaser makes full payment of all the required installments and the interest thereon, this legal reservation refers. to the bare, naked title. The equitable and beneficial title really went to the purchaser the moment he paid the first installment and was given a certificate of sale. The reservation of the title in favor of the Government is made merely to protect the interest of the Government so as to preclude or prevent the purchaser from encumbering or disposing of the lot purchased before the payment in full of the purchase price. Outside of this protection the Government retains no right as an owner. For instance, after issuance of the sales certificate and pending payment in full of the purchase price, the Government may not sell the lot to another. It may not even encumber it. It may not occupy the land to use or cultivate; neither may it lease it or even participate or share in its fruits. In other words, the Government does not and cannot exercise the rights and prerogatives of owner. And when said purchaser finally pays the final installment on the purchase price and is given a deed of conveyance and a certificate of title, the title at least in equity, retroacts to the time he first occupied the land, paid the first installment and was issued the corresponding certificate of sale. In other words, pending the completion of the payment of the purchase price, the purchaser is entitled to all the benefits and advantages which may accrue to the land as well as suffer the losses that may befall it. 3 That Pablo Fabian had paid five annual installments to the Government, and in fact been issued sale certificate 547 in his name, are conceded. He was therefore the owner of lot 164 at the time of his death. He left four daughters, namely, Esperanza, Benita I, Benita II and Silbina to whom all his rights and interest over lot 164 passed upon his demise. In case a holder of a certificate dies before the giving of the deed and does not leave a widow, then the interest of the holder of the certificate shall descend and deed shall issue to the person who under the laws of the Philippine Islands would have taken had the title been perfected before the death of the holder of the certificate, upon proof of the holders thus entitled of compliance with all the requirements of the certificate. 4 The assignment and sale of the lot to the defendants. Silbina and Teodora were therefore null and void as to that portion sold to Teodora, and as well as to that portion which lawfully devolved in favor of the appellants. To the extent of the participation of the appellants, application must be made of the principle that if property is acquired through fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the person from whom the property comes (Gayondato vs. Insular Treasurer, 49 Phil. 244). 2. In Diaz, et al. vs. Gorricho, et al., 103 Phil. 264-265 (1958), this Court, speaking through Mr. Justice J.B.L. Reyes, declared in no uncertain terms that laches may bar an action brought to enforce a constructive trust such as the one in the case at bar. Illuminating are the following excerpts from

the decision penned by Mr. Justice Reyes: Article 1456 of the new Civil Code, while not retroactive in character, merely expresses a rule already recognized by our courts prior to the Code's promulgation (see Gayondato vs. Insular Treasurer, 49 Phil. 244). Appellants are, however, in error in believing that like express trust, such constructive trusts may not be barred by lapse of time. The American law on trusts has always maintained a distinction between express trusts created by the intention of the parties, and the implied or constructive trusts that are exclusively created by law, the latter not being trusts in their technical sense (Gayondato vs. Insular Treasurer, supra). The express trusts disable the trustee from acquiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and makes such repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse possession does not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. But in constructive trusts, . . . the rule is that laches constitutes a bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise to the trust (54 Am. Jur., secs. 580, 581; 65 C.J., secs. 956, 957; Amer. Law Institute, Restatement of Trusts, section 219; on Restitution, section 179; Stianson vs. Stianson 6 ALR 287; Claridad vs. Benares, 97 Phil. 973. The assignment of sale certificate 547 was effected on October 5, 1928; and the actual transfer of lot 164 was made on the following November 14. It was only on July 8, 1960, 32 big years later, that the appellants for the first time came forward with their claim to the land. The record does not reveal, and it is not seriously asserted, that the appellees concealed the facts giving rise to the trust. Upon the contrary, paragraph 13 of the stipulation of facts of the parties states with striking clarity "that defendants herein have been in possession of the land in question since 1928 up to the present publicly and continuously under claim of ownership; they have cultivated it, harvested and appropriated the fruits for themselves." (emphasis supplied.) 3. Six years later, in Gerona, et al. vs. De Guzman, et al., L-19060, May 29, 1964, the factual setting attending which is substantially similar to that obtaining in the case at bar, this Court, in an excellently-phrased decision penned by Chief Justice, then Associate Justice, Roberto Concepcion, unequivocally reaffirmed the rule, overruling previous decisions to the contrary, that "an action for reconveyance of real property based upon a constructive or implied trust, resulting from fraud, may be barred by the statute of limitations," and further that "the action therefor may be filed within four years from the discovery of the fraud," the discovery in that case being deemed to have taken place when new certificates of title were issued exclusively in the names of the respondents therein. The following is what Justice Concepcion, speaking for the Court, said: [A]lthough, as a general rule, an action for partition among co-heirs does not prescribe, this is true only as long as the defendants do not hold the property in question under an adverse title (Cordova vs. Cordova, L-9936, January 14, 1948). The statute of limitations operates, as in other cases, from the moment such adverse title is asserted by the possessor of the property (Ramos v. Ramos, 45 Phil. 362; Bargayo v. Camumot, 40 Phil. 857; Castro v. Echarri, 20 Phil. 23). When respondents executed the aforementioned deed of extra-judicial settlement stating therein that they are the sole heirs of the late Marcelo de Guzman, and secured new transfer certificates of title in their own name, they thereby excluded the petitioners from the estate of the deceased, and consequently, set up a title adverse to them. And this is why petitioners have brought this action for the annulment of said deed upon the ground that the same is tainted with fraud. Although, there are some decisions to the contrary (Jacinto v. Mendoza, L-12540, February 28, 1959;

Cuison v. Fernandez, L-11764, January 31, 1959; Marabiles v. Quito, L-10408, October 18, 1956 and Sevilla v. De los Angeles, L-7745, November 18, 1955), it is already settled in this jurisdiction that an action for reconveyance of real property based upon a constructive or implied trusts, resulting from fraud, may be barred by the statute of limitations (Candelaria vs. Romero, L-12149, September 30, 1960; Alzona v. Capunita, L-10220, February 28, 1962). Inasmuch as petitioners seek to annul the aforementioned deed of "extra-judicial settlement" upon the ground of fraud in the execution thereof, the action therefor may be filed within four (4) years from the discovery of the fraud (Mauricio v. Villanueva, L-11072, September 24, 1959). Such discovery is deemed to have taken place, in the case at bar, on June 25, 1948, when said instrument was filed with the Register of Deeds and new certificates of title in the name of the respondents exclusively, for the registration of the deed of extra-judicial settlement constitutes constructive notice to the whole world (Diaz v. Gorricho, L-11229, March 29, 1958; Avecilla v. Yatco, L-11578, May 14, 1958; J. M. Tuason & Co., Inc. v. Magdangal, L-15539, January 30, 1962; Lopez v. Gonzaga, L-18788, January 31, 1964). (Emphasis supplied.) Upon the undisputed facts in the case at bar, not only had laches set in when the appellants instituted their action for, reconveyance in 1960, but as well their right to enforce the constructive trust had already prescribed. 5 It logically follows from the above disquisition that acquisitive prescription has likewise operated to vest absolute title in the appellees, pursuant to the provisions of section 41 of Act 190 that Ten years actual adverse possession by any person claiming to be the owner for that time of any land or interest in land, uninterruptedly continued for ten years by occupancy, descent, grants, or otherwise, in whatever way such occupancy may have commenced or continued, 6shall vest in every actual occupant or possessor of such land a full and complete title. . . . (Emphasis ours.) The stringent mandate of said section 41 that "the possession by the claimant or by the person under or through whom he claims must have been actual, open, public, continuous under a claim of title exclusive of any other right and adverse to all other claimants," was adjudged by the lower court as having been fulfilled in the case at hand. And we agree. Although paragraph 13 of the stipulation of facts hereinbefore adverted to does not explicitly employ the word "adverse" to characterize the possession of the defendants from 1928 up to the filing of the complaint in 1960, the words, "defendants have been in possession of the land since 1928 up to the present [1960] publicly and continuously under claim of ownership; they have cultivated it, harvested and appropriated the fruits for themselves," clearly delineate, and can have no other logical meaning than, the adverse character of the possession exercised by the appellees over the land. If the import of the abovequoted portion of the stipulation of facts is at all doubted, such doubt is dispelled completely by additional cumulative facts in the record which are uncontroverted. Thus, the appellees declared the lot for taxation purposes in their names, and the resulting tax declaration was later concelled and two tax declarations were issued in favor of Silbina Fabian and Teodora Fabian, respectively. They have been paying the real estate taxes thereon from 1929 to the present. And in 1945 they subdivided the lot into two equal parts, and two transfer certificates of title were issued separately in their names. Upon the foregoing disquisition, we hold not only that the appellants' action to enforce the constructive trust created in their favor has prescribed, but as well that a valid, full and complete title has vested in the appellees by acquisitive prescription. ACCORDINGLY, the judgment a quo, dismissing the complaint, is affirmed. No pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Angeles and Fernando, JJ., concur. Makalintal, J., concurs in the result. Footnotes 1Benita II Fabian died on October 8, 1937. Her only surviving child, Damaso Papa y Fabian, is one of the three plaintiffs-appellants. 2On February 19, 1962 the defendants filed an amended answer impleading Florencio and Gavino Landrito in substitution of their mother Silbina Fabian who had died on the previous February 12. 3Director of Lands, et al. vs. Rizal, et al., 87 Phil. v. 810-811. 4Sec. 16, Act 1120. 5See Bargayo vs. Camumot, 40 Phil. 870, 872 (1920) which held that "under the Spanish law an heir can acquire by prescription ownership of an inheritance to the prejudice of his co-heirs and that article 1965 of the Civil Code is only applied to an action for the partition of an inheritance, i.e., to an action wherein the rights of all parties to their respective shares of the inheritance is (sic) taken for granted but not to an action wherein the plaintiff's right to participate in the inheritance is denied," and the "acquisitive prescription of ownership (acquired by one of the co-owners, co-heirs and administrator, depositary, or lessee by means of an adverse possession under claim of title and after the lapse of the time fixed by law) can completely extinguish the right of the other co-owners, co-heirs, or owners of the property in the possession of the one claiming ownership by prescription." 6See Garcia, et al. vs. de Guzman, L-15988, August 30, 1962, cited in Garcia, et al. vs. Bello, et al., L-24702 and L-26357, Sept. 23, 1966, 18 Supreme Court Reports Annotated 101. .

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-22571 May 25, 1973 JOSEFINA VALDEZ, JAIME VALDEZ, ROGELIO ALMONTE, RAQUEL ALMONTE and RAUL ALMONTE, the latter two minors, represented in this action by their father, FRANCISCO ALMONTE, plaintiffsappellees, vs. TEOFILA OLORGA, by herself and in representation of minor CARMEN VALDEZ and RENATO OLORGA,defendants-appellants. Salvador P. Socrates for plaintiffs-appellees. Perfecto de los Reyes and Clarito A. Demaala for defendants-appellants.

MAKALINTAL, J.: The present appeal was taken by the defendants directly to this Court by record on appeal filed way back in 1964. The case, however, was submitted for decision only on September 4, 1970. In a motion dated April 25, 1973, the defendants appellants prayed that decision herein be expedited. A reading of the brief of the appellants shows that most of the arguments advanced therein challenge the findings of fact made by the court a quo. As pointed out by the plaintiffs-appellees, such findings are no longer reviewable by this Court, its jurisdiction being limited to deciding purely legal questions. The following facts as stated in the decision appealed from may therefore be considered established: This is an action for partition filed by the living children and grandchildren of the late spouses Federico Valdez, Sr. and Juanita Batul against the heir and widow of Federico Valdez, Jr. The action concerns Lot No. 18, of Puerto Princesa Cadastre, covered by T.C.T. No. T-94 in the name of Federico Valdez, Jr. Federico Valdez, Sr. died in Manila in the year 1931 and his wife, Juanita Batul, died in 1939. The spouses left the following children as their heirs: (1) Avelina Olorga, who died in 1941, leaving as her heir co-defendant Renato Olorga; (2) Elisa Valdez-Almonte, who died in 1947, leaving Rogelio, Raquel and Raul, all surnamed Almonte, as her heirs; (3) the plaintiff Josefina Valdez; (4) Federico Valdez, Jr., who died in September, 1960, leaving as his heirs defendants Teofila Olorga, his wife, and Carmen Valdez, his daughter; and (5) Jaime Valdez, co-plaintiff herein. In 1924, the spouses Federico Valdez, Sr. and Juanita Batul, bought Lot No. 18, the property now in dispute, from Dolores M. de Gutierrez for P500.00. In 1930, the old Valdez family, as vendees, occupied and lived in the premises of Lot No. 18. After the death of Federico Valdez, Sr., Juanita Batul, in the year 1936, executed a contract of lease over a portion of Lot No. 18 in favor of the protestant church of Puerto Princesa, Exhibit "A". The same Juanita Batul leased in 1939 a portion of Lot No. 18 to Mr. Gregorio Quicho. The transfer of the lot in the name of Federico, Sr., was never done because the owner's original certificate of title was lost. Josefina Valdez and Federico Valdez, Jr. commissioned their cousin Concepcion Castro to negotiate with the Gutierrez family (Exhibit "C") in 1948 in order that the property in question may be transferred to them. It turned out that the Gutierrez family was asking for an additional amount of P2,500.00 (Exh. "D"). Mrs. Castro came back to Puerto Princess without having realized her mission. In the same year she went back to Manila with Federico Valdez, Jr., and Mr. Gregorio Quicho. The deed was executed for the amount of P2,200.00 which was given by Mr. Gregorio Quicho, as payment for back rentals and payment for the purchase of that portion of lot No. 18 which he was renting and occupying. In executing the deed of sale, EXHIBIT "I" , the name of Federico Valdez, Jr. appeared as the only vendee. This was done pursuant to the wishes of Mr. Quicho who advanced the money, in order that he could facilitate the deed of sale between him and the Valdezes, with the understanding that Federico Valdez, Jr. will hold the same in trust for his other brother and sisters (Testimony of Mrs. Castro). When Federico Valdez, Jr. was still living, he never attempted to exclude the herein plaintiffs from ownership of the land in question. Said plaintiffs have been in open continuous and uninterrupted possession of the premises they are occupying inside the lot in question long before the execution of the deed of sale (Exh. "I"). It was only after the death of Federico Valdez, Jr. that the widow Teofila Olorga tried to eject the plaintiffs.

As clearly stated in the memorandum for the plaintiffs the following facts are undisputed: (1) That the land in question Lot No. 18 of the Puerto Princesa Cadastre, was originally purchased by the spouses Federico Valdez, Sr. and Juanita Batul from Dolores M. de Gutierrez for P500.00; (2) That the parties herein, plaintiffs and defendants alike, are all successors-in-interest of the spouses Federico Valdez, Sr., and Juanita Batul, either as forced or compulsory heirs or in representation thereof; (3) That the above-named spouses had been in open, public, peaceful and uninterrupted occupation and possession of Lot No. 18, the property in question, since the year 1930 or 1933; (4) That in 1939, Mr. Gregorio Quicho rented a portion of the lot in question from Juanita Batul; (5) That Mr. Quicho advanced the amount of P2,200.00 partly as purchase price of the portion purchased by him, in the final execution of the deed of sale, Exhibit "I"; and (6) That a part of the property in question, Lot 18-B, is still registered in the name of Federico Valdez, Jr., under T.C.T. No. T-634, cancelling T.C.T. No. 75. The following facts, although not admitted by the defendants, were not disputed: (1) That the Valdez Family, in 1930 or 1933, entered into, possessed and occupied Lot 18, the property in question; (2) That Juanita Batul, in 1936, entered into a contract of lease (Exh. "A") with the Baptist Church of Puerto Princesa over a portion of Lot 18; (3) That in 1947, upon discovering that the land in question had not been transferred in the name of their parents, Josefina Valdez made efforts to have the said land transferred to them, and commissioned Mrs. Castro, together with Federico Valdez, Jr., to negotiate with the Gutierrez family for the purpose, which culminated in the execution of the deed of sale, Exhibit "I"; (4) That in the course of said negotiation undertaken by Mrs. Castro, Federico Valdez, Jr, was brought to Manila where the deed of sale was finally placed in his name alone, with the express understanding that he will hold the same in trust for his other brother and sisters; (5) That the placing of the deed of sale in the name of Federico Valdez, Jr. alone, instead of the "Heirs of Federico Valdez, Sr." or "Heirs of Juanita Batul" was done through the suggestion of Mr. Quicho who wanted to facilitate his own deed of sale over the portion that he purchased; (6) That at the time of the execution of the deed of sale (Exh. "I"), Valdez, Jr. was barely 21 years old, a sophomore student in the high school, and he, together with his wife, were without any lucrative trade or calling; (7) That Josefina Valdez and her co-plaintiffs had been in continuous, public, peaceful and uninterrupted possession and occupation of the premises in question long before the death of Valdez, Jr.;

(8) That Valdez, Jr. never asserted, nor attempted to assert, during his lifetime, sole and exclusive ownership of the premises in question, against the herein plaintiffs; and (9) That during the lifetime of Valdez, Jr. he sold a portion of the land in question and leased other portions thereof to private parties, but he did so with the consent and approval of her elder sister, Josefina Valdez. In this connection we have to consider also the offer of evidence by the plaintiffs as matters to be testified by Mr. Gregorio Quicho were he present and able to testify and which were admitted by the defendants, such that the presentation of Mr. Quicho was waived by the plaintiffs. The testimony of Mr. Quicho which would have been given by him if he were presented and which were admitted by the defendants are as follows: (1) That a deed of sale for a consideration of P500.00 was executed by the spouses Gutierrez in favor of the spouses Federico Valdez, Sr. and Juanita Batul, over Lot 18 of Puerto Princesa Cadastre, the very lot in question, in the year 1924; (2) That Mr. Quicho rented and occupied since 1939, a portion of Lot 18, the lot in question, from Juanita Batul; (3) That the amount of P2,200.00 which was paid to Dolores M. Gutierrez for the execution of the deed of sale, Exhibit "I", was delivered by Mr. Gregorio Quicho, for payment of unpaid back rentals and as advances for the purchase of the portion of Lot 18 which he finally acquired; (4) That Mr. Quicho was instrumental in having the deed of sale executed in the name of Federico Valdez, Jr. the portion which he wanted to acquire. The legal point raised by the appellants is that since the land in question was sold to the late Federico Valdez, Jr. in 1948 and the Transfer Certificate of Title, so he alleges, was issued in his name in 1950, the action had already prescribed when it was filed more than ten (10) years thereafter, or in 1962; that furthermore, from the date of the sale up to the time his death in 1960 he exercised exclusive ownership of the land. In other words the appellants claim both extinctive and acquisitive prescription. Both claims are belied by the facts as found by the court a quo, which held: (1.) that when the deed of sale was executed and the name of Federico Valdez, Jr. was made to appear therein as the only vendee, "this was done pursuant to the wishes of Mr. Quicho who advanced the money, in order that he could facilitate the deed of sale between him and the Valdezes, With the understanding that Federico Valdez, Jr. will hold the same in, trust for his other brother and sisters;" and (2) that when 'Federico Valdez, Jr. was still living, "he never attempted to exclude the herein plaintiffs from ownership of the land in question, (and) said plaintiffs have been in continuous and uninterrupted possession of the premises they are occupying inside the lot in question long before the execution of the deed of sale (Exh. "I"), (and) it was only after the death of Federico Valdez, Jr. (in 1960) that the widow, Teofila Olorga, tried to eject the plaintiffs." Given the antecedents of the property and the fact that its acquisition by Federico Valdez, Jr. was for the benefit not of himself alone but also of his brother and sisters, although for purposes of convenience he was made to appear as the sole vendee, the juridical relation that arose among them was one of co-ownership, with the plaintiffs-appellees actually in possession of a portion of the property. Under Article 494 of the Civil Code, "No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership." Insofar as the aspect of extinctive prescription referred to in this article is concerned, it is but a restatement of Article 1965 of the Spanish Civil Code, which provides: "As between co-heirs, co-owners, or proprietors of adjacent estates, the action to demand the partition of the inheritance or of the thing held in common, or the survey of the adjacent properties, does not prescribe." And from the standpoint of acquisitive prescription, or prescription of ownership, this Court has held in numerous decisions involving fiduciary relations such as those occupied by a trustee with respect to the cestui que trust that as a general-rule the former's possession is not adverse and therefore cannot ripen into a title by

prescription. Adverse possession in such a case requires, the concurrence of the following-circumstances: (a) that the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) that such, positive acts of repudiation have been made known to the cestui que trust and (c) that the evidence thereon should be clear and conclusive. * These circumstances are not present in this case. In view of the foregoing considerations the judgment appealed from is hereby affirmed. With costs. Zaldivar, Castro, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Footnotes * Laguna vs. Levantina, 71 Phil. 566; Bargayo vs. Camumot, 40 Phil. 875; Osorio, et al. vs. Osorio, et al., 85 Phil. 209; Sumira vs. Vistan, 74 Phil. 138. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-59879 May 13, 1985 PATRICIO SINAON and MARIA, FRANCISCA and JOSE, all surnamed SINAON, petitioners, vs. ANDRES SOROGON, ANASTACIA PARREO, SOLEDAD PARREO, ANA PARREO, MARCELINA, CLARITA, RUFINO and MANUEL, all surnamed ARELLANO, SIMPLICIO SOMBLINGO and BRIGIDA SOMBLINGO and COURT OF APPEALS, respondents. Neil D. Hechanova for petitioners. Benjamin P. Sorongon for respondents.

AQUINO, J.: The issue in this case is whether an action for reconveyance of a registered five-hectare land, based on implied trust, would lie after the supposed trustees had held the land for more than forty years. According to the documentary evidence consisting of public documents and tax records, Judge (later Justice) Carlos A. Imperial in a decree dated March 4, 1916 adjudicated to Canuta Soblingo (Somblingo), a widow, Lot No. 4781 of the Sta. Barbara, Iloilo cadastre with an area of 5.5 hectares. OCT No. 6178-A was issued in 1917 to Canuta (Exh. 6 and 7 or B). In 1923 Canuta sold the lot to the spouses Patricio Sinaon and Julia Sualibio for P2,000 (Exh. 8). TCT No. 2542 was issued to the Sinaon spouses (Exh. 9 or C). It is still existing and uncancelled up to this time, Julia was the granddaughter of Canuta. The lot was declared for tax purposes in Sinaon's name (Exh. 3). The Sinaon spouses and their children paid the realty taxes due thereon (Exh. 1 to 5-C). They have possessed the land as owners from 1923 up to this time or for more than half a century.

Canuta was one of the five children of Domingo Somblingo, the alleged original owner of the lot when it was not yet registered. His other four children were Felipe, Juan, Esteban and Santiago. The theory of respondents Sorogon, et al., which they adopted in their 1968 second amended complaint (they filed the action in 1964) is that Canuta and the Sinaons were trustees of the lot and that the heirs of Domingo's four children are entitled to a 4/5 share thereof. That theory was sustained by the trial court and the Appellate Court. The trial court ordered the Sinaons to convey 4/5 of Lot No. 4781 to respondents Sorogon, et al. It decreed partition of the lot in five equal parts. The Sinaons appealed to this Court. The respondents did not file any brief. We hold that after the Sinaons had appeared to be the registered owners of the lot for more than forty years and had possessed it during that period, their title had become indefeasible and their possession could not be disturbed. Any pretension as to the existence of an implied trust should not be countenanced. The trustors. who created the alleged trust, died a long time ago. An attempt to prove the trust was made by unreliable oral evidence. The title and possession of the Sinaons cannot be defeated by oral evidence which can be easily fabricated and contradicted. The contradictory oral evidence leaves the court sometimes bothered and bewildered. There was no express trust in this case. Express trusts concerning real property cannot be proven by parol evidence (Art. 1443, Civil Code). An implied trust "cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof" (Suarez vs. Tirambulo, 59 Phil. 303; Salao vs. Salao, L-26699, March 16,1976, 70 SCRA 65, 83). Even assuming that there was an implied trust, plaintiffs' action was clearly barred by prescription (Salao vs. Salao, supra, p. 84). Prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and stale claims from springing up at great distances of time and surprising the parties or their representatives when the facts have become obscure from the lapse of time or the defective memory or death or removal of witnesses (53 C.J.S. 903). See Teves Vda. de Bacong vs. Teves and CA, G.R. No. 50143, October 24, 1983, 125 SCRA 137; Ramos vs. Ramos, L-19872, December 3, 1974, 61 SCRA 284; Gallanosa vs. Arcangel, L-29300, June 21, 1978, 83 SCRA 676 and Sinco vs. Longa 51 Phil. 507. It was not necessary for the Sinaons to plead prescription as a defense because there is no dispute as to the dates. There was no factual issue as to prescription (Chua Lamko vs. Dioso, 97 Phil. 821, 824; Ferrer vs. Ericta, L-41767, August 23, 1978, 84 SCRA 705). At any rate, the Sinaons invoked in the lower court the ruling laid down in Gerona vs. De Guzman, 120 Phil. 149, 153 that an action for reconveyance of realty, based upon a constructive or implied trust resulting from fraud, may be barred by prescription. The prescriptive period is reckoned from the issuance of the title which operates as a constructive notice (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266-267; J.M. Tuason & Co., Inc. vs. Magdangal, 114 Phil. 42, 46-47; Lopez vs. Gonzaga, 119 Phil. 424, 437). The supposed trust in this case, which is neither an express nor a resulting trust, is a constructive trust arising by operation of law (Art. 1456, Civil Code). It is not a trust in the technical sense (Gayondato vs. Treasurer of the P.I., 49 Phil. 244). * WHEREFORE, the judgment of the Court of Appeals is reversed and the complaint is dismissed. The receivership is terminated. The receiver is directed to wind up his accounts. No costs. SO ORDERED.

Makasiar (Chairman), Abad Santos, Escolin and Cuevas, JJ., concur. Justice Concepcion, Jr., took no part.

Footnotes * It was only in 1964 that plaintiffs, now respondents Sorogon et al., woke up. They had to amend their complaint twice because they were not sure of the facts. They were not able to state with certainty Domingo's surviving descendants. Teodulfo Somblingo, their first witness, and his four brothers, alleged grandchildren of Santiago, Domingo's son, were not joined as plaintiffs (29 tsn, July 29, 1969). Respondents Sorogon, et al. alleged in paragraph 5 of their complaint that Canuta Somblingo was made a trustee because she "was educated". This is false because she was illiterate as shown in the deed of sale, Exhibit 8. They at first alleged that Canuta died without issue. They later discovered that Canuta was survived by the Sinaon petitioners who were her great-grandchildren. According to Francisca Sinaon, a college graduate, Teodulfo Somblingo, who testified that he was a co-owner of the land, was a hired laborer, one of 15 laborers, who used Patricio Sinaon's carabao in plowing the land (111,130-2, 135 tsn Feb. 15, 1971). Even after the case was filed, Teodulfo continued to work as a thresher (136). Simplicio Somblingo, the husband of plaintiffs' witness, Cornelia Somblingo, was also a hired laborer (112). The trial court observed that the Sinaons did not present any evidence to dispute the oral testimony that the lot came from Domingo Somblingo. What the court overlooked is that the plaintiffs did not present trustworthy and convincing evidence that Domingo originally owned the lot at all. Canuta Somblingo-Umadhay the registered owner, had four children named Presentacion, Rufina, Elena and Fructuoso. As already noted, the land was purchased by Canuta's grand daughter, Julia, and her husband, Patricio Sinaon. The trial court denied Sinaon's motion for new trial which was designed to give him a chance to prove that he and the Umadhays had sufficient means to acquire the disputed lot (108-109, Record on Appeal). Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-63575 January 20, 1988 ROSA GICANO and NENITA GEOLLEGUE, petitioners, vs. ROSA GEGATO, RESURRECCION GEGATO and CATALINA GEGATO, respondents.

NARVASA, J.:

An action to recover an immovable from a defendant allegedly holding it under a constructive trust prescribes in ten (10) years, counted from the issuance of title to said defendant: so we have ruled in a number of cases; 1 and so We rule in this case. This case concerns a rather large tract of land, with an area of 225,322 square meters, situated in Hinigaran, Negros Occidental. The land, known as Lot 818, was originally owned, at least as far as this case is concerned, by two co-owners in equal shares: (1) Maximo Juanico, married to Rosa Gegato, and (2) Matilde Geolingo, married to Dionisio Mongcal. Their co-ownership was so set out in their certificate of title, TCT No. 30009. 2 Maximo Juanico died on May 21, 1942, survived by his wife, the aforenamed Rosa Gegato, and three (3) minor children: Presentacion, Resurreccion, and Catalina. 3 The other co-owner, Matilde Geolingo, and her husband, Dionisio Mongcal, also died; and their only child, Loreto Mongcal, executed an affidavit adjudicating to herself, as sole heir, her mother's one-half (1/2) share in Lot 818. 4That share she sold on December 14, 1951 to Rosa Gicano. In virtue thereof, TCT No. 30009 of the original co-owners was cancelled and a new one, TCT No. 8878, was issued in the names of (1) Maximo Juanico, married to Rosa Gegato (1/2 share) and (2) Rosa Gicano, married to Gorgonio Geollegue (1/2 share). 5 On August 23, 1952, a document was executed which gave rise to the controversy at bar. That document purported to be a Deed of Sale, or more properly, a deed of dacion en pago de deuda, intended to satisfy a debt of P2,333.33 of the late Maximo Juanico to Rosa Gicano by the conveyance, according to the express terms of the document, of said Maximo Juanico's one-half (1/2) share in Lot 818. It was signed by Rosa Gegato and her second husband, Raymundo Pundon. The latter took part in the transaction as judicial guardian of two (2) of Rosa's surviving minor children, Resurreccion and Catalina the third, Presentacion, having earlier died without issue. It was acknowledged by them before Notary Public Vicente T. Remitio. The sale was registered, TCT No. 8878 was cancelled, and on September 8, 1952 the Register of Deeds issued TCT No. 10189, covering the entirety of Lot 818, solely in the name of Rosa Gicano, married to Gorgonio Geollegue. 6 Twenty-three (23) years afterwards, or on February 13, 1976, Rosa Gegato and her daughters, Resurreccion and Catalina, brought an action in the Court of First Instance of Negros Occidental against Rosa Gicano and her husband, Gorgonio Geollegue, to compel the latter to reconvey Lot No. 818 to them and/or pay damages. 7 Rosa Gegato and her daughters alleged that it had never been their intention to transfer the entire one-half (1/2) share in Lot No. 818 to Rosa Gicano in payment of Maximo Juanico's debt in the sum of P2,333.33, but only one-third of the share of the minors in said undivided half of the property; that they were deceived into believing that it was only this one-third interest which was really being conveyed by the Deed of Sale of August 23, 1952, and it was on that understanding that Rosa Gegato and her minor children's judicial guardian, Raymundo Pundon, had signed the deed, both of them being unable to read and write English; that they discovered the fraud perpetrated on them only in 1975, when they hired a surveyor to partition the property and the latter informed them that title to Lot No. 818 had long since issued solely in the name of Nenita Geollegue, who had purchased it from her mother, Rosa Gegato Geollegue and had in due course obtained title in her name, TCT 31543, on June 23, 1964; and that on October 17, 1974, said Nenita Geollegue had mortgaged the lot to the Philippine Commercial and Industrial Bank as security for a loan of P156,000.00. 8 Rosa Gicano and her co-defendants filed a motion to dismiss the complaint alleging as grounds therefor, plaintiffs' lack of cause of action, laches, estoppel, and prescription. 9 The Trial court denied the motion in so far as it was based on the first ground, lack of cause of action. 10 It deferred resolution thereon as regards the other grounds until after trial on the merits. 11 Subsequently, however, after considering the pre-trial briefs and memoranda submitted by the parties in connection with the pre-trial, and without scheduling the case for trial on the merits any longer, the Trial Court promulgated an Order dismissing the complaint on the ground of prescription and laches.12 It opined that the action, being one for reconveyance predicated on an implied trust, prescribed in 10 years, commencing from the date that the initial document of transfer was registered and title issued; and since 23 years had already elapsed on the day of the institution of the action at bar, reckoned from the registration of the deed of sale and issuance of title, the suit was time-barred. The Trial Court's Order was however reversed by the Court of Appeals, on an appeal taken by Rosa Gegato, et al., and the case was remanded with instructions that a full dress trial on the merits be conducted. In its

Decision promulgated on May 26, 1982, 13 the Appellate Court declared that the outright dismissal of complaint on the ground of prescription was premature and violative of due process because it denied the parties the opportunity to prove their claims and defenses. It also held that the action was not in truth time-barred. The Appellate Court's reasoning does not however appear persuasive. It said that absent any proof to the contrary, the one-half (1/2) share of the deceased Maximo Juanico in Lot 818, originally owned in common by him with Matilde Geolingo, must be presumed to be conjugal in character; hence, only one-half (1/2) of said half constituted the estate of Maximo Juanico upon his death, the other half pertaining in ownership to his widow, Rosa Gegato, as her conjugal share; hence, Rosa Gegato's conjugal share could not have been meant to be included in the Deed of Sale of August 23, 1952, there being nothing in its language in fact to show this, and that deed was valid only in so far as concerned the transfer of 1/3 of her children's inheritance, but void as regards the remaining 2/3 for lack of cause or object in accordance with Article 1409 of the Civil Code, the action to declare its illegality being imprescriptible under Article 1410 of the same Code. But the action instituted by the plaintiffs Rosa Gegato, et al. was not one to declare the deed of sale of August 23, 1952 void ab initio, for lack of cause or object in accordance with Article 1409 of the Civil Code, which is really imprescriptible, but to annul it on account of fraud, on the theory of constructive trust, which prescribes in ten (10) years. In the case at bar, Rosa Gegato and her minor children by her deceased husband, Maximo Juanico (said children being represented by their judicial guardian, Ramundo Pundon) had executed a deed of sale and acknowledged it before a notary public which, upon its face, transferred the entirety of Maximo Juanico's right, share and interest in Lot 181 to Rosa Gicano. Now, if it be true that they were deceived into executing that deed of sale by Rosa Gicano, who taking advantage of their ignorance had made them believe that the deed conveyed only 1/3 of the children's share in their inheritance from their father, they certainly had the right to sue Rosa Gicano, and after presenting evidence of the fraud perpetrated upon them, recover so much of the property as they had never intended to transfer, and recover the damages thereby suffered by them. But they certainly did not have all the time in the world to bring that suit. They had to do it within ten (10) years from the issuance to Rosa Gicano of title to the property on the strength of the supposedly fraudulent deed of sale. 14 They did not file their action within this statutory period. They filed it only after twenty-three (23) years. When filed, their action had already been extinguished by prescription. They had slept on their rights. Time eroded their right of action and ultimately erased it, as a sand castle on a shore is slowly and inexorably obliterated by the rising tide. Their action was therefore correctly dismissed, even without a trial on the merits being first had. We have ruled that trial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets,, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the basis of a motion to dismiss, 15 or an answer which sets up such ground as an affirmative defense; 16 or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration; 17 or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings, 18 or where a defendant has been declared in default. 19 What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period, be otherwise sufficiently and satisfactorily apparent on the record: either in the averments of the plaintiffs complaint, or otherwise established by the evidence. WHEREFORE, the Decision of the Court of Appeals promulgated on May 26, 1982 is REVERSED, and the Order of the Trial Court dated October 29, 1976 dismissing the action for reconveyance and damages instituted by respondents Rosa Gegato, et al. on the ground of prescription is REINSTATED and AFFIRMED as being in accord with the relevant facts and the law. Costs against respondents. Teehankee, C.J., Cruz, Paras * and Gancayco, JJ., concur.

