Bus. Org.

I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165849 December 10, 2007
GILBERT G. GUY, Petitioner,
vs.
THE COURT OF APPEALS (8th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170185
IGNACIO AND IGNACIO LAW OFFICES, Petitioner,
vs.
THE COURT OF APPEALS (7th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170186
SMARTNET PHILIPPINES, Petitioner,
vs.
THE COURT OF APPEALS (7th DIVISION), NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY,
GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171066
LINCOLN CONTINENTAL DEVELOPMENT CO., INC., Petitioner,
vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G. CHEU,
GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 176650
LINCOLN CONTINENTAL DEVELOPMENT COMPANY, INC., Petitioner,
vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G. CHEU,
GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:

Before us are five (5) consolidated cases which stemmed from Civil Case No. 04-109444 filed with the
Regional Trial Court (RTC), Branch 24, Manila, subsequently re-raffled to Branch 461 and eventually to
Branch 25.2
The instant controversies arose from a family dispute. Gilbert Guy is the son of Francisco and Simny Guy.
Geraldine, Gladys and Grace are his sisters. The family feud involves the ownership and control of
20,160 shares of stock of Northern Islands Co., Inc. (Northern Islands) engaged in the manufacture,
distribution, and sales of various home appliances bearing the "3-D" trademark.
Simny and her daughters Geraldine, Gladys and Grace, as well as Northern Islands and Emilia
Tabugadir, have been impleaded as respondents in the above-entitled cases. Northern Islands is a
family-owned corporation organized in 1957 by spouses Francisco and respondent Simny Guy. In
November 1986, they incorporated Lincoln Continental Development Corporation, Inc. (Lincoln
Continental) as a holding company of the 50% shares of stock of Northern Islands in trust for their three
(3) daughters, respondents Geraldine, Gladys and Grace. Sometime in December 1986, upon
instruction of spouses Guy, Atty. Andres Gatmaitan, president of Lincoln Continental, indorsed in blank
Stock Certificate No. 132 (covering 8,400 shares) and Stock Certificate No. 133 (covering 11,760 shares)
and delivered them to Simny.

Page 1 of 166
Bus. Org. I Cases – Page 3 Syllabus

In 1984, spouses Guy found that their son Gilbert has been disposing of the assets of their corporations
without authority. In order to protect the assets of Northern Islands, Simny surrendered Stock Certificate
Nos. 132 and 133 to Emilia Tabugadir, an officer of Northern Islands. The 20,160 shares covered by the
two Stock Certificates were then registered in the names of respondent sisters, thus enabling them to
assume an active role in the management of Northern Islands.
On January 27, 2004, during a special meeting of the stockholders of Northern Islands, Simny was
elected President; Grace as Vice-President for Finance; Geraldine as Corporate Treasurer; and Gladys
as Corporate Secretary. Gilbert retained his position as Executive Vice President. This development
started the warfare between Gilbert and his sisters.
On March 18, 2004, Lincoln Continental filed with the RTC, Branch 24, Manila a Complaint for
Annulment of the Transfer of Shares of Stock against respondents, docketed as Civil Case No. 04-
109444. The complaint basically alleges that Lincoln Continental owns 20,160 shares of stock of
Northern Islands; and that respondents, in order to oust Gilbert from the management of Northern
Islands, falsely transferred the said shares of stock in respondent sisters’ names. Lincoln Continental then
prayed for an award of damages and that the management of Northern Islands be restored to Gilbert.
Lincoln also prayed for the issuance of a temporary restraining order (TRO) and a writ of preliminary
mandatory injunction to prohibit respondents from exercising any right of ownership over the shares.
On June 16, 2004, Lincoln Continental filed a Motion to Inhibit the Presiding Judge of Branch 24, RTC,
Manila on the ground of partiality. In an Order dated June 22, 2004, the presiding judge granted the
motion and inhibited himself from further hearing Civil Case No. 04-109444. It was then re-raffled to
Branch 46 of the same court.
On July 12, 2004, Branch 46 set the continuation of the hearing on Lincoln Continental’s application for
a TRO.
On July 13, 2004, respondents filed with the Court of Appeals a Petition for Certiorari and Mandamus,
docketed as CA-G.R. SP No. 85069, raffled off to the Tenth Division. Respondents alleged that the
presiding judge of Branch 24, in issuing the Order dated June 22, 2004 inhibiting himself from further
hearing Civil Case No. 04-109444, and the presiding judge of Branch 46, in issuing the Order dated July
12, 2004 setting the continuation of hearing on Lincoln Continental’s application for a TRO, acted with
grave abuse of discretion tantamount to lack or excess of jurisdiction.
Meanwhile, on July 15, 2004, the trial court issued the TRO prayed for by Lincoln Continental directing
respondents to restore to Gilbert the shares of stock under controversy. In the same Order, the trial
court set the hearing of Lincoln Continental’s application for a writ of preliminary injunction on July 19,
20, and 22, 2004.
On July 16, 2004, the Court of Appeals (Tenth Division) issued a TRO enjoining Branch 46, RTC, Manila
from enforcing, maintaining, or giving effect to its Order of July 12, 2004 setting the hearing of Lincoln
Continental’s application for a TRO.
Despite the TRO, the trial court proceeded to hear Lincoln Continental’s application for a writ of
preliminary injunction. This prompted respondents to file in the same CA-G.R. SP No. 85069 a
Supplemental Petition for Certiorari, Prohibition, and Mandamus seeking to set aside the Orders of the
trial court setting the hearing and actually hearing Lincoln Continental’s application for a writ of
preliminary injunction. They prayed for a TRO and a writ of preliminary injunction to enjoin the trial court
(Branch 46) from further hearing Civil Case No. 04-109444.
On September 17, 2004, the TRO issued by the Court of Appeals (Tenth Division) in CA-G.R. SP No. 85069
expired.
On September 20, 2004, Gilbert filed a Motion for Leave to Intervene and Motion to Admit Complaint-
in-Intervention in Civil Case No. 04-109444. In its Order dated October 4, 2004, the trial court granted
the motions.
Meantime, on October 13, 2004, the trial court issued the writ of preliminary mandatory injunction
prayed for by Lincoln Continental in Civil Case No. 04-109444.
On October 20, 2004, the Court of Appeals (Tenth Division) denied respondents’ application for
injunctive relief since the trial court had already issued a writ of preliminary injunction in favor of Lincoln
Continental. Consequently, on October 22, 2004, respondents filed with the Tenth Division a Motion to
Withdraw Petition and Supplemental Petition in CA-G.R. SP No. 85069.
Page 2 of 166
Bus. Org. I Cases – Page 3 Syllabus

On October 26, 2004, respondents filed a new Petition for Certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 87104, raffled off to the Eighth Division. They prayed that the TRO and writ
of preliminary injunction issued by the RTC, Branch 46, Manila be nullified and that an injunctive relief
be issued restoring to them the management of Northern Islands. They alleged that Gilbert has been
dissipating the assets of the corporation for his personal gain.
On October 28, 2004, the Court of Appeals Eighth Division issued a TRO enjoining the implementation
of the writ of preliminary injunction dated October 13, 2004 issued by the trial court in Civil Case No. 04-
109444; and directing Lincoln Continental to turn over the assets and records of Northern Islands to
respondents.
On November 2, 2004, respondents filed with the appellate court (Eighth Division) an
Urgent Omnibus Motion praying for the issuance of a break-open Order to implement its TRO.
On November 4, 2004, the Eighth Division issued a Resolution granting respondents’ motion. Pursuant
to this Resolution, respondents entered the Northern Islands premises at No. 3 Mercury Avenue, Libis,
Quezon City.
On November 18, 2004, Gilbert filed with this Court a petition for certiorari, docketed as G.R. No. 165849,
alleging that the Court of Appeals (Eighth Division), in granting an injunctive relief in favor of
respondents, committed grave abuse of discretion tantamount to lack or in excess of jurisdiction. The
petition also alleges that respondents resorted to forum shopping.
Meanwhile, on December 16, 2004, Smartnet Philippines, Inc. (Smartnet) filed with the Metropolitan Trial
Court (MeTC), Branch 35, Quezon City a complaint for forcible entry against respondents, docketed
as Civil Case No. 35-33937. The complaint alleges that in entering the Northern Islands premises,
respondents took possession of the area being occupied by Smartnet and barred its officers and
employees from occupying the same.
Likewise on December 16, 2004, Ignacio and Ignacio Law Offices also filed with Branch 37, same court,
a complaint for forcible entry against respondents, docketed as Civil Case No. 34106. It alleges that
respondents forcibly occupied its office space when they took over the premises of Northern Islands.
On December 22, 2004, the Eighth Division issued the writ of preliminary injunction prayed for by
respondents in CA-G.R. SP No. 87104.
Subsequently, the presiding judge of the RTC, Branch 46, Manila retired. Civil Case No. 04-109444 was
then re-raffled to Branch 25.
On January 20, 2005, respondents filed with the Eighth Division of the appellate court a Supplemental
Petition for Certiorari with Urgent Motion for a Writ of Preliminary Injunction to Include Supervening
Events. Named as additional respondents were 3-D Industries, Judge Celso D. Laviña, Presiding Judge,
RTC, Branch 71, Pasig City and Sheriff Cresencio Rabello, Jr. This supplemental petition alleges that
Gilbert, in an attempt to circumvent the injunctive writ issued by the Eighth Division of the appellate
court, filed with the RTC, Branch 71, Pasig City a complaint for replevin on behalf of 3-D Industries, to
enable it to take possession of the assets and records of Northern Islands. The complaint was docketed
as Civil Case No. 70220. On January 18, 2005, the RTC issued the writ of replevin in favor of 3-D Industries.
On April 15, 2005, respondents filed with the Eighth Division a Second Supplemental Petition
for Certiorari and Prohibition with Urgent Motion for the Issuance of an Expanded Writ of Preliminary
Injunction. Impleaded therein as additional respondents were Ignacio and Ignacio Law Offices,
Smartnet, Judge Maria Theresa De Guzman, Presiding Judge, MeTC, Branch 35, Quezon City, Judge
Augustus C. Diaz, Presiding Judge, MeTC, Branch 37, Quezon City, Sun Fire Trading Incorporated, Zolt
Corporation, Cellprime Distribution Corporation, Goodgold Realty and Development Corporation,
John Does and John Doe Corporations. Respondents alleged in the main that the new corporations
impleaded are alter egos of Gilbert; and that the filing of the forcible entry cases with the MeTC was
intended to thwart the execution of the writ of preliminary injunction dated December 22, 2004 issued
by the Court of Appeals (Eighth Division) in CA-G.R. SP No. 87104.1awphil
On April 26, 2005, the Eighth Division issued a Resolution admitting respondents’ new pleading. On
August 19, 2005, the Eighth Division (now Seventh Division) rendered its Decision in CA-G.R. SP No. 87104,
the dispositive portion of which reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and the October 13, 2004 Order
and the October 13, 2004 Writ of Preliminary Mandatory Injunction issued by Branch 46 of the Regional
Page 3 of 166
Bus. Org. I Cases – Page 3 Syllabus

Trial Court of Manila are hereby REVERSED and SET ASIDE. The December 17, 2004 Order and Writ of
Preliminary Injunction issued by this Court of Appeals are hereby MADE PERMANENT against all
respondents herein.
SO ORDERED.
Meanwhile, in a Decision3 dated September 19, 2005, the RTC, Branch 25, Manila dismissed the
complaint filed by Lincoln Continental and the complaint-in-intervention of Gilbert in Civil Case No. 04-
109444, thus:
WHEREFORE, in view of the foregoing, the Complaint and the Complaint-in-Intervention are hereby
DISMISSED. Plaintiff and plaintiff-intervenor are hereby ordered to jointly and severally pay defendants
the following:
(a) Moral damages in the amount of Php2,000,000.00 each for defendants Simny Guy,
Geraldine Guy, Grace Guy-Cheu and Gladys Yao;
(b) Moral damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;
(c) Exemplary damages in the amount of Php2,000,000.00 each for defendants Simny Guy,
Geraldine Guy, Grace Guy-Cheu, and Gladys Yao;
(d) Exemplary damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;
(e) Attorney’s fees in the amount of Php2,000.000.00; and
(f) Costs of suit.
SO ORDERED.
The trial court held that Civil Case No. 04-109444 is a baseless and an unwarranted suit among family
members; that based on the evidence, Gilbert was only entrusted to hold the disputed shares of stock
in his name for the benefit of the other family members; and that it was only when Gilbert started to
dispose of the assets of the family’s corporations without their knowledge that respondent sisters
caused the registration of the shares in their respective names.
Both Lincoln Continental and Gilbert timely appealed the RTC Decision to the Court of Appeals,
docketed therein as CA-G.R. CV No. 85937.
On September 15, 2005, 3-D Industries, Inc. filed a petition for certiorari, prohibition,
and mandamus with this Court assailing the Decision of the Court of Appeals in CA-G.R. SP No. 87104
setting aside the writ of preliminary injunction issued by the RTC, Branch 46. The petition was docketed
as G.R. No. 169462 and raffled off to the Third Division of this Court.
On October 3, 2005, the Third Division of this Court issued a Resolution4 dismissing the petition of 3-D
Industries in G.R. No. 169462. 3-D Industries timely filed its motion for reconsideration but this was denied
by this Court in its Resolution5 dated December 14, 2005.
Meanwhile, on October 10, 2005, Gilbert, petitioner in G.R. No. 165849 for certiorari, filed with this Court
a Supplemental Petition for Certiorari, Prohibition, and Mandamus with Urgent Application for a Writ of
Preliminary Mandatory Injunction challenging the Decision of the Court of Appeals (Seventh Division),
dated August 19, 2005, in CA-G.R. SP No. 87104. This Decision set aside the Order dated October 13,
2004 of the RTC, Branch 46 granting the writ of preliminary injunction in favor of Lincoln Continental.
On November 8, 2005, Ignacio and Ignacio Law Offices and Smartnet filed with this Court their petitions
for certiorari, docketed as G.R. Nos. 170185 and 170186, respectively.
On February 27, 2006, Lincoln Continental filed with this Court a petition for review
on certiorari challenging the Decision of the Court of Appeals (Seventh Division) in CA-G.R. CV No.
85937, docketed as G.R. No. 171066.
On March 20, 2006, we ordered the consolidation of G.R. No. 171066 with G.R. Nos. 165849, 170185,
and 170186.
In the meantime, in a Decision dated November 27, 2006 in CA-G.R. CV No. 85937, the Court of
Appeals (Special Second Division) affirmed the Decision in Civil Case No. 04-109444 of the RTC (Branch
25) dismissing Lincoln Continental’s complaint and Gilbert’s complaint-in-intervention, thus:
WHEREFORE, the appeals are dismissed and the assailed decision AFFIRMED with modifications that
plaintiff and plaintiff-intervenor are ordered to pay each of the defendants-appellees Simny Guy,
Geraldine Guy, Grace Guy-Cheu and Gladys Yao moral damages of ₱500,000.00, exemplary
damages of ₱100,000.00 and attorney’s fees of ₱500,000.00.
SO ORDERED.
Page 4 of 166
Bus. Org. I Cases – Page 3 Syllabus