Footnotes 1 Sinaon v. Sorongan, 136 SCRA 40, Amerol, et al. v. Bagumbaran, G.R.No. L-33621, Sept. 30, 1987;Guerrero v. C.A., 126 SCRA 109; Vda. de Pama, v. Pama, 124 SCRA 377, citing Diaz v. Gorricho, 103 Phil. 261, Candelaria v. Romero, 109 Phil. 500 and J.M. Tuason v.

Magdangal, 114 Phil. 42; Tongoy v. C.A., 123 SCRA 99, citing Tongoy v. C.A., supra; J.M. Tuason v. Magdangal, supra, Escay, v. CA., 61 SCRA 370, and Bonaga v. Soler, 2 SCRA 755. 2 Rollo, p. 25. 3 Id., p. 26. 4 Sec. 1, Rule 74 of the Rules of Court. 5 Id., pp. 25-26. 6 Id., pp. 26-27. 7 Id., p. 19. 8 Id., p. 27. 9 Id., p. 25. 10 The proper ground, of course, is not that plaintiffs have no cause of action, but that their complaint fails to state a cause of action. Sec. 1, g, Rule 16, Rules of Court. 11 Rollo, p. 25, N.B. Sec.3, Rule l6, states that "After hearing, the Court may deny or grant the motion to allow amendment of pleading or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable." 12 Rollo, p. 25. 13 Sison, P., J., ponente. 14 See cases collated at footnote 1, supra. 15 Sec. 1, f, Rule 16, Rules of Court. 16 Sec. 5, Rule 16. 17 Ferrer v. Ericta, 84 SCRA 705. 18 Garcia v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v. Dioso, et al., 97 Phil. 821. 19 PNB v. Perez, 16 SCRA 270. * Designated a Special Member of the First Division. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 71110 November 22, 1988

PAZ VILLAGONZALO, ESTELA VILLAGONZALO, AIDA VILLAGONZALO, HERMINIA VILLAGONZALO, GWENDOLYN VILLAGONZALO, JENSINE VILLAGONZALO and LEONILA VILLAGONZALO, petitioners, vs. INTERMEDIATE APPELLATE COURT and CECILIA A. VILLAGONZALO, respondents. Julio L. Falcone and Makilito B. Mahinay for petitioners. Adelino B. Sitoy for private respondent.

REGALADO, J.: From a decision rendered in favor of herein petitioners, as plaintiffs, against herein private respondent, as defendant, in an action for reconveyance in the then Court of First Instance of Leyte, 1 which reads:

Wherefore, decision is hereby rendered in favor of the plaintiffs and against defendant declaring Lot No. 7429 of the Ormoc Cadastre, situated at Bo. Dolores, Ormoc City, with an area of 97,213 square meters, more or less, as the conjugal property of the deceased spouses, Juan Villagonzalo and Felicisima Abella Villagonzalo hereby ordering the cancellation of Transfer Certificate of Title No. 4259 in the name of Cecilia A. Villagonzalo and ordering the Register of Deeds of Ormoc City to issue another Transfer Certificate of Title in the name of spouses Juan C. Villagonzalo and Felicisima A. Villagonzalo, Filipinos, of legal age, residents of Cebu City now deceased and survived by the present plaintiffs and defendants, each of whom upon payment of the inheritance taxes with the BIR, shall be entitled to 1/9 share of the land, subject to claims by other heirs and creditors within a period of two (2) years as provided for by the Rules of Court, and further ordering the partition of the said land within a period of ninety (90) days from the finality of this decision and if the parties cannot agree on the partition this Court may appoint a commissioner to partition the same without pronouncement as to costs. 2
therein defendant appealed to the former Intermediate Appellate Court which, in a decision 3 of the Second Civil Cases Division in AC-G.R. No. 65128, reversed the appealed judgment and dismissed the complaint for reconveyance. As found by the respondent Court

The facts in this regard show that on February 22, 1961, Juan C. Villagonzalo, the predecessor-in-interest of the parties, purchased Lot No. 7429 of the Ormoc Cadastre, situated at Barrio Dolores, Municipality of Ormoc, containing an area of 97,213 sq. meters covered by Transfer Certificate of Title No. 24611 of the Register of Deeds of Ormoc City, from the Heirs of Roman Matuguina for Pl,500.00 (Exhibits A and 6, Folder of Exhibits, pp. 1, 15). It was made to appear however that the sale was in the name of his daughter, defendant Cecilia Villagonzalo, who was single, since he borrowed from her the sum of P500.00 to complete the full payment of the price of the lot. Consequently, TCT No. 4259 was issued in the name of defendant Cecilia A. Villagonzalo as the registered owner (Exhibit 5, Ibid., p. 15) on July 18, 1962. The complaint was filed on April 2, 1975 thirteen (13) years after the issuance of Transfer Certificate of Title No. 4259 on the subject land in the name of the defendant Cecilia Villagonzalo. 4
On such factual moorings, the respondent court, now the Court of Appeals, held that the right of action of therein plaintiffs-appellees, petitioners herein, had prescribed for the reasons that follow. 5

It ratiocinated that when private respondent obtained Transfer Certificate of Title No. 4259 in her name she thereby excluded herein petitioners from the estate of their deceased predecessor-in-interest and, consequently, she set up a title to the land adverse to them. The registration of the deed of sale with the Register of Deeds, so it opined, was constructive notice to the whole world of defendant's adverse claim to the property, thereby repudiating any fiduciary or trust relationship involved. It anchored its conclusion on doctrinal holdings that an action for reconveyance based on an implied or constructive trust prescribes in ten years counted from the date when adverse title is asserted by the possessor of the property. Prescinding therefrom into the field of laches, respondent court further noted that because of the neglect and inaction of the present petitioners, the private respondent was thereby made to feel secure in her belief that she had rightly acquired the controverted land and that no legal action would be filed against her. She was thus induced to spend time, money and effort for the cultivation of the land and the payment of the taxes thereon. It then further rested its conclusion on the established principle that inaction and neglect of a party to assert a right can convert what could otherwise be a valid claim into a stale demand. Petitioners have come before Us contending that their action was seasonably filed because private respondent's registration of the land in her name was not a repudiation of the implied trust created between her and their father; and, confusing extinctive for aquisitive prescription, that good faith and just title are essential requisites in this case. The respondent court is correct and certiorari must be denied. It is now well settled that an action for reconveyance of real property to enforce an implied trust shall prescribe after ten years, 6 since it is an action based upon an obligation created by law, 7 and there can be no doubt as to its prescriptibility. 8 It is likewise established that said period of ten years is counted from the date adverse title to the property is asserted by the possessor thereof. In the case at bar, that assertion of adverse title, which consequently was a repudiation of the implied trust for the purpose of the statute of limitations, took place when Transfer Certificate of Title No. 4259 was issued in the name of private respondent on July 18, 1962. As succinctly but pithily resolved inVda. de Pama vs. Pama, et al.: 9

... Considering the settled doctrine that an action for reconveyance of real property based upon constructive or implied trust prescribes in ten (10) years counted from the date adverse title is asserted by the possessor of the property (Diaz vs. Gorricho, 103 Phil. 261; Candelaria vs. Romero, 109 Phil. 100; J. M. Tuazon vs. Magdangal, 114 Phil. 42); that when respondent Guillermo Pama caused the registration on June 18, 1956 of the affidavit of adjudication declaring himself to be the sole heir of the late Mateo Pama and obtained Transfer Certificate of Title No. T-4006 in his own name, he thereby excluded petitioners from the estate of the deceased Mateo Pama and, consequently, set up a title adverse to them; that such registration constitutes constructive notice to petitioners of the respondent's adverse claim to the property (Carantes vs. Court of Appeals, 76 SCRA 514, 523; Gerona vs. de Guzman, 11 SCRA 153, 157); and it appearing that petitioners filed their complaint for reconveyance only on April 28, 1969, or twelve (12) years, ten (10) months and ten (10) days after their cause of action had accrued on June 18, 1956; this Court resolved to dismiss this petition and to affirm the questioned order dismissing petitioner's complaint ... 10
There is also evidence of record that as far back as 1961, private respondent refused to give any share in the produce of the land to petitioners; that in 1963 she mortgaged the property in her own name; and that in 1969, she leased the same to one Ramon Valera, without the petitioners taking preventive or retaliatory legal action. 11 The rule in this jurisdiction is that an action to enforce an implied trust may be barred not only by prescription but also by laches, in which case repudiation is not even required. 12 Whether the trust is resulting or

constructive, its enforcement may be barred by laches. 13 Petitioners were, therefore, correctly faulted for their unjustified inaction. WHEREFORE, the judgment of the respondent Court is hereby AFFIRMED. SO ORDERED. Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

Footnotes 1 Fifth Branch; Civil Case No. 1409-0. 2 Rollo,11-12. 3 Penned by Crisolito Pascual, J., with whom concurred Serafin E. Camilon and Desiderio P. Jurado, JJ. 4 Rollo, 12-13. 5 Rollo, Ibid. 6 Cuaycong, et al. vs. Cuaycong, et al., 21 SCRA 1193 (1967). See also Buencamino, et al. vs. Matias, et al., 16 SCRA 849 (1966); Araneta vs. Perez, et al., 17 SCRA 643 (1966); Pascual, et al., vs. Meneses, et al., 20 SCRA 219 (1967); Julio vs. Dalandan, 21 SCRA 543 (1967); Fabian, et al., vs. Fabian, et al., 22 SCRA 231 (1968); Escay, et al., vs. Court of Appeals, et al., 61 SCRA 369 (1974). 7 Art. 1144 (2), Civil Code. 8 Ramos, et al. vs. Ramos, et al., 61 SCRA 284 (1974). 9 124 SCRA 377 (1983). 10 See also Duque, et al. vs. Domingo, et al., 80 SCRA 654 (1977). 11 Brief for Private Respondent, Rollo, 101-102. 12 Perez vs. Ong Chua, 116 SCRA 732 (1982). 13 Ramos, et al. Ramos, et al., supra, citing 90 C.J.S. 887-889; 54 Am. Jur. 449-450. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-50420 May 29, 1987

REMEDIOS FERRER-LOPEZ, assisted by her husband, ENGR. JUAN LOPEZ, ANTONIO V. FERRER, TRINIDAD FERRER-DUMAUAL, and ROSARIO FERRER-GUTIERREZ, all heirs of the late DOMINGA VELASCO VDA. DE FERRER, petitioners, vs. The Honorable Court of Appeals, TOMAS MANINGDING and Sp. MARIA NIEVES PUZON, Sps. FERMIN PERALTA and JULIANA PUZON, and HONORATA PUZON, assisted by her husband, Atty. DOMINGO PADLANrespondents.

PARAS, J.: Petitioners are seeking 1) the reversal of the decision of the respondent Court of Appeals 1 dated December 29, 1978, 2) the dismissal of the private respondents' complaint in the case below 3) the reconveyance to the petitioners of 2.6486 hectares or 26,486 sq.m. covered by O.C.T. #13505, Register of Deeds of Pangasinan which lot is at present in the name of private respondents and 4) the re-survey of subject lot actually purchased from Damasa Catalan by private respondents based on the actual "pilapil" and coconut trees boundaries as shown in the after ocular inspection report of the trial court's duly appointed commissioner and that of his rectified sketch. Petitioners are the children of the late Dominga Velasco who inherited Lot 12509 of the Cadastral Survey of Malasiqui, Pangasinan. Petitioners contend that the area of said property was originally 54 hectares but 10 hectares were sold by their mother so that what they inherited by way of testamentary succession are the remaining 44 hectares. Petitioners maintain that private respondents are encroaching on the portion of the land which belongs to them, that what the father of private respondents bought from Damasa Catalan in 1935 was the adjoining western portion of the land with only a total of 25,704 sq.m. or 2.5704 hectares and not a total area of 52,908 sq. m. as applied for by respondents in the registration of the land in 1957. Petitioners allege that at the time of the Bureau of Lands Cadastral Survey in the year 1935 and 1936, Ramon Puzon was then representing (2) two conflicting interests; namely, as overseer of Dominga Velasco over her 54-hectare land and as overseer of his children in the land bought by them from Damasa Catalan. Petitioners surmise that Ramon Puzon pointed to the surveyor the boundary between the lot bought by his children, and that of Dominga Velasco as well as the places where the monuments would be placed. They contend that the ocular inspection report and sketch of the Court's Commissioner clearly and patently show the intentional deviation of the boundary line from the barrio road to the lower portion going towards the North which is more than one kilometer in length and that the deviation is definitely against the land of Dominga Velasco from whom the petitioners inherited. Petitioners claim that private respondents were never in actual possession of the land in question and it was only sometime in February 1967 or a total of more than 32 years that private respondents first attempted to claim ownership over the alleged encroached portion of more than 2 1/2 hectares, which portion is part and parcel of the 44 hectares owned by Dominga Velasco. Petitioners maintain that they have been in successive, continuous, public, peaceful and uninterrupted possession of said 44 hectares including the questioned portion of more than 2 1/2 hectares, in the concept of absolute owners, with just and valid title to the exclusion of all other person for more than 60 years and up to the commencement of the litigation. On October 16, 1967, private respondents filed the complaint in the Court below docketed as Civil Case No. D2089 of the Court of First Instance of Pangasinan against petitioner herein and anchored their claim principally on the allegation that "sometime in 1965 defendants and her tenants entered, encroached and took possession of a portion of around 2 1/2 hectares more or less on the southwestern part of the aforedescribed parcel of land, cultivating and/or tenanting, the same since then up to the present under the claim of void and ineffective title or ownership." (p. 3, Record on Appeal). Private respondents maintain that the total area of petitioners' land is only 518,113 sq. m. or 51.8113 hectares; that when the Cadastral Survey of Lot 12509 was made, petitioners' mother was still living and that she herself caused the subdivision of Cadastral Lot 12509, into Lots 12509-A, 12509B, 12509-C, 12509-D, 12509-E and 12509-F and thereafter obtained in the same cadastral proceeding, original certificates of titles (Exhs. G, G-1, G-2, G-3, & G-4) which she delivered in 1960 to the petitioners in whose names the lot was registered, to wit:

E x h i b i t

O C T

Regi ster ed Own er Pedr o Mel enci o

L ot N o

Are

N o .

1 2 5 1 3

1 2 5 0 9A & 1 2 5 0 9B 1 2 5 0 9C 1 2 5 0 9D 1 2 5 0 9E 1 2 5 0 9F T O T A L

100,00 5 sqm

G 4

Azu cen a Ung son 1 2 5 1 2 1 2 5 1 1 1 2 5 1 0 1 2 5 0 9 Rem edio s Ferr er Trini dad Ferr er

G 3

100,05 4sqm

G 2

100,08 1sqm

G 1

Ros ario Ferr er

100,02 1sqm

Anto nio Ferr er

117,95 2sqm

518,13 3sq.m.

In answer to the allegation of petitioners in their Statement of Facts that the property of respondents was only 2 1/2 hectares pointing to the entry in the notarial registrar of Mariano Caranto (Exh. 1), respondents stated that

petitioners misconstrued the entries therein. Respondents claim that what was sold to respondents under Entry No. 185 was 1/2 of the land with an area of 26,704 sq.m. and what was sold under Entry No. 816 was the other half, with an area of 26,704 sq.m. or a total area of 53,408 sq.m. or 5.3408 hectares. Petitioners' allegation that respondents' late father represented two (2) conflicting interests when he acted as overseer of the landholding of the petitioners and acted as administrator of the property acquired from Damasa Catalan is a brazen lie and an attempt to blacken the memory of their father as there is a total lack of evidence whatsoever of any conflict of interests. As to the claim of an "intentional deviation of the boundary line from the barrio road" respondents allege that there is nothing in the reports and sketches to prove such claim. Respondents also maintain that aside from the aforementioned facts petitioners failed to include in their Statement of Facts, the following facts established by the evidence: l) The subject matter of the present litigation is a portion of that certain parcel of land situated in the Bo. Gatang, Malasiqui Pangasinan, more particularly described as follows: A parcel of land (Lot No. 12510 of the Cadastral Survey of Malasiqui, Cadastral Case No. 92, L.R.C. Cad. Record on 1860), situated in the Bo. of Gatang, Malasiqui, Pangasinan, Bounded on the NE, by Lot Nos. 12511 and 1391 1; on the S. by Road; on the SW by Lot No. 12509; and on the NW by the Balas Creek, . . . containing an area of Fifty Two Thousand Nine Hundred and Eight (52,908) sq.m. more or less.' 2) That as a consequence of the cadastral proceeding over the parcel of land in litigation, Lot. No. 12510 of the Cadastral Survey of Malasiqui, was brought under the operation of the land Registration Law, the corresponding decree was entered on December 3, 1956, and Original Certificate of Title No. 13505 (Exhibit A) was issued to the private respondents on January 5, 1957. 3) That the adjoining parcel of land, Lot 12509 of the Cadastral Survey of Malasiqui, with an area of 518,113 square meters has also been the object of the same cadastral proceeding. Said Lot 12509 originally belonged to petitioners' mother, the late Dominga Velasco Vda. de Ferrer. Before the cadastral hearing, Lot. No. 12509 was subdivided into five (5) lots, and the corresponding decrees were issued, and Original Certificates of Title Nos. 12509, 12510, 12511, 12512, 12513, were issued for the said subdivided lots in August, 1956 (Exhs. G, G-1, G-2, G-3, and G-4), MUCH EARLIER THAN THE DATE of issuance of the decree of registration of Lot. No. 12510. 4) That in 1965, private respondents informed the original defendants, now petitioners Juan Lopez and Remedios Ferrer-Lopez, who own Lot 12509-C which adjoins respondents' Lot 12510, that they encroached upon the respondents' Lot No. 12510. They agreed to a relocation survey with the understanding that any portion that may be found to be encroached upon by the petitioners will be returned to private respondents. 5) After the relocation, however, petitioners refused to give back possession over the portion of Lot 12510, encroached upon, so the private respondents sued the petitioners Remedios Ferrer-Lopez, together with her husband, Juan Lopez. In the answer of the original defendants, petitioners herein, Remedios Ferrer-Lopez and Juan Lopez, made reference to the other petitioners as additional defendants, and in an urgent ex-parte motion, moved that the other petitioners be impleaded as additional defendants. (pp. 7-9, Brief for the Respondents, p. 120, Rollo). After trial, the Court a quo decided in favor of the plaintiffs (private respondents herein) the dispositive portion of the decision reading as follows: WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the defendants ordering said defendants:

(a) to vacate the portion of about 2-1/2 hectares on the southewestern portion of Lot 12510 of the Malasiqui Cadastre covered by original certification of title No. 13505 of the Registry of Deeds for the province of Pangasinan, which portion is indicated by the shaded area in red ink in the sketch plan marked Exh. F; (b) to pay plaintiffs attorney's fees in the sum of P300.00 and the costs. SO ORDERED. (p. 107, Record on Appeal). Defendants (petitioners herein) appealed to the Court of Appeals which rendered judgment affirming in toto as assailed decision of the trial court and denied the motion for reconsideration of the same. Hence this appeal by certiorari by defendants-appellants assigning the following errors: I The respondent Court of Appeals erred in not considering, much less applying the provisions of Rule 26 of the Revised Rules of Court. II The respondent court overlooked and failed to consider the vital and proven fact that private respondents were never in possession of the more than 2-1/2 hectares of agricultural land in question. III The respondent court overlooked and failed to consider the actual and physical boundary of the petitioners' and private respondents' real landholding which adjoins, as determined by the trial court's duly appointed commissioner in an ocular inspection of the questioned premises. IV The respondent court erred in applying in the instant case the ruling on "implied trust." Petitioners' contentions are devoid of merit. The records show that the pre-trial proceedings were held on (4) four different dates to wit: March 18, 1968, July 15, 1968 and September 30, 1968 and finally on December 9, 1968. The request for Admission was made on June 4, 1968 when the pre-trial was already in progress. The need of the petitioners to repeat the request for the admission of the same matters during the continuation of the pretrial on September 30 and December 9, 1968 belied their allegations that the matters contained in their request for admission were already impliedly admitted in accordance with Rule 26 of the Revised Rules of Court. Moreover, during the trial in the court a quo, petitioners thru counsel attempted to introduce evidence on the same matters or objects of the Request for Admission. The conduct therefore of the petitioners during the pretrial and trial proper negates their resort to such procedural technicality in accordance with Rule 26 of the Rules of Court. We now come to petitioners' documentary evidence: (1) Exhibit 1 is a photostat of a notarial register showing the acknowledgment of certain deeds of sale (Entries Nos. 185 and 186) YET they do not show the contents of said Deeds of Sale; hence, they cannot be regarded as evidence of said contents;

(2) Exhibit 2 is a verified copy of the minutes of the court proceedings on November 27, 1953 (re Cadastral Lot No. 155 10). Said minutes show that private respondents did not present any Deed of Sale, YET this does not indicate that there had been loss of all the copies of said Deed of Sale. Neither is this non-production proof that petitioners are the true owners of the disputed portion. (3) Exhibit 3 is a tax declaration (No.43111) of the property involved and is, in the name of Dominga Velasco, the predecessor in interest of the petitioners, but as is well-known, said tax declaration is not conclusive evidence of ownership. Besides, it is not proof of the area covered by said portion. (4) Exhibits 4, 5 and 6 are realty tax payment receipts of the lot referred to in the aforementioned Tax Declaration, but again, it is evident that said receipts cannot in any sense be conclusive of ownership. Against this array of "proofs," We have Original Certificate of Title No. 13505 in the name of the private respondents. This Certificate of Title indicates true and legal ownership by them over the disputed premises. Petitioners also bewail the fact that the respondent Court did not bother to require the trial court to elevate to the appellate court two important documents, namely "the court's duly appointed Commissioner's Report together with the sketch duly approved by both parties which shows vividly the physical and actual boundaries of the lots in controversy." The ocular inspection had been ordered by the trial court upon motion of petitioners thru counsel. (Pets.' Brief, pp. 4-5). Such contentions hold no water. If indeed these reports and sketches were not part of the records elevated to the Court of Appeals, the petitioners have nobody to blame for their negligence but themselves. The petitioners should have included such "missing" reports and sketches in the Record on Appeal, or they could have asked for the transmittal of said reports and sketches to the appellate court. Moreover, in relation to said sketches, worth mentioning is the testimony of Engineer Miguel Mamaril who conducted the relocation survey upon request of his "compadre," petitioner Juan Lopez. There is no better evidence of the boundary line between the two lots than the earth dikes where the cadastral monuments were located as undisputably established by petitioners' own witness, Engineer Mamaril and as reflected in Exhibit F. Capitalizing on the fact that the late Ramon Puzon, father of private respondents, was the overseer of the land of Dominga Velasco, and the administrator of private respondents' land, petitioners advance the claim that Ramon Puzon pointed to the boundary and places where the monuments of the Bureau of Lands would be placed during the Cadastral Survey of the said land of private respondents and that of Dominga Velasco which adjoin each other. We cannot surmise however why petitioners forgot to explain why their mother, who was still alive when the cadastral survey was made, never questioned the area of 51.8 hectares and instead she even proceeded to subdivide the land, without any protest or objection as to the area, among the petitioners and their spouses Pedro Melencio and Azucena Ungson, (Exh. G, G-1, G-2, G-3 & G-4) with the technical assistance of Geodetic Engineer Miguel Mamaril and in the process giving to her daughters 10 hectares each, to her son 11.8 hectares, and to the spouses Pedro Melencio and Azucena Ungson 10 hectares, and thereafter causing the issuance of OCTs in their names with a total area less than what the petitioners claim. Thus, petitioners' mother acknowledged by her own acts, the title and possession of private respondents over Lot 12510. Petitioners did not also explain why they accepted the subdivision of Lot 12509 with an area of 51.8 hectares and accepted their corresponding OCTs without any objection or protest as to the area of the whole, or of their respective shares. Finally, petitioners failed to explain why petitioner Remedios Ferrer-Lopez who was given only an area of ten (10) hectares which adjoins the private respondent's lot, should now enlarge her landholding to 121/2 hectares thru an encroachment on the land of the respondents. Petitioners, to substantiate their claim of possession over the disputed land even prior to 1967, presented as their witnesses Jose Raceles and Maximo Candelaria. Their testimonies have no or scant probative value as the former failed to Identify the portion of the land he was tilling and the latter was a biased witness as he has been the overseer of petitioners, since the death of Ramon Puzon in 1950 and a former tenant of the land in controversy. It is interesting to note that he was evicted as a tenant therefrom barely one agricultural year after the purchase thereof by the private respondents.

This case having been elevated to Us for appellate review on both legal and factual issues, We now tackle the legal points raised. The doctrine of implied trust asserted by petitioners finds no application in the case at bar, because there are no proven facts to this effect. While an implied trust (of real or personal property) does not require the formalities of an express trust over realty (which as mandated by the law cannot be proved by oral evidence under Art. 1443 of the Civil Code, still there must be proof that the trustor wanted to grant one party only the beneficial ownership of a parcel of land, although said beneficiary may have legal title in himself. Implied trusts are exemplified in Arts, 1447-1456 of the Civil Code. Private respondents have been in possession of Lot. No. 12510 as owners since its purchase in 1935 thru their late father Ramon Puzon. Ramon Puzon was the overseer of petitioners' mother over another lot (Lot No. 12509) and not over the lot in question (Lot No. 12510). It is therefore obvious that there could not have been any possible conflict of interest in the role of private respondents' father. And even if indeed he had been the overseer of both lots, there was also no such conflict of interest. Both lots had their own marked and natural boundaries; both had their own separate registered titles of ownership; dominion over each was exercised by two separate groups of owners. Petitioners' claim of acquisitive prescription is unavailing against the conclusive and indefeasible character of OCT 13505 covering Lot No. 12510 in the name of private respondents even if the latter are not in actual possession of the premises. It is an elemental rule that the decree of registration bars all claims or rights, which arose or may have existed prior to the decree of registration. In summary therefore, the evidence of the petitioners is grossly inadequate to overcome the respondents' conclusive and indefeasible title and right of ownership and possession. We respect the findings of the trial court that the controversial piece of land was well within the titled property of the private respondents as We find no vital facts which have been overlooked or misappreciated. WHEREFORE, the petitioners' appeal by certiorari is hereby DISMISSED and the appealed decision is hereby AFFIRMED. SO ORDERED. Fernan (Chairman), Gutierrez, Jr., Bidin and Cortes, JJ., concur. Padilla, J., took no part.

Footnotes 1 PENNED by Justice Porfirio V. Sison (ponente) with Justices Mariano Serrano & Jorge R. Coquia, concurring. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-47924 July 31, 1989 MARCIANO ASUNCION, petitioner, vs. HON. GREGORIO G. PINEDA, Judge of the Court of First Instance of Rizal, Branch XXI, Pasig, Metro Manila, HEIRS OF MARIA OLIVEROS-SORIANO and HEIRS OF SOTERO OLIVEROS, respondents.

Benjamin S. Formoso for petitioner. Melencio G. Francisco for respondents. Jose S. Balajadia for Heirs of Oliveros.

PADILLA, J.: This petition for review seeks the annulment of the Order, dated 24 November 1977, issued by respondent Judge of the Court of First Instance of Rizal, Branch XXI, in Civil Case No. 26938, dismissing petitioner's complaint for reconveyance with damages. 1 On 7 August 1977, petitioner filed a complaint before the Court of First Instance of Rizal, Branch XXI, docketed as Civil Case No. 26938, entitled "Marciano Asuncion vs. Heirs of Spouses Maria Oliveros and Alejandro Soriano, et al. and the Heirs of Spouses Sotero Oliveros and Fausta Alarcon, et al." 2 The complaint seeks to compel defendants therein (now private respondents) to execute a Deed of Reconveyance over 3.5 hectares located at the northwestern portion of that parcel of land situated in Antipolo, Rizal, covered by T.C.T. No. 15394 (formerly O.C.T. No. 10) registered in the names of Estanislawa Partoza, Sotero Oliveros and Maria Oliveros. The complaint alleges that the property was held in trust by the private respondents' grandfather, Macario Oliveros, for the benefit of petitioner's father, Filemon Oliveros Asuncion. According to petitioner, as plaintiff, Filemon O. Asuncion (his father) is the son of Marcela Oliveros, full-blood sister of Macario Oliveros; that Filemon possessed, developed and cultivated the disputed 3.5 hectares of the land originally covered by O.C.T. No. 10 long before the title was issued; that Macario Oliveros and Filemon (his nephew) agreed to consolidate the possession and cultivation of their respective lands in order that the former's application with the Bureau of Lands for a Homestead Patent would be approved, since the possession and cultivation of Macario was incomplete and was then opposed by a third party; that it was also agreed that the 3.5 hectares of Filemon would remain registered in the name of Macario to be held in trust and for the benefit of Filemon; that after the approval of the application and issuance of the Homestead Patent in the name of Macario Oliveros, Filemon, and, later, his only son, herein petitioner Marciano Asuncion, continued to cultivate and possess the 3.5 hectares up to the present; that after the death of Macario, O.C.T. No. 10 was transferred in the names of his compulsory heirs, namely, his wife Estanislawa Partoza, and two children, Sotero and Maria, both surnamed Oliveros. Private respondents, the Heirs of Spouses Maria Oliveros and Alejandro Soriano, moved for the dismissal of the complaint on the ground, among other things, of res judicata. 3 Pertinent facts of the case are stated in the here assailed 24 November 1977 Order of respondent Judge, which reads as follows: In Civil Case No. 21048 also pending in this sala, the heirs of the spouses Maria Oliveros and Alejandro Soriano filed an action for partition with damages against the heirs of the spouses Sotero Oliveros and Fausta Alarcon concerning a property situated in the Municipality of Antipolo, Rizal and covered by Transfer Certificate of Title No. 15394 (formerly Original Certificate of Title No. 10 in the name of the Heirs of Macario Oliveros) of the registry of deeds of Rizal. Plaintiff herein, Marciano Asuncion, filed a motion for intervention claiming 3 1/2 hectares of the property, alleging that he and his predecessors-in-interest had been personally in possession and in cultivation of said property in good faith, openly, continuously, exclusively, publicly and notoriously and with a bonafide claim of ownership. Plaintiffs filed an opposition.

This Court, in denying the intervention, ruled: Intervenor does not claim to be an heir of Macario Oliveros. His claim of ownership based on possession which is alleged to be open, continuous, exclusive, public and in the concept of owner since time immemorial and long before the issuance of Original Certificate of Title No. 10, granting that this claim were true, cannot prevail upon the well-settled rule that the Torrens Title serves as evidence undefeasible [sic] title to the property in favor of the person whose name appears 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. Marciano Asuncion elevated the case to the Court of Appeals by means of a petition for mandamus and certiorari, (CA-G.R. No. SP-015636) seeking the annulment of the order of this Court denying his motion to intervene. In denying the petition the Court of Appeals ruled: PREMISES CONSIDERED, the Order appealed from is AFFIRMED. Petition is hereby DISMISSED and the Restraining Order issued in connection with his case is ordered LIFTED. Let the respondent Judge proceed with the partition proceedings. Without pronouncement as to costs. The decision of the Court of Appeals is already final and executory The motion to dismiss should be granted. In dismissing petitioner's complaint, respondent Judge found that the same facts and the same cause of action alleged in petitioner's motion for intervention in Civil Case No. 21048 are present in the case at bar. And since the Order denying petitioner's motion for intervention in Civil Case No. 21048 had become final and executory, the present complaint is barred by said final Order. Petitioner moved for a reconsideration of the abovesaid Order of 24 November 1977. 4 The motion was likewise denied on 7 February 1978. 5 Petitioner filed a notice of appeal and appeal bond. Later, he withdrew the same, whereupon, the court a quodismissed his appeal as per its Order dated 30 June 1978. In lieu of his withdrawn appeal, petitioner filed the instant petition for review on certiorari, on the ground that the issue involves jurisdiction of the lower court and that the instant petition is more expeditious than the ordinary appeal. 6 On 23 April 1979, the Court resolved to give due course to the petition. Two issues are raised by petitioner, to wit: A. whether the denial of his Motion To Intervene in Civil Case No. 21048 for partition is a bar to the petition for Reconveyance, a remedy invoked by petitioner under Section 102 of the Land Registration Law, Act 496; B. whether the action for reconveyance for the enforcement of the trust is subject to prescription under Act 496. The crux of petitioner's arguments in support of this petition is that he is not seeking a remedy under Section 38 of Act 496 (Land Registration Law) but rather the enforcement of a trust under the provisions of Section 102 of the said Act. He maintains that when Macario Oliveros and Filemon O. Asuncion (petitioner's father) agreed to have their respective lands consolidated for the purpose of expediting the former's application for a Homestead Patent, there was created a fiduciary relationship between them. Citing the case Manalang, et al. vs. Canlas, et al., L-6307, 20 April 1954, Vol. No. 50, No. 6, O.G., May 1954, petitioner avers that an action to compel a

trustee to convey the property registered in his name in trust for the benefit of a cestui que trust does not prescribe. Petitioner further contends that the present complaint is not barred by the "prior judgment" rendered in Civil Case No. 21048 because the judgment therein was a denial of his "Intervention" and not a decision on the merits of his contention, while the case at bar is an independent complaint for reconveyance to enforce the sacred and inviolable trust between Macario Oliveros and Filemon O. Asuncion, which is affirmed by defendants in Civil Case No. 21048 (Heirs of Spouses Sotero Oliveros and Fausta Alarcon) in their Answer to the Motion for Intervention. 7 On the other hand, private respondents, Heirs of Spouses Maria Oliveros and Alejandro Soriano, deny that there is such a trust agreement between Macario Oliveros, their grandfather, and Filemon O. Asuncion, petitioner's father, contrary to the sworn statement of the other private respondents, Heirs of Sotero Oliveros and Fausta Alarcon. Respondents (Heirs of Maria Oliveros) argue that if it were really true that during the lifetime of the Spouses Macario Oliveros and Estanislawa Partoza and Filemon O. Asuncion, there was such a trust agreement, the agreement should have been annotated at the back of Original Certificate of Title No. 10 and subsequently on T.C.T. No. 15394. And then, assuming arguendo that petitioner had a right to recover title to and possession of the property, respondents (Heirs of Maria Oliveros) allege that because of the failure of petitioner and his predecessor-in-interest to take action to recover the disputed property for sixty (60) years from the issuance of O.C.T. No. 10 in 1917, an action to recover title to and possession of the property in question has already prescribed. Finally, respondents (Heirs of Maria Oliveros) insist that the denial of petitioner's motion to intervene in Civil Case No. 21048 has become final; hence, a bar to the filing of the present action for reconveyance which was correctly dismissed by respondent Judge. It is well settled that the essential requisites for the existence of res judicata are: (1) that the former judgment must be final; (2) it must have been rendered by a court having jurisdiction of the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be, between the first and second actions, (a) identity of parties; (b) identity of subject matter; and (c) identity of cause of action. We note that in Civil Case No. 21048 which was an action for partition, the complainants were the Heirs of Spouses Maria Oliveros and Alejandro Soriano against the Heirs of Sotero Oliveros and Fausta Alarcon. Petitioner filed a motion to intervene therein which was denied by the court for reasons aforequoted. When petitioner's motion for intervention was denied, resultantly, he did not become a party to the case. Besides, the Order of the court denying his intervention is not a decision on the merits of Civil Case No. 21048. The said Order, therefore, does not constitute res judicata vis-a-vis the present case. Petitioner did not participate in the trial of Civil Case No. 21048 where he could have presented (but was not allowed) evidence to support his claim. But, even granting for the sake of argument that petitioner is a party in Civil Case No. 21048, yet, as admitted by the parties, the case was still pending before the same court when the present case (Civil Case No. 26938) for reconveyance was filed by petitioner herein. In other words, there is as yet no final judgment, to speak of, in Civil Case No. 21048, which would have the effect of barring the present case, on the ground of res judicata. The application of res judicata is at best not indubitable and the defense should, if at all, be alleged in the answer and resolved after trial on the merits, instead of by resolution of a simple motion to dismiss. 8 More so, where as in the present case, one set of respondents (Heirs of Sotero Oliveros) admit petitioner's claim. For the foregoing reasons, we believe that the denial of herein petitioner's Motion To Intervene in Civil Case No. 21048 is not res judicata to his present action. As regards, however, the second issue, we rule in the affirmative and against the petitioner. In the case of Sinaon vs. Sorongon, 9 this Court held that the petitioners therein having been registered owners of the lot for more than forty (40) years and having possessed it during said period, their title had become

indefeasible and their possession could not be disturbed. Any pretension as to the existence of an implied trust should not be countenanced. In the case at bar, O.C.T. No. 10 in the name of Macario Oliveros was issued in 1917, or almost sixty (60) years before the filing of the present complaint. Even granting that an implied or constructive trust was created in favor of Filemon O. Asuncion, petitioner's father, under Article 1456 of the Civil Code, still an action to reconvey real property based upon a constructive or implied trust can be barred by prescription. 10 Petitioner offers the document 11 wherein the Heirs of Sotero Oliveros (the other set of private respondents) acknowledge the claim of petitioner to the 3.5 hectares of the property under dispute. In the above cited Sinaoncase, which involved substantially the same circumstances as in the present case, the Court declared: The trustors, who created the alleged trust, died a long time ago. An attempt to prove the trust was made by unreliable oral evidence. The title and possession of the Sinaons cannot be defeated by oral evidence which can be easily fabricated and contradicted. The contradictory oral evidence leaves the court sometimes bothered and bewildered. There was no express trust in this case. Express trusts concerning real property cannot be proven by parol evidence (Art. 1443, Civil Code). An implied trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof (Suarez v. Tirambulo, 59 Phil. 303; Salao v. Salao, L-26699, March 16, 1976, 0 SCRA 65, 83). Hence, we find that the present action is barred by prescription. WHEREFORE, the petition is DISMISSED. Costs against petitioner. SO ORDERED. Melencio-Herrera, (Chairperson), Paras, Sarmiento and Regalado, JJ., concur.

Footnotes 1 Rollo, pp. 24-25. 2 Id., pp. 11-14. 3 Id., pp. 20-21. 4 Id., pp. 26-27. 5 Id., p. 31. 6 Id., p. 85. 7 Id., pp. 18-19. 8 Philippine United Sales Co. v. Gopengco, G.R. No. L-27728, February 29,1972, 43 SCRA 371. 9 G.R. No. L-59879, May 13,1985,136 SCRA 407.

10 Medina v. Court of Appeals, G.R. No. L-26107, November 27, 1981, 109 SCRA 437; Gerona v. Guzman, G.R. No. L-19060, May 29, 1964, 11 SCRA 153; Tiburcio, et al. v. PHHC, G.R. No. L- 13479, October 31, 1959, 106 Phil. 477. 11 Rollo, p. 18. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21616 December 11, 1967

GERTRUDES F. CUAYCONG, ET AL., plaintiffs-appellants, vs. LUIS D. CUAYCONG, ET AL., defendants-appellees. Benito C. Jalandoni and M. S. Gomez for plaintiffs-appellants. Hilado and Hilado for defendants-appellees. BENGZON, J.P., J.: Eduardo Cuaycong, married to Clotilde de Leon, died on June 21, 1936 without issue but with three brothers and a sister surviving him: Lino, Justo, Meliton and Basilisa. Upon his death, his properties were distributed to his heirs as he willed except two haciendas in Victorias, Negros Occidental, devoted to sugar and other crops the Haciendas Sta. Cruz and Pusod both known as Hacienda Bacayan. Hacienda Bacayan is comprised of eight (8) lots No. 28, covered by T.C.T. No. T-22130; Nos. 8, 17, 18 & 135, covered by T.C.T. No. T-22131; Nos. 21, 22, 23, covered by T.C.T. No. 22132 all of which are titled in the name of Luis D. Cuaycong, son of Justo Cuaycong. Lino Cuaycong died on May 4, 1937 and was survived by his children Paz, Carolina, Gertrudes, Carmen, Virgilio, Benjamin, Praxedes and Anastacio. Praxedes Cuaycong, married to Jose Betia, is already deceased and is survived by her children Jose Jr., Jesus, Mildred, Nenita and Nilo, all surnamed Betia. Anastacio Cuaycong, also deceased, is survived by his children Ester, Armando, Lourdes, Luis T., Eva and Aida, all surnamed Cuaycong. Meliton and Basilisa died without any issue. On October 3, 1961, the surviving children of Lino Cuaycong: Gertrudes, Carmen, Paz, Carolina, Virgilio; the surviving children of Anastacio: Ester, Armando, Lourdes, Luis T., Eva and Aida; as well as Jose, Jr., Jesus, Mildred, Nenita, Nilo, all surnamed Betia, children of deceased Praxedes Cuaycong Betia, filed as pauper litigants, a suit against Justo, Luis and Benjamin Cuaycong1 for conveyance of inheritance and accounting, before the Court of First Instance of Negros Occidental (Civil Case No. 6314), alleging among others that: 1. Eduardo Cuaycong had on several occasions, made known to his brothers and sisters that he and his wife Clotilde de Leon (died in 1940) had an understanding and made arrangements with Luis Cuaycong and his father Justo Cuaycong, that it was their desire to divide Haciendas Sta. Cruz and Pusod among his brothers and sister and his wife Clotilde. 2. With the consent of his wife, Eduardo had asked his brothers and sister to pay his wife P75,000 (the haciendas were worth P150,000) and then divide equally the remaining one-half share of Eduardo.

3. The brothers and sister failed to pay the 1/2 share of Clotilde over the two haciendas which were later acquired by Luis Cuaycong thru clever strategy, fraud, misrepresentation and in disregard of Eduardo's wishes by causing the issuance in his name of certificates of title covering said properties. 4. As the two haciendas were the subject of transactions between the spouses and Justo and Luis Cuaycong, Eduardo told Justo and Luis, and the two agreed, to hold in trust what might belong to his brothers and sister as a result of the arrangements and deliver to them their share when the proper time comes. 5. That as far back as 1936 Lino demanded from Justo and Luis his share and especially after Eduardo's and Clotilde's death, the plaintiffs demanded their shares. 6. That their demands had been refused and in 1960 during the estate proceedings of Praxedes Escalon, deceased wife of Luis D. Cuaycong, the latter fraudulently made it appear that the plaintiffs had nothing to do with the land; that Luis Cuaycong had possessed the lands since June 21, 1936 from which time he should be made to account for the plaintiffs' share; and that P1,500 attorney's fees should be paid in their favor. Luis D. Cuaycong on October 20, 1961 moved to dismiss the complaint on the grounds of unenforceability of the claim under the statute of frauds, no cause of action (Rule 8, Sec. 1 [f] of the Rules of Court), and bar of causes of action by the statute of limitations (Rule 8, Sec. 1[e]). Subsequently, opposition thereto, answer and reply were filed; the plaintiffs also sought to have Benjamin Cuaycong declared in default for his failure to answer. On December 16, 1961, the Court of First Instance ruled that the trust alleged, particularly in paragraph 8 of the complaint, refers to an immovable which under Article 1443 of the Civil Code may not be proved by parole evidence. Plaintiffs were given 10 days to file an amended complaint mentioning or alleging therein the written evidence of the alleged trust, otherwise the case would be dismissed. Later, on December 23, 1961, the court decreed that since there was no amended complaint filed, thus, no enforceable claim, it was useless to declare Benjamin Cuaycong in default. Plaintiff thereafter manifested that the claim is based on an implied trust as shown by paragraph 8 of the complaint. They added that there being no written instrument of trust, they could not amend the complaint to include such instrument. On January 13, 1962, the court dismissed the case for failure to amend the complaint; it further refused to reconsider its order denying the motion to declare Benjamin Cuaycong in default, stating that such a default declaration would be of no purpose. Failing in their efforts to have the dismissal reconsidered, plaintiffs appealed to Us. The resolution of the appeal hinges on whether the trust is express or implied. Paragraph 8 of the complaint state: That as the said two haciendas were then the subject of certain transactions between the spouses Eduardo Cuaycong and Clotilde de Leon on one hand, and Justo and Luis D. Cuaycong on the other, Eduardo Cuaycong told his brother Justo and his nephew, defendant Luis D. Cuaycong, to hold in trust what might belong to his brothers and sister as a result of the arrangements and to deliver to them their shares when the proper time comes, to which Justo and Luis D. Cuaycong agreed. The plaintiffs claim that an inplied trust is referred to in the complaint which, under Article 1457 of the Civil Code, may be proved by parole evidence. Our Civil Code defines an express trust as one created by the intention of the trustor or of the parties, and an implied trust as one that comes into being by operation of law.2 Express trusts are those 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. On the other hand, implied trusts are those which, without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, in dependently of the particular intention of the parties.3Thus, if the intention to establish a trust is clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other matters indicative of such intent, then the trust is implied. From these and from the provisions of paragraph 8 of the complaint itself, We find it clear that the plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor expressly told the defendants of his intention to establish the trust. Such a situation definitely falls under Article 1443 of the Civil Code.
lawphil

Appellants point out that not only paragraph 8 should be considered but the whole complaint, in which case they argue that an implied trust should be construed to exist. Article 1453, one of the cases of implied trust, is also cited: "When property is conveyed to a person in reliance upon his declared intentions to hold it for or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated." Said arguments are untenable, even considering the whole complaint. The intention of the trustor to establish the alleged trust may be seen in paragraphs 5 and 6.4 Article 1453 would apply if the person conveying the property did not expressly state that he was establishing the trust, unlike the case at bar where he was alleged to have expressed such intent. Consequently, the lower court did not err in dismissing the complaint. Besides, even assuming the alleged trust to be an implied one, the right alleged by plaintiffs Would have already prescribed since starting in 1936 When the trustor died, plaintiffs had already been allegedly refused by the aforesaid defendants in their demands over the land, and the complaint was filed only in 1961 more than the 10-year period of prescription for the enforcement of such rights under the trust. It is settled that the right to enforce an implied trust in one's favor prescribes in ten (10) years.5 And even under the Code of Civil Procedure, action to recover real property such as lands prescribes in ten years (Sec. 40, Act 190).
lawphil

And for the above reasons, We agree that it was pointless to declare Benjamin Cuaycong in default, considering that without a written instrument as evidence of the alleged trust, the case for the plaintiffs must be dismissed. WHEREFORE, the order of dismissal of the lower court appealed from is hereby affirmed, without costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,concur.

Footnotes
1

Benjamin Cuaycong was made a defendant because her refused to sue as a plaintiff. Article 1441. 89 C.J.S. 722, 724.

"(5) That on several occasions during the later years of Eduardo and Lino Cuaycong, the former made known to the latter and to their brothers and sister, that he and his wife, Clotilde de Leon, who died in 1941, had an understanding and made arrangements with defendant Luis D. Cuaycong and his father, Justo Cuaycong, that it was their (Eduardo's and Clotilde's) wish and desire, that Hdas. "Sta. Cruz," and "Pusod" above-referred to, should be divided between the brothers and sister of Eduardo Cuaycong, namely, Justo, Meliton, Lino and Basilisa, all surnamed Cuaycong, and his wife, Clotilde de Leon;
4

"(6) That pursuant to such wish and desire and arrangements, the said Eduardo Cuaycong, with the knowledge and consent of his wife, Clotilde de Leon, and as an agreement with the latter to effectuate their wish and desire had directed his brothers and sister to pay his wife the sum of P75,000.00, the value of the two haciendas above-mentioned being P150,000.00, and then divide the same among themselves share and share alike; or, at all events, should his brothers and sister fail to do just that, they should divide only the one-half (1/2) portions proindiviso thereof appertaining to him (Eduardo) in the conjugal properties;
5

Gonzales v. Jimenez, L-19073, Jan. 30, 1965.

ORIGINAL CASE NOT FOUND CRISTOBAL VS GOMEZ

Cristobal vs. Gomez 50 Phil. 810 Facts: Epifanio Gomez owns two parcels of land located in the Jabay, Municipality of Bacoor, Cavite and a lot located in town of Bacoor, Cavite. He sold the property with Pacto de Retro to Luis Yangco, redeemable in five years. The period to redeem expired but Yangco extended it. Gomez approached Bibiano Banas , a relative, to secure a loan. The latter only agreed if Gomezs brother Marcelino and sister Telesfora would also be responsible for the loan. On 12 August 1907, Marcelino and Telesfora entered into a private partnership in participation for the purpose of redeeming the property from Yangco. Epifanio was present when said agreement was discussed and assented to. The capital consisted of P7000, of which P1500 came from Marcelino, and P5500 from Telesfora. The agreement provided that the property redeemed will be placed in the name of Marcelino and Telesfora, the income, rent, and produce of the property would go to the two and that the property shall be returned to their brother as soon as the capital employed have been covered. Epifanio should also manifest good behavior in the opinion of Marcelino and Telesfora. More than a year later, Epifanio Gomez dies leaving Paulina Cristobal and their four children. Meanwhile, Marcelino Gomez continued to possess the property, improved it, and earned income from it. He acquired exclusive rights over it when Telesfora conveyed her interest to him. He sold the property with pacto de retro to Banas, redeemable within five years. On April 1, 1918, he redeemed the property from Banas. Subsequently, Paulina and children filed action to recover property from Marcelino. They claimed that the capital had been covered by the propertys income, hence, the same should be returned to them. The lower court granted their petition. Marcelino appealed. Hence the present petition.

Issue: Whether there was acceptance by Epifanio of the trust agreement. Held: Yes. Contrary to defendants claim that the agreement was kept secret from Epifanio, the testimony of Banas stated that Gomez was present when the arrangement for the repurchase of the property was discussed. Banas even told Epifanio to be thankful that the latter was able to recover the property from Yangco. Defendants also claim that because Epifanio had not accepted the donation in a public document, the same is unenforceable. This is untenable. Epifanio need not accept in accordance with formalities of donations. The court said that the partnership agreement should be viewed as an express trust, not as an intended donation. THUS: Heirs of Epifanio entitled to recover the property.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 160488 September 3, 2004

FELOMINA1 ABELLANA, petitioner, vs. SPOUSES ROMEO PONCE and LUCILA PONCE and the REGISTER OF DEEDS of BUTUAN CITY,respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review on certiorari assailing the June 16, 2003 decision2 of the Court of Appeals in CAG.R. CV No. 69213, which reversed and set aside the August 28, 2000 decision3 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 44,2974 square meter agricultural lot5 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.7The 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. 28749 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 Torreon11 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 witnesses22 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 title25 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 age29 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. xxx xxx xxx

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. xxx xxx xxx

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 xxx xxx xxx

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 131838 of the Civil Code), solemn contracts like donations are perfected only upon compliance with the legal formalities under Articles 74839 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.41Hence, Felomina can still recover title from Lucila. Article 144842 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 inloco 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 theratio 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 followingMODIFICATIONS: (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. Davide, Jr., Quisumbing, Carpio, and Azcuna, JJ., concur.

Footnotes
1

Also spelled as "Filomena" in some parts of the records.

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).

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)

Exhibit "A", Records, p. 7. TSN, 7 November 1995, pp. 69-70; 27 November 1995, pp. 188-191. TSN, 28 November 1995, pp. 284-285. Exhibit "B", Rollo, p. 392. TSN, 7 November 1995, pp. 75-76; 28 November 1995, p. 298. TSN, 7 November 1995, pp. 75-79. TSN, 7 November 1995, pp. 85-86. TSN, 27 November 1995, pp. 150-160. TSN, 26 July 1996, p. 503; 4 November 1996, pp. 542-544; 28 November 1996, pp. 589-592. TSN, 26 July 1996, pp. 506-508. TSN, 26 July, 1996, pp. 509-510. TSN, 26 July 1996, pp. 510-512. Rollo, pp. 113-114. Rollo, p. 37. Resolution dated October 2, 2003 (Rollo, p. 51). Nazareno v. Court of Appeals, G.R. No. 138842, 18 October 2000, 343 SCRA 637, 652.

10

11

12

13

14

15

16

17

18

19

20

21

22

The other witness was the late Lilia Caldoza, sister of the seller. TSN, 29 November 1995, pp. 237-240. TSN, 18 September 1997, pp. 709-712. Exhibit "B", Records, p. 392. Exhibit "Q", Records, p. 407. Exhibits "N"-"P", Records, pp. 404-406. Exhibit "R", Records, p. 408. She was 76 years old when she testified on November 7, 1995.

23

24

25

26

27

28

29

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. TSN, 7 November 1995, pp. 69-70 (Emphasis supplied). TSN, 27 November 1995, p. 188 (Emphasis supplied).

32

33

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. Concurring Opinion of Justice Reyes, J.B.L. in Armentia v. Patriarca, 125 Phil. 382, 395 (1966). 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.

37

38

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. Morales, supra. Diamonon v. Department of Labor and Employment, 384 Phil. 15, 22-23 (2000). Cometa v. Court of Appeals, G.R. No. 141855, 6 February 2001, 351 SCRA 294, 307. Siguan v. Lim, 376 Phil. 840, 856 (1999). Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

45

46

47

48

G.R. No. 136021

February 22, 2000

BENIGNA SECUYA, MIGUEL SECUYA, MARCELINO SECUYA, CORAZON SECUYA, RUFINA SECUYA, BERNARDINO SECUYA, NATIVIDAD SECUYA, GLICERIA SECUYA and PURITA SECUYA, petitioners, vs. GERARDA M. VDA. DE SELMA, respondent. PANGANIBAN, J.: In action for quieting of title, the plaintiff must show not only that there is a cloud or contrary interest over the subject real property, but that the have a valid title to it. In the present case, the action must fail, because petitioners failed to show the requisite title. The Case Before us is a Petition for Review seeking to set aside the July 30, 1998 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 38580,1 which affirmed the judgment2 of the Regional Trial Court (RTC) of Cebu City. The CA ruled: WHEREFORE, [there being] no error in the appealed decision, the same is hereby AFFIRMED in toto.3 The decretal portion of the trial court Decision reads as follows: WHEREFORE, in view of all the foregoing [evidence] and considerations, this court hereby finds the preponderance of evidence to be in favor of the defendant Gerarda Selma as judgment is rendered:

1. Dismissing this Complaint for Quieting of title, Cancellation of Certificate of Title of Gerarda vda. de Selma and damages, 2. Ordering the plaintiffs to vacate the premises in question and turn over the possession of the same to the defendant Gerarda Selma; 3. Requiring the plaintiffs to pay defendant the sum of P20,000 as moral damages, according to Art. 2217, attorney's fees of P15,000.00, litigation expenses of P5,000.00 pursuant to Art. 2208 No. 11 and to pay the costs of this suit.
1wphi1.nt

SO ORDERED.4 Likewise challenged is the October 14, 1998 CA Resolution which denied petitioners' Motion for Reconsideration.5 The Facts The present Petition is rooted in an action for quieting of title filed before the RTC by Benigna, Miguel, Marcelino, Corazon, Rufina, Bernardino, Natividad, Gliceria and Purita all surnamed Secuya against Gerarda M. vda. de Selma. Petitioners asserted ownership over the disputed parcel of land, alleging the following facts: xxx xxx xxx

8. The parcel of land subject of this case is a PORTION of Lot 5679 of the Talisay-Minglanilla Friar Lands Estate, referred to and covered [o]n Page 279, Friar Lands Sale Certificate Register of the Bureau of Lands (Exh. "K"). The property was originally sold, and the covering patent issued, to Maxima Caballero Vda. de Cario (Exhs. "K-1"; "K-2). Lot 5679 has an area of 12,750 square meters, more or less; 9. During the lifetime of Maxima Caballero, vendee and patentee of Lot 5679, she entered into that AGREEMENT OF PARTITION dated January 5, 1938 with Paciencia Sabellona, whereby the former bound herself and parted [with] one-third (1/3) portion of Lot 5679 in favor of the latter (Exh. "D"). Among others it was stipulated in said agreement of partition that the said portion of one-third so ceded will be located adjoining the municipal road (par. 5. Exh "D"); 10. Paciencia Sabellona took possession and occupation of that one-third portion of Lot 5679 adjudicated to her. Later, she sold the three thousand square meter portion thereof to Dalmacio Secuya on October 20, 1953, for a consideration of ONE THOUSAND EIGHT HUNDRED FIFTY PESOS (P1,850.00), by means of a private document which was lost (p. 8, tsn., 8/8/89-Calzada). Such sale was admitted and confirmed by Ramon Sabellona, only heir of Paciencia Sabellona, per that instrument denominated CONFIRMATION OF SALE OF UNDIVIDED SHARES, dated September 28, 1976(Exh. "B"); 11. Ramon Sabellona was the only [or] sole voluntary heir of Paciencia Sabellona, per that KATAPUSAN NGA KABUT-ON UG PANUGON NI PACIENCIA SABELLONA (Last Will and Testament of Paciencia Sabellona), dated July 9, 1954, executed and acknowledged before Notary Public Teodoro P. Villarmina (Exh. "C"). Pursuant to such will, Ramon Sabellona inherited all the properties left by Paciencia Sabellona; 12. After the purchase [by] Dalmacio Secuya, predecessor-in interest of plaintiffs of the property in litigation on October 20, 1953, Dalmacio, together with his brothers and sisters he being single took physical possession of the land and cultivated the same. In 1967, Edilberto Superales married Rufina Secuya, niece of Dalmacio Secuya. With the permission and tolerance of the Secuyas, Edilberto Superales constructed his house on the lot in question in January 1974 and lived thereon

continuously up to the present (p. 8., tsn 7/25/88 Daclan). Said house is inside Lot 5679-C-12-B, along lines 18-19-20 of said lot, per Certification dated August 10, 1985, by Geodetic Engineer Celestino R. Orozco (Exh. "F"); 13. Dalmacio Secuya died on November 20, 1961. Thus his heirs brothers, sisters, nephews and nieces are the plaintiffs in Civil Case No. CEB-4247 and now the petitioners; 14. In 1972, defendant-respondent Gerarda Selma bought a 1,000 square-meter portion of Lot 5679, evidenced by Exhibit "P". Then on February 19, 1975, she bought the bigger bulk of Lot 5679, consisting of 9,302 square meters, evidenced by that deed of absolute sale, marked as Exhibit "5". The land in question, a 3,000-square meter portion of Lot 5679, is embraced and included within the boundary of the later acquisition by respondent Selma; 15. Defendant-respondent Gerarda Selma lodged a complaint, and had the plaintiffs-petitioners summoned, before the Barangay Captain of the place, and in the confrontation and conciliation proceedings at the Lupong Tagapayapa, defendant-respondent Selma was asserting ownership over the land inherited by plaintiffs-petitioners from Dalmacio Secuya of which they had long been in possession . . . in concept of owner. Such claim of defendant-respondent Selma is a cloud on the title of plaintiffs-petitioners, hence, their complaint (Annex "C").6 Respondent Selma's version of the facts, on the other hand, was summarized by the appellate court as follows: She is the registered owner of Lot 5679-C-120 consisting of 9,302 square meters as evidenced by TCT No. T-35678 (Exhibit "6", Record, p. 324), having bought the same sometime in February 1975 from Cesaria Caballero as evidenced by a notarized Deed of Sale (Exhibit "5", Record, p. 323) and ha[ve] been in possession of the same since then. Cesaria Caballero was the widow of Silvestre Aro, registered owner of the mother lot, Lot. No. 5679 with an area of 12,750 square meters of the TalisayMinglanilla Friar Lands Estate, as shown by Transfer Certificate of Title No. 4752 (Exhibit "10", Record, p. 340). Upon Silvestre Aro's demise, his heirs executed an "Extrajudicial Partition and Deed of Absolute Sale" (Exhibit "11", Record, p. 341) wherein one-half plus one-fifth of Lot No. 5679 was adjudicated to the widow, Cesaria Caballero, from whom defendant-appellee derives her title.7 The CA Ruling In affirming the trial court's ruling, the appellate court debunked petitioners' claim of ownership of the land and upheld Respondent Selma's title thereto. It held that respondent's title can be traced to a valid TCT. On the other hand, it ruled that petitioners anchor their claim on an "Agreement of Partition" which is void for being violative of the Public Land Act. The CA noted that the said law prohibited the alienation or encumbrance of land acquired under a free patent or homestead patent, for a period of five years from the issuance of the said patent. Hence, this Petition.8 The Issues In their Memorandum, petitioners urge the Court to resolve the following questions: 1. Whether or not there was a valid transfer or conveyance of one-third (1/3) portion of Lot 5679 by Maxima Caballero in favor of Paciencia Sabellona, by virtue of [the] Agreement of Partition dated January 5, 1938[;] and 2. Whether or not the trial court, as well as the court, committed grave abuse of discretion amounting to lack of jurisdiction in not making a finding that respondent Gerarda M. vda. de Selma [was] a buyer in bad faith with respect to the land, which is a portion of Lot 5679.9