Lincoln Continental and Gilbert filed their respective motions for reconsideration, but they were denied
in a Resolution promulgated on February 12, 2007.
Lincoln Continental then filed with this Court a petition for review on certiorari assailing the Decision of
the Court of Appeals (Former Special Second Division) in CA-G.R. CV No. 85937. This petition was
docketed as G.R. No. 176650 and raffled off to the Third Division of this Court.
In our Resolution dated June 6, 2007, we ordered G.R. No. 176650 consolidated with G.R. Nos. 165849,
170185, 170186, and 171066.
THE ISSUES
In G.R. Nos. 165849 and 171066, petitioners Gilbert and Lincoln Continental raise the following issues:
(1) whether respondents are guilty of forum shopping; and (2) whether they are entitled to the
injunctive relief granted in CA-G.R. SP No. 87104.
In G.R. Nos. 170185 and 170186, the pivotal issue is whether the Court of Appeals committed grave
abuse of discretion amounting to lack or excess of jurisdiction in ruling that petitioners Ignacio and
Ignacio Law Offices and Smartnet are also covered by its Resolution granting the writ of preliminary
injunction in favor of respondents.
In G.R. No. 176650, the core issue is whether the Court of Appeals (Special Second Division) erred in
affirming the Decision of the RTC, Branch 25, Manila dated September 19, 2005 dismissing the
complaint of Lincoln Continental and the complaint-in-intervention of Gilbert in Civil Case No. 04-
109444.
THE COURT’S RULING
A. G.R. Nos. 165849 and 171066
On the question of forum shopping, petitioners Gilbert and Lincoln Continental contend that the acts
of respondents in filing a petition for certiorari and mandamus in CA-G.R. SP No. 85069 and
withdrawing the same and their subsequent filing of a petition for certiorari in CA-G.R. SP No. 87104
constitute forum shopping; that respondents withdrew their petition in CA-G.R. SP No. 85069 after the
Tenth Division issued a Resolution dated October 20, 2004 denying their application for a writ of
preliminary injunction; that they then filed an identical petition in CA-G.R. SP No. 87104 seeking the
same relief alleged in their petition in CA-G.R. SP No. 85069; and that by taking cognizance of the
petition in CA-G.R. SP No. 87104, instead of dismissing it outright on the ground of forum shopping, the
Court of Appeals committed grave abuse of discretion tantamount to lack or excess of jurisdiction.
A party is guilty of forum shopping when he repetitively avails of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the same
essential facts and circumstances, and all raising substantially the same issues either pending in, or
already resolved adversely by some other court.6 It is prohibited by Section 5, Rule 7 of the 1997 Rules
of Civil Procedure, as amended, which provides:
SECTION 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath
in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any other claim involving the same issues in any court, tribunal, or quasi-judicial agency
and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has
been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative
sanctions.

Page 5 of 166
Bus. Org. I Cases – Page 3 Syllabus

Forum shopping is condemned because it unnecessarily burdens our courts with heavy caseloads,
unduly taxes the manpower and financial resources of the judiciary and trifles with and mocks judicial
processes, thereby affecting the efficient administration of justice.7 The primary evil sought to be
proscribed by the prohibition against forum shopping is, however, the possibility of conflicting decisions
being rendered by the different courts and/or administrative agencies upon the same issues.8
Forum shopping may only exist where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other.9 Litis pendentia as a ground for dismissing
a civil action is that situation wherein another action is pending between the same parties for the same
cause of action, such that the second action is unnecessary and vexatious. The elements of litis
pendentia are as follows: (a) identity of parties, or at least such as representing the same interest in
both actions; (b) identity of rights asserted and the relief prayed for, the relief being founded on the
same facts; and (c) the identity of the two cases such that judgment in one, regardless of which party
is successful, would amount to res judicata in the other.10 From the foregoing, it is clear that sans litis
pendentia or res judicata, there can be no forum shopping.
While the first element of litis pendentia – identity of parties – is present in both CA-G.R. SP No. 85069
and CA-G.R. SP No. 87104, however, the second element, does not exist. The petitioners in CA-G.R. SP
No. 85069 prayed that the following Orders be set aside:
(1) the Order of inhibition dated June 22, 2004 issued by the presiding judge of the RTC of Manila,
Branch 24; and
(2) the Order dated July 12, 2004 issued by Branch 46 setting Gilbert’s application for preliminary
injunction for hearing.
In their petition in CA-G.R. SP No. 87104, respondents prayed for the annulment of the writ of preliminary
injunction issued by the RTC, Branch 46 after the expiration of the TRO issued by the Tenth Division of
the Court of Appeals. Evidently, this relief is not identical with the relief sought by respondents in CA-
G.R. SP No. 85069. Clearly, the second element of litis pendentia – the identity of reliefs sought - is
lacking in the two petitions filed by respondents with the appellate court. Thus, we rule that no grave
abuse of discretion amounting to lack or excess of jurisdiction may be attributed to the Court of
Appeals (Eighth Division) for giving due course to respondents’ petition in CA-G.R. SP No. 87104.
On the second issue, Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as amended provides:
SECTION 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted
when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained of, or in
requiring the performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance, or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency, or a person is doing, threatening, or is attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.
For a party to be entitled to an injunctive writ, he must show that there exists a right to be protected
and that the acts against which the injunction is directed are violative of this right.11 In granting the
respondents’ application for injunctive relief and making the injunction permanent, the Court of
Appeals (Seventh Division) found that they have shown their clear and established right to the disputed
20,160 shares of stock because: (1) they have physical possession of the two stock certificates
equivalent to the said number of shares; (2) Lincoln Continental is a mere trustee of the Guy family;
and (3) respondents constitute a majority of the board of directors of Northern Islands, and accordingly
have management and control of the company at the inception of Civil Case No. 94-109444. The
appellate court then ruled that the trial court committed grave abuse of discretion in issuing a writ of
preliminary mandatory injunction in favor of Guy. The writ actually reduced the membership of
Northern Islands board to just one member - Gilbert Guy. Moreover, he failed to establish by clear and
convincing evidence his ownership of the shares of stock in question. The Court of Appeals then held

Page 6 of 166
Bus. Org. I Cases – Page 3 Syllabus

there was an urgent necessity to issue an injunctive writ in order to prevent serious damage to the rights
of respondents and Northern Islands.
We thus find no reason to depart from the findings of the Court of Appeals. Indeed, we cannot discern
any taint of grave abuse of discretion on its part in issuing the assailed writ of preliminary injunction and
making the injunction permanent.
B. G.R. Nos. 170185 & 170186
Ignacio and Ignacio Law Offices and Smartnet, petitioners, claim that the Court of Appeals never
acquired jurisdiction over their respective persons as they were not served with summons, either by the
MeTC or by the appellate court in CA-G.R. SP No. 87104. Thus, they submit that the Court of Appeals
committed grave abuse of discretion amounting to lack or excess of jurisdiction when it included them
in the coverage of its injunctive writ.
Jurisdiction is the power or capacity given by the law to a court or tribunal to entertain, hear, and
determine certain controversies.12 Jurisdiction over the subject matter of a case is conferred by law.
Section 9 (1) of Batas Pambansa Blg. 129,13 as amended, provides:
SEC. 9. Jurisdiction. – The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo
warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction.
Rule 46 of the 1997 Rules of Civil Procedure, as amended, governs all cases originally filed with the
Court of Appeals. The following provisions of the Rule state:
SEC. 2. To what actions applicable. – This Rule shall apply to original actions
for certiorari, prohibition, mandamusand quo warranto.
Except as otherwise provided, the actions for annulment of judgment shall be governed by Rule 47,
for certiorari, prohibition, and mandamus by Rule 65, and for quo warranto by Rule 66.
xxx
SEC. 4. Jurisdiction over person of respondent, how acquired. – The court shall acquire jurisdiction over
the person of the respondent by the service on him of its order or resolution indicating its initial action
on the petition or by his voluntary submission to such jurisdiction.
SEC. 5. Action by the court. – The court may dismiss the petition outright with specific reasons for such
dismissal or require the respondent to file a comment on the same within ten (10) days from notice.
Only pleadings required by the court shall be allowed. All other pleadings and papers may be filed
only with leave of court.
It is thus clear that in cases covered by Rule 46, the Court of Appeals acquires jurisdiction over the
persons of the respondents by the service upon them of its order or resolution indicating its initial action
on the petitions or by their voluntary submission to such jurisdiction.14 The reason for this is that, aside
from the fact that no summons or other coercive process is served on respondents, their response to
the petitions will depend on the initial action of the court thereon. Under Section 5, the court may
dismiss the petitions outright, hence, no reaction is expected from respondents and under the policy
adopted by Rule 46, they are not deemed to have been brought within the court’s jurisdiction until
after service on them of the dismissal order or resolution.15
Records show that on April 27, 2005, petitioners in these two forcible entry cases, were served copies
of the Resolution of the Court of Appeals (Seventh Division) dated April 26, 2005 in CA-G.R. SP No.
87104.16 The Resolution states:
Private respondents SMARTNET PHILIPPINES, INC., IGNACIO & IGNACIO LAW OFFICE, SUNFIRE TRADING,
INC., ZOLT CORPORATION, CELLPRIME DISTRIBUTION CORPO., GOODGOLD REALTY & DEVELOPMENT
CORP., are hereby DIRECTED to file CONSOLIDATED COMMENT on the original Petition for Certiorari,
the First Supplemental Petition for Certiorari, and the Second Supplemental Petition for Certiorari (not
a Motion to Dismiss) within ten (10) days from receipt of a copy of the original, first and second Petitions
for Certiorari.17
Pursuant to Rule 46, the Court of Appeals validly acquired jurisdiction over the persons of Ignacio and
Ignacio Law Offices and Smartnet upon being served with the above Resolution.
But neither of the parties bothered to file the required comment. Their allegation that they have been
deprived of due process is definitely without merit. We have consistently held that when a party was
afforded an opportunity to participate in the proceedings but failed to do so, he cannot complain of
Page 7 of 166
Bus. Org. I Cases – Page 3 Syllabus

deprivation of due process for by such failure, he is deemed to have waived or forfeited his right to be
heard without violating the constitutional guarantee.18
On the question of whether the Court of Appeals could amend its Resolution directing the issuance of
a writ of preliminary injunction so as to include petitioners, suffice to state that having acquired
jurisdiction over their persons, the appellate court could do so pursuant to Section 5 (g), Rule 135 of the
Revised Rules of Court, thus:
SEC. 5. Inherent powers of courts. – Every court shall have power:
xxx
(g) To amend and control its process and orders so as to make them conformable to law and justice.
In Villanueva v. CFI of Oriental Mindoro19 and Eternal Gardens Memorial Parks Corp. v. Intermediate
Appellate Court,20 we held that under this Rule, a court has inherent power to amend its judgment so
as to make it conformable to the law applicable, provided that said judgment has not yet acquired
finality, as in these cases.
C. G.R. No. 176650
The fundamental issue is who owns the disputed shares of stock in Northern Islands.
We remind petitioner Lincoln Continental that what it filed with this Court is a petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended. It is a rule in this jurisdiction
that in petitions for review under Rule 45, only questions or errors of law may be raised. 21 There is a
question of law when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts, or when the issue does not call for an examination of the
probative value of the evidence presented. There is a question of fact when the doubt arises as to the
truth or falsehood of facts or when there is a need to calibrate the whole evidence considering mainly
the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances, as
well as their relation to each other and to the whole, and the probability of the situation. 22 Obviously,
the issue raised by the instant petition for review on certiorari, involves a factual matter, hence, is
outside the domain of this Court. However, in the interest of justice and in order to settle this controversy
once and for all, a ruling from this Court is imperative.
One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln
Continental held the disputed shares of stock of Northern Islands merely in trust for the Guy sisters. In
fact, the evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis
that this factual finding by the trial court was affirmed by the Court of Appeals, being supported by
evidence, and is, therefore, final and conclusive upon this Court.
Article 1440 of the Civil Code provides that:
ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary.
In the early case of Gayondato v. Treasurer of the Philippine Islands,23 this Court defines trust, in its
technical sense, as "a right of property, real or personal, held by one party for the benefit of another."
Differently stated, a trust is "a fiduciary relationship with respect to property, subjecting the person
holding the same to the obligation of dealing with the property for the benefit of another person."24
Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question.
But record shows that there is no evidence to support their claim. Rather, the evidence on record
clearly indicates that the stock certificates representing the contested shares are in respondents’
possession. Significantly, there is no proof to support his allegation that the transfer of the shares of stock
to respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is never presumed but
must be established by clear and convincing evidence.25 Gilbert failed to discharge this burden. We,
agree with the Court of Appeals that respondent sisters own the shares of stocks, Gilbert being their
mere trustee. Verily, we find no reversible error in the challenged Decision of the Court of Appeals
(Special Second Division) in CA-G.R. CV No. 85937.
WHEREFORE, we DISMISS the petitions in G.R. Nos. 165849, 170185, 170186 and 176650; and DENY the
petitions in G.R. Nos. 171066 and 176650. The Resolutions of the Court of Appeals (Eighth Division), dated
October 28, 2004 and November 4, 2004, as well as the Decision dated October 10, 2005 of the Court
of Appeals (Seventh Division) in CA-G.R. SP No. 87104 are AFFIRMED. We likewise AFFIRM IN TOTO the
Page 8 of 166
Bus. Org. I Cases – Page 3 Syllabus

Decision of the Court of Appeals (Special Second Division), dated November 27, 2006 in CA-G.R. CV
No. 85937. Costs against petitioners.
SO ORDERED.

Page 9 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 76590 February 26, 1990
HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners,
vs.
COURT OF APPEALS and HEIRS OF MARIA DE LA CRUZ Y GUEVARRA, respondents.