For a clearer understanding of the above matters, we will divide the issues into three: first, the implications of the Agreement of Partition; second, the validity of the Deed of Confirmation of Sale executed in favor of the petitioners; and third, the validity of private respondent's title. The Court's Ruling The Petition fails to show any reversible error in the assailed Decision. Preliminary Matter: The Action for Quieting of Title In an action to quiet title, the plaintiffs or complainants must demonstrate a legal or an equitable title to, or an interest in, the subject real property.10 Likewise, they must show that the deed, claim, encumbrance or proceeding that purportedly casts a cloud on their title is in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.11 This point is clear from Article 476 of the Civil Code, which reads: Whenever there is 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 title. An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein. In the case at bar, petitioners allege that TCT No. 5679-C-120, issued in the name of Private Respondent Selma, is a cloud on their title as owners and possessors of the subject property, which is a 3,000 squaremeter portion of Lot No. 5679-C-120 covered by the TCT. But the underlying question is, do petitioners have the requisite title that would enable them to avail themselves of the remedy of quieting of title? Petitioners anchor their claim of ownership on two documents: the Agreement of Partition executed by Maxima Caballero and Paciencia Sabellona and the Deed of Confirmation of Sale executed by Ramon Sabellona. We will now examine these two documents. First Issue: The Real Nature of the "Agreement of Partition" The duly notarized Agreement of Partition dated January 5, 1938; is worded as follows: AGREEMENT OF PARTITION I, MAXIMA CABALLERO, Filipina, of legal age, married to Rafael Cario, now residing and with postal address in the Municipality of Dumaguete, Oriental Negros, depose the following and say: 1. That I am the applicant of vacant lot No. 5679 of the Talisay-Minglanilla Estate and the said application has already been indorsed by the District Land Officer, Talisay, Cebu, for private sale in my favor; 2. That the said Lot 5679 was formerly registered in the name of Felix Abad y Caballero and the sale certificate of which has already been cancelled by the Hon. Secretary of Agriculture and Commerce; 3. That for and in representation of my brother, Luis Caballero, who is now the actual occupant of said lot I deem it wise to have the said lot paid by me, as Luis Caballero has no means o[r] any way to pay the government;

4. That as soon as the application is approved by the Director of Lands, Manila, in my favor, I hereby bind myself to transfer the one-third (l/3) portion of the above mentioned lot in favor of my aunt, Paciencia Sabellana y Caballero, of legal age, single, residing and with postal address in Tungkop, Minglanilla, Cebu. Said portion of one-third (1/3) will be subdivided after the approval of said application and the same will be paid by her to the government [for] the corresponding portion. 5. That the said portion of one-third (1/3) will be located adjoining the municipal road; 6. I, Paciencia Sabellana y Caballero, hereby accept and take the portion herein adjudicated to me by Mrs. Maxima Caballero of Lot No. 5679 Talisay-Minglanilla Estate and will pay the corresponding portion to the government after the subdivision of the same; IN WITNESS WHEREOF, we have hereunto set our hands this 5th day of January, 1988, at Talisay, Cebu."12 The Agreement: An Express Trust, Not a Partition Notwithstanding its purported nomenclature, this Agreement is not one of partition, because there was no property to partition and the parties were not co-owners. Rather, it is in the nature of a trust agreement. 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. 13 Trust relations between parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties. An implied trust comes into being by operation of law.14 The present Agreement of Partition involves an express 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." That Maxima Caballero bound herself to give one third of Lot No. 5629 to Paciencia Sabellona upon the approval of the former's application is clear from the terms of the Agreement. Likewise, it is evident that Paciencia acquiesced to the covenant and is thus bound to fulfill her obligation therein. As a result of the Agreement, Maxima Caballero held the portion specified therein as belonging to Paciencia Sabellona when the application was eventually approved and a sale certificate was issued in her name.15 Thus, she should have transferred the same to the latter, but she never did so during her lifetime. Instead, her heirs sold the entire Lot No. 5679 to Silvestre Aro in 1955. From 1954 when the sale certificate was issued until 1985 when petitioners filed their Complaint, Paciencia and her successors-in-interest did not do anything to enforce their proprietary rights over the disputed property or to consolidate their ownership over the same. In fact, they did not even register the said Agreement with the Registry of Property or pay the requisite land taxes. While petitioners had been doing nothing, the disputed property, as part of Lot No. 5679, had been the subject of several sales transactions16 and covered by several transfer certificates of title. The Repudiation of the Express Trust While no time limit is imposed for the enforcement of rights under express trusts,17 prescription may, however, bar a beneficiary's action for recovery, if a repudiation of the trust is proven by clear and convincing evidence and made known to the beneficiary.18 There was a repudiation of the express trust when the heirs of Maxima Caballero failed to deliver or transfer the property to Paciencia Sabellona, and instead sold the same to a third person not privy to the Agreement. In the memorandum of incumbrances of TCT No. 308719 issued in the name of Maxima, there was no notation of the Agreement between her and Paciencia. Equally important, the Agreement was not registered; thus, it could not bind third persons. Neither was there any allegation that Silvestre Aro, who purchased the property from Maxima's heirs, knew of it. Consequently, the subsequent sales transactions involving the land in dispute and

the titles covering it must be upheld, in the absence of proof that the said transactions were fraudulent and irregular. Second Issue: The Purported Sale to Dalmacio Secuya Even granting that the express trust subsists, petitioners have not proven that they are the rightful successorsin-interest of Paciencia Sabellona. The Absence of the Purported Deed of Sale Petitioners insist that Paciencia sold the disputed property to Dalmacio Secuya on October 20, 1953, and that the sale was embodied in a private document. However, such document, which would have been the best evidence of the transaction, was never presented in court, allegedly because it had been lost. While a sale of a piece of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public instrument and recorded in the Registry of Property.20 Moreover, while petitioners could not present the purported deed evidencing the transaction between Paciencia Sabellona and Dalmacio Secuya, petitioners' immediate predecessor-in-interest, private respondent in contrast has the necessary documents to support her claim to the disputed property. The Questionable Value of the Deed Executed by Ramon Sabellona To prove the alleged sale of the disputed property to Dalmacio, petitioners instead presented the testimony of Miguel Secuya, one of the petitioners; and a Deed21 confirming the sale executed by Ramon Sabellona, Paciencia's alleged heir. The testimony of Miguel was a bare assertion that the sale had indeed taken place and that the document evidencing it had been destroyed. While the Deed executed by Ramon ratified the transaction, its probative value is doubtful. His status as heir of Paciencia was not affirmatively established. Moreover, he was not presented in court and was thus not quizzed on his knowledge or lack thereof of the 1953 transaction. Petitioners' Failure to Exercise Owners' Rights to the Property Petitioners insist that they had been occupying the disputed property for forty-seven years before they filed their Complaint for quieting of title. However, there is no proof that they had exercised their rights and duties as owners of the same. They argue that they had been gathering the fruits of such property; yet, it would seem that they had been remiss in their duty to pay the land taxes. If petitioners really believed that they owned the property, they have should have been more vigilant in protecting their rights thereto. As noted earlier, they did nothing to enforce whatever proprietary rights they had over the disputed parcel of land. Third Issue: The Validity of Private Respondent's Title Petitioners debunk Private Respondent Selma's title to the disputed property, alleging that she was aware of their possession of the disputed properties. Thus, they insist that she could not be regarded as a purchaser in good faith who is entitled to the protection of the Torrens system. Indeed, a party who has actual knowledge of facts and circumstances that would move a reasonably cautious man to make an inquiry will not be protected by the Torrens system. In Sandoval v. Court of Appeals,22 we held:

It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the same, but only has to rely on the title. He is charged with notice only of such burdens and claims as are annotated on the title. The aforesaid principle admits of an unchallenged exception: that a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense without the need of inquiring further except 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 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 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 the certificate. One who falls within the exception can neither be denominated an innocent purchaser for value purchaser in good faith; and hence does not merit the protection of the law. Granting arguendo that private respondent knew that petitioners, through Superales and his family, were actually occupying the disputed lot, we must stress that the vendor, Cesaria Caballero, assured her that petitioners were just tenants on the said lot. Private respondent cannot be faulted for believing this representation, considering that petitioners' claim was not noted in the certificate of the title covering Lot No. 5679. Moreover, the lot, including the disputed portion, had been the subject of several sales transactions. The title thereto had been transferred several times, without any protestation or complaint from the petitioners. In any case, private respondent's title is amply supported by clear evidence, while petitioners' claim is barren of proof. Clearly, petitioners do not have the requisite title to pursue an action for quieting of title.
1w phi1.nt

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioners. SO ORDERED. Melo, Vitug, Purisima and Gonzaga-Reyes, JJ., concur.

Footnotes
1

Seventeenth Division, composed of J. Portia Alio-Hormachuelos (ponente), J. Buenaventura J. Guerrero (chairman) and J. Renato C. Dacudao (member).
2

Penned by Judge German G. Lee Jr. Rollo, p. 29. RTC Decision, p. 13; rollo, p. 54. Rollo, p. 31. Petition, pp. 3-6; rollo, pp. 5-8. CA Decision, p. 3; rollo, p. 27.

This case was deemed submitted for decision on July 29, 1999, upon simultaneous receipt by this Court of the Memoranda of both parties. Petitioners' Memorandum was signed by Atty. Alejandro V. Peregrino; respondent's Memorandum, by Atty. Roberto R. Palmares.
9

Memorandum for Petitioners, p. 6; rollo, p. 145.

10

Art. 477, Civil Code. "The plaintiff must have legal or equitable title to, or an interest in the real property which is the subject matter of the action. He need not be in possession of said property."
11

Tolentino, Civil Code of the Philippines, Vol. II, p. 150. Records, p. 53. Rizal Surety & Insurance Company v. CA, 261 SCRA 69, August 28, 1996. Art. 1441, Civil Code. Records, p. 6.

12

13

14

15

16

Lot No. 5679 was sold to Silvestre Aro in 1955, and TCT No. 4752 was issued in his name in 1959. Upon his death, his heirs inherited the property, and his children sold their shares to Cesaria Caballero, Aro's widow. Cesaria Caballero then entered into several mortgage and sales transactions with several banks and with Francisco Sioson, Edgar Adlawan and Private Respondent Gerarda Selma.
17

Aquino, Civil Code, Vol. II, p. 557. See Mindanao Development Authority v. CA, 113 SCRA 429, April 5, 1982. Dated March 9, 1954. Art. 709, Civil Code. Records, p. 4. 260 SCRA 283, August 1, 1996, per Romero, J.

18

19

20

21

22

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-46296 September 24, 1991 EPITACIO DELIMA, PACLANO DELIMA, FIDEL DELIMA, VIRGILIO DELIMA, GALILEO DELIMA, JR., BIBIANO BACUS, OLIMPIO BACUS and PURIFICACION BACUS, petitioners, vs. HON. COURT OF APPEALS, GALILEO DELIMA (deceased), substituted by his legal heirs, namely: FLAVIANA VDA. DE DELIMA, LILY D. ARIAS, HELEN NIADAS, ANTONIO DELIMA, DIONISIO DELIMA, IRENEA DELIMA, ESTER DELIMA AND FELY DELIMA, respondents.

Gabriel J. Canete for petitioners. Emilio Lumontad, Jr. for private respondents.

MEDIALDEA, J.:p This is a petition for review on certiorari of the decision of the Court of Appeals reversing the trial court's judgment which declared as null and void the certificate of title in the name of respondents' predecessor and which ordered the partition of the disputed lot among the parties as co-owners. The antecedent facts of the case as found both by the respondent appellate court and by the trial court are as follows: During his lifetime, Lino Delima acquired Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate in Cebu by sale on installments from the government. Lino Delima later died in 1921 leaving as his only heirs three brothers and a sister namely: Eulalio Delima, Juanita Delima, Galileo Delima and Vicente Delima. After his death, TCT No. 2744 of the property in question was issued on August 3, 1953 in the name of the Legal Heirs of Lino Delima, deceased, represented by Galileo Delima. On September 22, 1953, Galileo Delima, now substituted by respondents, executed an affidavit of "Extrajudicial Declaration of Heirs." Based on this affidavit, TCT No. 2744 was cancelled and TCT No. 3009 was issued on February 4,1954 in the name of Galileo Delima alone to the exclusion of the other heirs. Galileo Delima declared the lot in his name for taxation purposes and paid the taxes thereon from 1954 to 1965. On February 29, 1968, petitioners, who are the surviving heirs of Eulalio and Juanita Delima, filed with the Court of First Instance of Cebu (now Regional Trial Court) an action for reconveyance and/or partition of property and for the annulment of TCT No. 3009 with damages against their uncles Galileo Delima and Vicente Delima,. Vicente Delima was joined as party defendant by the petitioners for his refusal to join the latter in their action. On January 16, 1970, the trial court rendered a decision in favor of petitioners, the dispositive portion of which states: IN VIEW OF THE FOREGOING CONSIDERATIONS, the following are the declared owners of Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate presently covered by transfer Certificate of Title No. 3009, each sharing a pro-indiviso share of one-fourth; 1) Vicente Delima (one-fourth) 2) Heirs of Juanita Delima, namely: Bibiano Bacus, Olimpio Bacus and Purificacion Bacus (on-fourth); 3) Heirs of Eulalio Delima, namely Epitacio, Pagano, Fidel, Virgilio and Galileo Jr., all surnamed Delima (one-fourth); and 4) The Heirs of Galileo Delima, namely Flaviana Vda. de Delima, Lily D. Arias, Helen Niadas and Dionisio, Antonio, Eotu Irenea, and Fely, all surnamed Delima (one-fourth).

Transfer Certificate of Title No. 3009 is declared null and void and the Register of Deeds of Cebu is ordered to cancel the same and issue in lieu thereof another title with the above heirs as pro-indiviso owners. After the payment of taxes paid by Galileo Delima since 1958, the heirs of Galileo Delima are ordered to turn a over to the other heirs their respective shares of the fruits of the lot in question computed at P170.00 per year up to the present time with legal (interest). Within sixty (60) days from receipt of this decision the parties are ordered to petition the lot in question and the defendants are directed to immediately turn over possession of the shares here awarded to the respective heirs. Defendants are condemned to pay the costs of the suit. The counterclaim is dismissed. SO ORDERED. (pp. 54-55, Rollo) Not satisfied with the decision, respondents appealed to the Court of Appeals. On May 19, 1977, respondent appellate court reversed the trial court's decision and upheld the claim of Galileo Delima that all the other brothers and sister of Lino Delima, namely Eulalio, Juanita and Vicente, had already relinquished and waived their rights to the property in his favor, considering that he (Galileo Delima) alone paid the remaining balance of the purchase price of the lot and the realty taxes thereon (p. 26, Rollo). Hence, this petition was filed with the petitioners alleging that the Court of Appeals erred: 1) In not holding that the right of a co-heir to demand partition of inheritance is imprescriptible. If it does, the defenses of prescription and laches have already been waived. 2) In disregarding the evidence of the petitioners.(p.13, Rollo) The issue to be resolved in the instant case is whether or not petitioners' action for partition is already barred by the statutory period provided by law which shall enable Galileo Delima to perfect his claim of ownership by acquisitive prescription to the exclusion of petitioners from their shares in the disputed property. Article 494 of the Civil Code expressly provides: Art. 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned. Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement. A donor or testator may prohibit partition for a period which shall not exceed twenty years. Neither shall there be any partition when it is prohibited by law. No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership. As a rule, possession by a co-owner will not be presumed to be adverse to the others, but will be held to benefit all. It is understood that the co-owner or co-heir who is in possession of an inheritance pro-indiviso for himself and in representation of his co-owners or co-heirs, if, as such owner, he administers or takes care of the rest thereof with the obligation of delivering it to his co-owners or co-heirs, is under the same situation as a

depository, a lessee or a trustee (Bargayo v. Camumot, 40 Phil, 857; Segura v. Segura, No. L-29320, September 19, 1988, 165 SCRA 368). Thus, an action to compel partition may be filed at any time by any of the co-owners against the actual possessor. In other words, no prescription shall run in favor of a co-owner against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Del Blanco v. Intermediate Appellate Court, No. 72694, December 1, 1987, 156 SCRA 55). However, from the moment one of the co-owners claims that he is the absolute and exclusive owner of the properties and denies the others any share therein, the question involved is no longer one of partition but of ownership (De Castro v. Echarri, 20 Phil. 23; Bargayo v. Camumot, supra; De los Santos v. Santa Teresa, 44 Phil. 811). In such case, the imprescriptibility of the action for partition can no longer be invoked or applied when one of the co-owners has adversely possessed the property as exclusive owner for a period sufficient to vest ownership by prescription. It is settled that possession by a co-owner or co-heir is that of a trustee. In order that such possession is considered adverse to the cestui que trust amounting to a repudiation of the co-ownership, the following elements must concur: 1) that the trustee has performed unequivocal acts amounting to an ouster of the cestui que trust; 2) that such positive acts of repudiation had been made known to the cestui que trust; and 3) that the evidence thereon should be clear and conclusive (Valdez v. Olorga, No. L-22571, May 25, 1973, 51 SCRA 71; Pangan v. Court of Appeals, No. L-39299, October 18, 1988, 166 SCRA 375). We have held that when a co-owner of the property in question executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein he appears as the new owner of the property, thereby in effect denying or repudiating the ownership of the other co-owners over their shares, the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder (Castillo v. Court of Appeals, No. L-18046, March 31, 1964, 10 SCRA 549). Since an action for reconveyance of land based on implied or constructive trust prescribes after ten (10) years, it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitations is counted (Jaramil v. Court of Appeals, No. L-31858, August 31, 1977, 78 SCRA 420). Evidence shows that TCT No. 2744 in the name of the legal heirs of Lino Delima, represented by Galileo Delima, was cancelled by virtue of an affidavit executed by Galileo Delima and that on February 4, 1954, Galileo Delima obtained the issuance of a new title in Ms name numbered TCT No. 3009 to the exclusion of his co-heirs. The issuance of this new title constituted an open and clear repudiation of the trust or co-ownership, and the lapse of ten (10) years of adverse possession by Galileo Delima from February 4, 1954 was sufficient to vest title in him by prescription. As the certificate of title was notice to the whole world of his exclusive title to the land, such rejection was binding on the other heirs and started as against them the period of prescription. Hence, when petitioners filed their action for reconveyance and/or to compel partition on February 29, 1968, such action was already barred by prescription. Whatever claims the other co-heirs could have validly asserted before can no longer be invoked by them at this time. ACCORDINGLY, the petition is hereby DENIED and the assailed decision of the Court of Appeals dated May 19, 1977 is AFFIRMED. SO ORDERED. Narvasa (Chairman), Cruz and Grio-Aquino, JJ., concur. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-39299 October 18, 1988

ISAAC, SEVERINO, MARIA, TELESFORA, FELISA, SERAPIO, SIMEON and MACARIA all surnamed PANGAN,petitioners, vs. COURT OF APPEALS and TEODORA GARCIA, respondents. Magtanggol C. Gunigundo for petitioners. David C. Canta for private respondent.

CRUZ, J.: The property in question is a parcel of land with an area of 635 square meters and situated in San Pascual, Obando, Bulacan. 1 It was originally owned by Leon Hilario and is now being disputed between the herein petitioners, who are his great grandchildren by his daughter Silvestra, and the private respondent, Teodora Garcia, who is his granddaughter by his daughter Catalina. 2 In 1964, the petitioners filed an application for the registration of the land in their names by virtue of their continuous and exclusive possession thereof since 1895, by themselves and their father and grandfather before them. After proper notices by publication and posting as required, the trial court issued an order of general default, there being no opposition to the application, and proceeded to hear the evidence of the applicants ex-parte. On the basis thereof, the application was approved on March 31, 1966. On June 8, 1966, the herein private respondent filed a petition to set aside the said decision, which the trial Court granted, 3 admitting at the same time her opposition to the application and setting the case for reception of her evidence. This evidence sought to show that the land was inherited by Leon Hilario's three children, but the son, Felicisimo, waived his right thereto and thereby made his two sisters, Silvestra and Catalina, its exclusive co-owners. As Catalina's daughter, she was entitled to one-half of the property, the other half going to Silvestra's heirs, the petitioners herein and the latter's grandchildren. 4 On September 13, 1968, the trial judge issued an order dismissing the opposition and reinstating his original order of March 31,1966. 5 His reason was that whatever rights Teodora might have had over the property had been forfeited by extinctive prescription because she had left the land in 1942 and had not since then asserted any claim thereto until 1966. On appeal to the respondent court, 6 this decision was reversed on the ground that the appellees had not clearly proved that they had acquired the property by prescription. Hence, the appellant was entitled to one-half of the property as heir, conformably to her opposition in the court a quo. Their motion for reconsideration having been denied, they have now come to this Court in a petition for review by certiorari under Rule 45 of the Rules of Court. The petitioners' position is that the respondent court erred in holding that the private respondent was entitled to one-half of the land, which she had not lost by extinctive prescription because it was held by them in trust for her. They also insist that the appealed decision completely disregarded the factual findings of the trial court that they had acquired the whole land by virtue of their long, continued and adverse possession thereof, which should bar any claim by Teodora to her supposed part ownership. It is stressed at the outset that the appellate court is not necessarily bound by the factual findings of the trial court simply because the latter had the opportunity to observe the witnesses directly and assess their credibility by their deportment. While this may be a conceded advantage of the trial judge, the appellate court may still reverse his findings of fact if they are not based on the evidence submitted or have been reached without considering the other matters of record that might have dictated a different conclusion. The Court of Appeals precisely is vested with jurisdiction to review questions of fact as decided by the lower court. It would be evading this responsibility if it should merely adopt the findings in the decision under review on the convenient

justification that the trial judge had the opportunity, which it did not have, of gauging the reliability of the witnesses first-hand. When, therefore, the respondent court accepted the private respondent's allegation that the land was inherited by the parties from their common ancestor, Leon Hilario, such a finding, based on the record and not rejected but even assumed by the trial court, did not, in our view, constitute grave abuse of discretion. And when, on the strength of this finding, it then held that an implied trust was created between the petitioners who were in possession of the land, and Teodora Garcia, their aunt and co-heir, that too, as we see it, is not an arbitrary assumption. In fact, the Court feels this is the more plausible relationship between the parties, compared to the version offered by the petitioners, who claim they acquired the property from their grandfather through their father, who apparently acquired it from his mother, Leon Hilario's daughter. It does not appear that they have pre-empted the other heirs to the property through any other mode of acquisition, like sale or some similar exclusive transaction. They have not submitted any evidence of how they acquired the land from their great grandfather, confining themselves to the assertion that they have continued his original possession, presumably as heirs of their father, who inherited from his mother Silvestra, who was the daughter of Hilario. If this be their theory, then they unavoidably must recognize Teodora Garcia's own claim to the subject property as she too was an heir, being the daughter of Catalina, who was also a daughter of Hilario. The trial court said, however, that assuming Teodora had the right to the disputed property, the same was forfeited by her through extinctive prescription by failure to assert it in time. In its original decision, it affirmed the petitioners' claim that they had acquired ownership over the whole property by their adverse possession thereof for more than thirty years in concept of owner. Teodora Garcia apparently did not challenge such ownership and so by her inaction forever lost the right to do so. The respondent court, rejecting this contention, held that the petitioners' possession was not for their benefit alone but also in favor of Teodora, who was a co-heir with them and therefore also a co-owner of the property. In other words, their possession, while adverse to the rest of the world, was not against Teodora herself, whose share they held in implied trust for her as a co-owner of the land, and whose fruits their father shared with her occasionally, or at least promised her she would get eventually. The Court believes that this, too, is not an arbitrary conclusion. To support their claim of exclusive ownership of the entire land, the petitioners stress that the property was declared for taxation purposes in the name of Tomas Pangan, their father, in 1948 and another tax declaration was issued, also in his name, in 1965. Moreover, real estate taxes were paid by them from 1908 to 1914, 1930 to 1932, 1956 to 1957, and 1960 to 1965, whereas Teodora Garcia, by her own admission, never paid any tax at all on the disputed land. 7 Tax declarations are indicia but not conclusive proof of ownership. 8 If the property was declared in the name of To as Pangan only, it could be that this was done only for reasons of convenience, more so if it was understood, as the private respondent did, that he was declaring the property not only for himself but for herself also as the other co-owner. As for the admitted fact that Teodora Garcia never actually paid the real estate taxes, the explanation she gave was that she assumed her share of such taxes was being paid from her share in the fruits of her portion of the land, which she said she was not getting regularly, much less in full. We hold that this explanation is also plausible enough. But for all this, there is still the question of whether or not Teodora Garcia, by her failure to assert her right, allowed the statutory period to lapse, thus enabling the petitioners to perfect their claim of ownership by acquisitive prescription and so exclude her from her share in the subject property. It is a settled rule that possession by one co-owner will not be regarded as adverse to the other co-owners but in fact as beneficial to all of them. 9 Hence, as long as his co-ownership is recognized, an action to compel partition will not prescribe and may be filed at any time against the actual possessor by any of the other coowners. 10However, if the co-owner actually holding the property asserts exclusive dominion over it against the other co-owners, the corollary of the rule is that he can acquire sole title to it after the lapse of the prescribed

prescriptive period. From that moment, the question involved will be one of ownership and no longer mere partition. 11 According to the petitioners, there was such repudiation which was admitted by the private respondent herself Testifying for herself at the hearing on her opposition in the registration proceedings, she declared: ATTY. CANLAS: Q: After the death of Tomas Pangan, did you ask the heirs of Tomas Pangan of your alleged share in the property in question? A: Yes, sir. Q: What did they tell you? A: They said that I have no right to a share and they won't give me my share. Q: How many years ago did you ask from them? A: Immediately after the death of their father. Q: That was some 20 years ago? A: I do not know how many years ago. Q: And during all that span of more than 20 years ago you did not file any action to recover your share on the land in question?
A: No sir, it was only this time .
12

For title to prescribe in favor of the co-owner, however, there must be a clear showing that he has repudiated the claims of the other co-owners and that they have been categorically advised of the exclusive claim he is making to the property in question. It is only when such unequivocal notice has been given that the period of prescription will begin to run against the other co-owners and ultimately divest them of their own title if they do not seasonably defend it. 13 Adverse possession requires the concurrence of the following circumstances: 1. That the trustee has performed unequivocal acts amounting to an ouster of the cestui que trust; 2. That such positive acts of repudiation had been made known to the cestui que trust; and 3. That the evidence thereon should be clear and conclusive. 14 On the basis of the evidence presented by the parties, the Court is not convinced that the above requirements have been satisfied. Although there are admittedly some precedents to the contrary, it would appear that the weight of authority requires a categorical and final rejection of the co-owners' claim, usually manifested by a formal legal action, to make the prescriptive period start to run against the claimant. Thus

Filing by a trustee of an action in court against the trustor to quiet title to property, or for recovery of ownership thereof, held in possession by the former, may constitute an act of repudiation of the trust reposed on him by the latter. 15

The issuance of the certificate of title would constitute an open and clear repudiation of any trust, and the lapse of more than 20 years, open and adverse possession as owner would certainly suffice to vest title by prescription. 16 An action for the reconveyance of land based on implied or constructive trust prescribes within 10 years. And it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitation is counted. 17 The prescriptive period may only be counted from the time petitioners repudiated the trust relation in 1956 upon the filing of the complaint for recovery of possession against private respondents so that the counterclaim of the private respondents contained in their amended answer wherein they asserted absolute ownership of the disputed realty by reason of the continuous and adverse possession of the same is well within the 10-year prescriptive period. 18 There is clear repudiation of a trust when one who is an apparent administrator of property causes thecancellation of the title thereto in the name of the apparent beneficiaries and gets a new certificate of title in his own name. 19 It is only when the defendants, alleged co-owners of the property in question, executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein they appear as the new owners of a definite area each, thereby in effect denying or repudiating the ownership of one of the plaintiffs over his alleged share in the entire lot, that the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder. 20
The established evidence clearly shows that the subject land was inherited by the petitioners and the private respondent as co-heirs of their common ancestor, Leon Hilario, whose possession they continued to acquire prescriptive title over the property. That possession was originally in the name of all the heirs, including Teodora Garcia, who in fact had been assured by Tomas Pangan, the petitioners' father, that she would get the share to which she was entitled. The petitioners have not proved that their possession excluded their co-owner and aunt or that they derived their title from a separate conveyance to them of the property by Leon Hilario. Parenthetically, such a conveyance, if it existed, would be questionable as it might have deprived Leon's other children of their legitime. In any case, the petitioners appear to have arrogated the entire property to themselves upon their father's death sometime in 1942 or at the latest in 1965 when they sought to register the land in their names to the exclusion of Teodora Garcia. The question is, Did such an act begin the period of extinctive prescription against the private respondent? Manifestly, the petitioners have acted in bad faith in denying their aunt and co-heir her legal share to the property they had all inherited from Leon Hilario through their respective parents. This is regrettable as Teodora Garcia is their father's first cousin who apparently trusted him and, indeed, relied on his promise that her share would be protected. Tomas Pangan presumably was sincere in this assurance, but it was unfortunately not honored by his children upon his death for they soon dismissed out of hand Teodora Garcia's claim to the subject property. In cases where there is a clear showing of imposition and improper motives, the courts must be vigilant in the protection of the rights of the exploited. 21 So said the respondent court, and we agree, We note that the private respondent "is a poor and ignorant 62-year old widow" * whose misplaced trust in her nephews and nieces is being used now precisely to defeat her claim to the share that she believes is rightfully hers. It is a sorry spectacle, indeed, to see her own close kin longing up on her, so to speak, to deprive her of her small heritage, and in her old age at that. With all this in mind, we affirm the finding of the respondent court that there was no adequate notice by the petitioners to the private respondent of the rejection of her claim to her share in the subject property. Noticeably

absent here is a categorical assertion by the petitioners of their exclusive right to the entire property that barred her own claim of ownership of one-half thereof nor is there any explanation as to why they said she had no right to a share. If this trusting woman did not immediately take legal action to protect her rights, it was simply because of forbearance toward her nephews and nieces, let alone the fact that there was really no cases belli as yet that required her to act decisively. That legal provocation arose only when the petitioners commenced the registration proceedings in 1965, and it was from that time she was required to act, as she did, to protect her interests. In an earlier case 22 we stressed that this Court is not only a court of law but also of justice. Faced with a choice between a decision that will serve justice and another that will deny it because of a too strict interpretation of the law, we must resolve in favor of the former, for the ultimate end of the law is justice. Bonus judex secundum aequum at bonum judicat stricto juri praefert. 23 This is a wise maxim we will follow here in ruling for the deprived and ignorant old widow. WHEREFORE, the petition is DENIED and the challenged decision AFFIRMED in full, with costs against the petitioners. It is so ordered. Narvasa, Grio-Aquino and Medialdea, JJ., concur.

Separate Opinions

GANCAYCO, J., dissenting: As private respondent admitted that petitioners verbally repudiated her claim as co-owner of the property, it was effectively an unequivocal notice amounting to an ouster of the cestui que trust and the period of prescription began to run since then. It is not required that such a repudiation should be through a formal legal action. I, therefore vote to grant the petition by reversing and setting aside the decision of respondent court and its resoluttion denying the motion for reconsideration thereof, and reinstating the order of March 31, 1966 of the trial court.

Separate Opinions GANCAYCO, J., dissenting: As private respondent admitted that petitioners verbally repudiated her claim as co-owner of the property, it was effectively an unequivocal notice amounting to an ouster of the cestui que trust and the period of prescription began to run since then. It is not required that such a repudiation should be through a formal legal action. I, therefore vote to grant the petition by reversing and setting aside the decision of respondent court and its resoluttion denying the motion for reconsideration thereof, and reinstating the order of March 31, 1966 of the trial court. Footnotes 1 Exhibit "D," Original Record, p. 14.

2 Original Record, p. 110. 3 Presided by Judge Juan de Borja. 4 TSN, August 22, 1966, pp. 3-7. 16-21; Original Record, pp. 79- 81. 5 Original Record, pp. 11 0-1 12. 6 Chanco, J., ponente, with A. Reyes and Pascual, JJ. 7 Ibid., pp. 18-20. 8 Ramos v. Court of Appeals, 122 SCRA 542. 9 Cortes v. Oliva, 33 Phil. 480. 10 Sebial v. Sebial, 64 SCRA 385. 11 De Castro v. Echarri, 20 Phil. 23; Cortes v. Oliva, supra; Bargayo v. Camumot, 40 Phil. 857; Sebial v. Sebial, supra. 12 TSN, August 22,1966, pp. 27-28. 13 Cortes v. Oliva, supra. 14 Valdez v. Olorga, 51 SCRA 71. 15 Alzona v. Capunitan, February 28,1962, G.R. No. L-10220. 16 Lopez v. Gonzaga January 31,1964, G.R. No. L-18788. 17 Jaramil v. Court of Appeals, 78 SCRA 420. 18 Roa, Jr. v. Court of Appeals, 123 SCRA 3. 19 Carantes v. Court of Appeals, 76 SCRA 514. 20 Castrillo v. Court of Appeals, 10 SCRA 549. 21 Rollo, p. 37. * In 1974. 22 Alonzo v. IAC, 150 SCRA 259. 23 A good judge decides according to justice and right and prefers equity to strict law.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 156357 February 18, 2005

ENGR. GABRIEL V. LEYSON, DR. JOSEFINA L. POBLETE, FE LEYSON QUA, CARIDAD V. LEYSON and ESPERANZA V. LEYSON, petitioners, vs. NACIANSINO BONTUYAN and MAURECIA B. BONTUYAN, respondents. DECISION CALLEJO, SR., J.: This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA), as well as its Resolution in CA-G.R. CV No. 64471 denying the motion for reconsideration of the said decision. The Antecedents Calixto Gabud was the owner of a parcel of land located in Barangay Adlawon, Mabolo, Cebu City, which was declared for taxation purposes under Tax Declaration (T.D.) No. 03276-R in 19452 with the following boundaries: North Calixto Gabud East Marcelo Cosido South Pedro Bontuyan West Asuncion Adulfo.3 Because of the construction of a provincial road, the property was divided into two parcels of land covered by T.D. No. 03276-R and T.D. No. 01979-R. On February 14, 1948, Gabud executed a Deed of Absolute Sale4 over the property covered by T.D. No. 03276-R, as well as the other lot covered by T.D. No. 01979-R, in favor of Protacio Tabal, married to Leodegaria Bontuyan. On the basis of the said deed, T.D. No. 03276-R was cancelled by T.D. No. 13615-R in the name of Protacio Tabal effective 1949.5 On January 5, 1959, Tabal executed a Deed of Sale6over the property covered by T.D. No. 13615-R in favor of Simeon Noval, married to Vivencia Bontuyan, daughter of Gregorio Bontuyan, for P800.00. T.D. No. 13615-R was cancelled by T.D. No. 100356 in the names of the spouses Noval.7 Gregorio Bontuyan received a copy of the said tax declaration in behalf of the spouses Noval.8The latter tax declaration was then cancelled by T.D. No. 008876 under the same names effective 1967.9 Subsequently, the property was surveyed by Cadastral Land Surveyor Mauro U. Gabriel on January 22, 1964. The plan survey was approved on September 30, 1966.10 The property covered by T.D. No. 008876 was identified as Lot No. 17150 of Cebu Cadastre No. 12, while the property covered by T.D. No. 01979-R was identified as Lot No. 13272. On May 22, 1968, the spouses Noval executed a Deed of Absolute Sale11 over the two lots covered by T.D. No. 008876 in favor of Lourdes V. Leyson for P4,000.00. Lourdes Leyson took possession of the property and had it fenced. Despite the said sale, T.D. No. 008876 was cancelled by T.D. No. 21267 effective 1974.12Thereafter, T.D. No. 21267 was cancelled by T.D. No. 2382113 which, in turn, was cancelled by T.D. No. 01-17455 effective 1980.14 In 1989, the latter was cancelled by a new tax declaration, T.D. No. 01-001-00646. All these tax declarations were in the names of the spouses Noval.15 Meanwhile, Lourdes Leyson paid for the realty taxes over the property. However, the tax declaration issued thereon continued to be under the names of the spouses Noval.16

Despite his knowledge that the property had been purchased by his son-in-law and daughter, the spouses Noval, Gregorio Bontuyan, who was then 91 years old, filed an application with the Bureau of Lands for a free patent over Lot No. 17150 on December 4, 1968. He alleged therein that the property was public land and was neither claimed nor occupied by any person,17 and that he first entered upon and began cultivating the same in 1918. Thus, on November 19, 1971, Free Patent No. 510463 was issued over Lot No. 17150 in his favor, on the basis of which Original Certificate of Title (OCT) No. 0-1619 was issued to and under his name on March 21, 1974.18 Another parcel of land, Lot No. 13272, was also registered under the name of Gregorio Bontuyan under OCT No. 0-1618. He then declared Lot No. 17150 for taxation purposes under T.D. No. 13596 effective 1974.19 On February 20, 1976, Gregorio Bontuyan executed a Deed of Absolute Sale20 over Lot No. 17150 in favor of his son, Naciansino Bontuyan. On April 28, 1980, Gregorio Bontuyan, then 103 years old, executed another Deed of Absolute Sale21 over Lot Nos. 13272 and 17150, covered by OCT No. 0-1618 and OCT No. 0-1619, respectively, in favor of Naciansino Bontuyan for P3,000.00. On the basis of the said deed, OCT No. 0-1619 was cancelled by TCT No. 1392 in the name of Naciansino Bontuyan on December 2, 1980.22 Gregorio Bontuyan died intestate on April 12, 1981.23 On March 30, 1981, the spouses Bontuyan executed a Real Estate Mortgage over Lot No. 17150 covered by OCT No. 0-1619 in favor of the Development Bank of the Philippines (DBP) as security for a loan of P11,200.00.24Naciansino Bontuyan had earlier executed an affidavit that the property was not tenanted. Shortly thereafter, the spouses Bontuyan left the Philippines and resided in the United States. Meanwhile, Lourdes Leyson died intestate. The spouses Bontuyan returned to the Philippines in 1988 to redeem the property from DBP only to discover that there were tenants living on the property installed by Engineer Gabriel Leyson, one of the late Lourdes Leysons children. Despite being informed that the said spouses owned the property, the tenants refused to vacate the same. The tenants also refused to deliver to the spouses the produce from the property. The spouses Bontuyan redeemed the property from DBP on September 22, 1989. On February 12, 1993, Jose Bontuyan, Nieves Atilano, Pacifico Bontuyan, Vivencia Noval and Naciansino Bontuyan, the surviving heirs of Gregorio Bontuyan, executed an Extrajudicial Settlement25 of the latters estate and adjudicated Lot No. 13272 in favor of Naciansino. Based on the said deed, T.D. No. 01-001-00877 was issued to and under the name of Naciansino over the said property starting 1994. On June 24, 1993, Naciansino Bontuyan, through counsel, wrote Engr. Gabriel Leyson, demanding that he be furnished with all the documents evidencing his ownership over the two lots, Lots Nos. 17150 and 13272.26 Engr. Leyson ignored the letter. The spouses Bontuyan, thereafter, filed a complaint against Engr. Leyson in the Regional Trial Court (RTC) of Cebu City for quieting of title and damages. They alleged that they were the lawful owners of the two lots and when they discovered, upon their return from the United States, that the property was occupied and cultivated by the tenants of Engr. Leyson, they demanded the production of documents evidencing the latters ownership of the property, which was ignored. The spouses Bontuyan prayed that, after due proceedings, judgment be rendered in their favor, thus: WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court to render judgment against the defendant and in favor of the plaintiffs, to wit: (a) Confirming the ownership of the plaintiffs on the lots in question; (b) Ordering defendant to pay the plaintiffs the amount of Twenty Thousand Pesos (P20,000.00) as the share of the plaintiffs of the produce of the lots in question; (c) Ordering defendant to pay plaintiffs the sum of P50,000.00 as reimbursement of attorneys fees and the further sum of P500.00 as appearance fee every time the case is called for trial;

(d) Ordering the defendant to pay plaintiffs the sum of P50,000.00 as moral damages and exemplary damages may be fixed by the court; (e) Ordering defendant to pay plaintiffs the sum of P5,000.00 as actual expenses for the preparation and filing of the complaint; (f) Ordering defendant to pay the costs; and (g) Granting to plaintiffs such other reliefs and remedies just and equitable in the premises. 27 In his answer to the complaint, Engr. Leyson averred, by way of affirmative defenses, that the two lots were but portions of a parcel of land owned by Calixto Gabud, covered by T.D. No. 03276-R, and was subdivided into two parcels of land because of the construction of a provincial road on the property; Gabud later sold the two lots to Protacio Tabal, who sold the same to Simeon Noval, married to Vivencia Bontuyan, one of the children of Gregorio Bontuyan; Simeon Noval later sold the property to Lourdes Leyson on May 22, 1968 who, forthwith, took possession thereof as owner; and Gregorio Bontuyan was issued a free patent over the property through fraud. Engr. Leyson concluded that the said patent, as well as OCT No. 0-1619 and TCT No. 1392, were null and void and that the plaintiffs acquired no title over the property. Engr. Leyson interposed a counterclaim against the spouses Bontuyan and repleaded as an integral part thereof all the material allegations in his affirmative defense. He prayed that, after due proceedings, judgment be rendered in his favor, thus: a) Dismissing Plaintiffs complaint for failure to include indispensable parties; b) Declaring the Defendant and his four (4) sisters, namely, Dr. Josefina L. Poblete, Mrs. Fe L. Qua, Esperanza Leyson and Caridad Leyson as the true and legal owners and possessors of the parcels of land in issue; c) Declaring OCT No. 0-1619 in the name of Gregorio Bontuyan and TCT No. 1392 in the name of Naciansino Bontuyan null and void and to order the Register of Deeds to cancel the same and issue new ones in favor of the Defendant Gabriel V. Leyson and his four (4) sisters, namely: Dr. Josefina L. Poblete, Mrs. Fe L. Qua, Esperanza V. Leyson and Caridad V. Leyson; d) And on the Counterclaim, to order Plaintiffs to pay the Defendant the following sums: d-1) P50,000.00 as attorneys fees and appearance fee of P1,000.00 per hearing; d-2) P500,000.00 as moral damages; d-3) P20,000.00 as exemplary damages; d-4) P10,000.00 as expenses of litigation. Defendant further prays for such other reliefs just and equitable in the premises.28 In due course, the other children of Lourdes Leyson, namely, Dr. Josefina L. Poblete, Fe Leyson Qua, Caridad V. Leyson and Esperanza V. Leyson, were allowed to intervene as defendants. They filed their answer-inintervention wherein they adopted, in their counterclaim, paragraphs 7 to 26 of the answer of their brother, Engr. Leyson, the original defendant. They prayed that, after due hearing, judgment be rendered in their favor as follows: Wherefore, this Honorable Court is prayed to render judgment in favor of the Defendant and the Defendants-inIntervention and against the Plaintiffs as follows:

a) Promissory Plaintiffs complaint for failure to include indispensable parties and for lack of cause of action; b) Declaring the Defendant and his four (4) sisters, namely: Dr. Josefina L. Poblete; Mrs. Fe L. Qua, Esperanza Leyson and Caridad Leyson as the true and legal owners and possessors of the parcels of land in issue; c) Declaring OCT No. 0-1619 in the name of Gregorio Bontuyan and TCT No. 1392 in the name of Naciansino Bontuyan null and void and to order the Register of Deeds to cancel the same and issue new ones in favor of the Defendant Gabriel V. Leyson and his four (4) sisters, namely: Dr. Josefina L. Poblete, Mrs. Fe L. Qua, Esperanza V. Leyson and Caridad V. Leyson; d) On the Counterclaim, Plaintiffs should pay the Defendants the following sums: d-1) P50,000.00 as attorneys fees and appearance fee of P1,000.00 per hearing; d-2) P500,000.00 as moral damages to each Intervenor; d-3) P50,000.00 as exemplary damages; d-4) P15,000.00 as expenses of litigation. Defendant further prays for such other reliefs just and equitable in the premises.29 In their reply, the spouses Bontuyan averred that the counterclaim of the defendants for the nullity of TCT No. 1392 and the reconveyance of the property was barred by laches and prescription. On January 21, 1999, the trial court rendered judgment in favor of the Leyson heirs and against the spouses Bontuyan. The fallo of the decision reads: WHEREFORE, foregoing considered judgment is hereby rendered dismissing plaintiffs complaint for dearth of evidence declaring the defendant and the intervenors as the true and legal owners and possessors of the subject parcels of land; declaring OCT No. 0-1619 in the name of Gregorio Bontuyan and TCT No. 1392 in the name of Naciansino Bontuyan null and void; ordering the Register of Deeds to cancel OCT No. 0-1619 and TCT No. 1392 and issue new ones in favor of defendant Gabriel Leyson and intervenors Josefina Poblete, Fe Qua, Esperanza Leyson and Caridad Leyson; ordering plaintiff to pay defendant and intervenors the following: a) P50,000.00 attorneys fees; b) 1,000.00 per appearance; c) 100,000.00 moral damages for defendant and intervenors; d) 10,000.00 exemplary damages; and e) 10,000.00 litigation expenses. SO ORDERED.30 The trial court held that Simeon Noval had sold the lots to Lourdes Leyson on May 22, 1968, who thus acquired title over the property.

The spouses Bontuyan appealed the decision to the CA which affirmed, with modification, the decision of the RTC. The appellate court held that the Leyson heirs were the owners of Lot No. 13273, while the spouses Bontuyan were the owners of Lot No. 17150. The CA ruled that the answer of the Leyson heirs to the complaint constituted a collateral attack of OCT No. 0-1619 which was proscribed by law. The Leyson heirs filed a motion for reconsideration of the decision insofar as Lot No. 17150 was concerned, contending that their counterclaim for the nullification of OCT No. 0-1619 contained in their answer constituted a direct attack on the said title. The CA denied the motion. The Leyson heirs then filed a petition for review with this Court and made the following assignments of error: First Assignment of Error THE HONORABLE COURT OF APPEALS COMMITTED ERROR WHEN IT RULED THAT THE NULLITY OR THE VALIDITY OF OCT NO. 0-1619 CANNOT BE RULED UPON IN THESE PROCEEDINGS BROUGHT BY THE RESPONDENTS FOR THE QUIETING OF THEIR TITLE. Second Assignment of Error THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT PETITIONERS ANSWER WITH COUNTERCLAIM, PRAYING FOR THE CANCELLATION OF PLAINTIFFS TORRENS CERTIFICATE IS A MERE COLLATERAL ATTACK ON THE TITLE.31 Third Assignment of Error THE APPELLATE COURT GRAVELY ERRED WHEN IT MODIFIED THE DECISION OF THE REGIONAL TRIAL COURT DATED JANUARY 21, 1999 BY RULING THAT PETITIONERS ARE DECLARED THE OWNERS OF LOT 13273 BUT RESPONDENTS ARE DECLARED THE OWNERS OF LOT 17150 UNDER OCT NO. 0-1619 AND PRESENTLY COVERED BY TCT NO. 1392 IN THE NAME OF NACIANSINO BONTUYAN, DESPITE THE APPELLATE COURTS AFFIRMING THE FINDINGS OF THE TRIAL COURT THAT FRAUD WAS COMMITTED BY GREGORIO BONTUYAN (RESPONDENTS PREDECESSOR-ININTEREST) IN ACQUIRING TITLE OVER THE SUBJECT PROPERTIES.32 Fourth Assignment of Error THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT RECONVEYANCE OF TITLE OF LOT 17150 COVERED BY OCT NO. 0-1619 AND PRESENTLY COVERED BY TCT NO. 1392, IN FAVOR OF PETITIONERS HAD PRESCRIBED.33 Fifth Assignment of Error THE APPELLATE COURT GRAVELY ERRED IN NOT GRANTING ATTORNEYS FEES AND APPEARANCE FEES DESPITE RESPONDENTS FRAUD IN ACQUIRING TITLE OVER THE SUBJECT PROPERTIES.34 On the first two assignments of errors, the petitioners aver that the counterclaim in their answer to the complaint constituted a direct attack of the validity of OCT No. 0-1619. They maintain that the appellate courts reliance on the ruling of this Court in Cimafrancia v. Intermediate Appellate Court35 was misplaced. They assert that what is controlling is the ruling in Pro Line Sports Center, Inc. v. Court of Appeals36 wherein this Court held that the counterclaim of the petitioners therein constituted a direct attack on a certificate of title. The petitioners, likewise, cited Section 55 of Act No. 496, as amended, to buttress their stance. They plead that their answer to the complaint should be liberally construed so as to afford them substantial justice. On the other hand, the respondents assert that the decision of the CA is correct. They claim that Lot No. 17150 was still public land when Lourdes Leyson purchased the same from Simeon Noval, and that the property became private land only when Free Patent No. 510463 was issued to and under the name of Gregorio Bontuyan.

We agree with the contention of the petitioners that the CA erred in not nullifying OCT No. 0-1619 and TCT No. 1392 and ordering the respondents to reconvey the property covered by the said title to the petitioners. The respondents, as plaintiffs in the court a quo, were burdened to prove their claim in their complaint that Gregorio Bontuyan was the owner of Lot No. 17150 and that they acquired the property in good faith and for valuable consideration from him.37 However, the respondents failed to discharge this burden. The evidence on record shows that Calixto Gabud sold the property to Protacio Tabal on February 14, 1948,38 and that the latter sold the property to Simeon Noval on January 5, 1959.39 Simeon Noval then sold the property to Lourdes Leyson on May 22, 1968.40 The respondents failed to adduce any evidence to prove that Lourdes Leyson, or even Simeon Noval, sold the property to Gregorio Bontuyan, or to any of the respondents for that matter. Since Gregorio Bontuyan was not the owner of the property, he could not have sold the same to his son Naciansino Bontuyan and the latters wife, the respondents herein. As the Latin adage goes: NEMO DAT QUOD NON HABET. Gregorio Bontuyan could not feign ignorance of Simeon Novals ownership of the property, considering that the latter was his son-in-law, and that he (Gregorio Bontuyan) was the one who received the owners copy of T.D. No. 100356 covering the property under the name of Simeon Noval.41 At the dorsal portion of the said tax declaration, there was even an annotation that the property was transferred to Simeon Noval as shown by the deed of sale executed before Notary Public Gregorio A. Uriarte who notarized the deed of sale over the property executed by Protacio Tabal in favor of Simeon Noval on January 5, 1959. 42 We note that the respondents failed to adduce in evidence any receipts of real property tax payments made on the property under their names, which would have fortified their claim that they were the owners of the property. We agree with the findings of the CA, thus: This case involves two parcels of land Lot 17150 and Lot 13273. Lot 17150 is registered under the Torrens System under the names of plaintiffs-appellants, while Lot 13273 remained to be unregistered. In this case, records show that defendant-appellee and intervenors-appellees are the true owners of the subject lots. They have in their favor tax receipts covering the subject lots issued since 1945. While, indeed, tax receipts and declarations are not incontrovertible evidence of ownership, such, however, if accompanied with open, adverse, continuous possession in the concept of an owner, as in this case, constitute evidence of great weight that person under whose name the real taxes were declared has a claim of right over the land. Further, defendant-appellee and intervenors-appellees presented before the trial court the Deed of Absolute Sale dated February 14, 1948, executed by Calixto Gabud, conveying the subject lots in favor of Protacio Tabal. The deed is a notarial document. Likewise presented is the Deed of Absolute Sale of the subject lots dated January 5, 1959, executed by Protacio Tabal in favor of spouses Simeon Noval and Vivencia Bontuyan. The document is, likewise, a notarial document. Defendant-appellee and intervenors-appellees also presented the Deed of Absolute Sale of the subject lots dated May 22, 1968, executed by spouses Simeon Noval and Vivencia Bontuyan in favor of Lourdes Leyson. The deed is a notarial document. A notarial document is evidence of the facts in clear, unequivocal manner therein expressed. It has in its favor the presumption of regularity. It is admissible in evidence without necessity of preliminary proof as to its authenticity and due execution. There exist (sic) no trace of irregularity in the transfers of ownership from the original owner, Calixto Gabud, to defendant-appellee and intervenors-appellees. Plaintiffs-appellants, on the other hand, offered no convincing evidence as to how their predecessor-in-interest, Gregorio Bontuyan, acquired the subject lots. Plaintiffs-appellants presented only the Free Patent and OCT No. 0-1619, covering Lot No. 17150, issued in the name of Gregorio Bontuyan.

As to Lot No. 13273, We find no sufficient reason why defendant-appellee and intervenors-appellees should be disturbed in their ownership and possession of the same.43 As copiously shown by the record, Gregorio Bontuyan filed his application for a free patent with the Bureau of Lands on December 4, 1968 in gross bad faith, thereby defrauding Lourdes Leyson of the said property through deceit. Gregorio Bontuyan falsely declared in the said application: (a) that he entered upon and cultivated the property since 1918 and that the property was not claimed or occupied by any person; and (b) that Lot No. 17150 was located in Sirao, Cebu City, when, in fact, the property was located in Adlawon, Cebu City. Lourdes Leyson was not notified of the said application and failed to file any opposition thereto. Gregorio Bontuyan was then able to secure Free Patent No. 510463 on November 19, 1971 and OCT No. 0-1619 on March 21, 1974. It appears in the said title that the propertys location was indicated as "Sirao, Cebu City."44 Indeed, the CA declared that Gregorio Bontuyan had acquired title to the property through fraud: However, as to Lot No. 17150, We find that despite the fraud committed by Gregorio Bontuyan (plaintiffsappellants predecessor-in-interest) in acquiring his title over the said lot, ownership over the said lot should be adjudged in favor of plaintiffs-appellants. Records, indeed, show that, at the time when Gregorio Bontuyan applied for Free Patent, Gregorio Bontuyan was living with his daughter, Vivencia Bontuyan (defendant-appellees predecessor-in-interest). Thus, Gregorio Bontuyan must have known that at the time when he applied for free patent on December 1968, the subject lots were already sold on May 1968 by his daughter Vivencia Bontuyan in favor of Lourdes Leyson, predecessor-ininterest of defendants-appellees. Moreover, records further show that Gregorio Bontuyan sold twice Lot [No.] 17150 to plaintiffs-appellants. The first was in 1976 and the other was in 1980. Plaintiffs-appellants offered no reasonable explanation why Gregorio Bontuyan have (sic) to sell twice Lot No. 17150 in favor of plaintiffs-appellants. As found by the trial court, these are badges of bad faith which affect the validity of the title of Gregorio Bontuyan over the subject lots. We are aware that 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. It cannot be a shield for the commission of fraud. It does not permit one to enrich himself at the expense of another. Where one does not have any rightful claim over a real property, the torrens system of registration can confirm or record nothing. 45 The findings of the CA affirmed the findings of the trial court in its decision, thus: After having thoroughly analyzed the records and the evidences adduced during the trial of this case, this Court is convinced and sincerely believes that the lots in question were originally owned by Calixto Gabud as evidenced by T.D. [No.] 03276R marked as Exh. "1." In 1945, this consisted of only one lot in Adlawon, Cebu City, as there was no provincial road yet. However in 1948, the said parcel of land was divided into two because a provincial road was constructed passing through it. Hence, T.D. [No.] 03276R and T.D. [No.] 01979R were issued to Calixto Gabud. On February 16, 1948, Calixto Gabud sold the said parcels of land to spouses Protacio Tabal and Ludegaria (sic) Bontuyan as evidenced by an Absolute Deed of Sale, Exh. "2." On January 5, 1959, spouses Protacio Tabal and Ludegaria (sic) Bontuyan, in turn, sold the same parcels of land to spouses Simeon Noval and Vivencia Bontuyan as evidenced by a Deed of Sale, Exh. "4." It is noteworthy to mention at this point in time that Vivencia Bontuyan is one of the daughters of Gregorio Bontuyan, the father of herein plaintiff Naciansino Bontuyan. In May 1968, spouses Simeon Noval and Vivencia Bontuyan sold the subject parcels of land to Lourdes vs. (sic) Leyson, the mother of herein defendant as evidenced by a Deed of Sale marked as Exh. "6." It is quite perplexing for the court to imagine that Gregorio Bontuyan, father of herein plaintiff, who was then residing with spouses Simeon Noval and Vivencia Bontuyan at 179 C San Jose dela Montaa, Mabolo, Cebu City, as reflected in his application for Free Patent (Exhs. "8" & "26") dated December 4, 1968 was unaware of the sale of the subject parcels of land made by his daughter Vivencia Bontuyan and spouse Simeon Noval to Lourdes Leyson. It is evident that, after the sale from spouses Noval to Lourdes Leyson in May 1968, Gregorio Bontuyan applied for Free Patent for the same parcels of land in December 1968 claiming to have cultivated the land since 1918, stating therein the location as Sirao and not Adlawon which is the true and correct location. Sirao and Adlawon are two different barangays which are not even

adjacent to each other. In fact, as borne out by Exh. "25," it is separated by Barangay Guba. In 1974, Free Patent No. 510463 and OCT# 0-1619 was issued to Gregorio Bontuyan covering subject property, the location of which is in Barangay Sirao in consonance to his application. Gregorio Bontuyans application for Free Patent over subject parcels of land had raised in the mind of this Court reasonable badges of bad faith on his part as the subject parcels of land were already sold by his daughter Vivencia Bontuyan and spouse Simeon Noval to Lourdes Leyson. Another badge of bad faith is raised in the mind of this Court when he (Gregorio) sold the subject parcels of land twice to his son Naciansino Bontuyan in 1976 and 1980, respectively, wherein both Deeds of Sale were notarized by different Notary Publics, (Exhs. "10" & "16").46 Considering that Lourdes Leyson was in actual possession of the property, the respondents cannot, likewise, claim that they were in good faith when Gregorio Bontuyan allegedly sold the property to them on April 28, 1980.
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Anent the third and fourth assignments of error, we do not agree with the ruling of the CA that the petitioners failed to directly attack the validity of OCT No. 0-1619. The CA failed to consider the fact that, in their respective answers to the complaint, the petitioners inserted therein a counterclaim wherein they repleaded all the material allegations in their affirmative defenses, that Gregorio Bontuyan secured OCT No. 0-1619 through fraud and deceit and prayed for the nullification thereof. While Section 47 of Act No. 496 provides that a certificate of title shall not be subject to collateral attack, the rule is that an action is an attack on a title if its object is to nullify the same, and thus challenge the proceeding pursuant to which the title was decreed. The attack is considered direct when the object of an action is to annul or set aside such proceeding, or enjoin its enforcement. On the other hand, an attack is indirect or collateral when, in an action to obtain a different relief, an attack on the proceeding is nevertheless made as an incident thereof.47 Such action to attack a certificate of title may be an original action or a counterclaim in which a certificate of title is assailed as void. A counterclaim is considered a new suit in which the defendant is the plaintiff and the plaintiff in the complaint becomes the defendant. It stands on the same footing and is to be tested by the same rules as if it were an independent action.48 Furthermore, since all the essential facts of the case for the determination of the titles validity are now before the Court, to require the party to institute cancellation proceedings would be pointlessly circuitous and against the best interest of justice.49
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The CA, likewise, erred in holding that the action of the petitioners to assail OCT No. 0-1619 and TCT No. 1392 and for the reconveyance of the property covered by the said title had already prescribed when they filed their answer to the complaint. Case law has it that an action for reconveyance prescribes in ten years, the point of reference being the date of registration of the deed or the date of issuance of the certificate of title over the property. In an action for reconveyance, the decree of registration is highly regarded as incontrovertible. What is sought instead is the transfer of the property or its title, which has been wrongfully or erroneously registered in another persons name, to its rightful or legal owner, or to one who has a better right.50 However, in a series of cases, this Court declared that an action for reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the acts. In Vda. de Cabrera v. Court of Appeals,51 the Court held: ... [A]n action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten 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, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that 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, 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.

Similarly, in the case of David v. Malay,52 the same pronouncement was reiterated by the Court: ... 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 the 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 ... 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.
1awphi 1.nt

The paramount reason for this exception is based on the theory that registration proceedings could not be used as a shield for fraud.53 Moreover, to hold otherwise would be to put premium on land-grabbing and transgressing the broader principle in human relations that no person shall unjustly enrich himself at the expense of another.54 In the present case, Lourdes Leyson and, after her death, the petitioners, had been in actual possession of the property. The petitioners were still in possession of the property when they filed their answers to the complaint which contained their counterclaims for the nullification of OCT No. 0-1619 and TCT No. 1392, and for the consequent reconveyance of the property to them. The reconveyance is just and proper in order to put a stop to the unendurable anomaly that the patentees should have a Torrens title for the land which they and their predecessors never possessed and which has been possessed by another in the concept of an owner. 55 On the fifth assignment of error, we rule for the petitioners. The award of attorneys and appearance fees is better left to the sound discretion of the trial court, and if such discretion is well exercised, as in this case, it will not be disturbed on appeal.56 With the trial and the appellate courts findings that the respondents were in bad faith, there is sufficient basis to award attorneys and appearance fees to the petitioners. Had it not been for the filing of a baseless suit by the respondents against the petitioners, the latter would not have sought the services of counsel to defend their interests and represent them in this case.
1awphi1.nt

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals declaring the respondents the owners of Lot No. 17150 covered by OCT No. 0-1619 and TCT No. 1392; and setting aside the award of attorneys fees in favor of the petitioners by the Regional Trial Court are REVERSED AND SETASIDE. The Court hereby AFFIRMS the ownership of the petitioners of Lot No. 17150. OCT No. 0-1619 and TCT No. 1392 covering the said lot are hereby nullified. The Register of Deeds is ORDERED to cancel TCT No. 1392 and to issue another title over the property in favor of the petitioners as co-owners thereof. The trial courts award ofP50,000.00 for attorneys fees to the petitioners is AFFIRMED. No pronouncement as to costs. SO ORDERED. Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Footnotes
1

Penned by Associate Justice Eugenio S. Labitoria, with Associate Justices Teodoro P. Regino (retired) and Rebecca De Guia-Salvador, concurring.