PARAS, J.:

This is a petition for review on certiorari of the June 17, 1986 decision * of the then Intermediate
Appellate Court in AC-G.R. CV No. 05785 reversing the appealed decision of the Regional Trial Court
of Angeles City, and the November 12, 1986 resolution of the same court denying the motion for
reconsideration.
Herein petitioners are the heirs (children) of the late Maria de la Cruz y Gutierrez, married to Mateo del
Rosario Lansang, while herein private respondents are the heirs of Maria de la Cruz y Guevarra, married
to Calixto Dimalanta, and Fermin de la Cruz. The controversy involves a 1,980 square meters portion of
Lot 1488.
From 1921 until her death in 1951, Maria de la Cruz y Gutierrez resided in the questioned lot in the
concept of an owner. She declared the lot for tax purposes in her name. Later, she entrusted the
administration of the said lot to her niece Maria de la Cruz y Guevarra. When cadastral proceedings
were held in Porac, in Cadastral Case No. 18, on March 17, 1926, Maria de la Cruz y Gutierrez filed an
answer to the questioned lot. In the said filed answer, over the handwritten name "Maria de la Cruz y
Gutierrez" is a thumbmark presumably affixed by her, Exhibit "2-C"; that in paragraph 7, a person named
therein as Fermin de la Cruz y Gutierrez is stated to have an interest or participation on the said lot.
However, in the space provided in paragraph 8 to be filled up with the personal circumstances of
claimant Maria de la Cruz y Gutierrez, what appears therein is the name Maria de la Cruz, married to
Calixto Dimalanta, instead of Maria de la Cruz y Gutierrez, Exhibit "2-A"; and in the space provided in
paragraph 9, intended for the personal circumstances of other person or persons who may have an
interest on the said lot, the name Fermin de la Cruz, single, appears, Exhibit "2-B". Accordingly, the trial
court rendered a decision adjudicating Lot No. 1488 in favor of Maria de la Cruz, 26 years old, married
to Calixto Dimalanta and Fermin de la Cruz, Single. Finally, Original Certificate of Title No. 16684 of the
Register of Deeds of Pampanga was issued in their names.
Petitioners, claiming to have learned of the same only on July 1, 1974, on October 1, 1974 (allegedly
barely three months after discovery of the registration, and two years after the death of Maria de la
Cruz y Guevarra who, before she died in 1974, revealed to petitioners Daniel Lansang and Isidro
Lansang that the lot of their mother Maria de la Cruz y Gutierrez had been included in her title), filed
with the then Court of First Instance of Pampanga, Branch IV, presided over by Hon. Cesar V.
Alejandria, a complaint for reconveyance, docketed therein as Civil Case No. 2148. The same was
amended on June 16, 1975.
The main thrust of the complaint is that the claimant of Lot 1488 in Cadastral Case No. 18 was Maria
de la Cruz y Gutierrez and not Maria de la Cruz y Guevarra who by not using her maternal surname
"Guevarra" succeeded in registering Lot 1488 in her name and that of her brother Fermin de la Cruz.
Under the circumstances, it is claimed that Maria de la Cruz married to Calixto Dimalanta and Fermin
de la Cruz hold the property in trust for the petitioners.
In their answer (Rollo, pp. 62-65), private respondents claimed that the land in questi•n is their exclusive
property, having inherited the same from their parents and the OCT No. 16684 was issued in their
names. Moreover, they asserted that petitioners have lost their cause of action by prescription.
During the pre-trial, the parties stipulated the following facts:
1. That Lot No. 1488 is the lot in question as stated in Paragraph 3 of the
Complaint;

Page 10 of 166
Bus. Org. I Cases – Page 3 Syllabus

2. That on March 17, 1926, Maria de la Cruz y Gutierrez filed her Answer over
the cadastral lot in question;
3. That Maria de la Cruz y Gutierrez affixed her thumbmark in the Answer
dated March 17, 1926;
4. That by virtue of the Answer over Cadastral lot in question filed by Maria
de la Cruz y Gutierrez on March 17, 1926, OCT No. 16684 was issued
covering the lot in question;
5. That the maternal surname of Maria de la Cruz and Fermin de la Cruz is
Guevarra and not Gutierrez; and
6. That Maria de la Cruz y Guevarra and Fermin de la Cruz y Guevarra did
not file their answer over the lot in question. (p. 3, Intermediate Appellate
Court Decision; p. 46, Rollo)
The issues stated are as follows:
1. Whether or not the handwritings in the Answer of Maria de la Cruz y
Gutierrez were her handwritings;
2. Whether or not the heirs of Maria de la Cruz y Gutierrez are paying the
land taxes of the lot in question proportionately to their respective shares;
3. Whether or not Lot 1488, the lot in question, is declared in the name of
Maria de la Cruz y Gutierrez;
4. Whether or not during the lifetime of Maria de la Cruz y Gutierrez up to
the time of her death, she was in actual possession of the lot in question;
and
5. If there was fraud in securing OCT No. 16684 in the name of Maria de la
Cruz, married to Calixto Dimalanta, and Fermin de la Cruz, single. (pp. 3-4,
Intermediate Appellate Court Decision; pp. 4647, Rollo)
After trial, the trial court, in a decision dated November 17, 1983 (ibid., pp. 34-42), ruled in favor of the
petitioners. The decretal portion of the said decision, reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs;
(a) ordering the above-named defendants to reconvey to the plaintiffs a
portion of 1,980 square meters of Lot No. 1488 covered by Original
Certificate of Title No. 16684 of the Register of Deeds of Pampanga, by
executing a deed of reconveyance and registering the same with the said
Office at their own expense;
(b) ordering the parties to cause the survey and division of Lot No. 1844 into
two equal parts in order that two separate titles, one for the plaintiffs and
the other for the defendants can be issued by the Register of Deeds of
Pampanga in their favor and one-half of the expenses therefore to be
shouldered by the plaintiffs, and the other half by the defendant;
(c) ordering that the land to be adjudicated to the plaintiffs should include
the portion where the existing house of the late Maria de la Cruz y Gutierrez
is situated;
(d) ordering the plaintiffs and the defendants to pay the corresponding
estate and inheritance taxes if the parcels of land inherited by them are
subject to the payment of the same;
(e) ordering the defendants to pay the costs of suit.
On appeal, considering the action as based on an implied trust, the then Intermediate Appellate Court
in its decision promulgated on June 17, 1986 (Ibid., pp. 44-53) reversed the decision of the trial court.
The dispositive portion reads:
WHEREFORE, the Court is constrained to REVERSE the decision appealed from. A new one
is hereby entered dismissing the complaint.
A Motion for Reconsideration was filed, but the same was denied in a resolution dated November 12,
1986 (Ibid., p. 66). Hence, the instant petition.
Petitioners raised three (3) reasons warranting review, to wit:
Page 11 of 166
Bus. Org. I Cases – Page 3 Syllabus

I
RESPONDENT COURT ERRED WHEN IT RULED THAT THE ACTION FOR RECONVEYANCE FILED
BY HEREIN PETITIONERS WITH THE LOWER COURT HAD ALREADY PRESCRIBED;
II
RESPONDENT COURT ERRED IN RULING THAT PETITIONERS WERE GUILTY OF LACHES; and
III
RESPONDENT COURT ERRED IN RULING THAT THERE WAS NO EVIDENCE OF FRAUD
COMMITTED BY THE PREDECESSOR-IN-INTEREST OF PRIVATE RESPONDENTS IN SECURING
TITLE TO THE LOT IN QUESTION.
(pp. 13, 20 and 22, Petition for Review pp. 21, 28, and 30 Rollo)
The instant petition is impressed with merit.
The main issue in this case is whether or not petitioners' action for reconveyance has already
prescribed.
The answer is in the negative.
As aptly argued by petitioners, the Court of Appeals erred when it ruled that their action has already
prescribed; obviously on the wrong premise that the action is one based on implied or constructive
trust. As maintained by petitioners, their action is one based on express trust and not on implied or
constructive trust. Petitioners' predecessor-in-interest, Maria de la Cruz y Gutierrez, was an unlettered
woman, a fact borne out by her affixing her thumbmark in her answer in Cadastral Case No. 18, Exhibit
"2-C". Because of her mental weakness, in a prepared document for her, Exhibit "B-3", she consented
and authorized her niece Maria de la Cruz y Guevarra to administer the lot in question. Such fact is
corroborated by the testimony of Daniel Lansay, the son of Maria de la Cruz y Gutierrez that Maria de
la Cruz y Guevarra was the one entrusted with the paying of land taxes.
Private respondents argue that said Exhibit "B-3" is a portion of the tax declaration (Exhibit "B") which
was prepared by the Office of the Municipal Assessor/Treasurer where the lot in question is located,
and clearly not the written instrument constituting an express trust required under Article 1443 of the
Civil Code. This argument of private respondents, is untenable. It has been held that under the law on
Trusts, it is not necessary that the document expressly state and provide for the express trust, for it may
even be created orally, no particular words are required for its creation (Article 1444, Civil Code). An
express trust is created by the direct and positive acts of the parties, by some writing or deed or will or
by words evidencing an intention to create a trust (Sotto v. Teves, 86 SCRA 154 [1978]). No particular
words are required for the creation of an express trust, it being sufficient that a trust is clearly intended
(Vda. de Mapa v. Court of Appeals, 154 SCRA 294 [1987]). Hence, petitioner's action, being one based
on express trust, has not yet prescribed. Be it noted that Article 1443 of the Civil Code which states "No
express trusts concerning an immovable or any interest therein may be proved by parol evidence,"
refers merely to enforceability, not validity of a contract between the parties. Otherwise stated, for
purposes of validity between the parties, an express trust concerning an immovable does not have to
be in writing. Thus, Article 1443 may be said to be an extension of the Statute of Frauds. The action to
compel the trustee to convey the property registered in his name for the benefit of the cestui for trust
does not prescribe. If at all, it is only when the trustee repudiates the trust that the period of prescription
may run (Enriquez v. Court of Appeals, 104 SCRA 656 [1981]).
PREMISES CONSIDERED, the June 17, 1986 decision of the Intermediate Appellate Court is hereby
REVERSED and the November 17, 1983 decision of the trial court is hereby REINSTATED, excpt as to the
latter court's finding that this case deals with an implied trust.
SO ORDERED.

Page 12 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 154096 August 22, 2008
IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and JOSE G. RESLIN, petitioners,
vs.
COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA BENEDICTO-PAULINO, respondents.
DECISION
VELASCO, JR., J.:

The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify the Decision 1 dated
October 17, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 64246 and its Resolution2 of June 20,
2002 denying petitioners' motion for reconsideration. The assailed CA decision annulled and set aside
the Orders dated October 9, 2000, December 18, 2000, and March 15, 2001 of the Regional Trial Court
(RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners' amended complaint in Civil Case
Nos. 3341-17 and 3342-17.
The Facts
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and his business
associates (Benedicto Group) organized Far East Managers and Investors, Inc. (FEMII) and Universal
Equity Corporation (UEC), respectively. As petitioner Irene Marcos-Araneta would later allege, both
corporations were organized pursuant to a contract or arrangement whereby Benedicto, as trustor,
placed in his name and in the name of his associates, as trustees, the shares of stocks of FEMII and UEC
with the obligation to hold those shares and their fruits in trust and for the benefit of Irene to the extent
of 65% of such shares. Several years after, Irene, through her trustee-husband, Gregorio Ma. Araneta
III, demanded the reconveyance of said 65% stockholdings, but the Benedicto Group refused to
oblige.
In March 2000, Irene thereupon instituted before the RTC two similar complaints for conveyance of
shares of stock, accounting and receivership against the Benedicto Group with prayer for the issuance
of a temporary restraining order (TRO). The first, docketed as Civil Case No. 3341-17, covered the UEC
shares and named Benedicto, his daughter, and at least 20 other individuals as defendants. The
second, docketed as Civil Case No. 3342-17, sought the recovery to the extent of 65% of FEMII shares
held by Benedicto and the other defendants named therein.
Respondent Francisca Benedicto-Paulino,3 Benedicto's daughter, filed a Motion to Dismiss Civil Case
No. 3341-17, followed later by an Amended Motion to Dismiss. Benedicto, on the other hand, moved
to dismiss4 Civil Case No. 3342-17, adopting in toto the five (5) grounds raised by Francisca in her
amended motion to dismiss. Among these were: (1) the cases involved an intra-corporate dispute over
which the Securities and Exchange Commission, not the RTC, has jurisdiction; (2) venue was improperly
laid; and (3) the complaint failed to state a cause of action, as there was no allegation therein that
plaintiff, as beneficiary of the purported trust, has accepted the trust created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which Benedicto and Francisca
countered with a Joint Reply to Opposition.
Upon Benedicto's motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss, Benedicto and Francisca, by way of
bolstering their contentions on improper venue, presented the Joint Affidavit5 of Gilmia B. Valdez,
Catalino A. Bactat, and Conchita R. Rasco who all attested being employed as household staff at the
Marcos' Mansion in Brgy. Lacub, Batac, Ilocos Norte and that Irene did not maintain residence in said
place as she in fact only visited the mansion twice in 1999; that she did not vote in Batac in the 1998
national elections; and that she was staying at her husband's house in Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5 community tax
certificate6 (CTC) issued on "11/07/99" in Curimao, Ilocos Norte to support her claimed residency in
Batac, Ilocos Norte.
Page 13 of 166
Bus. Org. I Cases – Page 3 Syllabus

In the meantime, on May 15, 2000, Benedicto died and was substituted by his wife, Julita C. Benedicto,
and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these partly constituted "real action,"
and that Irene did not actually reside in Ilocos Norte, and, therefore, venue was improperly laid. In its
dismissal order,7 the court also declared "all the other issues raised in the different Motions to Dismiss x
x x moot and academic."
From the above order, Irene interposed a Motion for Reconsideration8 which Julita and Francisca duly
opposed.
Pending resolution of her motion for reconsideration, Irene filed on July 17, 2000 a Motion (to Admit
Amended Complaint),9attaching therewith a copy of the Amended Complaint10 dated July 14, 2000
in which the names of Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin appeared as additional
plaintiffs. As stated in the amended complaint, the added plaintiffs, all from Ilocos Norte, were Irene's
new trustees. Parenthetically, the amended complaint stated practically the same cause of action
but, as couched, sought the reconveyance of the FEMII shares only.
During the August 25, 2000 hearing, the RTC dictated in open court an order denying Irene's motion for
reconsideration aforementioned, but deferred action on her motion to admit amended complaint
and the opposition thereto.11
On October 9, 2000, the RTC issued an Order12 entertaining the amended complaint, dispositively
stating:
WHEREFORE, the admission of the Amended Complaint being tenable and legal, the same is
GRANTED.
Let copies of the Amended Complaint be served to the defendants who are ordered to answer within
the reglementary period provided by the rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court,13 Irene may opt to file, as a matter of right, an
amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos Norte resident, in the
amended complaint setting out the same cause of action cured the defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the amended complaint in
question in the place of residence of any of Irene's co-plaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC, by Order14 dated
December 18, 2000, denied the motion and reiterated its directive for the two to answer the amended
complaint.
In said order, the RTC stood pat on its holding on the rule on amendments of pleadings. And scoffing
at the argument about there being no complaint to amend in the first place as of October 9, 2000
(when the RTC granted the motion to amend) as the original complaints were dismissed with finality
earlier, i.e., on August 25, 2000 when the court denied Irene's motion for reconsideration of the June
29, 2000 order dismissing the original complaints, the court stated thusly: there was actually no need to
act on Irene's motion to admit, it being her right as plaintiff to amend her complaints absent any
responsive pleading thereto. Pushing its point, the RTC added the observation that the filing of the
amended complaint on July 17, 2000 ipso factosuperseded the original complaints, the dismissal of
which, per the June 29, 2000 Order, had not yet become final at the time of the filing of the amended
complaint.
Following the denial on March 15, 2001 of their motion for the RTC to reconsider its December 18, 2000
order aforestated, Julita and Francisca, in a bid to evade being declared in default, filed on April 10,
2001 their Answer to the amended complaint.15 But on the same day, they went to the CA via a petition
for certiorari, docketed as CA-G.R. SP No. 64246, seeking to nullify the following RTC orders: the first,
admitting the amended complaint; the second, denying their motion to dismiss the amended
complaint; and the third, denying their motion for reconsideration of the second issuance.
Inasmuch as the verification portion of the joint petition and the certification on non-forum shopping
bore only Francisca's signature, the CA required the joint petitioners "to submit x x x either the written
authority of Julita C. Benedicto to Francisca B. Paulino authorizing the latter to represent her in these
proceedings, or a supplemental verification and certification duly signed by x x x Julita C.
Page 14 of 166
Bus. Org. I Cases – Page 3 Syllabus