Records, p. 30. (Exhibit "1") Ibid. Id. at 31. (Exhibit "2") Id. at 32. (Exhibit "3") Id. (Exhibit "4") Id. at 33. (Exhibit "5") Id. (Exhibit "5-A) Id. at 34. Id. at 42. Id. at 35. (Exhibit "6") Id. at 36. (Exhibit "7") Id. at 37. (Exhibit "7-A") Id. at 38. (Exhibit "7-B") Id. at 39. (Exhibit "7-C") Id. at 357-400. (Exhibits "28" to "28-QQ") Id. at 346. (Exhibit "8") Id. at 347. (Exhibit "9") Id. at 405. (Exhibit "21") Id. at 356. (Exhibit "16") Id. at 350. (Exhibit "10") Id. at 220. (Exhibit "B") Id. at 351. (Exhibit "11") Id. at 355. (Exhibit "15") Id. at 227. (Exhibit "C") Id. at 8. Id. at 3-4.

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Id. at 28. Id. at 93-94. Id. at 453-459. Rollo, p. 15. Id. at 20. Id. at 24. Id. at 25. 147 SCRA 611 (1987). 281 SCRA 162 (1997). Section 1, Rule 131 of the Revised Rules of Evidence. Supra at No. 4. (Exhibit "2") Supra at No. 6. (Exhibit "4") Supra at No. 11. (Exhibit "6") Supra at No. 8. (Exhibit "5-A") Supra at No. 6. (Exhibit "4") Rollo, pp. 35-36. Records, p. 347. (Exhibit "9-A") Rollo, p. 37. Records, pp. 458-459. Mallilin, Jr. v. Castillo, 333 SCRA 628 (2000), citing Co v. Court of Appeals, 196 SCRA 705 (1991). Pro Line Sports Center, Inc. v. Court of Appeals, 281 SCRA 162 (1997). Mendoza v. Court of Appeals, 158 SCRA 508 (1988). Heirs of Pomposa Saludares v. Court of Appeals, 420 SCRA 51 (2004). 267 SCRA 339 (1997), citing Heirs of Jose Olviga v. Court of Appeals, 227 SCRA 330 (1990). 318 SCRA 711 (1999), citing Faja v. Court of Appeals, 75 SCRA 441 (1977). Heirs of Pomposa Saludares v. Court of Appeals, supra, p. 49.

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Almarza v. Arguelles, 156 SCRA 718 (1987). Linaza v. Intermediate Appellate Court, 182 SCRA 855 (1990). De Castro v. Court of Appeals, 384 SCRA 607 (2002). Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

55

56

G.R. No. 175393

December 18, 2009

GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. THE REGIONAL TRIAL COURT OF PASIG CITY, BRANCH 71, CRESENCIANO RABELLO, JR., SHERIFF IV, RTC-BRANCH 71, PASIG CITY; AND EDUARDO M. SANTIAGO, SUBSTITUTED BY HIS WIDOW, ROSARIO ENRIQUEZ VDA. DE SANTIAGO, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 177731 GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. HON. CELSO LAVIA, Presiding Judge, RTC, Pasig City, Branch 71, CRESENCIANO RABELLO, JR., Sheriff, RTC-71, PASIG CITY, and EDUARDO M. SANTIAGO, substituted by his widow, ROSARIO ENRIQUEZ VDA. DE SANTIAGO, Respondents. DECISION LEONARDO-DE CASTRO, J.: The case now before us stems from two petitions that were consolidated upon motion of petitioner Government Service Insurance System (GSIS). We are well aware of the impact and the significance of the matters presented here on both parties and after careful study of the laws and jurisprudence applicable, we now discuss the facts, issues, and arguments from which we have reached our conclusion. As the final arbiter of all legal questions, we intend this decision to put an end to this long-drawn litigation. The first case, docketed as G.R. No. 175393, is a Petition for Certiorari and Prohibition 1 seeking to annul respondent trial courts Orders dated November 20, 2006 and September 12, 2006 issued in Civil Case No. 59439 entitled Eduardo M. Santiago, substituted by his widow, Rosario Enriquez Vda. De Santiago v. GSIS, and to perpetually restrain respondent sheriff from enforcing said Orders of respondent trial court. The second case, docketed as G.R. No. 177731, is a Petition for Review on Certiorari 2 filed under Rule 45 of the Rules of Court, as amended, which seeks to reverse and set aside: (1) the Decision3 of the Court of Appeals (CA) dated August 3, 2006 partially granting the Petition for Certiorari and Prohibition and affirming with modifications the assailed Orders of the respondent trial court, in GSIS v. Hon. Celso Lavia, Presiding Judge, Regional Trial Court Pasig City, Branch 71, Cresenciano Rabello, Jr., Sheriff, RTC-71, Pasig City, and Eduardo M. Santiago, substituted by his widow, Rosario Enriquez Vda. De Santiago, docketed as CA-G.R. SP No. 84079, and (2) the CA Resolution dated April 27, 2007 denying petitioners Verified Motion for Reconsideration. I. FACTS OF THE CASE

From September 1956 to October 1957, spouses Jose C. Zulueta and Soledad Ramos (Zulueta spouses) obtained various loans from GSIS totaling P3,117,000.00 secured by a real estate mortgage on several parcels of land located in Pasig City and covered by Transfer Certificates of Title (TCTs) Nos. 26105, 37177, and 50356 (the mother titles) in their name. Because of the Zulueta spouses default, GSIS, on August 14, 1974, extrajudicially foreclosed the mortgages dated September 25, 1956, March 6, 1957, April 4, 1957, and October 15, 1957, forP5,229,917.84. Being the highest bidder, GSIS was issued a certificate of sale by the sheriff. On November 25, 1975, GSIS consolidated its title over the lots subject of the foreclosure sale. Subsequently, GSIS disposed of the foreclosed properties together with lots not covered by the foreclosure sale. On March 6, 1980, GSIS sold the foreclosed properties to Yorkstown Development Corporation, which sale was disapproved by the Office of the President of the Philippines. The Register of Deeds of Rizal cancelled the land titles issued to Yorkstown Development Corporation.4 After GSIS had re-acquired the properties sold to Yorkstown Development Corporation, it began disposing the foreclosed lots, including the excluded ones. The lots had already been divided by the Zulueta spouses into smaller lots but GSIS consolidated title on the three mother titles, because these were what the Zulueta spouses had earlier mortgaged to it. Under the first mortgage on September 25, 1956, out of the 199 lots covered by TCT No. 26105, 78 lots (subject lots) were expressly excluded from the mother titles mortgage. On April 7, 1990, Antonio Vic Zulueta (Antonio), the Zulueta spouses successor-in-interest, transferred all his rights and interests5 in the excluded lots to Eduardo M. Santiago (Santiago), whose lawyer wrote a letter dated May 11, 1989 asking GSIS to return said lots. On May 7, 1990, Antonio, represented by Santiago, filed an action for reconveyance of the excluded lots against GSIS in the Regional Trial Court (RTC) of Pasig City (Branch 71), presided over by Hon. Celso Lavia (respondent judge), docketed as Civil Case No. 59439 and entitled Eduardo M. Santiago, et al. v. GSIS. After a court battle between Antonio and Santiago wherein the former sought the revocation of the Special Power of Attorney in favor of the latter, Antonio was substituted by Eduardo Santiago who, upon his death on March 6, 1996, was later substituted by his widow, Rosario Enriquez Vda. de Santiago (private respondent), as plaintiff in the case. After trial, respondent judge rendered a Decision6 dated December 17, 1997, finding that neither prescription nor laches had set in. The dispositive portion7 of the Decision reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendant: Ordering defendant to reconvey to plaintiff the seventy-eight (78) lots released and excluded from the foreclosure sale including the additional exclusion from the public sale, namely: a. Lot Nos. 1, 6, 7, 8, 9, 10 and 13, Block I (Old Plan). b. Lot Nos. 1, 3, 4, 5, 7, 8, 10, Block II (Old Plan). c. Lot Nos. 3, 10, 12 and 13, Block I (New Plan), Block III (Old Plan). d. Lot Nos. 7, 14 and 20, Block III (New Plan), Block V (Old Plan). e. Lot Nos. 13 and 20, Block IV (New Plan), Block VI (Old Plan). f. Lot Nos. 1, 2, 3 and 10, Block V (New Plan), Block VII (Old Plan). g. Lot Nos. 1, 5, 8, 15, 26 and 27, Block VI (New Plan), Block VIII (Old Plan).

h. Lot Nos. 7 and 12, Block VII (New Plan), Block II (Old Plan). i. Lot Nos. 1, 4 and 6, Block VIII (New Plan), Block X (Old Plan). j. Lot 5, Block X (New Plan), Block XII (Old Plan). k. Lot 6, Block XI (New Plan), Block XII (Old Plan). l. Lots 2, 5, 12 and 15, Block I. m. Lots 6, 9 and 11, Block II. n. Lots 1, 5, 6, 7, 16 and 23, Block 3. o. Lot 6, Block 4. p. Lots 5, 12, 13 and 24, Block 5. q. Lots 10 and 16, Block 6. r. Lots 6 and 15, Block 7. s. Lots 13, 24, 28 and 29, Block 8. t. Lots 1, 11, 17 and 22, Block 9. u. Lots 1, 2, 3 and 4, Block 10. v. Lots 1, 2, 3 and 5 (New), Block 11. 2. Ordering defendant to pay plaintiff, if the [78] excluded lots could not be reconveyed [,] the fair market value of each of said lots. 3. Ordering the Registry of Deeds of Pasig City to cancel the land titles covering the excluded lots in the name of defendant or any of its successors-in-interest including all derivative titles therefrom and to issue new land titles in plaintiffs name. 4. Ordering the Register of Deeds of Pasig City to cancel the Notices of Lis Pendens inscribed in TCT No. PT-80342 under Entry No. PT-12267/T-23554; x x x TCT No. PT-81812 under Entry No. PT12267/T-23554; and TCT No. PT-84913 under Entry No. PT-12267/T-23554. 5. Costs of suit. Counterclaims filed by defendant, intervenors Urbano and intervenors Gonzales are DISMISSED. SO ORDERED. Petitioner appealed the aforesaid decision to the CA, docketed as CA-G.R. CV No. 62309 (the first CA case) which, in a decision dated February 22, 2002, affirmed the same. GSIS went up to the Supreme Court via a petition for review on certiorari docketed as G.R. No. 155206 (the first SC case). The first CA decision was affirmed in toto by the Supreme Court in a decision dated October 28, 2003, which became final and executory on February 24, 2004.

On April 2, 2004, private respondent filed a motion before the RTC for execution of its decision. Opposing the motion, GSIS pointed out that under Sec. 39 of Republic Act No. 8291, otherwise known as the GSIS Act of 1997, and existing jurisprudence, its funds and properties were exempt from execution. On April 27, 2004, respondent judge issued an order granting the motion for execution and fixing the current fair market value of the subject lots,8 which were ordered reconveyed to private respondent, at P35,000.00 per square meter, or a total of P1,166,165,000.00 computed on the basis of an aggregate area of 33,319 square meters. In arriving at said value, respondent judge explained: "x x x [The] Court considers the amount of P35,000.00 per square meter, of all the reconveyed 78 lots, representing the current fair market value which value is well within the range [P10,000.00 P45,000.00 per square meter] established and found by the trial court, affirmed by the Court of Appeals and has been considered binding and conclusive upon the Supreme Court per its Decision dated October 28, 2003 which has become final and executory on February 24, 2004."9 Pursuant to the order of execution, respondent judge issued a writ of execution10 on April 28, 2004. Acting upon said writ, Sheriff Cresenciano Rabello, Jr. (respondent sheriff), along with private respondents counsel, Atty. Jose Suing (Atty. Suing), went to the GSIS main office on April 29, 2004 to serve the same and a notice addressed to Atty. Winston F. Garcia, president and general manager of GSIS, demanding payment of the abovementioned amount of P1,166,165,000.00. On the same date, respondent sheriff and Atty. Suing served notices of garnishment on GSIS banks, namely: Development Bank of the Philippines (DBP), Land Bank of the Philippines, Philippine National Bank (PNB), and Philippine Veterans Bank. On May 4, 2004, GSIS filed a motion to quash writ of execution (motion to quash) on the grounds that: (i) it was exempt from execution under Sec. 39 of Rep. Act No. 8291; (ii) it was deprived of the opportunity to contest the order of execution since the writ of execution was served before its receipt of an official copy of said order; and (iii) the lower courts valuation of the subject lots at P35,000.00 per square meter was unrealistic, too high and without legal and factual basis.11 Private respondent opposed GSIS motion to quash,12 arguing as follows: (i) that the motion is pro forma as it merely repeated the grounds discussed in GSIS opposition and supplemental opposition to her motion for execution; (ii) that GSIS was duly served a copy of the order of execution through its counsel, Atty. Lucio L. Yu, Jr., who read the same when he met respondent sheriff and Atty. Suing during their April 29, 2004 visit to the GSIS main office; and (iii) that the lower courts determination of the current market value of the subject lots was based on its findings which were affirmed by the CA and the Supreme Court.13 On May 13, 2004, respondent judge issued an Order14 disposing as follows: WHEREFORE, the Motion to Quash Writ of Execution is hereby DENIED for lack of merit. The Motion for Issuance of Writ of Execution or Order for Cancellation of Lis Pendens and the Motion to cancel Notice of Lis Pendens, with their merits, are both GRANTED. SO ORDERED. Thereafter, on May 21, 2004, petitioner filed before the CA a special civil action for certiorari and prohibition docketed as CA-G.R. SP No. 84079 (the second CA case), with prayer for temporary restraining order (TRO) and/or writ of preliminary injunction to annul the Orders dated April 27, 2004 and May 13, 2004, respectively, and the Writ of Execution dated April 28, 2004, ascribing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of respondent judge for denying GSIS motion to quash. Petitioner alleged that its funds and properties were exempt from execution. Petitioner likewise filed a Petition for Mandamus15 with prayer for temporary mandatory restraining order and writ of preliminary injunction before the RTC of Pasay City dated May 20, 2004. The petition was a special civil action for mandamus under Rule 65 of the Revised Rules of Court seeking to compel PNB and DBP (respondent banks) to release the deposit made by petitioner by allowing petitioner GSIS to withdraw its funds

and monies deposited in respondent banks. The RTC Pasay City, Branch 115, in Civil Case No. 04-0316 CFM, issued an Order16 dated May 26, 2004 granting the TRO on the ground that pursuant to Rep. Act No. 8291, the funds of GSIS cannot be subject of any garnishment, considering that GSIS badly needed the money to finance its daily operations. A portion of the RTC Order is quoted below: "Between whatever right or obligation the banks may have to retain the deposits and let another party withdraw it and the right of the depositor GSIS, who acts in behalf of millions of beneficiaries who will suffer the moment the financial condition of GSIS is compromised, this Court finds the choice commonsensical. "Considering that the rights of the GSIS over its own funds has been firmly established plus the unimaginable scenario of chaos the country might face the moment the public has learned that the funds of the only Government Agency tasked to provide social security protection of the government workers is in jeopardy is almost certain this Court deems it best to issue a status quo order. WHEREFORE, respondent PNB and DBP are restrained from honoring the garnishing of the GSIS funds x x x (faded text in rollo). On May 31, 2004, RTC Pasay City Branch 115 issued an Order17 in Civil Case No. 04-0316 CFM that provides: "In compliance with the Ex-parte Request for Clarification of Order dated 26 May 2004, directing the parties to preserve the status quo and in light of the Temporary Restraining Order issued by the Court of Appeals dated May 27, 2004, in CA-G.R. SP. 84079 case entitled "Government Service Insurance System vs. Hon. Celso Lavia, et al.", restraining the garnishment of the subject deposits, clarification is hereby made that the status quo contemplated in the Order refers to the condition of the parties prior to the service of the Notice of Garnishment on the respondent banks by the Sheriff of the RTC-71 of Pasig City and that the said status quo Order was never intended to prevent petitioner GSIS from withdrawing the funds and monies deposited in the respondent banks. SO ORDERED."18 Meantime, in its Decision in CA-GR SP No. 84079, the CA held: WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The orders dated April 27, 2004 and May 13, 2004 and writ of execution dated April 28, 2004, all issued by the regional Trial Court of Pasig City (Branch 71) in Civil Case No. 59439 entitled "Eduardo M. Santiago, etc., vs. Government Service Insurance System", are AFFIRMED with MODIFICATIONS in (i) that said orders and writ shall be for the satisfaction of the decision dated December 17, 1997 rendered in said case to the extent of the sum of P399,828,000.99; and (ii) that said court is directed to immediately conduct a hearing for the purpose of determining the fair market value of the subject lots as of April 29, 2004 and, upon such determination, issue an order of execution and the corresponding writ for the unsatisfied portion of the decision, if any. The motion for reconsideration of our resolution dated July 27, 2004 and motion to allow immediate partial execution filed by respondent Rosario Enriquez Vda. de Santiago are PARTIALLY GRANTED in that the writ of preliminary injunction heretofore issued by this Court is PARTIALLY LIFTED, such that execution of the decision in Civil Case No. 59439 for the amount of P399,828,000.00 may immediately proceed while the writ of preliminary injunction against the execution of the rest of the judgment award is made PERMANENT subject to the disposition in the preceding paragraph. For lack of merit, the motion to cite GSIS and others for direct contempt is DENIED. SO ORDERED.19 On August 15, 2006, petitioner filed a Verified Motion for Reconsideration20 of the Decision dated August 3, 2006 on the main ground that it should not be deprived of what it alleged was the "main mode of satisfying the judgment, i.e., reconveyance." Petitioner attached as Annex "A" a Memorandum21 entitled "Status of 78 Lots

Covered by Writ of Execution in Civil Case No. 59439 xxx as annotated in TCT No. 23554 of the Registry of Deeds, Pasig City," which states that "the total number of lots adjudged is only 76 not 78 and the total area should not be 33,319 [sq. m.] but only 32,534 [sq. m.]." The respondent trial court issued an Order22 dated November 20, 2006 denying the petitioners Urgent Motion for Reconsideration, the Urgent Motion to Quash Order of Delivery of Money,23 and the Manifestation to Set Case for Presentation of Rebuttal Evidence24 dated October 19, 2006.25 On November 24, 2006, petitioner GSIS filed with respondent trial court a Manifestation and Urgent Motion for Inhibition26 "on the ground, among others, that respondent judges undue and passionate haste in executing the final judgment, and related acts, reveal clearly his bias towards private respondent Santiago." Subsequently, petitioner filed with this Court a Petition for Certiorari and Prohibition, docketed as G.R. No. 175393 (the second SC case), with prayer for a TRO and/or a Writ of Preliminary Injunction, claiming that the questioned Orders and the Order of Delivery of Money were issued and enforced with grave abuse of discretion amounting to lack or excess of jurisdiction, or in excess of jurisdiction, in the absence of factual and legal bases; and that petitioner had no plain, speedy and adequate remedy in the ordinary course of law except the present petition, to protect its interest against the enforcement of the subject Orders.27 This Court issued a Resolution28 dated December 13, 2006 dismissing the Petition in G.R. No. 175393 for: (a) being a wrong mode of appeal; and (b) violating the rule on forum shopping. On March 12, 2007, this Court issued another Resolution29 denying with finality petitioners Motion for Reconsideration of the earlier Resolution dated December 13, 2006. The Court said: "It is rather obvious that petitioners Motion for Reconsideration pending with the CA and its present Petition, while ostensibly directed at different orders of the RTC, are actually aimed at only one objective: to thwart implementation of the modified April 28, 2004 Writ of Execution. Such simultaneous recourse to two remedies at different fora for a single objective is plain forum shopping. Forum shopping exists not only when a final judgment in one case will amount to res judicata in another, but also where the elements of litis pendentia are present, i.e., regardless of which party will prevail, the result of one action will be determinative of that of the other action. Specifically, if we give due course to the present Petition, our proceedings would have to take precedence over the resolution by the CA of petitioners Motion for Reconsideration. Our decision would also bind the CA On the issue of the April 28, 2004 Writ of Execution. There is also the possibility that if the CA Proceeds to resolve petitioners Motion for Reconsideration, its resolution will preempt our action on the present Petition. Either way, one court will be pitted against the other in an appalling scheme petitioner should not get away with. Having declared the present Petition improper for forum shopping, petitioners request that it be treated as a Petition for Review on Certiorari under Rule 45 is not feasible. WHEREFORE, the Motion for Reconsideration is DENIED with finality. SO ORDERED.30 On March 28, 2007, however, petitioner filed a Motion for Leave to File and For Admission of Second Motion for Reconsideration with Prayer to Set Case for Oral Arguments. On April 4, 2007, this Court issued a Resolution31granting petitioners Motion and setting aside the Resolution dated December 13, 2006; reinstating the petition; requiring respondents therein to comment on the petition; and resolving to issue a TRO32 enjoining respondents therein, their representatives or assigns, and/or any person acting for and in their behalf, from enforcing the Orders dated November 20, 2006 and September 12, 2006 of respondent trial court and the Order of Delivery of Money dated September 14, 2006 of respondent Sheriff in Civil Case No. 59439 of the RTC, Branch 71, Pasig City. This Court resolved to refer the petition in G.R. No. 175393 to the Court En Banc for disposition; however, on June 19, 2007, the Court resolved to return the case to the Third Division.33

On April 27, 2007, the CA denied petitioners motion for reconsideration in CA-G.R. SP No. 84079. Hence, GSIS filed this Petition for Review on Certiorari docketed as G.R. No. 177731 (the third SC case). II. THEORY OF PETITIONER In G.R. No. 177731, petitioner alleges that the CA committed a manifest reversible error: 1. In ordering the respondent trial court to proceed with the second option of requiring the petitioner GSIS to pay private respondent for the value of the lots initially pegged at P12,000.00 without affording petitioner GSIS the opportunity to show compliance with the first option of reconveyance of the lots; 2. In ignoring the exemption from execution of the funds and assets of petitioner GSIS under Section 39 of Section 1 of the GSIS Act of 1997 (R.A. No. 8291); and 3. In holding that petitioner GSIS is barred by estoppel from invoking the prior sale, reconveyance and segregation of lots and double enumeration of two lots, because these allegedly delve into the correctness of respondent trial courts decision.34 In its MEMORANDUM,35 petitioner summarizes the issues involved in this case as follows: I. Whether it is grave abuse of discretion or gross reversible error for the respondent trial court to ignore or modify the judgment of the Supreme Court. A. Whether there has been actual or constructive compliance with the judgment directing the reconveyance of the 78 lots which are the subject matter of this case. B. Whether in the absence of denial by the private respondent of the fact of reconveyance to the buyers of private respondents assignor of the lots in question, petitioner GSIS should be deemed to have satisfied the decision under the first option of reconveyance. Otherwise, there would be unjust enrichment and double indemnification. C. Whether the respondent trial court acted with obvious partiality toward the private respondent. II. Whether it is tenable that when a literal and blind execution of a judgment shall result in grievous error and injustice, the judgment should be executed in a faithful manner that harmonizes with truth and equity. If necessary to avoid distortions, falsehood, and marked injustice, whether the Supreme Court may even reverse and set aside its earlier judgment. A. Whether a party litigant is necessarily bound by the mistakes or grave negligence of its former counsel and officials or employees. III. Whether the respondent trial court committed reversible error when it ruled on the issue of prescription IV. Whether it is state policy that GSIS funds are exempt from garnishment. Whether just claims of litigants should be decided in a way that does not conflict with such public policy.36 In claiming that "execution should harmonize with truth and equity,"37 petitioner avers that finality of judgment is a principle needed in the administration of justice; however, in cases where gross injustice shall result from insistence on the principle, it has to be disregarded. Petitioner further avers that the present litigation is one such case. Petitioner alleges that the principle of law that the sacred principle of justice should not be sacrificed at the altar of technicalities has remained unchanged up to the present, and claims that it has been reiterated from time to time by this Honorable Court.

Petitioner argues that "substantive merit, not technicalities, should be considered by this honorable Court."38Under the November 20, 2006 Order of the respondent trial court, the sale by Jose Zulueta of the subject lots to his buyers may no longer be raised at this time, but petitioner urges this Court to hold otherwise. Petitioner likewise contends that a "final judgment may be modified or reversed,"39 and cites cases where this Court allegedly ruled so. Petitioner argues that where there is deviation from a final judgment, as in the present case, and non-reopening will result in gross injustice to the petitioner and unjust enrichment to the respondent, the wrong decision can still be reconsidered and reversed. Petitioner likewise alleges that it is not bound by the negligence of its lawyers, and claims that it is not true that it failed to raise the defense of previous reconveyance as the records of this case would easily bear out that petitioner mentioned during the proceedings held in the respondent trial court that there had already been reconveyance. Petitioner submits that any negligence of its former lawyers in not including the fact of reconveyance in their Answer or in not capitalizing upon it throughout the trial proceedings should not prejudice the interests of the 1,500,000 GSIS members and pensioners. Petitioner reiterates its argument that "even if correct, the claim for reconveyance has prescribed." 40 Lastly, regarding the alleged "ethical dimensions" of the case, petitioner argues: "One Billion Pesos shortens the actuarial life of the GSIS by one full year. The amount represents the cash dividends of 621 policy holders for one and a half years."41 Even though private respondents lawyers are highlighting her advanced age and failing health, petitioner points out that she had already agreed to pay 54% of the net benefits from the case to three of her lawyers. Petitioner quotes the September 12, 2006 Order of the RTC Pasig City where it stated, "The proceedings have become a fight among the lawyers for their alleged attorneys fees." 42 Petitioner likewise claims that under Sec. 39 of Rep. Act No. 8291, the GSIS Act of 1997, its funds are exempt from taxes, legal processes, liens, attachments, garnishments, and executions, and such exemption is a state policy based on the Constitution under its social justice provisions. Lastly, petitioner asks that this Court revisit the ruling in Rubia v. GSIS, 43 which held that the GSIS exemption from execution is not absolute. Petitioner makes the following averments regarding this issue: Rubia distinguishes between GSIS funds to pay for benefits and funds intended for investments. There is no such distinction. All funds including those invested and the income derived from them are funds used to pay benefits. GSIS never views its income from investments as "profits". All income goes to benefit payments, if not current, then for the future when the billions now paid annually will multiply several times because most of the 1,200,000 current members and the employees succeeding them will have retired. The amount involved in Rubia is relatively nominal. But when unlawful or unjustified claims like the Billion Peso garnishment in this case comes up, the true meaning and correct interpretation of the GSIS Charter become imperative. xxx GSIS respectfully submits that the trust funds under its stewardship have the same public character as funds of regular departments, bureaus, and offices of the Government. GSIS is not in business, in the commercial meaning of the word. GSIS tries to make its trust fund earn in order to meet the heavy demands and requirements of the future. In the same way as funds needed to construct school buildings or to buy tanks, helicopters, and other defense equipment may not be garnished to pay debts of the Department of Education and Culture or the Department of National Defense, so should funds intended for pensions of public servants, their death compensation or disability benefits be freed from the perils of execution and garnishment. Or defraudation as in this case. xxx The law provides for the exemption of GSIS funds from court processes, execution, garnishment, and other levies. It does not follow that parties with legitimate grievances cannot have any means of redress. The law provides for the handling of claims against regular departments, bureaus, and offices. The exemption of GSIS

from court processes means that the same procedure for regular government offices should apply to it. Having removed regular procedures like attachment and garnishment, the law provides the mode of redress against exempt agencies and institutions for persons filing cases against GSIS. xxx Clearly, the forcible execution of the final judgment in this Santiago case will no doubt violate Section 39 of Section 1 of R.A. No. 8291 and the State policy relative to the preservation and maintenance of the actuarial solvency of the funds of petitioner GSIS.44 III. THEORY OF PRIVATE RESPONDENT In her Consolidated Memorandum (in G.R. No. 175393) and Comment (in G.R. No. 177731) (With Motion Ad Cautelam For Leave To File),45 private respondent avers that: 44. The issues tackled here can be divided into four (4) groups. The First Group, those which have been already laid to rest by the finality of judgment of the RTC, 1st CA Decision and the 1st SC Decision but which petitioner GSIS is reviving in the current incidents of these proceedings. The Second Group consist of those raised in the Petition in GR No. 175393 (2nd SC Case). The Third Group are those raised in Petition in GR No. 177731 (3rd SC Case). The Fourth Group comprises the issue of "Reconveyance" and related matters. 45. The issues are therefore the following: 45. A. FIRST GROUP OF ISSUES I. Whether or not there is forum shopping and therefore the petitions should already be dismissed; II. Whether or not, the subject case having become final and executory, the instant two petitions should be dismissed; III. Whether or not Prescription or Laches has set in; IV. Whether or not petitioner GSIS funds or properties are exempt from execution; Violation of other Rules 45. B. SECOND GROUP OF ISSUES (Raised in G.R. No. 175393, 2nd SC Case) V. Whether or not the RTC Order dated 12 September 2006 sought to be reconsidered was, in fact, prematurely issued; VI. Whether or not respondent RTC deviated from the final and executory judgment when it effectively ruled that the judgment against the petitioner GSIS should be satisfied through the alternative and secondary mode (i.e., payment of the fair market value of the 78 lots, computed at P12,000.00 per square meter) without according the petitioner GSIS the primary mode of satisfying the same judgment (i.e., reconveyance of the said lots); VII. Whether or not in the absence of denial by the private respondents lawyers, with the actual reconveyance to the latter of some 59 out of 78 lots in question, the petitioner GSIS should be deemed to have satisfied the judgment to the extent of the same approximately fifty nine (59) lots; otherwise, there would be a clear case of unjust enrichment and double indeminification; VIII. Whether or not [the] Honorable Presiding Judge of the respondent RTC acted with obvious partiality toward respondent; and