Benedicto."16 Records show the submission of the corresponding authorizing Affidavit17 executed by
Julita in favor of Francisca.
Later developments saw the CA issuing a TRO18 and then a writ of preliminary injunction19 enjoining the
RTC from conducting further proceedings on the subject civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the assailed RTC orders and dismissing
the amended complaints in Civil Case Nos. 3341-17 and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby GRANTED. The assailed
Orders admitting the amended complaints are SET ASIDE for being null and void, and the
amended complaints a quo are, accordingly, DISMISSED.20
Irene and her new trustees' motion for reconsideration of the assailed decision was denied through the
equally assailed June 20, 2002 CA Resolution. Hence, this petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA decision and resolution on the
following submissions that the appellate court erred in: (1) allowing the submission of an affidavit by
Julita as sufficient compliance with the requirement on verification and certification of non-forum
shopping; (2) ruling on the merits of the trust issue which involves factual and evidentiary determination,
processes not proper in a petition for certiorari under Rule 65 of the Rules of Court; (3) ruling that the
amended complaints in the lower court should be dismissed because, at the time it was filed, there
was no more original complaint to amend; (4) ruling that the respondents did not waive improper
venue; and (5) ruling that petitioner Irene was not a resident of Batac, Ilocos Norte and that none of
the principal parties are residents of Ilocos Norte.21
The Court's Ruling
We affirm, but not for all the reasons set out in, the CA's decision.
First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping
Petitioners tag private respondents' petition in CA-G.R. SP No. 64246 as defective for non-compliance
with the requirements of Secs. 422 and 523 of Rule 7 of the Rules of Court at least with regard to Julita,
who failed to sign the verification and certification of non-forum shopping. Petitioners thus fault the
appellate court for directing Julita's counsel to submit a written authority for Francisca to represent
Julita in the certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal requirement which the court
may motu proprio direct a party to comply with or correct, as the case may be. As the Court
articulated in Kimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-
Organized Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals:
V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein made are done in
good faith or are true and correct and not mere speculation. The Court may order the correction of the pleading, if not verified, or act on the unverified
pleading if the attending circumstances are such that a strict compliance with the rule may be dispensed with in order that the ends of justice may
be served.24

Given this consideration, the CA acted within its sound discretion in ordering the submission of proof of
Francisca's authority to sign on Julita's behalf and represent her in the proceedings before the
appellate court.
Signature by Any of the Principal Petitioners is Substantial Compliance
Regarding the certificate of non-forum shopping, the general rule is that all the petitioners or plaintiffs
in a case should sign it.25 However, the Court has time and again stressed that the rules on forum
shopping, which were designed to promote the orderly administration of justice, do not interdict
substantial compliance with its provisions under justifiable circumstances.26As has been ruled by the
Court, the signature of any of the principal petitioners27 or principal parties,28 as Francisca is in this case,
would constitute a substantial compliance with the rule on verification and certification of non-forum
shopping. It cannot be overemphasized that Francisca herself was a principal party in Civil Case No.
3341-17 before the RTC and in the certiorari proceedings before the CA. Besides being an heir of

Page 15 of 166
Bus. Org. I Cases – Page 3 Syllabus

Benedicto, Francisca, with her mother, Julita, was substituted for Benedicto in the instant case after his
demise.
And should there exist a commonality of interest among the parties, or where the parties filed the case
as a "collective," raising only one common cause of action or presenting a common defense, then the
signature of one of the petitioners or complainants, acting as representative, is sufficient compliance.
We said so in Cavile v. Heirs of Clarita Cavile.29 Like Thomas Cavile, Sr. and the other petitioners in
Cavile, Francisca and Julita, as petitioners before the CA, had filed their petition as a collective, sharing
a common interest and having a common single defense to protect their rights over the shares of
stocks in question.
Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65
Petitioners' posture on the second issue is correct. As they aptly pointed out, the CA, in the exercise of
its certiorari jurisdiction under Rule 65, is limited to reviewing and correcting errors of jurisdiction only. It
cannot validly delve into the issue of trust which, under the premises, cannot be judiciously resolved
without first establishing certain facts based on evidence.
Whether a determinative question is one of law or of fact depends on the nature of the dispute. A
question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain given set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts being admitted. A question
of fact obtains when the doubt or difference arises as to the truth or falsehood of facts or when the
query invites the calibration of the whole evidence considering mainly the credibility of the witnesses,
the existence and relevancy of specific surrounding circumstances, as well as their relation to each
other and to the whole, and the probability of the situation.30
Clearly then, the CA overstepped its boundaries when, in disposing of private respondents' petition for
certiorari, it did not confine itself to determining whether or not lack of jurisdiction or grave abuse of
discretion tainted the issuance of the assailed RTC orders, but proceeded to pass on the factual issue
of the existence and enforceability of the asserted trust. In the process, the CA virtually resolved
petitioner Irene's case for reconveyance on its substantive merits even before evidence on the matter
could be adduced. Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pre-trial
stage. To stress, the nature of the trust allegedly constituted in Irene's favor and its enforceability, being
evidentiary in nature, are best determined by the trial court. The original complaints and the amended
complaint certainly do not even clearly indicate whether the asserted trust is implied or express. To be
sure, an express trust differs from the implied variety in terms of the manner of proving its
existence.31 Surely, the onus of factually determining whether the trust allegedly established in favor of
Irene, if one was indeed established, was implied or express properly pertains, at the first instance, to
the trial court and not to the appellate court in a special civil action for certiorari, as here. In the
absence of evidence to prove or disprove the constitution and necessarily the existence of the trust
agreement between Irene, on one hand, and the Benedicto Group, on the other, the appellate court
cannot intelligently pass upon the issue of trust. A pronouncement on said issue of trust rooted on
speculation and conjecture, if properly challenged, must be struck down. So it must be here.
Third Issue: Admission of Amended Complaint Proper
As may be recalled, the CA veritably declared as reversibly erroneous the admission of the amended
complaint. The flaw in the RTC's act of admitting the amended complaint lies, so the CA held, in the
fact that the filing of the amended complaint on July 17, 2000 came after the RTC had ordered with
finality the dismissal of the original complaints. According to petitioners, scoring the CA for its
declaration adverted to and debunking its posture on the finality of the said RTC order, the CA failed
to take stock of their motion for reconsideration of the said dismissal order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the Rules of Court which
provides:
SEC. 2. Amendments as a matter of right. -- A party may amend his pleading once as a matter
of right at any time before a responsive pleading is served or in the case of a reply, at any time
within ten (10) days after it is served.

Page 16 of 166
Bus. Org. I Cases – Page 3 Syllabus

As the aforequoted provision makes it abundantly clear that the plaintiff may amend his complaint
once as a matter of right, i.e., without leave of court, before any responsive pleading is filed or served.
Responsive pleadings are those which seek affirmative relief and/or set up defenses,32 like an answer.
A motion to dismiss is not a responsive pleading for purposes of Sec. 2 of Rule 10.33 Assayed against the
foregoing perspective, the RTC did not err in admitting petitioners' amended complaint, Julita and
Francisca not having yet answered the original complaints when the amended complaint was filed.
At that precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a matter of right, the option
of amending her underlying reconveyance complaints. As aptly observed by the RTC, Irene's motion
to admit amended complaint was not even necessary. The Court notes though that the RTC has not
offered an explanation why it saw fit to grant the motion to admit in the first place.
In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of admitting an
amended complaint before a responsive pleading is filed, wrote:
W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is the rule that a motion to dismiss is not a
responsive pleading for purposes of Section 2, Rule 10. As no responsive pleading had been filed, respondent could amend her complaint in Civil Case
No. C-20124 as a matter of right. Following this Court's ruling in Breslin v. Luzon Stevedoring Co. considering that respondent has the right to amend her
complaint, it is the correlative duty of the trial court to accept the amended complaint; otherwise,mandamus would lie against it. In other words, the
trial court's duty to admit the amended complaint was purely ministerial. In fact, respondent should not have filed a motion to admit her amended
complaint.34

It may be argued that the original complaints had been dismissed through the June 29, 2000 RTC order.
It should be pointed out, however, that the finality of such dismissal order had not set in when Irene
filed the amended complaint on July 17, 2000, she having meanwhile seasonably sought
reconsideration thereof. Irene's motion for reconsideration was only resolved on August 25, 2000. Thus,
when Irene filed the amended complaint on July 17, 2000, the order of dismissal was not yet final,
implying that there was strictly no legal impediment to her amending her original complaints.35
Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively precluded from raising the matter of
improper venue by their subsequent acts of filing numerous pleadings. To petitioners, these pleadings,
taken together, signify a waiver of private respondents' initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially concerns a rule of procedure
which, in personal actions, is fixed for the greatest convenience possible of the plaintiff and his
witnesses. The ground of improperly laid venue must be raised seasonably, else it is deemed waived.
Where the defendant failed to either file a motion to dismiss on the ground of improper venue or
include the same as an affirmative defense, he is deemed to have waived his right to object to
improper venue.36 In the case at bench, Benedicto and Francisca raised at the earliest time possible,
meaning "within the time for but before filing the answer to the complaint,"37 the matter of improper
venue. They would thereafter reiterate and pursue their objection on venue, first, in their answer to the
amended complaints and then in their petition for certiorari before the CA. Any suggestion, therefore,
that Francisca and Benedicto or his substitutes abandoned along the way improper venue as ground
to defeat Irene's claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue
Subject Civil Cases are Personal Actions
It is the posture of Julita and Francisca that the venue was in this case improperly laid since the suit in
question partakes of a real action involving real properties located outside the territorial jurisdiction of
the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract, or the recovery of damages.38 Real actions, on the other
hand, are those affecting title to or possession of real property, or interest therein. In accordance with
the wordings of Sec. 1 of Rule 4, the venue of real actions shall be the proper court which has territorial
jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. The venue
of personal actions is the court where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a non-resident defendant where
he may be found, at the election of the plaintiff.39
Page 17 of 166
Bus. Org. I Cases – Page 3 Syllabus

In the instant case, petitioners are basically asking Benedicto and his Group, as defendants a quo, to
acknowledge holding in trust Irene's purported 65% stockownership of UEC and FEMII, inclusive of the
fruits of the trust, and to execute in Irene's favor the necessary conveying deed over the said 65%
shareholdings. In other words, Irene seeks to compel recognition of the trust arrangement she has with
the Benedicto Group. The fact that FEMII's assets include real properties does not materially change
the nature of the action, for the ownership interest of a stockholder over corporate assets is only
inchoate as the corporation, as a juridical person, solely owns such assets. It is only upon the liquidation
of the corporation that the stockholders, depending on the type and nature of their stockownership,
may have a real inchoate right over the corporate assets, but then only to the extent of their
stockownership.
The amended complaint is an action in personam, it being a suit against Francisca and the late
Benedicto (now represented by Julita and Francisca), on the basis of their alleged personal liability to
Irene upon an alleged trust constituted in 1968 and/or 1972. They are not actions in rem where the
actions are against the real properties instead of against persons.40 We particularly note that possession
or title to the real properties of FEMII and UEC is not being disputed, albeit part of the assets of the
corporation happens to be real properties.
Given the foregoing perspective, we now tackle the determinative question of venue in the light of
the inclusion of additional plaintiffs in the amended complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4
We point out at the outset that Irene, as categorically and peremptorily found by the RTC after a
hearing, is not a resident of Batac, Ilocos Norte, as she claimed. The Court perceives no compelling
reason to disturb, in the confines of this case, the factual determination of the trial court and the
premises holding it together. Accordingly, Irene cannot, in a personal action, contextually opt for Batac
as venue of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec. 2, Rule 4 of
the Rules of Court adverts to as the place "where the plaintiff or any of the principal plaintiffs resides"
at the time she filed her amended complaint. That Irene holds CTC No. 1701945141 issued sometime in
June 2000 in Batac, Ilocos Norte and in which she indicated her address as Brgy. Lacub, Batac, Ilocos
is really of no moment. Let alone the fact that one can easily secure a basic residence certificate
practically anytime in any Bureau of Internal Revenue or treasurer's office and dictate whatever
relevant data one desires entered, Irene procured CTC No. 17019451 and appended the same to her
motion for reconsideration following the RTC's pronouncement against her being a resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the proper court venue,
asseverate that Batac, Ilocos Norte is where the principal parties reside.
Pivotal to the resolution of the venue issue is a determination of the status of Irene's co-plaintiffs in the
context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4, which pertinently provide as follows:
Rule 3
PARTIES TO CIVIL ACTIONS
SEC. 2. Parties in interest. -- A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of
the real party in interest.
SEC. 3. Representatives as parties. -- Where the action is allowed to be prosecuted or defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
in the title of the case and shall be deemed to be the real party in interest. A representative
may be a trustee of an express trust, a guardian, an executor or administrator, or a party
authorized by law or these Rules. An agent acting in his own name and for the benefit of an
undisclosed principal may sue or be sued without joining the principal except when the contract
involves things belonging to the principal.
Rule 4
VENUE OF ACTIONS
SEC. 2. Venue of personal actions. -- All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal

Page 18 of 166
Bus. Org. I Cases – Page 3 Syllabus

defendants resides, or in the case of a non-resident defendant where he may be found, at the
election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff is Irene. As self-styled beneficiary
of the disputed trust, she stands to be benefited or entitled to the avails of the present suit. It is
undisputed too that petitioners Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte,
were included as co-plaintiffs in the amended complaint as Irene's new designated trustees. As
trustees, they can only serve as mere representatives of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of whether or not venue had
properly been laid should not be difficult.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in a personal action
case, the residences of the principal parties should be the basis for determining proper venue.
According to the late Justice Jose Y. Feria, "the word 'principal' has been added [in the uniform
procedure rule] in order to prevent the plaintiff from choosing the residence of a minor plaintiff or
defendant as the venue."42 Eliminate the qualifying term "principal" and the purpose of the Rule would,
to borrow from Justice Regalado, "be defeated where a nominal or formal party is impleaded in the
action since the latter would not have the degree of interest in the subject of the action which would
warrant and entail the desirably active participation expected of litigants in a case."43
Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands undisputedly as the
principal plaintiff, the real party-in-interest. Following Sec. 2 of Rule 4, the subject civil cases ought to
be commenced and prosecuted at the place where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac declared Irene as not a resident of Batac, Ilocos Norte.
Withal, that court was an improper venue for her conveyance action.
The Court can concede that Irene's three co-plaintiffs are all residents of Batac, Ilocos Norte. But it
ought to be stressed in this regard that not one of the three can be considered as principal party-
plaintiffs in Civil Case Nos. 3341-17 and 3342-17, included as they were in the amended complaint as
trustees of the principal plaintiff. As trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the
right to prosecute a suit, but only on behalf of the beneficiary who must be included in the title of the
case and shall be deemed to be the real party-in-interest. In the final analysis, the residences of Irene's
co-plaintiffs cannot be made the basis in determining the venue of the subject suit. This conclusion
becomes all the more forceful considering that Irene herself initiated and was actively prosecuting her
claim against Benedicto, his heirs, assigns, or associates, virtually rendering the impleading of the
trustees unnecessary.
And this brings us to the final point. Irene was a resident during the period material of Forbes Park,
Makati City. She was not a resident of Brgy. Lacub, Batac, Ilocos Norte, although jurisprudence44 has it
that one can have several residences, if such were the established fact. The Court will not speculate
on the reason why petitioner Irene, for all the inconvenience and expenses she and her adversaries
would have to endure by a Batac trial, preferred that her case be heard and decided by the RTC in
Batac. On the heels of the dismissal of the original complaints on the ground of improper venue, three
new personalities were added to the complaint doubtless to insure, but in vain as it turned out, that
the case stays with the RTC in Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of their cases, and the
persuasiveness of arguments to secure a favorable verdict. It is high time that courts, judges, and those
who come to court for redress keep this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision and Resolution dated October 17,
2001 and June 20, 2002, respectively, of the CA in CA-G.R. SP No. 64246, insofar as they nullified the
assailed orders of the RTC, Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17 on
the ground of lack of jurisdiction due to improper venue, are hereby AFFIRMED. The Orders dated
October 9, 2000, December 18, 2000, and March 15, 2001 of the RTC in Civil Case Nos. 3341-17 and
3342-17 are accordingly ANNULLED and SET ASIDE and said civil cases are DISMISSED.
Costs against petitioners.
SO ORDERED.
Page 19 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 160711 August 14, 2004
HEIRS OF MAXIMO LABANON, represented by ALICIA LABANON CAÑEDO and the PROVINCIAL
ASSESSOR OF COTABATO, Petitioners,
vs.
HEIRS OF CONSTANCIO LABANON, represented by ALBERTO MAKILANG, Respondents.
DECISION
VELASCO, JR., J.:

The Case
This Petition for Review on Certiorari under Rule 45 seeks the recall and nullification of the May 8, 2003
Decision1of the Court of Appeals (CA) in CA-G.R. CV No. 65617 entitled Heirs of Constancio Labanon
represented by Alberto Makilang v. Heirs of Maximo Labanon represented by Alicia Labanon Cañedo
and the Provincial Assessor of Cotabato, which reversed the August 18, 1999 Decision2 of the
Kidapawan City, Cotabato Regional Trial Court (RTC), Branch 17, in Civil Case No. 865. Likewise assailed
is the October 13, 2003 Resolution3 which disregarded petitioners’ Motion for Reconsideration.
The Facts
The CA culled the facts this way:
During the lifetime of Constancio Labanon, prior to the outbreak of WWII, he settled upon a piece of
alienable and disposable public agricultural land situated at Brgy. Lanao, Kidapawan, Cotabato x x x.
Constancio cultivated the said lot and introduced permanent improvements that still exist up to the
present. Being of very limited educational attainment, he found it difficult to file his public land
application over said lot. Constancio then asked his brother, Maximo Labanon who was better
educated to file the corresponding public land application under the express agreement that they will
divide the said lot as soon as it would be feasible for them to do so. The offer was accepted by Maximo.
During the time of the application it was Constancio who continued to cultivate the said lot in order to
comply with the cultivation requirement set forth under Commonwealth Act 141, as amended, on
Homestead applications. After which, on June 6, 1941, due to industry of Constancio, Homestead
Application No. 244742 (E-128802) of his brother Maximo was approved with Homestead Patent No.
67512. Eventually, Original Certificate of Title No. P-14320 was issued by the Register of Deeds of
Cotabato over said lot in favor of Maximo Labanon.
On February 11, 1955, Maximo Labanon executed a document denominated as "Assignment of Rights
and Ownership" and docketed as Doc. No. 20; Page No. 49; Book No. V; Series of 1955 of the Notarial
Register of Atty. Florentino Kintanar. The document was executed to safeguard the ownership and
interest of his brother Constancio Labanon. Pertinent portion of which is reproduced as follows:
"That I, MAXIMO LABANON, of legal age, married to Anastacia Sagarino, and a resident of Kidapawan,
Cotabato, for and in consideration of the expenses incurred by my elder brother CONSTANCIO
LABANON also of legal age, Filipino, widower and a resident of Kidapawan, Cotabato, for the clearing,
cultivation and improvements on the eastern portion xxx Lot No. 1, Blk. 22, Pls-59 xxx which expenses
have been incurred by my said brother xxx before the outbreak of the last world war xxx I do hereby
assign transfer and convey my rights to, interests in and ownership on the said eastern portion of said
Lot No. 1, Block 22, Pls-59 ONE HUNDRED (100 M) ALONG THE NATIONAL HIGHWAY, (DAVAO-COTABATO
ROAD) by TWO HUNDRED FIFTY METERS (250 M) going inside the land to cover an area of TWO AND
ONE HALF HECTARES (25,000 SQ. M.), more or less, adjoining the school site of barrio Lanao, Kidapawan,
Cotabato, to the said CONSTANCIO LABANON, his heirs and assigns, can freely occupy for his own use
and benefit xxx.
IN WITNESS WHEREFOF, I have hereunto set my hand this 11th day of February 1995 at Kidapawan,
Cotabato.
(SGD) MAXIMO LABANON
With my marital consent.
Page 20 of 166
Bus. Org. I Cases – Page 3 Syllabus

(SGD) ANASTACIA SAGARINO

(Wife)" (p.16, rollo)
On April 25, 1962, Maximo Labanon executed a sworn statement reiterating his desire that his elder
brother Constancio, his heirs and assigns shall own the eastern portion of the Lot, pertinent portion of
which reads:
"That I am the same and identical person who is a homestead applicant (HA-224742, E-128802) of a
tract of land which is covered by Homestead Patent No. 67512 dated June 6, 1941, known as Lot No.
1, Block 22, Pls-59, situated in [B]arrio Lanao, Municipality of Kidapawan, Province of Cotabato,
Philippines, and containing an area of 5.0000 hectares, more or less;
That I am the same and identical person who executed a deed of ASSIGNMENT OF RIGHTS AND
OWNERSHIP in favor of my brother Constancio Labanon, now deceased, now for his heirs, for the
eastern half portion of the land above described, and which deed was duly notarized by notary public
Florentino P. Kintanar on February 11, 1955 at Kidapawan, Cotabato and entered in his Notarial
Register as Doc. No. 20, Page No. 49, Book No. V, Series of 1955; and
That in order that I and the Heirs of Constancio Labanon will exercise our respective rights and
ownership over the aforementioned lot, and to give force and effect to said deed of assignment, I
hereby, by these presents, request the Honorable Director of Lands and the Land Title Commission to
issue a separate title in my favor covering the western half portion of the aforementioned lot and to
the Heirs of Constancio Labanon a title for the eastern half portion thereof.
IN WITNESS THEREOF, I have hereunto set my hand this 25th day of April, 1962, at Pikit, Cotabato,
Philippines." (p. 9, records)
After the death of Constancio Labanon, his heirs executed an [e]xtra-judicial settlement of estate with
simultaneous sale over the aforesaid eastern portion of the lot in favor of Alberto Makilang, the
husband of Visitacion Labanon, one of the children of Constancio. Subsequently, the parcel of land
was declared for taxation purposes in the name of Alberto under TD No. 11593. However, in March
1991, the defendants heirs of Maximo Labanon namely, Alicia L. Caniedo, Leopoldo Labanon, Roberto
Nieto and Pancho Labanon, caused to be cancelled from the records of the defendant Provincial
Assessor of Cotabato the aforesaid TD No. 11593 and the latter, without first verifying the legality of the
basis for said cancellation, did cancel the same. x x x Further, after discovering that the defendant-
heirs of Maximo Labanon were taking steps to deprive the heirs of Constancio Labanon of their
ownership over the eastern portion of said lot, the latter, thru Alberto Makilang, demanded the owner’s
copy of the certificate of title covering the aforesaid Lot to be surrendered to the Register of Deeds of
Cotabato so that the ownership of the heirs of Constancio may be fully effected but the defendants
refused and still continue to refuse to honor the trust agreement entered into by the deceased brothers.
x x x4
Thus, on November 12, 1991, petitioners filed a complaint5 for Specific Performance, Recovery of
Ownership, Attorney’s Fees and Damages with Writ of Preliminary Injunction and Prayer for Temporary
Restraining Order against respondents docketed as Civil Case No. 865 before the Kidapawan City RTC.
After hearing, the trial court rendered its August 18, 1999 Decision, the decretal portion of which reads:
Wherefore, prescinding from the foregoing facts and considerations the Court finds and so holds that
the [defendant-heirs] of Maximo Labanon represented by Alicia Labanon Caniedo have proved by
preponderance of evidence that they are entitled to the reliefs set forth in their answer and
consequently judgment is hereby rendered as follows:
1. Ordering the dismissal of the complaint against the Heirs of Maximo Labanon represented by
Alicia Labanon Caniedo for lack of merit;
2. Ordering the dismissal of the case against the Provincial Assessor. The claim of the plaintiff is
untenable, because the duties of the Provincial Assessor are ministerial. Moreover, the
presumption of regularity in the performance of his duty is in his favor;
3. Ordering the plaintiff to pay the defendants the amount of P20,000.00 as exemplary
damages, P10,000.00 for Attorney’s Fees, P500.00 per appearance in Court; and
4. To pay the costs of this suit.
IT IS SO ORDERED.6

Page 21 of 166
Bus. Org. I Cases – Page 3 Syllabus

Aggrieved, respondents elevated the adverse judgment to the CA which issued the assailed May 8,
2003 Decision in CA-G.R. CV No. 65617, the fallo of which states:
WHEREFORE, the appeal is hereby GRANTED for being meritorious. The assailed decision of the Regional
Trial Court is hereby REVERSED and SET ASIDE and a new one is hereby entered as follows:
1) Recognizing the lawful possession of the plaintiffs-appellants over the eastern portion of the
property in dispute;
2) Declaring the plaintiffs-appellants as owners of the eastern portion of the property by reason
of lawful possession;
3) Ordering the Provincial Assessor to reinstate TD No. 11593 and declaring TD No. 243-A null and
void;
4) Ordering the defendants-appellees to pay the plaintiffs-appellants the amount of P20,000 as
moral damages, P10,000 for attorney’s fees, P500.00 per appearance in Court and
5) To pay the costs of the suit.
SO ORDERED.
The Issues
Surprised by the turn of events, petitioners brought this petition before us raising the following issues, to
wit:
1. Whether or not Original Certificate of Title No. 41320 issued on April 10, 1975 in the name of
MAXIMO LABANON be now considered indefeasible and conclusive; and
2. Whether or not the Trust Agreement allegedly made by Constancio Labanon and Maximo
Labanon prescribed.7
The Court’s Ruling
The petition must fail.
First Issue
Respondents are not precluded from challenging the validity of Original Certificate of Title No. P-41320
Petitioners argue that respondents can no longer question Maximo Labanon’s ownership of the land
after its registration under the principle of indefeasibility of a Transfer Certificate of Title (TCT).
Such argument is inaccurate.
The principle of indefeasibility of a TCT is embodied in Section 32 of Presidential Decree No. (PD) 1529,
amending the Land Registration Act, which provides:
Section 32. Review of decree of registration; Innocent purchaser for value. The decree of registration
shall not be reopened or revised by reason of absence, minority, or other disability of any person
adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject,
however, to the right of any person, including the government and the branches thereof, deprived of
land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual
fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of
registration not later than one year from and after the date of the entry of such decree of registration,
but in no case shall such petition be entertained by the court where an innocent purchaser for value
has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase
"innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to
include an innocent lessee, mortgagee, or other encumbrancer for value.
Upon the expiration of said period of one year, the decree of registration and the certificate of title
issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case
may pursue his remedy by action for damages against the applicant or any other persons responsible
for the fraud.
Contrary to petitioners’ interpretation, the aforequoted legal provision does not totally deprive a party
of any remedy to recover the property fraudulently registered in the name of another. Section 32 of
PD 1529 merely precludes the reopening of the registration proceedings for titles covered by the
Torrens System, but does not foreclose other remedies for the reconveyance of the property to its
rightful owner. As elaborated in Heirs of Clemente Ermac v. Heirs of Vicente Ermac:
While it is true that Section 32 of PD 1529 provides that the decree of registration becomes
incontrovertible after a year, it does not altogether deprive an aggrieved party of a remedy in law.

Page 22 of 166
Bus. Org. I Cases – Page 3 Syllabus

The acceptability of the Torrens System would be impaired, if it is utilized to perpetuate fraud against
the real owners.8
A more succinct explanation is found in Vda. De Recinto v. Inciong, thus:
The mere possession of a certificate of title under the Torrens system does not necessarily make the
possessor a true owner of all the property described therein for he does not by virtue of said certificate
alone become the owner of the land illegally included. It is evident from the records that the petitioner
owns the portion in question and therefore the area should be conveyed to her. The remedy of the
land owner whose property has been wrongfully or erroneously registered in another's name is, after
one year from the date of the decree, not to set aside the decree, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of
justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for
value, for damages.9 (Emphasis supplied.)
Undeniably, respondents are not precluded from recovering the eastern portion of Original Certificate
of Title (OCT) No. P-14320, with an area subject of the "Assignment of Rights and Ownership" previously
owned by their father, Constancio Labanon. The action for Recovery of Ownership before the RTC is
indeed the appropriate remedy.
Second Issue
The trust agreement between Maximo Labanon and Constancio Labanon may still be enforced
Former Vice-President and Senator Arturo Tolentino, a noted civilist, explained the nature and import
of a trust:
Trust is the legal relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership of the former entitling
him to the performance of certain duties and the exercise of certain powers by the latter.10
This legal relationship can be distinguished from other relationships of a fiduciary character, such as
deposit, guardianship, and agency, in that the trustee has legal title to the property.11 In the case at
bench, this is exactly the relationship established between the parties.
Trusts are classified under the Civil Code as either express or implied. Such classification determines the
prescriptive period for enforcing such trust.
Article 1444 of the New Civil Code on express trust provides that "[n]o particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly intended."
Civil law expert Tolentino further elucidated on the express trust, thus:
No particular form of words or conduct is necessary for the manifestation of intention to create a trust.
It is possible to create a trust without using the word "trust" or "trustee". Conversely, the mere fact that
these words are used does not necessarily indicate an intention to create a trust. The question in each
case is whether the trustor manifested an intention to create the kind of relationship which to lawyers
is known as trust. It is immaterial whether or not he knows that the relationship which he intends to
create is called a trust, and whether or not he knows the precise characteristics of the relationship
which is called a trust.12
Correlatively, we ruled in Estate of Edward Miller Grimm v. Estate of Charles Parsons and Patrick C.
Parsons, that:
An express trust is created by the direct and positive acts of the parties, by some writing or deed or by
words evidencing an intention to create a trust; the use of the word trust is not required or essential to
its constitution, it being sufficient that a trust is clearly intended.131avvphi1
In the instant case, such intention to institute an express trust between Maximo Labanon as trustee and
Constancio Labanon as trustor was contained in not just one but two written documents, the
Assignment of Rights and Ownership as well as Maximo Labanon’s April 25, 1962 Sworn Statement. In
both documents, Maximo Labanon recognized Constancio Labanon’s ownership and possession over
the eastern portion of the property covered by OCT No. P-14320, even as he recognized himself as the
applicant for the Homestead Patent over the land. Thus, Maximo Labanon maintained the title over
the property while acknowledging the true ownership of Constancio Labanon over the eastern portion
of the land. The existence of an express trust cannot be doubted nor disputed.
On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that unrepudiated written
express trusts are imprescriptible:
Page 23 of 166
Bus. Org. I Cases – Page 3 Syllabus