IX. This Honorable Court, in G.R. No. 140393, entitled "Dela Merced vs. GSIS, et al" having also decreed the reconveyance of the lots to Dela Merced, which include at least one (1) of the subject 78 lots, the physical impossibility of the petitioner GSIS reconveying a singular lot to two different parties has to be clarified; 45. C. THIRD GROUP OF ISSUES (raised in G.R. No. 177731, 3rd SC Case). [Whether or not the Court of Appeals committed the following manifest reversible errors:] X. [In] ordering respondent trial court to proceed with the second option of requiring the petitioner GSIS to pay the private [respondent] for the value of the lots initially pegged at P12,000.00 without affording petitioner GSIS the opportunity to show compliance with the first option of reconveyance of the lots; XI. [In] ignoring the exemption from execution of the funds and assets of petitioner GSIS under Section 39 and Section 1 of the GSIS Act of 1997 (R.A. No. 8291); and XII. In holding that petitioner GSIS is barred by estoppel from invoking the prior sale reconveyance and segregation of lots and double enumeration of two lots, because these allegedly delve into the correctness of respondent trial courts decision. 45. D. FOURTH GROUP OF ISSUES ("Reconveyance" and related issues) XIII. GR No. 177731 (3rd SC Case) is not a petition for review it is actually a camouflaged petition for re-opening of the case. XIV. "Reconveyance" was introduced progressively in a creeping manner from none or nothing to a bare allegation and now to a complete "defense". Hence, it should be dismissed for being unreliable. XV. "Reconveyance" is no longer just a matter of defeating the execution. GR No. 177731 as made, is a matter of defense to be introduced in the RTC. XVI. GSIS is not even consistent of how many lots have been "reconveyed". XVII. "Reconveyance" has not been proved as fact, as petitioner GSIS would want to impress. XVIII. The Honorable Court should not refer the case back to the RCT for the " conduct of a hearing to determine the actual number of lots which have already been transferred or reconveyed".46 Private respondent claims that the issues expressly raised in G.R. No. 177731 were already tackled in G.R. No. 175393, and that the issue that GSIS was barred by estoppel from invoking the prior sale reconveyance and segregation of lots and double enumeration of two lots was already raised in the second CA case as well as the first and second SC cases. Private respondent also claims that all these prove that this Court had been right in dismissing the petition for forum shopping. Private respondent notes that the body of the third SC Case (G.R. No. 177731), which should discuss matters taken up in the CA decision under review, actually contains an introduction of "new matters regarding the socalled prior reconveyance allegedly made by GSIS to Zulueta"47 that were not raised in the questioned CA decision. Private respondent alleges that forum shopping is clearly present here. As the CA finally resolved the pending Motion for Reconsideration filed by petitioner in CA-G.R. SP No. 84079 by denying/ dismissing it, GSIS filed a Petition for Review on Certiorari of said CA decision to this Court (G.R. No. 177731), and then moved for consolidation of that case with G.R. No. 175393 because the issues were the same. Private respondent contends that "[there] is no controversy at all that the RTC Decision has become final and executory."48 She states that "the doctrine of finality of judgments is grounded on fundamental considerations of

public policy and sound practice once judgment becomes final and executory, the prevailing party should not be denied the fruits of his victory by some subterfuge devised by the losing party," citing Quelnan v. VHF Philippines.49 Regarding the issue of prescription or laches, private respondent argues that it should no longer be looked into again in this instance, as it had already been laid to rest when the RTC Decision, affirmed by both the CA and this Court, had become final and executory. In fact, private respondent points out that the issue of prescription or laches had been admitted by petitioner and was not raised in the petition itself, but was only raised again in the latters Memorandum of Arguments in the second SC Case. This issue had thus been laid to rest when the decision in the first SC case became final and executory. As held in CA-G.R. CV No. 62309 dated February 22, 2002: Neither is defendant-appellee guilty of laches. We agree with the ruling of the lower court that plaintiff and her predecessors cannot be held guilty of laches. There is no evidence that they actually slept on their rights. Lawful owners have a right to demand the return of property at anytime as long as possession was unauthorized or merely tolerated (Quevada vs. Glorioso, 294 SCRA 608). Besides, the essential elements of laches are not present in this case, especially a delay in asserting plaintiffs right. Anent petitioners contention that the CA decision dissolving the TRO/injunction is not immediately executory, private respondent argues, among others, that the CA decision categorically called for its immediate implementation, and the RTC, being an inferior court, was not free to entertain a contrary view, until and unless the CA reverses itself. As regards petitioners claim that the RTC deviated from the final judgment sought to be executed when it failed to accord GSIS the "primary mode of satisfying the same judgment (i.e., reconveyance of the said lots)," private respondent counters, the alleged "primary" mode of execution had already been rendered impossible by petitioners own acts, as found by the branch sheriff who attempted to execute on the subject real properties. Private respondent points out that "it was GSIS itself claiming in October 11, 1996 yet (when the case was still being tried at the RTC) that it could no longer return the titles back to the then plaintiff" and that "although it had all the records even then, [petitioner] did not claim that it had already returned 58 lots to the plaintiff (as it is claiming now)."50 Since it had already known fully well that it could not actually reconvey, it was thus "sophisticated misrepresentation" for petitioner to insist that reconveyance should first be effected and then claim that it had already been accomplished through some alleged dispositions even prior to the filing of the case. With regard to petitioners allegation that there had already been partial execution of the RTC decision by prior reconveyance, private respondent argues that the alleged sale by Zulueta is a matter of defense that could no longer be brought up at the execution stage. Private respondent contends that petitioners allegation is preposterous, as reconveyance in satisfaction of the RTC decision is against reason and the natural order of things, for the past cannot come after the future, and execution cannot come before judgment or the filing of the case in the RTC. Private respondent avers that petitioner, in reality, wants to re-open an "immutable final and executory decision of the courts," under a form of new trial not found in the Rules of Court, which if allowed would trivialize or even destroy other core procedural principles, which, due to their importance, actually overlap considerations for attainment of substantial justice.51 Private respondent points out that petitioners claims of previous reconveyance of subject properties to the former plaintiffs predecessor or his assignees are mere conjectures and broad allegation of facts, for while it says it has returned many lots to the old Zulueta or his assignees, it has not identified said lots, stated how many were supposed to have been reconveyed, or presented the deed of conveyances it alleged to have executed. These indefinite claims before this Court, which is not a trier of facts, cannot legally and rightfully be the basis for this Court to lend its extraordinary power in a petition for certiorari to review, modify or annul the RTCs Orders. Private respondent submits that "the tentativeness of [the] GSIS claims, together with the said violation of the rule against forum shopping, should prompt the Honorable Court to dismiss the petition."52 Petitioner uses an internal memorandum, which has no probative value, to bolster its claim of reconveyance. Said document was

introduced for the first time in the second petition to this Court, and being a private document, it needs to be authenticated in court by a competent witness in order to be considered by the courts as evidence. Since this Court is not a trier of facts, it cannot for the first time consider evidence without the lower court having passed its judgment on it. With regard to petitioners contention that respondent judge acted with obvious partiality towards private respondent, the latter argues that the acts being questioned were all within the power of the RTC to do and were appropriate and proper for the occasion, but they happened to be adverse rulings in resolving issues raised by GSIS. Anent petitioners contention that "at least one" of the subject lots was involved in Dela Merced v. GSIS, et al.,53thus making it physically impossible for GSIS to reconvey the same lot to two different parties, private respondent alleges that GSIS is not sure as to the identity of the alleged Dela Merced lot vis--vis the subject lots, and a mere conjecture cannot possibly be the basis for this Court to make the extraordinary order for the de facto re-opening of a final and executory judgment.54 As to the fourth group of issues involving reconveyance and its related issues, private respondent avers that a major portion of the petition in G.R. No. 177731 (the third SC case) is devoted to a new statement of facts "enumerating, detailing and discussing the alleged incidents of reconveyance," which were narrated as if they were part of the records of the case, when in truth they were never mentioned, discussed, introduced, much less proved in the four cases filed prior to this case. Private respondent further avers that a petition for review, by its very name and nature, "deals with what has been taken up in the court a quo."55 Private respondent reiterates that the issue of "previous reconveyance" was only mentioned after the RTC decision, the first CA case, and the first SC case, respectively, had already become final and executory. This Court had thus been made to accept and appreciate allegations of facts directly introduced to it by petitioner GSIS. The alleged reconveyance may have been testified to in the RTC, but it was not put in issue in the proceedings and on appeal. This "prior reconveyance" of the subject lots to Zulueta was a matter of defense (not execution) that should have been presented in the trial court.56 Private respondent contends that contrary to petitioners claim, documents from the Register of Deeds 57 show that it was GSIS, and not Zulueta, which had conveyed the lots to third parties. Finally, private respondent avers that while petitioner says that the purpose of the referral back to the RTC is to make the mechanical act of determining the actual number of lots already reconveyed, it really will entail the presentation of evidence that indeed such lots were sold, transferred, or assigned by Zulueta himself, which in effect, would mean re-opening the case itself, a course of action that is incongruous to the finality of the decision, which has been admitted by the GSIS. Private respondent prays that this Court render judgment in her favor by ordering as follows: a. Dismissing the instant petitions for violation of the rule against forum shopping and/or for lack of merit; b. In GR No. 175393, declaring the assailed RTC Order dated 12 September 2006 and the assailed RTC Order dated 20 November 2006 valid in so far as the same refer to the execution or garnishment of funds up to the extent of P399,828,000 (but the allocation of said amount to the plaintiff and the attorneys claiming attorneys fees or the entitlement of all or any of the latter to attorneys fees is left to the lower court/s to determine); c. Ordering the RTC to immediately implement and enforce the order or writ of execution and/or notice of garnishment; and d. Ordering the RTC to conduct proceedings to determine the market value of the subject 78 lots and thereafter execute or cause the execution of the remaining unsatisfied portion of the decision. 58

IV. DISCUSSION The doctrine of finality of judgments accepts of exceptions only under certain circumstances, as we have held in Spouses Gomez v. Correa, et al.,[59]: It is settled that when a final judgment is executory, it becomes immutable and unalterable. The judgment may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest Court of the land. The doctrine is founded on considerations of public policy and sound practice that, at the risk of occasional errors, judgments must become final at some definite point in time. The only recognized exceptions are the correction of clerical errors or the making of so-called nunc pro tunc entries in which case there is no prejudice to any party, and where the judgment is void. None of these has been shown to be present to justify the "modification" of the judgment. Parenthetically, the modification was made not by the same court (CFI of Pasig) that rendered the judgment. None of the exceptional circumstances to this doctrine exist in this case. The modification that would result should the petition be granted would not involve merely clerical errors, but would entail presentation of alleged newly-discovered evidence that should have been raised as affirmative defenses during trial. Moreover, the judgment involved herein has been upheld, and not declared void, by this Court. As correctly cited by private respondent, we have made the following pronouncements regarding this doctrine: xxx Public policy and sound practice demand that at the risk of occasional errors, judgment of courts should become final at some definite date. The Court frowns upon frivolous appeals and any dilatory maneuver calculated to defeat or frustrate the ends of justice and fair play (Philippine National Bank v. Court of Appeals)[60]. xxx Once a decision is final and executory, it can no longer be attacked by any party or be modified directly or indirectly, even by the Court (Philippine Commercial & Industrial Bank v. Court of Appeals)[61]. xxx To once again re-open that issue through a different avenue would defeat the existence of our courts as final arbiters of legal controversies. Having attained finality, the decision is beyond review or modification even by this Court (Toledo-Banaga v. Court of Appeals) 62 . Nothing is more settled in law than that once a judgment attains finality it thereby becomes immutable and unalterable. It may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land. Just as the losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his case. The doctrine of finality of judgment is grounded on fundamental considerations of public policy and sound practice, and that, at the risk of occasional errors, the judgments or orders of courts must become final at some definite time fixed by law; otherwise, there would be no end to litigations, thus setting to naught the main role of courts of justice which is to assist in the enforcement of the rule of law and the maintenance of peace and order by setting justiciable controversies with finality (Gallardo-Corro v. Gallardo)63 . What petitioner seeks to do is for this Court to now hold that there had already been reconveyance, conducted through various transactions, of the subject properties even before the commencement of the case with the RTC, and, in effect, for us to nullify a final and executory judgment that had been passed upon by the RTC, the CA, and this Court in the first SC case. This we cannot do; not with the submissions presented to us by petitioner; not during the execution stage of the proceedings; not even under the veiled threat that in failing to grant the petition, we will be deciding against the fate of the GSIS funds that exist for the service of government employees who deserve to be favored in law under the principles of social justice and equity.

Being government employees ourselves, we understand the need to preserve the actuarial solvency of the GSIS, especially at this time when, right after the series of calamities that have severely affected the country, GSIS needs to release funds for the various loan applications being made nationwide. Petitioner had already been subjected to much criticism caused by the delay in the processing and releasing of the loan proceeds due to glitches in its computer system and the sheer volume of applications. The Court, in dismissing this petition, is aware of the predicament that petitioner finds itself in at this time, however, justice requires us to look at both sides and at the entirety of the case now before us. In doing so, we recognize that rights of private citizens had already arisen and we uphold such rights. Even if petitioner claims that it recognizes the finality of the RTC decision, as affirmed by both the CA and this Court, and that it only wants that the execution be conducted properly, to grant the petition would be to negate the factual findings of the RTC and to render useless the conclusions reached in the three levels of the judiciary on the reconveyance of the subject properties. Regarding the alleged exemption of the funds and properties of GSIS, we quote with approval pertinent portions of the Decision of the CA dated August 3, 2006 in CA-G.R. SP No. 84079: The petition and pending incidents hinge on the principal issue of whether the exemption from execution and garnishment of the funds and properties of GSIS under Sec. 39 of Rep. Act No. 8291 may be invoked to quash the writ of execution issued pursuant to the final and executory judgment against it. We rule in the negative. In Rubia vs. GSIS (432 SCRA 529), the Supreme Court ruled that the exemption from execution enjoyed by GSIS under Sec. 39 of Rep. Act No. 8291 is not absolute. The Rubia case stemmed from an action for specific performance and damages filed by Marino E. Rubia (or "Rubia") seeking refund of his overpayment on his housing loan with GSIS. The RTC of Laguna (San Pedro, Branch 93) ruled in favor of Rubia. The decision having become final and, upon Rubias motion, the RTC issued a writ of execution, on the strength of which the sheriff served a notice of garnishment against the account of GSIS with LBP. GSIS filed a motion to quash the writ of execution but it was denied. Thus, GSIS funds with LBP, to the extent of the amount of the judgment award in favor of Rubia, were garnished and turned over to him in satisfaction of the writ of execution. On the matter of GSIS exemption from execution, the Supreme Court ratiocinated, thus: In so far as Section 39 of the GSIS charter exempts the GSIS from execution, suffice it to say that such exemption is not absolute and does not encompass all the GSIS funds. By way of illustration and as may be gleaned from the Implementing Rules and Regulation of the GSIS Act of 1997, one exemption refers to social security benefits and other benefits of GSIS members under Republic Act No. 8291 in connection with financial obligations of the members to other parties. The pertinent GSIS Rule provides: Rule XV. Funds of the GSIS Section 15.7 Exemption of Benefits of Members from Tax, Attachment, Execution, Levy or other Legal Processes. The social security benefits and other benefits of GSIS members under R.A. 8291 shall be exempt from tax, attachment, garnishment, execution, levy or other processes issued by the courts, quasijudicial agencies or administrative bodies in connection with all financial obligations of the member, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties or incurred in connection with his position or work, as well as COA disallowances. Monetary liability in favor of the GSIS, however, may be deducted from the benefits of the member. x x x The processual exemption of the GSIS funds and properties under Section 39 of the GSIS Charter, in our view, should be read consistently with its avowed principal purpose: to maintain actuarial solvency of the GSIS in the protection of assets which are to be used to finance the retirement, disability and life insurance benefits of its members. Clearly, the exemption should be limited to the purposes and objects covered. Any interpretation that would give it an expansive construction to exempt all GSIS assets from legal processes absolutely would be unwarranted. Furthermore, the declared policy of the State in Section 39 of the GSIS Charter granting GSIS an exemption from tax, lien, attachment, levy, execution, and other legal processes should be read together with the grant of

power to the GSIS to invest its "excess funds" under Section 36 of the same Act. Under Section 36, the GSIS is granted the ancillary power to invest in business and other ventures for the benefit of the employees, by using its excess funds for investment purposes. In the exercise of such function and power, the GSIS is allowed to assume a character similar to a private corporation. Thus, it may sue and be sued, as also, explicitly granted by its charter. Needless to say, where proper, under Section 36, the GSIS may be held liable for the contracts it has entered into in the course of its business investments. For GSIS cannot claim a special immunity from liability in regard to its business ventures under said Section. Nor can it deny contracting parties, in our view, the right of redress and the enforcement of a claim, particularly as it arises from a purely contractual relationship, of a private character between an individual and the GSIS. In the instant case, the final and executory judgment arose from loans extended by GSIS to private respondents predecessors-in-interest in the course of its business and secured by a mortgage. As in Rubia, GSIS relationship with private respondents predecessors-in-interest is purely private and contractual in nature. As such, GSIS cannot claim immunity from the enforcement of the final and executory judgment against it. 64 Petitioner is asking this Court to reverse our findings in Rubia, supra, and as a result, rule that the immunity granted to it by Rep. Act No. 8291 is absolute. We see no reason to depart from the conclusions reached in said case. In fact, all the more should GSIS not be allowed to hide behind such immunity in this case, where its obligation arises not just from a simple business transaction, but from its utter failure to return properties that it had wrongfully foreclosed. As we have held in the first SC case, G.R. No. 155206: The Court agrees with the findings and conclusion of the trial court and the CA. The petitioner is not an ordinary mortgagee. It is a government financial institution and, like banks, is expected to exercise greater care and prudence in its dealings, including those involving registered lands.65 Petitioner questions the manner in which execution was conducted in this case, and insists that reconveyance should be the "primary mode" and then payment only a "secondary mode." We do not agree. We quote with approval the discussion of the second CA decision, where the court held: x x x [There] is no need for respondent judge to first issue a writ of execution for the reconveyance of the subject lots. Such recourse would merely be an exercise in futility because as shown in the Sheriffs Partial Report dated May 3, 2004 x x x, reconveyance was not possible as of April 29, 2004 since the subject lots were no longer registered in the name of GSIS. To quote said partial report: "That considering the seventy eight (78) excluded lots were already sold by the GSIS to third party buyers as stated and attested by Mr. Manuel Ibabao, GSIS Acquired Asset Officer IV, in his submission and presentation of List of Lots Excluded from Foreclosure to the Honorable Court and was marked as Exhibit 3, dated October 11, 1996, reconveyance of GSIS of said lots to the plaintiff is no longer possible; as verified and confirmed by the undersigned during his levy on said lots on April 29, 2004 together with Sheriff Marcial Estrellado, subject excluded lots are not only titled to individual buyers in good faith but they have also constructed their houses and buildings there and having [resided] therein for so many years with some other lots being sold and resold to other new buyers; for purposes of attaching/levying subject excluded lots now would be impossible and ineffective because the owners are in actual possession of their lots they being buyers in good faith with corresponding possession of titles to it. Reconveyance of the seventy eight (78) excluded lots mentioned in paragraph 1 (a to v) of the Decision dated December 17, 1997 is very impossible so that on paragraph 2, garnishment is resorted to." Nevertheless, We find merit in GSIS claim that the valuation of the subject lots at P35,000.00 per square meter has no factual and legal basis. While said valuation falls within the P10,000.00 to P45,000.00 range as the estimated market value of said properties per testimony of Eduardo M. Santiago, as alluded to by the RTC, it did not "set out in its decision the facts which had been proved and its conclusions culled therefrom" (People vs. Lizada, 396 SCRA 62). Indeed, "(t)rial courts should not merely reproduce the respective testimonies of witnesses of both parties and come out with its decretal conclusion" (People vs. Lizada, supra). Besides, the fair market value of the subject lots cannot be a mere ballpark figure. There should be some factual and legal basis for arriving at a reasonable valuation of the lots. Admittedly, the price range mentioned

in the final and executory judgment against GSIS is too wide and encompassing that further analysis is necessary to establish with more exactitude the fair market value of the subject lots. GSIS asserts that respondent sheriff committed grave abuse of discretion in serving the writ of execution prior to its receipt of an official copy of the order of execution, thereby depriving it of an opportunity to contest said order. Contrary to its claim, GSIS was given the opportunity to question the order of execution as, in fact, it filed an opposition and supplemental opposition to private respondents motion for execution in the court below. Even supposing that GSIS was denied the opportunity to move for reconsideration of the order of execution, this was subsequently cured when it filed the motion to quash where it raised its objections to the issuance of the order and writ of execution. xxx Since GSIS did not deny the facts stated in the sheriffs partial report, We accord the same full faith and credit in keeping with the presumption of regularity in the performance of official duty.
alf-lawphil

GSIS further contends that instead of immediately serving the notices of garnishment on its banks, respondent sheriff should have effected the reconveyance of the subject lots to private respondent. As earlier discussed, respondent sheriff already made a determination in his partial report dated May 3, 2004 that reconveyance of the subject properties was no longer possible. Hence, he properly acted in proceeding to enforce the payment of the fair market value of the subject lots. xxx Based on GSIS own appraisal of lands in San Antonio Vilalge as of December 18, 2003, the reasonable value of the subject lots ranged from P12,000.00 to P15,000.00 per square meter depending on the street where a particular lot is located (Annex "R", petition). Since GSIS itself has admitted that the reasonable value of the subject lost, which have an aggregate area of 33,319 square meters, was at least P12,000.00 per square meter or a total value of P399,828,000.00, partial execution may now proceed on the basis of said valuation. Any difference between the P12,000.00 per square meter valuation and the fair market value of the subject lots as of April 29, 2004, as may be finally determined by the court a quo, can be recovered later. It is the fair market value of the subject lots as of April 29, 2004 which must be reckoned for purposes of enforcing the judgment in question because it was on that date that it was ascertained that reconveyance of those lots was no longer possible. This is as it should be in order to afford private respondent partial satisfaction of the judgment which she and her predecessors-in-interest have long sought. As found in said judgment, private respondent and her privies have been deprived of ownership and enjoyment of the subject lots since November 1975. To add insult to injury, it took them almost fourteen years to obtain a final and executory judgment against GSIS. On the other hand, the quantity (78 lots) and area (33,319 square meters) of the lots adjudged to be reconveyed cannot be reduced. It is settled that final and executory judgment is immutable and cannot be altered except for correction of clerical errors or making of nunc pro tunc entries (Mayon Estate Corporation vs. Altrua, 440 SCRA 377). Indeed, if we are to keep and sustain the peoples faith in the judicial system, We must ensure that those who have won their cases on the merits will obtain the relief they patiently sought. Otherwise, our courts might as well be decision mills churning out judgments which are nothing more than Pyrrhic victories for the prevailing parties. The dispositive portion of the questioned CA decision reads: WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The orders dated April 27, 2004 and May 13, 2004 and writ of execution dated April 28, 2004, all issued by the regional Trial Court of Pasig City (Branch 71) in Civil Case No. 59439 entitled "Eduardo M. Santiago, etc., vs. Government Service Insurance System", are AFFIRMED with MODIFICATIONS in (i) that said orders and writ shall be for the

satisfaction of the decision dated December 17, 1997 rendered in said case to the extent of the sum of P399,828,000.99; and (ii) that said court is directed to immediately conduct a hearing for the purpose of determining the fair market value of the subject lots as of April 29, 2004 and, upon such determination, issue an order of execution and the corresponding writ for the unsatisfied portion of the decision, if any. The motion for reconsideration of our resolution dated July 27, 2004 and motion to allow immediate partial execution filed by respondent Rosario Enriquez Vda. de Santiago are PARTIALLY GRANTED in that the writ of preliminary injunction heretofore issued by this Court is PARTIALLY LIFTED, such that execution of the decision in Civil Case No. 59439 for the amount of P399,828,000.00 may immediately proceed while the writ of preliminary injunction against the execution of the rest of the judgment award is made PERMANENT subject to the disposition in the preceding paragraph. For lack of merit, the motion to cite GSIS and others for direct contempt is DENIED. SO ORDERED.66 Since petitioner filed a Motion for Reconsideration of the above decision, the CA issued a Resolution in CAG.R. SP NO. 8407967 and held: The asserted sale, reconveyance and segregation of lots, as well as the alleged double-enumeration of two lots (Lot 7, Block 2 and Lot 7, Block 3, with areas 396 and 389 square meters, respectively) delve into the correctness of the trial courts decision. However, an issue not timely presented in the proceedings before the lower court is barred by the principle of estoppel (Springsun Management Systems Corporation vs. Camerino, 449 SCRA 65). It is too late for petitioner to seek modification of the trial courts decision which has already become final and executory. All that is needed to be done is to carry out the terms and conditions of said decision. This is consistent with the doctrine of finality of judgments (Clavano, Inc. vs. Housing and Land Use Regulatory board, 378 SCRA 172). Consequently, no new and cogent reason as presented in the motion for reconsideration which would warrant reconsideration of Our decision. On the other hand, Sec. 37, Rule 138 of the Revised Rules of Court provides that an attorney shall have a lien "upon all judgments for the payment of money, and executions issued in pursuance of such judgments, which he has secured in a litigation of his client, from and after the time when he shall have caused a statement of his claim of such lien to be entered upon the records of the court rendering such judgment, or issuing such execution, x x x. As the judgment involved in this case was rendered by the Regional Trial Court of Pasig City (Branch 71), it is in that court where the asserted charging lien should be recorded. WHEREFORE, for lack of merit, the motion for reconsideration and notice of charging lien and motion for recording of charging lien are DENIED. SO ORDERED. It has not escaped our notice that petitioner deliberately filed two cases, herein consolidated, involving the same parties and issues, in its desperate attempt to stay the execution of the judgment against it. Petitioner should be reminded that our rules on forum shopping are meant to prevent the possibility of conflicting decisions being rendered by different fora upon the same issues.68 Petitioner is admonished from bending the rules of procedure to suit its purposes. Obedience to the rules promulgated by this Court to ensure the efficient administration of justice must be the norm, and not the exception. Lastly, on petitioners contention that it should not be bound by the failure of its former lawyers to timely raise the affirmative defense of reconveyance, we are not convinced. Clients are bound by the mistakes, negligence and omission of their counsel. While in exceptional circumstances, clients may be excused from the failure of

counsel, the grounds raised in the present case do not persuade this Court to consider it as an exception to the rule. Indeed, as we have held in Romago, Inc. v. Siemens Building Technologies, Inc.:69 Public interest demands an end to every litigation and a belated effort to reopen a case that has already attained finality will serve no purpose other than to delay the administration of justice. To reverse the CA Decision denying petitioner's petition for relief from judgment would put a premium on the negligence of petitioner's former counsel and encourage endless litigation. If the negligence of counsel is generally admitted as a justification for opening cases, there would never be an end to a suit so long as a new counsel can be employed who could allege and show that prior counsel had not been sufficiently diligent, experienced or learned. We, therefore, write finis to this litigation. 70 WHEREFORE, in view of the foregoing, the consolidated petitions docketed as G.R. Nos. 175393 and 177731 are hereby DISMISSED. The Decision of the Court of Appeals dated August 3, 2006 in CA-G.R. SP No. 84079 and Resolution dated April 27, 2007 modifying the Orders by respondent judge dated November 20, 2006 and September 12, 2006 issued in Civil Case No. 59439 are hereby AFFIRMED. SO ORDERED. TERESITA J. LEONARDO-DE CASTRO Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice Chairperson CONCHITA CARPIO MORALES Associate Justice LUCAS P. BERSAMIN Associate Justice

MARTIN S. VILLARAMA, JR. Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, 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. REYNATO S. PUNO Chief Justice

Footnotes
1

Rollo, G.R. No. 177731, pp. 3-55. Id. at 17. Id. at 69.

On July 2, 1980, TCT No. 23552 was issued canceling TCT No. 21926; TCT No. 23553 cancelled TCT No. 21925; and TCT No. 23554 cancelling TCT No. 21924, all in the name of GSIS.
5

Rollo, G.R. No. 177731, p. 119. Id. at 110-125. Id. at 70-71. Id. at 477. Id. at 72. Id. at 176.

10

11

GSIS attached an internal Memorandum (Annex "A") dated December 18, 2003 to its Motion to Quash, with subject "Appraisal of Property" (San Antonio Village), and provides: 2. Valuation 2.1 Pricing The evaluation of the prices of lot (sic) was made on the basis of the zonal valuation costs prepared by the Bureau of Internal Revenue as certified by [the] Revenue District Officer of Pasig City, Metro Manila to insure viability, subject to the prevailing conditions. 2.2 Lot pricing Prevailing prices at Malvar [St.] is xxx P12,000./sq. m. (zonal). For Amber, Araneta, Atienza, Capinpin, [L]im, Lukban, [and] Segundo [Sts.], xxx price is P15,000/sq. m. (zonal). [Per our] own appraisal, the price is reasonable and may therefore be adopted. Remarks: Appraisal was based on the street where the lots are situated for reasons of (sic) property lots [were] not listed on the appraisal request.
12

Rollo, G.R. No. 177731, p. 194.

Petitioner GSIS filed a Reply to the Opposition to Defendants Motion to Quash Writ of Execution; rollo, G.R. No. 175393, pp. 198-209.
13 14

Rollo, G.R. No. 177731, p. 73. Id. at 286-295. Id. at 298-299. Id. at 300.

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Supra note 16. Rollo, G.R. No. 177731, pp. 86-87. Rollo, G.R. No. 175393, pp. 224-237. Id. at 240-242 Rollo, G.R. No. 177731, pp. 451-465. Id. at 89-95. Id. at 98-100. Id. at 59-73. Id. at 466-470. Rollo, G.R. No. 175393, p. 11. Rollo, G.R. No. 175393, p. 270. Id. at 322-324. Id. at 323-324. Rollo, G.R. No. 177731, pp. 472-473. Id. at 474-476. Rollo, G.R. No. 175393, p. 410. Rollo, G.R. No. 177731, p. 44. Rollo, G.R. No. 175393, pp. 605-670. Id. at 618-619. Id. at 634. Id. at 636. Id. at 638. Id. at 643. Id. at 646. Id. at 647. G.R. No. 151439, June 21, 2004, 432 SCRA 529.

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Rollo, G.R. No. 175393, pp. 649-650. Id. at 839-910. Id. at 858-862. Id. at 861-862. Id. at 865. G.R. No. 138500, September 16, 2005, 470 SCRA 73. Rollo, G.R. No. 175393, p. 889. Id. at 891. Id. at 894. G.R. No. 140393, September 11, 2001, 365 SCRA 1. Rollo, G.R. No. 175393, p. 900. Id. at 901-902. Id. at 904-905. Id. at 906-907. Id. at 909-910. G.R. No. 153923, October 2, 2009. G.R. No. 81524, February 4, 2000, 324 SCRA 714, 726. G.R. No. 120739, July 20, 2000, 336 SCRA 258, 265. G.R. No. 127941, January 28, 1999, 302 SCRA 331, 341. G.R. No. 136228, January 30, 2001, 350 SCRA 568, 578. Emphasis ours. Rollo, G.R. No. 177731, pp. 79-81. GSIS v. Santiago, G.R. No. 155206, October 28, 2003, 414 SCRA 563, 570. Rollo, G.R. No. 177731, pp. 81-87. Id. at 89-91. Collantes v. Court of Appeals, G.R. No. 169604, March 6, 2007, 517 SCRA 561, 568. G.R. No. 181969, October 2, 2009.

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Ibid. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-27294 June 28, 1983 ALFREDO ROA, JR., LETICIA ROA DE BORJA, RUBEN ROA, CORNELIO ROA and ELSIE ROA-CACNIO (as heirs of the late Alfredo Roa, Sr.). petitioners, vs. HON. COURT OF APPEALS and the spouses JOAQUIN CASIO and CUSTODIA VALDEHUESA, respondents. Alberto Cacnio for petitioners. Melecio Virgilio Law Office for respondents.