While there are some decisions which hold that an action upon a trust is imprescriptible, without
distinguishing between express and implied trusts, the better rule, as laid down by this Court in other
decisions, is that prescription does supervene where the trust is merely an implied one. The reason has
been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as
follows:
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed
in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by
section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29, 1958, however,
the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure referred
only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law)
where no fiduciary relation exists and the trustee does not recognize the trust at all.14
This principle was amplified in Escay v. Court of Appeals this way: "Express trusts prescribe 10 years from
the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 0.G. p. 8429, Sec. 40,
Code of Civil Procedure)."15
In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the
enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the trustee.16
In the case at bar, Maximo Labanon never repudiated the express trust instituted between him and
Constancio Labanon. And after Maximo Labanon’s death, the trust could no longer be renounced;
thus, respondents’ right to enforce the trust agreement can no longer be restricted nor prejudiced by
prescription.
It must be noted that the Assignment of Rights and Ownership and Maximo Labanon’s Sworn
Statement were executed after the Homestead Patent was applied for and eventually granted with
the issuance of Homestead Patent No. 67512 on June 6, 1942. Evidently, it was the intent of Maximo
Labanon to hold the title over the land in his name while recognizing Constancio Labanon’s equitable
ownership and actual possession of the eastern portion of the land covered by OCT No. P-14320.
In addition, petitioners can no longer question the validity of the positive declaration of Maximo
Labanon in the Assignment of Rights and Ownership in favor of the late Constancio Labanon, as the
agreement was not impugned during the former’s lifetime and the recognition of his brother’s rights
over the eastern portion of the lot was further affirmed and confirmed in the subsequent April 25, 1962
Sworn Statement.
Section 31, Rule 130 of the Rules of Court is the repository of the settled precept that "[w]here one
derives title to property from another, the act, declaration, or omission of the latter, while holding the
title, in relation to the property, is evidence against the former." Thus, petitioners have accepted the
declaration made by their predecessor-in-interest, Maximo Labanon, that the eastern portion of the
land covered by OCT No. P-14320 is owned and possessed by and rightfully belongs to Constancio
Labanon and the latter’s heirs. Petitioners cannot now feign ignorance of such acknowledgment by
their father, Maximo.
Lastly, the heirs of Maximo Labanon are bound to the stipulations embodied in the Assignment of Rights
and Ownership pursuant to Article 1371 of the Civil Code that contracts take effect between the
parties, assigns, and heirs.
Petitioners as heirs of Maximo cannot disarrow the commitment made by their father with respect to
the subject property since they were merely subrogated to the rights and obligations of their
predecessor-in-interest. They simply stepped into the shoes of their predecessor and must therefore
recognize the rights of the heirs of Constancio over the eastern portion of the lot. As the old adage
goes, the spring cannot rise higher than its source.
WHEREFORE, the petition is DENIED. The May 8, 2003 CA Decision and October 13, 2003 Resolution in
CA-G.R. CV No. 65617 are AFFIRMED with the modifications that the Kidapawan City, Cotabato RTC,
Branch 17 is directed to have OCT No. P-14320 segregated and subdivided by the Land Management
Bureau into two (2) lots based on the terms of the February 11, 1955 Assignment of Rights and Ownership
executed by Maximo Labanon and Constancio Labanon; and after approval of the subdivision plan,
to order the Register of Deeds of Kidapawan City, Cotabato to cancel OCT No. P-14320 and issue one
title each to petitioners and respondents based on the said subdivision plan.
Costs against petitioners. SO ORDERED.
Page 24 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 on September 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:

Page 25 of 166
Bus. Org. I Cases – Page 3 Syllabus

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.
Page 26 of 166
Bus. Org. I Cases – Page 3 Syllabus

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
intervenor-appellant 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.

Page 27 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 G–P & Co. Citing Article 1448 of the Civil Code,16 the
appellate court held that respondent G–P & 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-in-intervention (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
Page 28 of 166
Bus. Org. I Cases – Page 3 Syllabus

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
Page 29 of 166
Bus. Org. I Cases – Page 3 Syllabus

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.
Page 30 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 and vice versa, vis-à-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: How about the signature appearing on Exhibit CC-1 …?
A: This is Charles Parsons, sir.
Q: - You are familiar with the signature?
A: 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?
Page 31 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 a Deed 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.

Page 32 of 166
Bus. Org. I Cases – Page 3 Syllabus

THIRD DIVISION
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.1âwphi1.nêt
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 Cariño (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

Page 33 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 Talisay-Minglanilla 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:

Page 34 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 —
square-meter 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 Cariño, 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

Page 35 of 166
Bus. Org. I Cases – Page 3 Syllabus

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
successors-in-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
Page 36 of 166
Bus. Org. I Cases – Page 3 Syllabus

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
Page 37 of 166
Bus. Org. I Cases – Page 3 Syllabus

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.1âwphi1.nêt
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.

Page 38 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165696 April 30, 2008
ALEJANDRO B. TY, petitioner,
vs.
SYLVIA S. TY, in her capacity as Administratrix of the Intestate Estate of Alexander Ty, respondent.
DECISION
AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court against the Decision1 of the
Court of Appeals (CA) in CA-G.R. No. 66053 dated July 27, 2004 and the Resolution therein dated
October 18, 2004.
The facts are stated in the CA Decision:
On May 19, 1988, Alexander Ty, son of Alejandro B. Ty and Bella Torres, died of cancer at the
age of 34. He was survived by his wife, Sylvia Ty, and his only daughter, Krizia Katrina Ty. A few
months after his death, a petition for the settlement of his intestate estate was filed by Sylvia Ty
in the Regional Trial Court of Quezon City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as Administratrix, for settlement and
distribution of the intestate estate of Alexander in the County of Los Angeles, the Superior Court
of California ordered the distribution of the Hollywood condominium unit, the Montebello lot,
and the 1986 Toyota pick-up truck to Sylvia Ty and Krizia Katrina Ty.
On November 23, 1990, Sylvia Ty submitted to the intestate Court in Quezon City an inventory of
the assets of Alexander’s estate, consisting of shares of stocks and a schedule of real estate
properties, which included the following:
1. EDSA Property – a parcel of land with an area of 1,728 square meters situated in EDSA,
Greenhills, Mandaluyong, Metro Manila, registered in the name of Alexander Ty when he was
still single, and covered by TCT No. 0006585;
2. Meridien Condominium – A residential condominium with an area of 167.5 square meters
situated in 29 Annapolis Street, Greenhills, Mandaluyong, Metro Manila, registered in the name
of the spouses Alexander Ty and Sylvia Ty, and covered by Condominium Certificate of Title No.
3395;
3. Wack-Wack Property – A residential land with an area of 1,584 square meters situated in Notre
Dame, Wack-Wack, Mandaluyong, Metro Manila, registered in the name of the spouses
Alexander Ty and Sylvia Ty, and covered by TCT No. 62670.
On November 4, 1992, Sylvia Ty asked the intestate Court to sell or mortgage the properties of
the estate in order to pay the additional estate tax of P4,714,560.02 assessed by the BIR.
Apparently, this action did not sit well with her father-in-law, the plaintiff-appellee, for on
December 16, 1992, Alejandro Ty, father of the deceased Alexander Ty, filed a complaint for
recovery of properties with prayer for preliminary injunction and/or temporary restraining order.
Docketed as Civil Case No. 62714, of the Regional Trial Court of Pasig, Branch 166, the complaint
named Sylvia Ty as defendant in her capacity as [Administratrix] of the Intestate Estate of
Alexander Ty.
Forthwith, on December 28, 1992, defendant Sylvia Ty, as Administratrix of the Intestate Estate of
Alexander Ty, tendered her opposition to the application for preliminary injunction. She claimed
that plaintiff Alejandro Ty had no actual or existing right, which entitles him to the writ of
preliminary injunction, for the reason that no express trust concerning an immovable maybe
proved by parole evidence under the law. In addition, Sylvia Ty argued that the claim is barred
by laches, and more than that, that irreparable injury will be suffered by the estate of Alexander
Ty should the injunction be issued.
To the aforementioned opposition, plaintiff filed a reply, reiterating the arguments set forth in his
complaint, and denying that his cause of action is barred by laches.
Page 39 of 166
Bus. Org. I Cases – Page 3 Syllabus

In an order dated February 26, 1993, the Regional Trial Court granted the application for a writ
of preliminary injunction.
As to the complaint for recovery of properties, it is asserted by plaintiff Alejandro Ty that he owns
the EDSA property, as well as the Meridien Condominium, and the Wack-Wack property, which
were included in the inventory of the estate of Alexander Ty. Plaintiff alleged that on March 17,
1976, he bought the EDSA property from a certain Purificacion Z. Yujuico; and that he registered
the said property in the name of his son, Alexander Ty, who was to hold said property in trust for
his brothers and sisters in the event of his (plaintiffs) sudden demise. Plaintiff further alleged that
at the time the EDSA property was purchased, his son and name-sake was still studying in the
United States, and was financially dependent on him.
As to the two other properties, plaintiff averred that he bought the Meridien Condominium
sometime in 1985 and the Wack-Wack property sometime in 1987; that titles to the
aforementioned properties were also placed in the name of his son, Alexander Ty, who was also
to hold these properties in trust for his brothers and sisters. Plaintiff asserted that at [the] time the
subject properties were purchased, Alexander Ty and Sylvia Ty were earning minimal income,
and were thus financially incapable of purchasing said properties. To bolster his claim, plaintiff
presented the income tax returns of Alexander from 1980-1984, and the profit and loss statement
of defendant’s Joji San General Merchandising from 1981-1984.
Plaintiff added that defendant acted in bad faith in including the subject properties in the
inventory of Alexander Ty’s estate, for she was well aware that Alexander was simply holding
the said properties in trust for his siblings.
In her answer, defendant denied that the subject properties were held in trust by Alexander Ty
for his siblings. She contended that, contrary to plaintiff’s allegations, Alexander purchased the
EDSA property with his own money; that Alexander was financially capable of purchasing the
EDSA property as he had been managing the family corporations ever since he was 18 years
old, aside from the fact that he was personally into the business of importing luxury cars. As to
the Meridien Condominium and Wack-Wack property, defendant likewise argued that she and
Alexander Ty, having been engaged in various profitable business endeavors, they had the
financial capacity to acquire said properties.
By way of affirmative defenses, defendant asserted that the alleged verbal trust agreement
over the subject properties between the plaintiff and Alexander Ty is not enforceable under the
Statute of Frauds; that plaintiff is barred from proving the alleged verbal trust under the Dead
Man’s Statute; that the claim is also barred by laches; that defendant’s title over the subject
properties cannot be the subject of a collateral attack; and that plaintiff and counsel are
engaged in forum-shopping.
In her counterclaim, defendant prayed that plaintiff be sentenced to pay attorney’s fees and
costs of litigation.
On November 9, 1993, a motion for leave to intervene, and a complaint-in-intervention were
filed by Angelina Piguing-Ty, legal wife of plaintiff Alejandro Ty. In this motion, plaintiff-intervenor
prayed that she be allowed to intervene on the ground that the subject properties were
acquired during the subsistence of her marriage with the plaintiff, hence said properties are
conjugal. On April 27, 1994, the trial court issued an Order granting the aforementioned motion.
During the hearing, plaintiff presented in evidence the petition filed by defendant in Special
Proceedings No. Q-88-648; the income tax returns and confirmation receipts of Alexander Ty
from 1980-1984; the profit and loss statement of defendant’s Joji San General Merchandising
from 1981-1984; the deed of sale of the EDSA property dated March 17, 1976; the TCT’s and CCT
of the subject properties; petty cash vouchers, official receipts and checks to show the plaintiff
paid for the security and renovation expenses of both the Meridien Condominium and the
Wack-Wack property; checks issued by plaintiff to defendant between June 1988 – November
1991 to show that plaintiff provided financial support to defendant in the amount of P51,000.00;
and the articles of incorporations of various corporations, to prove that he, plaintiff, had put up
several corporations.

Page 40 of 166
Bus. Org. I Cases – Page 3 Syllabus

Defendant for her presented in evidence the petition dated September 6, 1988 in Special
Proceedings No. Q-88-648; the TCTs and CCT of the subject properties; the deed of sale of stock
dated July 27, 1988 between the ABT Enterprises, Incorporated, and plaintiff; the transcript of
stenographic notes dated January 5, 1993 in SEC Case No. 4361; the minutes of the meetings,
and the articles of incorporation of various corporations; the construction agreement between
the defendant and the Home Construction, for the renovation of the Wack-Wack property; the
letters of Home Construction to defendant requesting for payment of billings and official
receipts of the same, to show that defendant paid for the renovation of the Wack-Wack
property; the agreement between Drago Daic Development International, Incorporated, and
the spouses Alexander Ty and Sylvia Ty, dated March, 1987, for the sale of the Wack-Wack
property covered by TCT No. 55206 in favor of the late Alexander Ty and the defendant; a
photograph of Krizia S. Ty; business cards of Alexander Ty; the Order and the Decree No. 10 of
the Superior Court of California, dated July 20, 1989; the agreement between Gerry L. Contreras
and the Spouses Alexander Ty and Sylvia Ty, dated January 26, 1988, for the Architectural
Finishing and Interior Design of the Wack-Wack property; official receipts of the Gercon
Enterprises; obituaries published in several newspapers; and a letter addressed to Drago Daic
dated February 10, 1987.2
Furthermore, the following findings of facts of the court a quo, the Regional Trial Court of Pasig City,
Branch 166 (RTC), in Civil Case No. 62714, were adopted by the CA, thus:
We adopt the findings of the trial court in respect to the testimonies of the witnesses who testified
in this case, thus:
"The gist of the testimony of defendant as adverse witness for the plaintiff:
"Defendant and Alexander met in Los Angeles, USA in 1975. Alexander was then only 22 years
old. They married in 1981. Alexander was born in 1954. He finished high school at the St. Stephen
High School in 1973. Immediately after his graduation from high school, Alexander went to the
USA to study. He was a full-time student at the Woodberry College where he took up a business
administration course. Alexander graduated from the said college in 1977. He came back to
the Philippines and started working in the Union Ajinomoto, Apha Electronics Marketing
Corporation and ABT Enterprises. After their marriage in 1981, Alexander and defendant lived
with plaintiff at the latter’s residence at 118 Scout Alcaraz St.[,] Quezon City. Plaintiff has been
engaged in manufacturing and trading business for almost 50 years. Plaintiff has established
several corporations. While in the USA, Alexander stayed in his own house in Montebello,
California, which he acquired during his college days. Alexander was a stockholder of
companies owned by plaintiff’s family and got yearly dividend therefrom. Alexander was an
officer in the said companies and obtained benefits and bonuses therefrom. As stockholder of
Ajinomoto, Royal Porcelain, Cartier and other companies, he obtained stock dividends.
Alexander engaged in buy and sell of cars. Defendant cannot give the exact amount how
much Alexander was getting from the corporation since 1981. In 1981, defendant engaged in
retail merchandising i.e., imported jewelry and clothes. Defendant leased two (2) units at the
Greenhills Shoppesville. Defendant had dividends from the family business which is real estate
and from another corporation which is Perway. During their marriage, defendant never
received allowance from Alexander. The Wack-Wack property cost P5.5 million. A Car Care
Center was established by Alexander and defendant was one of the stockholders. Defendant
and Alexander spent for the improvement of the Wack-Wack property. Defendant and
Alexander did not live in the condominium unit because they followed the Chinese tradition
and lived with plaintiff up to the death of Alexander. Defendant and Alexander started putting
improvements in the Wack-Wack property in 1988, or a few months before Alexander died.
"The gist of the testimony of Conchita Sarmiento:
"In 1966, Conchita Sarmiento was employed in the Union Chemicals as secretary of plaintiff who
was the president. Sarmiento prepared the checks for the school expenses and allowances of
plaintiff’s children and their spouses. Sarmiento is familiar with the Wack-Wack property. Plaintiff
bought the Wack-Wack property and paid the architect and spent for the materials and labor
in connection with the construction of the Wack-Wack property (Exhs. ‘M’ to ‘Z’ inclusive; Exhs.
Page 41 of 166
Bus. Org. I Cases – Page 3 Syllabus