GUERRERO, J.: Appeal by way of certiorari from the Decision of the Court of Appeals 1 in CA-G.R. No. 34746-R entitled "Alfredo Roa, Plaintiff-Appellant, versus Joaquin Casio et al., Defendants-Appellees," and from the Resolution of the said Court 2 denying plaintiff-appellant's motion for reconsideration of the said Decision. On September 1, 1955, an action for recovery of possession of a parcel of land was filed before the Court of First Instance of Misamis Oriental by Alfredo Roa, Sr. (now deceased and subsequently substituted by his heirs, the herein petitioners) against respondent spouses, Joaquin Casio and Custodia Valdehuesa (real name appears to be Teodosia Valdehuesa), successors-in- interest of one Pablo Valdehuesa, now deceased. In his complaint, Alfredo Roa, Sr. alleged that the said land is agricultural; that it is situated in Bugo, formerly within the municipality of Tagoloan, Misamis Oriental, now comprised within the limits of the City of Cagayan de Oro; that it is registered in his name under Original Certificate of Title No. T-21D; that he found the private respondents occupying said land. He prayed that possession of the same be returned to him and that he be awarded actual and moral damages in the sum of P10,000.00. In answer to the complaint, respondent spouses alleged that the land in question formerly belonged to one Pablo Valdehuesa, father of respondent Custodia (Teodosia) Valdehuesa and now deceased; that it was however titled in the name of Alfredo Roa, Sr., Trinidad Reyes Roa, Esperanza Roa de Ongpin, Concepcion Roa and her husband Zosimo Roa in Land Registration Case No. 12, G.R.L.O. Record No. 10003 of the Court of First Instance of Misamis Oriental by virtue of an agreement entered into between the Roas and said Pablo Valdehuesa; that the conditions of the said compromise agreement were never complied with by the Roas notwithstanding the death of Pablo Valdehuesa in 1928 and despite repeated demands for compliance thereof; that the heirs of said Pablo Valdehuesa sold the land in question to them on April 30, 1930, after rescinding the aforementioned compromise agreement; and that they now enjoy the privileges of absolute ownership over said land by reason of their continuous and adverse possession thereof since time immemorial. By way of counterclaim, the respondents prayed for the reconveyance of the said parcel of land contending that the compromise agreement created an implied trust between the parties to it, and for damages in the amount of P10,000.00. In answer to private respondent's counterclaim, Alfredo Roa, Sr. maintained that the heirs of Pablo Valdehuesa cannot rescind the compromise agreement by their own act alone or without going to court; and that the alleged

sale of the said heirs to private respondents was null and void, in view of the fact that respondent spouses knew that the land was then titled in the name of the Roas under Act 496. On December 22, 1959, the parties submitted to the Court a quo an agreed Stipulation of Facts, to wit: STIPULATION OF FACTS That parties herein, assisted by their respective attorneys, have agreed on the following facts: 1. That the plaintiff and the defendants are all of age and with capacity to sue and be sued. 2. That the plaintiff and his brothers and sisters Trinidad Reyes Roa, Esperanza Roa de Ongpin, Concepcion Roa and Zosimo Roa, husband of the latter, were the owners proindiviso of a parcel of land located in Tagoloan, Misamis Oriental, containing an area of several hundred hectares, and sometime in 1925, and for the purpose of registering their title to said parcel of land, the said co- owners filed an application with the Court of First Instance of Misamis Oriental, and said application was docketed in said Court as Expediente No. 12, G.L.R.O. Record No. 10003. 3. That in the application as well as in the plans accompanying said application in Expediente No. 12, G.L.R.O. No. 10003, was included a parcel of land which is now the portion in litigation in this case. 4. That one Pablo Valdehuesa filed an opposition in said Expediente No. 12, G.L.R.O. Record No. 10003. claiming absolute and exclusive ownership over a portion which is now the property under litigation. 5. That sometime during the year 1925, the co-owners, said Concepcion Roa, Esperanza Roa de Ongpin and Trinidad Reyes Roa and Zosimo Roa entered into an agreement with the said Pablo Valdehuesa, and the terms of their agreement are contained in the document hereto attached, made a part hereof, and marked as Exhibit "1". 6. That in compliance with his obligation under and by virtue of said Exhibit " 1" the said Pablo Valdehuesa withdrew the opposition filed by him in said case Expediente No. 12, G.L.R.O. Record No. 10003, and as the result of said withdrawal, the plaintiff and his co-owners succeeded in registering their title to their property, including the portion owned by Pablo Valdehuesa as claimed in his opposition. 7. That the said Pablo Valdehuesa died in May of 1928, and upon his death his estate passed to the ownership of his widow and legitimate children including all his rights under said Exhibit " 1 " to the property in question. 8. That since then the property in question has been in the possession of the defendants, and their possession together with the possession of their predecessors in said property has been open, continuous and uninterrupted to this date. 9. That sometime after the issuance of title in favor of the plaintiff (Transfer Certificate of Title No. 21-A) and his aforementioned brothers and sisters covering the parcel of land subject matter of the application filed by them in Expediente No. 12, G.L.R.O. Record No. 10003, the said plaintiff and his brothers and sisters partitioned among themselves said property, and plaintiff was adjudicated a share in said property, of which the parcel of land covered by the opposition of Pablo Valdehuesa withdrawn under the terms of Exhibit " 1" is a part or portion of said charge, and covered by T-21-D (copy attached as Exh. "A").

10. That the portion in litigation as correctly described in paragraph 3 of the complaint is covered by the certificate of title referred to above. 11. That in 1955 the plaintiff had a surveyor relocate the corners and boundaries of his land as described in his title and that the portion of about 2 hectares on the eastern end of the land is in the possession and is actually occupied by the defendant. This is the portion in litigation described in par. 3 of the complaint . 12. That Expediente No. 12, G.L.R.O. Record No. 10003 have been totally destroyed during the last World War, and the parties reserve the right to present additional evidence during the hearing of this case. Cagayan de Oro City, December 22, 1959. ( S g d . ) A L F R E D O R O A

P l a i n t i f f (Sgd.) HERNA NDO PINEDA (Attorne y for Plaintiff) (Sgd.) JOAQUIN CASIO

(Sgd.) CUSTO DIA VALDE HUESA (Defend ants) (Sgd.) MANUEL C. FERNANDEZ (Sgd.) CONCO RDIO C. DIEL (Attorne y for defenda nts") The aforesaid compromise agreement mentioned in paragraph 5 of the agreed Stipulation of Facts was thereafter ratified on May 11, 1927 as shown in Exhibit " 1" as follows: SEPAN TODOS LOS QUE LA PRESENTE VIEREN : Que nosotros, los abajo firmantes, mayores de edad hacemos constar: 1. Que somos los dueos mancomunados de la propiedad conocida por Terrenos de Bugu, en el municipio de Tagoloan, provincia de Misamis. 2. Que en la tramitacion del Exp. No.12,G.L.R.O.,Record No. 10003, para el registro de dicha propiedad, el Sr. Pablo Valdehuesa del municipio de Tagoloan, que era uno de los opositores, consintio en retirar su oposicion contra nuestra citada solicitud de registro a condicion de que le reconozcamos su dominio y propiedad sobre una parcela de terreno dentro de la comprension de Bugu que el ocupaba, o se le compre, y de otro modo se le compense al reintegrarnos dicha parcela en tiempo oportuno. La descripcion del terreno referido cuya extension es de una hectares, cuarenta y nueve areas y cincuenta y nueve centiareas, aparece en el escrito de oposicion que obra en el referido Exp. 12, y que luego fue retirado por convenio de partes. 3. Por tanto, en complimiento de dicho convenio y como consecuencia del mismo, ratificamos lo que tenemos prometido, para lo cual autorizamos al Sr. Zosimo Roa a que busque y adquiera otro pedazo de terreno fuera de la comprension de Bugu, de una hectarea, cuarenta y nueve areas y cincuenta y nueve centiareas, poco mas o menos, y que sea acceptable para el Sr. Pablo Valdehuesa, como canje or permuta con la parcela que el ocupa; en la inteligencia de que el valor de compra no exceda de P400.00 en su defecto, si no se encuentra un terreno que sea satisfactorio para el Sr. Pablo Valdehuesa, se le compensara el reintegro arriba citado en la mencionada cantidad de P400.00. 4. Por su parte, el Sr. Pablo Valdehuesa, acepta todo lo establecido en este documento, obligandose a respetarlo y acatarlo. En testimonio de todo lo cual, firmamos el presente documento en Cagayan de Misamis, hoy, 11 de Mayo de 1927. (Sgd.) Trinidad Roa de Reyes (Sgd.) Esperanza Roa de Ongpin

(Sgd.) Concepcion Roa (Sgd.) Zosimo Roa __________________________ Alfredo Roa ___________________________ Pablo Valdehuesa Pursuant to said Exhibit "1", Concepcion, Esperanza, Trinidad and Zosimo, all surnamed Roa, agreed to replace the land of Pablo Valdehuesa with another parcel of land with an area of 1.4959 hectares to be given to Pablo Valdehuesa in exchange for the land occupied by him, or if said land was not acceptable to him, to pay him the amount of P400.00. Neither of these undertakings was complied with by the Roas and Pablo Valdehuesa continued in possession of the land occupied by him until the same was sold by the heirs of Pablo Valdehuesa to the respondent spouses on April 30, 1930. On March 6, 1964, the lower court rendered the decision ordering the plaintiff Alfredo Roa to reconvey the land in dispute to the defendants, now the respondent spouses, on the ground that same could not have been registered in the name of the plaintiff and his brother and sisters if not for the compromise agreement aforestated and further to pay said defendants the amount of P1,000.00 as attorney's fees plus costs. On appeal taken by Alfredo Roa, the appellate court affirmed the decision of the lower court and declared that (a) the compromise agreement created an express trust between the Roa brothers and sisters, including Alfredo, Sr., (b) that the respondent spouses' action for reconveyance was imprescriptible on the authority of Mirabiles, et al. v. Quito, et al., L- 14008, October 18, 1956; and (c) that Alfredo Roa cannot invoke the indefeasibility and imprescriptibility of the Torrens title issued in his name for the land in dispute since the said title was secured by him in breach of an express trust, and thus, the Court ordered the reconveyance of the property within fifteen (15) days from the finality of the decision. Alfredo Roa, now substituted by his heirs, the herein petitioners Alfredo Roa, Jr., Leticia Roa de Borja, Ruben Roa, Cornelio Roa and Elsie Roa-Cacnio, moved to reconsider the adverse decision. Acting on this motion for reconsideration, the Court of Appeals in a majority resolution denied the said motion, and while conceding that "the creation of an express trust leaves room for doubt," the said Court ruled that the compromise agreement, at the least gave rise to an implied trust under Art. 1456 of the New Civil Code. Hence, petitioners filed this present petition on the following assignment of errors: I. The respondent Court of Appeals erred when it ruled that Alfredo Roa, the petitioners' predecessor-in-interest, was bound by the compromise agreement (Exh. "I") in the execution of which, according to the Stipulation of Facts, said Alfredo Roa neither participated nor signed. II. On the assumption that the aforementioned compromise agreement was binding upon Alfredo Roa, the respondent Court of Appeals erred when it held the said agreement, which stipulated the conveyance of the property in dispute for a consideration, as having established a trust relationship between the parties to it. III. The respondent Court of Appeals erred when it held that the ruling in the case of Gerona, et al. va. De Guzman, G.R. No. L-19060, May 29, 1964, is inapplicable to the case at bar. On the first assigned error, We reject the contention of the petitioners that Alfredo Roa, Sr. was not bound by the compromise agreement for not being a participant or signatory thereto. It may be true that Alfredo Roa, Sr. did not sign the compromise agreement, Exh. " 1 ", for he was then in Manila working as a newspaperman but he certainly benefited from the effects of the compromise agreement which obliged Pablo Valdehuesa to withdraw, as he did withdraw his opposition to the registration of the Roa property under the Torrens system.

The Roa property was subsequently registered without opposition and title was issued thereto in the name of Alfredo Roa, his brother Zosimo and his sisters Trinidad, Esperanza and Concepcion, all surnamed Roa as coowners thereof. Certainly, the Roas may not escape compliance from their obligation under the compromise agreement by partitioning the property and assigning the property in dispute as part of the share of the petitioners. Moreover, it will be a pure and simple case of unjust enrichment for petitioners to acquire and own the property of Pablo Valdehuesa, without paying the value thereof or exchanging the land with another with an equal area as originally agreed. With respect to the second assignment of error, We do not agree with the holding of the respondent appellate court that an express trust was created between the parties by reason of the compromise agreement entered into between them. Express trusts are created by the intention of the trustor or one of the parties (Article 1441, New Civil Code). While no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended (Article 1444, New Civil Code), in the case at bar, We find no direct and positive intent to create a trust relationship between the parties to the compromise agreement under which Pablo Valdehuesa agreed to withdraw his opposition to the application for registration upon the commitment of the Roas to give Valdehuesa another piece of land of equal area or pay its price of P 400.00. It seems clear to Us that the Roas under the compromise agreement did not commit themselves to hold the lot claimed by Pablo Valdehuesa for Pablo Valdehuesa and in Pablo Valdehuesa's name. If the compromise agreement did not result to an express trust relationship, did it, however, give rise to an implied trust? Private respondents claim that under the terms of the compromise agreement, the land claimed by Pablo Valdehuesa should be deemed held in trust by the Roas when the latter failed to relocate him or pay the price therefor. The respondent appellate court took private respondents' position, and opined, 3 thus It could thus be gleaned that had it not been for the promise of the Roas contained in Exhibit 1, Valdehuesa would not have been induced to withdraw his opposition in the land registration case. When, therefore, the Roas turned their back to a solemn agreement entered in a court proceedings, they were guilty of fraud. Fraud is every kind of deception, whether in the form of insidious machinations, manipulations, concealments or misrepresentations, for the purpose of leading another party into error and then execute a particular act. It must have a determining influence on the consent of the victim." (4 Tolentino, Civil Code, p. 462) It results from the foregoing that although the creation of an express trust leaves room for doubt, by operation of law, an implied trust is created, 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. (N.C.C)". We cannot sustain the holding of the respondent appellate court in its Resolution denying petitioners' motion for reconsideration that by operation of law an implied trust was created under the terms of the compromise agreement in the light of Article 1456 of the New Civil Code cited above. We rule that Art. 1456 is not applicable because it is quite clear that the property of Pablo Valdehuesa was acquired by the Roas not through mistake or fraud but by reason of the voluntary agreement of Valdehuesa to withdraw his opposition to the registration of the land under the Torrens system. There is incontrovertible evidence that the Roas intended to abide by the compromise agreement at the time of the execution of the same. The private respondents themselves introduced additional evidence which showed that on May 11, 1927, Trinidad Roa, Esperanza Roa de Ongpin, Concepcion Roa and Zosimo Roa confirmed in writing the terms and conditions of the agreement they had entered into with Pablo Valdehuesa in the land registration proceedings. Even the respondent appellate court expressly determined the aforesaid failure of the Roas to comply with the terms of the compromise agreement to be an afterthought; thus,

The change of mind of the plaintiff-appellant later is of no moment in the case at bar. 4
While it is Our ruling that the compromise agreement between the parties did not create an express trust nor an implied trust under Art. 1456 of the New Civil Code, We may, however, make recourse to the principles of the general law of trusts, insofar as they are not in conflict with the New Civil Code, Code of Commerce, the Rules of Court and special laws which under Art. 1442 of the New Civil Code are adopted. While Articles 1448 to 1456 of the New Civil Code enumerates cases of implied trust, Art. 1447 specifically stipulates that the enumeration of the cases of implied trust does not exclude others established by the general law of trusts, but the limitations laid down in Art 1442 shag be applicable. In American law and jurisprudence, We find the following general principles: A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or retentions of property of which equity, in accordance with its fundamental principles and the traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust. (76 Am. Jur. 2d, Sec. 221, pp. 446-447). And specifically applicable to the case at bar is the doctrine that "A constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it." (76 Am. Jur. 2d, Sec. 222, p. 447). The above principle is not in conflict with the New Civil Code, Code of Commerce, Rules of Court and special laws. And since We are a court of law and of equity, the case at bar must be resolved on the general principles of law on constructive trust which basically rest on equitable considerations in order to satisfy the demands of justice, morality, conscience and fair dealing and thus protect the innocent against fraud. As the respondent court said, "It behooves upon the courts to shield fiduciary relations against every manner of chickanery or detestable design cloaked by legal technicalities." The next point to resolve is whether the counterclaim of private respondents for the reconveyance of the property in dispute has already prescribed in the light of established jurisprudence that the right to enforce an implied trust prescribes in ten years. Admittedly, Pablo Valdehuesa and his heirs remained in possession of the property in question in 1925 when by reason of the compromise agreement Valdehuesa withdrew his opposition to the registration applied for by the Roas for which reason the latter were able to obtain a Torrens title to the property in their name. However, Valdehuesa and his heirs continued their possession of the land until he sold the property in question to private respondents herein on April 30, 1930 and the latter remained in possession and were never disturbed in their occupancy until the filing of the original complaint for recovery of possession on Sept. 1, 1955 after demand was made upon them when a relocation survey initiated by petitioners established that private respondents were actually occupying about 2 hectares on the eastern end of the property. Upon these facts, the prescriptive period may only be counted from the time petitioners repudiated the trust relation in 1955 upon the filing of the complaint for recovery of possession against private respondents so that the counterclaim of the private respondents contained in their amended answer of June 12, 1956 wherein they asserted absolute ownership of the disputed realty by reason of their continuous and adverse possession of the same is well within the tenyear prescriptive period.

Finally, the case at bar is quite similar to the case of Dolores Pacheco vs. Santiago Arro, 85 Phil. 505, wherein the claim to the lots in the cadastral case was withdrawn by the respondents relying upon the assurance and promise made in open court by Dr. M. Y. in behalf of J. Y. y R., the predecessor-in-interest of the petitioners and the Court held that a trust or a fiduciary relation between them arose, or resulted therefrom, or was created thereby and the trustee cannot invoke the statute of limitations to bar the action and defeat the right of the cestuis que trustent. (Cited in Tolentino, Civil Code of the Philippines, Vol. IV, p. 627). WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED. SO ORDERED. Concepcion, Jr., De Castro and Escolin, JJ., concur. A quino J., concurs in the result Makasiar (Chairman) and Abad Santos, JJ., took no part.

Footnotes 1 Third Division: Yatco, J., ponente; Capistrano, J. and Caizares, J., concurring. 2 Special Division of Five: Yatco, J., ponente; Canizares J., concurring; Gatmaitan, J., concurs in a separate opinion; Capistrano, J., and Alvendia, J., dissenting. 3 Rollo, p. 77. 4 Decision, CA., p. 7. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-75342 March 15, 1990 SPOUSES CELEDONIO MANZANILLA and DOLORES FUERTE, and INES CARPIO, petitioners, vs. HON. COURT OF APPEALS and JUSTINA CAMPO, respondents. Basilio V. Lanoria for petitioners. Villamor J. Antonio for private respondent.

MEDIALDEA, J.: This is a petition for review on certiorari of the decision (pp. 111-118, Rollo) of the Intermediate Appellate Court, now Court of Appeals, in AC-G.R. CV No. 00925 entitled "Justina Campo, Plaintiff-Appellee, versus Sps. Celedonio Manzanilla and Dolores Fuerte, and Ines Carpio, Defendants-Appellants", which affirmed the

decision (pp. 55-56,Rollo) of the Court of First Instance of Rizal, Branch IX, Quezon City, now Regional Trial Court of Quezon City, in Civil Case No. Q-28061. The facts of the case are not disputed. In 1963, spouses Celedonio and Dolores Manzanilla (spouses Manzanilla) sold on installment an undivided one-half portion of their residential house and lot covered by TCT No. 59223 and located at No. 12, Casiana St., Santol, Quezon City. At the time of the sale, the said property was mortgaged to the Government Service Insurance System (GSIS), which fact was known to the vendees, spouses Magdaleno and Justina Campo. The Campo spouses took possession of the premises upon payment of the first installment on April 17, 1963 and up to the present. Some payments (Exhibits "A" to "A-1") were made to petitioners while some were made directly to GSIS (Exhibits "A-10" to "A-29"). On May 17, 1965, the GSIS filed its application to foreclose the mortgage on the property for failure of the Manzanilla spouses to pay their monthly amortizations. On October 11, 1965, the property was sold at public auction where GSIS was the highest bidder. Two months before the expiration of the period to redeem or on August 31, 1966, the Manzanilla spouses executed a Deed of Absolute Sale (Exhibit "D") of the undivided one half portion of their property in favor of the Campo spouses. Upon the expiration of the period to redeem without the Manzanilla spouses exercising their right of redemption, title to the property was consolidated in favor of the GSIS and a new title (TCT No. 135031) issued in its name. In January 1969, the Manzanilla spouses made representations and succeeded in re-acquiring the property from the GSIS. Upon full payment of the purchase price, an Absolute Deed of Sale was executed by GSIS in favor of the Manzanilla spouses. Upon registration thereof on March 19, 1973, a new certificate of title (TCT No. 188293) in the name of the Manzanilla spouses was issued by the Register of Deeds of Quezon City. On May 14, 1973, the Manzanilla spouses mortgaged the property to the Bian Rural Bank. On September 7, 1973, petitioner Ines Carpio purchased the property from the Manzanilla spouses and agreed to assume the mortgage in favor of Bian Rural Bank. On November 12, 1973, private respondent Justina Campo registered her adverse claim over TCT No. 188293 with the Register of Deeds of Quezon City. On October 3, 1977, petitioner Ines Carpio filed an ejectment case against private respondent Justina Campo in Civil Case No. 31350, with the City Court of Quezon City. On July 31, 1979, private respondent Justina Campo (already a widow) filed a complaint (pp. 26-30, Rollo) for quieting of title against the Manzanilla spouses and Ines Carpio with the Court of First Instance of Rizal, Branch IX, Quezon City, now the Regional Trial Court of Quezon City and docketed as Civil Case No. Q-28061, praying among others, for the issuance to her of a certificate of title over the undivided one-half portion of the property in question. Civil Case No. Q-28061 is the subject of this appeal. After trial, a decision promulgated on September 30, 1982 was rendered in favor of the herein private respondent, Justina Campo. The dispositive portion of the decision reads: WHEREFORE, premises considered, judgment is rendered in favor of the plaintiff Justina C. Campo and the defendants and/or all persons claiming rights under them are ordered to desist from exercising rights or ownerships over the half-portion of the plaintiff. The mortgage of the property to the Bian Rural Bank is hereby cancelled in so far as the half- portion is concerned and accordingly, the sale of defendant Ines Carpio regarding the half portion of the

plaintiff is hereby considered null and void. The defendants, spouses Celedonio and Dolores Manzanilla are ordered to surrender their owner's duplicate copy of TCT No. 188293 to the Register of Deeds of Quezon City for its cancellation in order that a new certificate of title could be issued in favor of the plaintiff Justina C. Campo with regards to her half-portion and to execute such document as is necessary to effect said transfer. SO ORDERED. (p. 56, Rollo) The decision was appealed by petitioners, spouses Manzanilla and Ines Carpio, to the Intermediate Appellate Court, now Court of Appeals, which affirmed the said decision of the trial court. Petitioners' Motion For Reconsideration filed with the Court of Appeals was denied on July 16, 1986. Hence, this petition for review under Rule 45 of the Rules of Court on the following issues: 1. WHETHER OR NOT A BUYER OF ONE-HALF PORTION OF A MORTGAGED PROPERTY WITH FULL KNOWLEDGE OF SAID MORTGAGE, MAY DEMAND RECONVEYANCE FROM THE SELLER/MORTGAGOR WHO WAS ABLE TO BUY SAID PROPERTY FROM THE MORTGAGEE AFTER IT WAS LEGALLY FORECLOSED AND OWNERSHIP DULY CONSOLIDATED IN THE NAME OF THE MORTGAGEE, UNDER THE DOCTRINE OF IMPLIED TRUST. 2. WHETHER OR NOT A PURCHASER OF REAL PROPERTY IS BOUND TO GO BEYOND THE TITLE THEREOF IN DETERMINING THE REAL STATUS OF SAID PROPERTY TO BE CONSIDERED A BUYER IN GOOD FAITH. 3. WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES (p. 12, Rollo). The main issue to be resolved in this case is whether, under the facts stated, petitioners Manzanillas are under any legal duty to reconvey the undivided one-half portion of the property to private respondent Justina Campo. It is petitioners' contention that a buyer of one-half portion of a mortgaged property who, at the time of the sale had full knowledge of the existence of the mortgage, has no legal right to demand reconveyance from the seller/mortgagor who was able to buy said property from the mortgagee after it was legally foreclosed and ownership duly consolidated in the name of the latter. Private respondent, on the other hand contends that petitioners committed fraud upon them (Campo spouses) by deliberately allowing the loan to lapse, the mortgage to be foreclosed and the subsequent reacquisition of the same after the expiration of the period of redemption without exercising their right of redemption. Upon the re-acquisition by the Manzanillas of the whole property from GSIS, they are considered trustees of an implied trust in favor of private respondent Campo. Both the court a quo and respondent appellate court share the view of private respondent. Both courts believe that petitioners exercised fraud upon the Campo spouses when they bought back the whole property believing that as the GSIS acquired absolute ownership and title to the property private respondent can no longer be entitled to the same. The petition is impressed with merit. There is no sufficient basis for the trial court to conclude that herein petitioners acted in bad faith in their dealings with the Campo spouses. The latter had full knowledge of the existing mortgage of the whole property in favor of GSIS prior to the sale of the one-half portion to them. There is also no showing that as one of the considerations of the sale, herein petitioners undertook to release the property from the mortgage at all costs. With this condition of the property at the time of the sale, private respondents were forewarned of the consequences of their transaction with the petitioners.

There is also no basis to conclude that petitioners deliberately allowed the loan to lapse and the mortgage to be foreclosed. No specific act or series of acts were presented and proven from which it could be safely concluded that the failure of petitioners to pay off their loan was deliberate. They explained that their financial condition prevented them from dutifully complying with their obligations to the GSIS. In a display of their good faith and fair dealing after the property was foreclosed, the petitioners, realizing the imminent loss of the said property, even granted the private respondent the right to redeem it from the GSIS. This right was granted in the Deed of Absolute Sale executed by petitioners in favor of the Campo spouses. Moreover, it was also stipulated that private respondent recognized the superior lien of GSIS on the property and agreed to be bound by the terms and conditions of the mortgage. These stipulations were all contained in the Deed, as follows: . . . the VENDORS do hereby covenant and agree with the VENDEES that they are lawfully seized in fee of said premises and that they have a perfect right to convey the same and that they will warrant and forever defend the same unto the said vendees, their heirs and assigns against the lawful claim of all persons whomsoever, subject to the mortgage lien in favor of the Government Service Insurance System aforementioned. That the VENDEES recognize the superior lien of the Government Service Insurance System (GSIS) and agree to be bound by the terms and conditions thereof, . . . That the VENDORS likewise agree that in the event the mortgagee, Government Service Insurance System should foreclose the mortgage on the said property, the herein VENDEES, Spouses Magdaleno Campo and Justina Cabuag, their heirs or assigns, shall have the right to redeem or otherwise deal with the Government Service Insurance System (GSIS) in connection with this property. Vendees agree that vendors may repurchase the property within the time provided by law. (pp. 74-75, Rollo) In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem the property from GSIS, title to the property was consolidated in the name of GSIS. The new title cancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean title free from any lien in favor of any person including that of the Campo spouses. If it were true that petitioners deliberately allowed the loan to lapse and the mortgage to be foreclosed, We do not see how these circumstances can be utilized by them to their advantage. There was no guarantee that petitioners would be able to redeem the property in the event the mortgage thereon was foreclosed as in fact they failed to redeem because they had no money. On the other hand, had they opted to eventually exercise their right of redemption after foreclosure, they would be under a legal duty to convey one-half portion thereof sold to the Campo spouses because by then, title to the property would still be in their name. Either way, petitioners were bound to lose either the entire property in case of failure to redeem or the one-half portion thereof sold to private respondent in the case of redemption. Further, should petitioners let the period of redemption lapse without exercising the right of redemption, as what happened in this case, there was no guarantee that the same could be re-acquired by them from GSIS nor would GSIS be under any legal duty to resell the property to them. There may be a moral duty on the part of petitioners to convey the one-half portion of the property previously sold to private respondents. However, they are under no legal obligation to do so. Hence, the action to quiet title filed by private respondent must fail. Justice is done according to law. As a rule, equity follows the law. There may be a moral obligation, often regarded as an equitable consideration (meaning compassion), but if there is no enforceable legal duty, the action must fail although the disadvantaged party deserves commiseration or sympathy. The choice between what is legally just and what is morally just, when these two options do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35 Phil. 769, 788 where he said:

Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be in addition, a violation of law, the commission of what the law knows as an actionable wrong before the courts are authorized to lay hold of the situation and remedy it. (Rural Bank of Paranaque, Inc. vs. Remolado, 62051, March 18, 1985) (135 SCRA 409, 412) In the questioned decision, respondent appellate court ruled that an implied trust exists in favor of private respondents. We do not agree. Article 1456 of the New Civil Code on implied trust has no application in the case at bar. Article 1456 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. There was no mistake nor fraud on the part of petitioners when the subject property was re-acquired from the GSIS. The fact that they previously sold one-half portion thereof has no more significance in this re-acquisition. Private respondent's right over the one-half portion was obliterated when absolute ownership and title passed on to the GSIS after the foreclosure sale. The property as held by GSIS had a clean title. The property that was passed on to petitioners retained that quality of title. As regards the rights of private respondent Ines Carpio, she is a buyer in good faith and for value. There was no showing that at the time of the sale to her of the subject property, she knew of any lien on the property except the mortgage in favor of the Bian Rural Bank. No other lien was annotated on the certificate of title. She is also not required by law to go beyond what appears on the face of the title. When there is nothing on the certificate of title to indicate any cloud or vice in the ownership of the property or any encumbrances thereon, the purchaser is not to explore further than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate right thereof (NGA v. IAC, G.R. No. 68741, January 28, 1988). ACCORDINGLY, the petition is GRANTED. The appealed decision of the Court of Appeals is hereby REVERSED. Civil Case No. Q-28061 for quieting of title is hereby DISMISSED. SO ORDERED. Narvasa, Gancayco and Grio-Aquino, JJ., concur.

Separate Opinions

CRUZ, J., dissenting: I regret I cannot give my concurrence to the well-argued ponencia of Mr. Justice Medialdea because, for all its seemingly flawless logic, there is something in the conclusion reached that does not sit well with my own sense of justice. In Alonzo v. Intermediate Appellate Court, 150 SCRA 261, I had occasion to ponder a similar problem when I thought aloud for the Court:

The question is sometimes asked in serious inquiry or in curious conjecture, whether we are a court of law or a court of justice. Do we apply the law even if it is unjust or do we administer justice even against the law? Thus queried, we do not equivocate. The answer is that we do neither because we are a court both of law and of justice. We apply the law with justice for that is our mission and purpose in the scheme of our Republic. In the case at bar, I am not quite convinced that the Campo spouses agreed to assume the mortgage debt (as otherwise the deed of sale should have said so) or that they understood they were supposed to do so as this has not been clearly shown (in which case the ambiguity should be resolved against the one who caused it). The rights (and duties) of the parties are really uncertain, if not rather baffling. Thus, the petitioners "even granted the private respondent the right to redeem the property, from the GSIS," as the ponencia notes on p. 6, even as the Deed of Absolute Sale also stipulated, somewhat inconsistently, that the "Vendees agree that the Vendors may repurchase the property within the time provided by law." It is possible that the Vendees believed it was the Vendors who were supposed to discharge the mortgage debt, more so since the widow Campo was allowed to remain on the property by the Manzanillas even after they had repurchased it from the GSIS. The law may really support the Manzanillas and Carpio if it is strictly interpreted. But as Justice Holmes observed, "Courts are apt to err by sticking too closely to the words of a law where these words import a policy that goes beyond them." I fear we may be missing the lesson of this thought by not applying the law, as I think we must, not with rigor but with justice.

Separate Opinions CRUZ, J., dissenting: I regret I cannot give my concurrence to the well-argued ponencia of Mr. Justice Medialdea because, for all its seemingly flawless logic, there is something in the conclusion reached that does not sit well with my own sense of justice. In Alonzo v. Intermediate Appellate Court, 150 SCRA 261, I had occasion to ponder a similar problem when I thought aloud for the Court: The question is sometimes asked in serious inquiry or in curious conjecture, whether we are a court of law or a court of justice. Do we apply the law even if it is unjust or do we administer justice even against the law? Thus queried, we do not equivocate. The answer is that we do neither because we are a court both of law and of justice. We apply the law with justice for that is our mission and purpose in the scheme of our Republic. In the case at bar, I am not quite convinced that the Campo spouses agreed to assume the mortgage debt (as otherwise the deed of sale should have said so) or that they understood they were supposed to do so as this has not been clearly shown (in which case the ambiguity should be resolved against the one who caused it). The rights (and duties) of the parties are really uncertain, if not rather baffling. Thus, the petitioners "even granted the private respondent the right to redeem the property, from the GSIS," as the ponencia notes on p. 6, even as the Deed of Absolute Sale also stipulated, somewhat inconsistently, that the "Vendees agree that the Vendors may repurchase the property within the time provided by law." It is possible that the Vendees believed it was the Vendors who were supposed to discharge the mortgage debt, more so since the widow Campo was allowed to remain on the property by the Manzanillas even after they had repurchased it from the GSIS. The law may really support the Manzanillas and Carpio if it is strictly interpreted. But as Justice Holmes observed, "Courts are apt to err by sticking too closely to the words of a law where these words import a policy that goes beyond them." I fear we may be missing the lesson of this thought by not applying the law, as I think we must, not with rigor but with justice.

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