‘AA’ to ‘ZZ,’ inclusive; Exhs. ‘AAA’ to ‘ZZZ,’ inclusive; Exhs. ‘AAAA’ to ‘FFFF,’ inclusive). Plaintiff
entrusted to Alexander the supervision of the construction of the Wack-Wack property, so that
Exhibit ‘M’ shows that the payment was received from Alexander. Plaintiff visited the Wack-
Wack property several times and even pointed the room which he intended to occupy.
Sarmiento was told by plaintiff that it was very expensive to maintain the house. The documents,
referring to the numerous exhibits, were in the possession of plaintiff because they were
forwarded to him for payment. Sarmiento knows the residential condominium unit because in
1987 plaintiff purchased the materials and equipments for its renovation, as shown by Exhs.
‘GGGG’ to ‘QQQQ’ inclusive. Plaintiff supported defendant after the death of Alexander, as
shown by Exhs. ‘RRRR’ to ‘TTTT’ inclusive. Sarmiento was plaintiff’s secretary and assisted him in
his official and personal affairs. Sarmiento knew that Alexander was receiving a monthly
allowance in the amount of P5,000.00 from Alpha.
"The gist of the testimony of the plaintiff:
Plaintiff is 77 years old and has been engaged in business for about 50 years. Plaintiff established
several trading companies and manufacturing firms. The articles of incorporation of the
companies are shown in Exhs. ‘UUUUU’ (Manila Paper Mills, Inc.); ‘UUUUU-1’ (Union Chemicals
Inc.); ‘UUUUU-2’ (Starlight Industrial Company Inc.); ‘UUUUU-3’ (Hitachi Union, Inc.); ‘UUUUU-4’
(Philippine Crystal Manufacturing Corp.). Alexander completed his elementary education in
1969 at the age of 15 years and finished high school education in 1973. Alexander left in 1973
for the USA to study in the Woodberry College in Los Angeles. Alexander returned to the
Philippines in 1977. When Alexander was 18 years old, he was still in high school, a full-time
student. Alexander did not participate in the business operation. While in High School Alexander,
during his free time attended to his hobby about cars – Mustang, Thunderbird and Corvette.
Alexander was not employed. Plaintiff took care of Alexander’s financial needs. Alexander was
plaintiff’s trusted son because he lived with him from childhood until his death. In 1977 when
Alexander returned to the Philippines from the USA, he did not seek employment. Alexander
relied on plaintiff for support. After Alexander married defendant, he put up a Beer Garden and
a Car Care Center. Plaintiff provided the capital. The Beer Garden did not make money and
was closed after Alexander’s death. Defendant and Alexander lived with plaintiff in Quezon
City and he spent for their needs. Plaintiff purchased with his own money the subject properties.
The EDSA property was for investment purposes. When plaintiff accompanied Alexander to the
USA in 1973, he told Alexander that he will buy some properties in Alexander’s name, so that if
something happens to him, Alexander will distribute the proceeds to his siblings. When the EDSA
property was bought, Alexander was in the USA. Plaintiff paid the real estate taxes. With
plaintiff’s permission, Alexander put up his Beer Garden and Car Care Center in the EDSA
property. It was Alexander who encouraged plaintiff to buy the condominium unit because
Alexander knew the developer. The condominium unit was also for investment purposes. Plaintiff
gave Alexander the money to buy the condominium unit. After sometime, Alexander and
defendant asked plaintiff’s permission for them to occupy the condominium unit. Plaintiff spent
for the renovation of the condominium unit. It was Alexander who encouraged plaintiff to buy
the Wack-Wack property. Plaintiff spent for the renovation of the condominium unit. It was
Alexander who encouraged plaintiff to buy the Wack-Wack property. Plaintiff paid the price
and the realty taxes. Plaintiff spent for the completion of the unfinished house on the Wack-
Wack property. Plaintiff bought the Wack-Wack property because he intended to transfer his
residence from Quezon City to Mandaluyong. During the construction of the house on the
Wack-Wack property plaintiff together with Conchita Sarmiento, used to go to the site. Plaintiff
even told Sarmiento the room which he wanted to occupy. Alexander and defendant were
not in a financial position to buy the subject properties because Alexander was receiving only
minimal allowance and defendant was only earning some money from her small stall in
Greenhills. Plaintiff paid for defendant’s and Alexander income taxes (Exhs. ‘B,’ ‘C,’ ‘D,’ ‘E,’ and
‘F’). Plaintiff kept the Income Tax Returns of defendant and Alexander in his files. It was one of
plaintiff’s lawyers who told him that the subject properties were included in the estate of
Alexander. Plaintiff called up defendant and told her about the subject properties but she
Page 42 of 166
Bus. Org. I Cases – Page 3 Syllabus

ignored him so that plaintiff was saddened and shocked. Plaintiff gave defendant monthly
support of P 51, 000.00 (Exhs. ‘RRRR’ to ‘TTTTT," inclusive) P 50,000.00 for defendant and P1,000.00
for the yaya. The Wack-Wack property cost about P5.5 million.
"The gist of the testimony of Robert Bassig:
"He is 73 years old and a real estate broker. Bassig acted as broker in the sale of the EDSA
property from Purificacion Yujuico to plaintiff. In the Deed of Sale (Exh. ‘G’) it was the name of
Alexander that was placed as the vendee, as desired by plaintiff. The price was paid by plaintiff.
Bassig never talked with Alexander. He does not know Alexander.
"The gist of the testimony of Tom Adarne as witness for defendant:
Adarne is 45 years old and an architect. He was a friend of Alexander. Adarne was engaged
by defendant for the preparation of the plans of the Wack-Wack property. The contractor who
won the bidding was Home Construction, Inc. The Agreement (Exh. ‘26’) was entered into by
defendant and Home Construction Inc. The amount of P955,555.00 (Exh. ’26-A’) was for the
initial scope of the work. There were several letter-proposals made by Home Construction (Exhs.
‘27-34-A,’ inclusive). There were receipts issued by Home Construction Inc. (Exhs. ’35,’ ‘36’ and
‘37’). The proposal were accepted and performed. The renovation started in 1992 and was
finished in 1993 or early 1994.
"The gist of the testimony of Rosanna Regalado:
"Regalado is 43 years old and a real estate broker. Regalado is a close friend of defendant.
Regalado acted as broker in the sale of the Wack-Wack property between defendant and
Alexander and the owner. The sale Agreement (Exh. ‘38’) is dated March 5, 1987. The price
is P5.5 million in Far East Bank and Trust Company manager’s checks. The four (4) checks
mentioned in paragraph 1 of the Agreement were issued by Alexander but she is not sure
because it was long time ago.
"The gist of the testimony of Sylvia Ty:
"She is 40 years old, businesswoman and residing at 675 Notre Dame, Wack-Wack Village,
Mandaluyong City. Sylvia and Alexander have a daughter named Krizia Katrina Ty, who is 16
years old. Krizia is in 11thgrade at Brent International School. Alexander was an executive in
several companies as shown by his business cards (Exhs. ’40,’ ‘40-A,’ ’40-B,’ ‘40-C,’ ‘40-D,’ ‘40-
E,’ ‘40-F,’ and ‘40-G’). Before defendant and Alexander got married, the latter acquired a
condominium unit in Los Angeles, USA, another property in Montebello, California and the EDSA
property. The properties in the USA were already settled and adjudicated in defendant’s favor
(Exhs. ‘41’ and ‘41-A’). Defendant did not bring any property into the marriage. After the
marriage, defendant engaged in selling imported clothes and eventually bought four (4) units
of stall in Shoppesville Greenhills and derived a monthly income of P50,000.00. the price for one
(1) unit was provided by defendant’s mother. The other three (3) units came from the house and
lot at Wack-Wack Village. The P3.5 million manager’s check was purchased by Alexander. The
sale Agreement was signed by Alexander and defendant (Exhs. ’38-A’ and ‘38-B’). After the
purchase, defendant and Alexander continued the construction of the property. After
Alexander’s death, defendant continued the construction. The first architect that defendant
and Alexander engaged was Gerry Contreras (Exhs. ’42,’ ‘42-A’ and ‘42-A-1’ to ‘42-A-7’). The
post-dated checks issued by Alexander were changed with the checks of plaintiff. After the
death of Alexander, defendant engaged the services of Architect Tom Adarne. Home
Construction, Inc. was contracted to continue the renovation. Defendant and Alexander made
payments to Contreras from January to May 1998 (Exhs. ’43,’ ‘43-A’ to ‘43-H,’ inclusive). A
general contractor by the name of Nogoy was issued some receipts (Exhs. ’43-J’ and ‘43-K’). a
receipt was also issued by Taniog (Exh. ‘43-L’). the payments were made by defendant and
Alexander from the latter’s accounts. The Agreement with Home Construction Inc. (Exhs. ‘26’)
shows defendant’s signature (Exh. ‘26-A’). the additional works were covered by the progress
billings (Exhs. ‘27’ to ‘34-A’). Defendant paid them from her account. The total contract amount
was P5,049,283.04. The total expenses, including the furnishings, etc. reached the amount of P8
to 10 million and were paid from defendant’s and Alexander’s funds. After the death of
Alexander, plaintiff made payments for the renovation of the house (Exh. ‘M’) which plaintiff
Page 43 of 166
Bus. Org. I Cases – Page 3 Syllabus

considered as advantages but plaintiff did not make any claim for reimbursement from the
estate of Alexander. Defendant’s relationship with plaintiff became strained when he asked her
to waive her right over the Union Ajinomoto shares. Alexander was a friend of Danding
Cojuangco and was able to import luxury cars. Alexander made a written offer to purchase the
Wack-Wack property. Alexander graduated from the Woodberry College in 1978 or 1979 and
returned to the Philippines in 1979 defendant returned to the Philippines about six (6) months
later. Plaintiff was financially well off or wealthy. Alexander was very close to plaintiff and he was
the most trusted son and the only one who grew up in plaintiff’s house. Plaintiff observed Chinese
traditions. Alexander was not totally dependent on plaintiff because he had his own earnings.
Upon his return from the USA, Alexander acquired the properties in the USA while studying there.
At the time of his death, Alexander was vice president of Union Ajinomoto. Defendant could
not say how much was the compensation of Alexander from Union Ajinomoto. Defendant could
not also say how much did Alexander earn as vice president of Royal Porcelain Corporation.
Alexander was the treasurer of Polymark Paper Industries. Alexander was the one handling
everything for plaintiff in Horn Blower Sales Enterprises, Hi-Professional Drilling, Round Consumer,
MVR Picture Tubes, ABT Enterprises. Plaintiff supported defendant and her daughter in the
amount of P51,000.00 per month from 1988-1990. Defendant did not offer to reimburse plaintiff
the advances he made on the renovation of the Wack-Wack property because their
relationship became strained over the Ajinomoto shares. Defendant could not produce the
billings which were indicated in the post-dated checks paid to Architect Contreras. After the
birth of her child, defendant engaged in the boutique business. Defendant could not recall how
much she acquired the boutique (for). In 1983 or 1984 defendant started to earn P50,000.00 a
month. The properties in the USA which were acquired by Alexander while still single were known
to plaintiff but the latter did not demand the return of the titles to him. The Transfer Certificates
of Title of the Wack-Wack and EDSA properties were given to defendant and Alexander. The
Condominium Certificate of Title was also given to defendant and Alexander. The plaintiff did
not demand the return of the said titles.
"The gist of the testimony of Atty. Mario Ongkiko:
"Atty. Ongkiko prepared the Deed of Sale of the EDSA property. There was only one Deed of
Sale regarding the said property. The plaintiff was not the person introduced to him by Yujuico
as the buyer.3
On January 7, 2000, the RTC rendered its decision, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring plaintiff as the true and lawful owner of the subject properties, as follows:
A. A parcel of land with an area of 1728 square meters, situated along EDSA Greenhills,
Mandaluyong City, covered by TCT No. 006585.
B. A residential land with an area of 1584 square meters, together with the improvements
thereon, situated in Notre Dame, Wack-Wack Village, Mandaluyong City, covered by
TCT No. 62670.
C. A residential condominium unit with an area of 167.5 square meters, situated in 29
Annapolis St., Greenhills, Mandaluyong City, covered by Condominium Certificate Title
No. 3395.
2. Ordering the defendant to transfer or convey the subject properties in favor of plaintiff and
the Register of Deeds for Mandaluyong City to transfer and issue in the name of plaintiff the
corresponding certificates of title.
3. Ordering the defendant to pay plaintiff the amount of P100,000.00, as moral damages
and P200,000.00, as attorney’s fees plus the cost of the suit.
SO ORDERED.4
Respondent herein, Sylvia S. Ty, appealed from the RTC Decision to the CA, assigning the following as
errors:
I.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE EDSA PROPERTY BUT
PLACED TITLE THERETO IN THE NAME OF ALEXANDER T. TY, SO THAT AN EXPRESS TRUST WAS
Page 44 of 166
Bus. Org. I Cases – Page 3 Syllabus

CREATED BETWEEN APPELLEE, AS TRUSTOR AND ALEXANDER AS TRUSTEE IN FAVOR OF THE LATTER’S
SIBLINGS, AS BENEFICIARIES EVEN WITHOUT ANY WRITING THEREOF; ALTERNATIVELY, THE TRIAL
COURT ERRED IN ANY CASE IN HOLDING THAT AN IMPLIED TRUST EXISTED BETWEEN APPELLEE AND
ALEXANDER TY IN FAVOR OF APPELLEE UNDER THE SAME CIRCUMSTANCES.
II.
THE TRIAL COURT ERRED IN HOLDING THAT APPELLEE PURCHASED THE WACK-WACK AND
MERIDIEN CONDOMINIUM PROPERTIES BUT PLACED ITS TITLES THERETO IN THE NAMES OF SPOUSES
ALEXANDER AND APPELLANT BECAUSE HE WAS FINANCIALLY CAPABLE OF PAYING FOR THE
PROPERTIES WHILE ALEXANDER OR HIS WIFE, APPELLANT SYLVIA S. TY, WERE INCAPABLE. HENCE,
A RESULTING TRUST WAS CREATED BETWEEN APPELLEE AND HIS SON, ALEXANDER, WITH THE
FORMER, AS OWNER-TRUSTOR AND BENEFICIARY AND THE LATTER AS TRUSTEE CONCERNING THE
PROPERTIES.
III.
THE TRIAL COURT ERRED IN AWARDING MORAL DAMAGES OF P100,000 AND ATTORNEY’S FEES
OF P200,000 IN FAVOR OF APPELLEE AND AGAINST DEFENDANT-APPELLANT IN HER CAPACITY AS
ADMINISTRATRIX OF THE INTESTATE ESTATE OF ALEXANDER TY, INSTEAD OF AWARDING APPELLANT
IN HER COUNTERCLAIM ATTORNEY’S FEES AND EXPENSES OF LITIGATION INCURRED BY HER IN
DEFENDING HER HUSBAND’S ESTATE AGAINST THE UNJUST SUIT OF HER FATHER-IN-LAW, HEREIN
APPELLEE, WHO DISCRIMINATED AGAINST HIS GRAND DAUGHTER KRIZIA KATRINA ON ACCOUNT
OF HER SEX.
The arguments in the respective briefs of appellant and appellee are summarized by the CA Decision,
as well as other preliminary matters raised and tackled, thus:
In her Brief, defendant-appellant pointed out that, based on plaintiff-appellee’s testimony, he
actually intended to establish an express trust; but that the trial court instead found that an
implied trust existed with respect to the acquisition of the subject properties, citing Art. 1448 of
the Civil Code of the Philippines.
It is defendant-appellant’s contention that the trial court erred: In applying Art. 1448 on implied
trust, as plaintiff-appellee did not present a shred of evidence to prove that the money used to
acquire said properties came from him; and in holding that both she and her late husband were
financially incapable of purchasing said properties. On the contrary, defendant-appellant
claimed that she was able to show that she and her late husband had the financial capacity
to purchase said properties.
Defendant-appellant likewise questioned the admission of the testimony of plaintiff-appellee,
citing the Dead Man’s Statute; she also questioned the admission of her late husband’s income
tax returns, citing Section 71 of the NIRC and the case of Vera v. Cusi, Jr.
On July 10, 2001, plaintiff-appellee filed his appellee’s Brief, whereunder he argued: That the trial
court did not err in finding that the subject properties are owned by him; that the said properties
were merely registered in Alexander’s name, in trust for his siblings, as it was plaintiff-appellee
who actually purchased the subject properties he having the financial capacity to acquire the
subject properties, while Alexander and defendant-appellant had no financial capacity to do
so; that defendant-appellant should be sentenced to pay him moral damages for the mental
anguish, serious anxiety, wounded feelings, moral shock and similar injury by him suffered, on
account of defendant-appellant’s wrongful acts; and that defendant appellant should also
pay for attorney’s fees and litigation expenses by him incurred in litigating this case.
In a nutshell, it is plaintiff-appellee’s thesis that in 1973, when he accompanied his son,
Alexander, to America, he told his son that he would put some of the properties in Alexander’s
name, so that if death overtakes him (plaintiff-appellee), Alexander would distribute the
proceeds of the property among his siblings. According to plaintiff-appellee, the three
properties subject of this case are the very properties he placed in the name of his son and
name-sake; that after the death of Alexander, he reminded his daughter-in-law, the defendant
appellant herein, that the subject properties were only placed in Alexander’s name for
Alexander to hold trust for his siblings; but that she rejected his entreaty, and refused to reconvey

Page 45 of 166
Bus. Org. I Cases – Page 3 Syllabus

said properties to plaintiff-appellee, thereby compelling him to sue out a case for
reconveyance.
On September 5, 2001, defendant-appellant filed her reply Brief and a motion to admit
additional evidence. Thereafter, several motions and pleadings were filed by both parties.
Plaintiff-appellee filed a motion for early resolution dated May 17, 2002 while defendant-
appellant filed a motion to resolve dated August 6, 2003 and a motion to resolve incident dated
August 12, 2003.
Plaintiff-appellee then filed a comment on the motion to resolve incident, to which defendant-
appellant tendered a reply. Not to be outdone, the former filed a rejoinder.
Thus, on February 13, 2004, this Court issued a resolution, to set the case for the reception of
additional evidence for the defendant-appellant.
In support of her motion to admit additional evidence, defendant-appellant presented receipts
of payment of real estate taxes for the years 1987 to 2004, obviously for the purpose of proving
that she and her late husband in their own right were financially capable of acquiring the
contested properties. Plaintiff-appellee however did not present any countervailing evidence.
Per resolution of March 25, 2004, this Court directed both parties to submit their respective
memorandum of authorities in amplification of their respective positions regarding the
admissibility of the additional evidence.
Defendant-appellant in her memorandum prayed that the additional evidence be considered
in resolving the appeal in the interest of truth and substantial justice. Plaintiff-appellee, on the
other hand, in his memorandum, argued that the additional evidence presented by the
defendant-appellant is forgotten evidence, which can lo longer be admitted, much less
considered, in this appeal. Thereafter, the case was submitted for decision.
Before taking up the main issue, we deem it expedient to address some collateral issues, which
the parties had raised, to wit: (a) the admissibility of the additional evidence presented to this
Court, (b) the admissibility of plaintiff’s testimony, (c) the admissibility of the income tax return,
and (d) laches.
On the propriety of the reception of additional evidence, this Court falls backs (sic) upon the
holding of the High Court in Alegre v. Reyes, 161 SCRA 226 (1961) to the effect that even as
there is no specific provision in the Rules of Court governing motions to reopen a civil case for
the reception of additional evidence after the case has been submitted for decision, but before
judgment is actually rendered, nevertheless such reopening is controlled by no other principle
than that of the paramount interest of justice, and rests entirely upon the sound judicial
discretion of the court. At any rate, this Court rules that the tax declaration receipts for the EDSA
property for the years 1987-1997, and 1999; for the Wack-Wack property for the years 1986-1987,
1990-1999; and for the Meridien Condominium for the years 1993-1998 cannot be admitted as
they are deemed forgotten evidence. Indeed, these pieces of evidence should have been
presented during the hearing before the trial court.
However, this Court in the interest of truth and justice must hold, as it hereby holds, that the tax
declaration receipts for the EDSA property for the years 2000-2004; the Wack-Wack property for
the years 2000-2004; and the Meridien Condominium for the years 2000-2001 may be admitted
to show that to this date, it is the defendant-appellant, acting as an administratrix, who has
been paying the real estate taxes on the aforestated properties.
As regards the admissibility of plaintiff-appellee’s testimony, this Court agrees with the trial court
that:
"Defendant’s argument to the effect that plaintiff’s testimony proving that the deceased
Alexander Ty was financially dependent on him is inadmissible in evidence because he
is barred by the Dead Man’s Statute (Rule 130, Sec. 20, Rules of Court) for making such
testimony, is untenable. A reading of pages 10 to 45 of the TSN, taken on November 16,
1998, which contain the direct-examination testimony of plaintiff, and pages 27, 28, 30,
34, 35, 37, 39, 40 of the TSN, taken on January 15, 1999; page 6 of the TSN taken on
December 11, 1998, pages 8, 10, 11, 12, 14, 23 24 of TSN, taken on taken on February 19,
1999; and pages 4,5,6,7,8,11,25 and 27 of the TSN taken on March 22, 1999, will show that
Page 46 of 166
Bus. Org. I Cases – Page 3 Syllabus

defendant’s lawyer did not object to the plaintiff as witness against defendant, and that
plaintiff was exhaustively cross-examined by defendant’s counsel regarding the
questioned testimony, hence, the same is not covered by the Dead Man’s Statute
(Marella v. Reyes, 12 Phil. 1; Abrenica v. Gonda and De Gracia, 34 Phil. 739; Tongco v.
Vianzon, 50 Phil. 698).
A perusal of the transcript of stenographic notes will show that counsel for defendant-appellant
was not able to object during the testimony of plaintiff-appellee. The only time that counsel for
defendant-appellant interposed his objection was during the examination of Rosemarie Ty, a
witness (not a party) to this case. Thus the Dead Man’s Statute cannot apply.
With regard to the income tax returns filed by the late Alexander Ty, this Court holds that the
same are admissible in evidence. Neither Section 71 of the NIRC nor the case of Vera v.
Cusi applies in this case. The income tax returns were neither obtained nor copied from the
Bureau of Internal Revenue, nor produced in court pursuant to a court order; rather these were
produced by plaintiff-appellee from his own files, as he was the one who kept custody of the
said income tax returns. Hence, the trial court did not err in admitting the income tax returns as
evidence.
Anent the issue of laches, this Court finds that the plaintiff-appellee is not guilty of laches. There
is laches when: (1) the conduct of the defendant or one under whom he claims, gave rise to
the situation complained of; (2) there was delay in asserting a right after knowledge defendant’s
conduct and after an opportunity to sue; (3) defendant had no knowledge or notice that the
complainant would assert his right; and (4) there is injury or prejudice to the defendant in the
event relief is accorded to the complainant. These conditions do not obtain here.
In this case, there was no delay on the part of plaintiff-appellee in instituting the complaint for
recovery of real properties. The case was files four years after Alexander’s death; two years after
the inventory of assets of Alexander’s estate was submitted to the intestate court; and one
month after defendant-appellant filed a motion to sell or mortgage the real estate properties.
Clearly, such length of time was not unreasonable.5
The CA then turned to "the critical, crucial and pivotal issue of whether a trust, express or implied, was
established by the plaintiff-appellee in favor of his late son and name-sake Alexander Ty."
The CA proceeded to distinguish express from implied trust, then found that no express trust can be
involved here since nothing in writing was presented to prove it and the case involves real property. It
then stated that it disagrees with the court a quo’s application of Art. 1448 of the Civil Code on implied
trust, the so-called purchase money resulting trust, stating that the very Article provides the exception
that obtains when the person to whom the title is conveyed is the child, legitimate or illegitimate, of
the one paying the price of the sale, in which case no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
The CA therefore reasoned that even assuming that plaintiff-appellee paid at least part of the price of
the EDSA property, the law still presumes that the conveyance was a discretion (a gift of devise) in
favor of Alexander.
As to plaintiff-appellee’s argument that there was no donation as shown by his exercise of dominion
over the property, the CA held that no credible evidence was presented to substantiate the claim.
Regarding the residence condominium and the Wack-Wack property, the CA stated that it did not
agree either with the findings of the trial court that an implied trust was created over these properties.
The CA went over the testimonies of plaintiff-appellee and the witness Conchita Sarmiento presented
to show that spouses Alexander and Sylvia S. Ty were financially dependent of plaintiff-appellee and
did not have the financial means or wherewithals to purchase these properties. It stated:
Consider this testimony of plaintiff-appellee:
Q During the time that Alex was staying with you, did you ever come to know that Alexander
and his wife did go to the States?
A Yes, sir. But I do not know the exact date. But they told me they want to go to America for
check up.
Q Was that the only time that Alexander went to the States?

Page 47 of 166
Bus. Org. I Cases – Page 3 Syllabus

A Only that time, sir. Previously, he did not tell me. That last he come (sic) to me and tell [sic]
me that he will go to America for check up. That is the only thing I know.
Q Would you say for the past five years before his death Alex and his wife were going to the
States at least once a year?
A I cannot say exactly. They just come to me and say that I [sic] will go to "bakasyon." They
are already grown people. They don’t have to tell me where they want to go.
Q You are saying that Alexander did not ask you for assistance whenever he goes to the
States?
A Sometimes Yes.
Q In what form?
A I gave him peso, sir.
Q For what purpose?
A Pocket money, sir.
There is no evidence at all that it was plaintiff-appellee who spent for the cancer treatment
abroad of his son. Nor is there evidence that he paid for the trips abroad of Alexander and the
defendant-appellant. Admittedly, he only gave his son Alexander pocket money once in a
while. Simply put, Alexander was not financially dependent upon the plaintiff-appellee, given
that Alexander could afford the costs of his cancer treatment abroad, this on top of the trips he
made to the United States at least once a year for five successive years without the support of
his father.
The fact that Alexander stayed with his father, the plaintiff-appellee in this case, even after he
married Sylvia and begot Krizia, does not at all prove that Alexander was dependent on plaintiff-
appellee. Neither does it necessarily mean that it was plaintiff-appellee who was supporting
Alexander’s family. If anything, plaintiff-appellee in his testimony admitted that Alexander and
his family went to live with him in observance of Chinese traditions.
In addition, the income tax returns of Alexander from 1980-1984, and the profit and loss
statement of defendant-appellant’s Joji San General Merchandising from 1981-1984, are not
enough to prove that the spouses were not financially capable of purchasing the said
properties. Reason: These did not include passive income earned by these two, such as interests
on bank deposits, royalties, cash dividends, and earnings from stock trading as well as income
from abroad as was pointed out by the defendant-appellant. More importantly, the said
documents only covered the years 1980-1984. The income of the spouses from 1985 to 1987 was
not shown. Hence, it is entirely possible that at the time the properties in question were
purchased, or acquired, Alexander and defendant-appellant had sufficient funds, considering
that Alexander worked in various capacities in the family corporations, and his own business
enterprises, while defendant-appellant had thriving businesses of her own, from which she
acquired commercial properties.
And this is not even to say that plaintiff-appellee is this case failed to adduce conclusive,
incontrovertible proof that the money use to purchase the two properties really came from him;
or that he paid for the price of the two properties in order to have the beneficial interest or
estate in the said properties.
A critical examination of the testimony of plaintiff-appellee’s witness, Conchita Sarmiento, must
also show that this witness did not have actual knowledge as to who actually purchased the
Wack-Wack property and the Meridien Condominium. Her testimony that plaintiff-appellee
visited the Wack-Wack property and paid for the costs of the construction of the improvements
over the said property, in the very nature of things, does not prove that it was the plaintiff-
appellee who in fact purchased the Wack-Wack property.6
On the other hand, the CA found defendant-appellant’s evidence convincing:
In contrast, Rosana Regalado had actual knowledge of the transaction she testified to,
considering that she was the real estate broker who negotiated the sale of the Wack-Wack
property between its previous owner Drago Daic and the spouses Alexander and Sylvia Ty. In
her testimony, she confirmed that the checks, which were issued to pay for the purchase price

Page 48 of 166
Bus. Org. I Cases – Page 3 Syllabus

of the Wack-Wack property, were signed and issued by Alexander, thereby corroborating the
testimony of defendant-appellant on this point.
Significantly, during the trial, Conchita Sarmiento identified some receipts wherein the payor
was the late Alexander Ty. Apparently, prior to the death of Alexander, it was Alexander himself
who was paying for the construction of the Wack-Wack property; and that the only time
plaintiff-appellee paid for the costs of the construction was when Alexander died.
Quite compelling is the testimony of defendant-appellant in this respect:
Q And after the death and burial of your husband, will you tell this Honorable Court what
happened to the construction of this residence in Wack-Wack?
A Well, of course, during the period I was mourning and I was reorganizing myself and my life,
so I was not mainly focused on the construction, so it took a couple of months before I realized
that the post-dated checks issued by my husband was changed through checks by my father-
in-law Mr. Alejandro Ty.
Q And did you had [sic] any conversation with Mr. Alejandro Ty regarding as to why he did
that?
A Yes, sir, that was the beginning of our misunderstanding, so I decided to hire a lawyer and
that is Atty. Ongkiko, to be able to settle my estate and to protect myself from with the checks
that they changed that my husband issued to Architect Gerry Contreras.
Q Was there any point in time that you yourself took over the construction?
A Yes, sir, right after a year of that property after I was more settled.
Q And did you engaged [sic] the services of any professional or construction company for
the purpose?
A Yes, sir.
Q Who was that?
A Architect Tom Adarme.
Q What is his first name, if you recall?
A Architect Tommy Adarme.
Q And was there any company or office which helped Architect Adarme in the continuation
of the construction?
A Yes, I also signed a contract with Architect Adarme and he hired Home Construction to
finish the renovation and completion of the construction in Wack-Wack, sir.
Q Do you have any document to show that you yourself overtook personally the continuation
of the construction of your residence?
A Yes, sir I have the whole construction documents and also the documents through Arch.
Gerry Contreras, that contract that we signed.
In other words, plaintiff-appellee took over the management of the construction of the Wack-
Wack property only because defendant-appellant was still in mourning. And, If ever plaintiff-
appellee did pay for the costs of the construction after the death of Alexander, it would be
stretching logic to absurd proportions to say that such fact proved that he owns the subject
property. If at all, it only shows that he is entitled to reimbursement for what he had spent for the
construction.7
Accordingly, the CA concluded, as follows:
Going by the records, we hold that plaintiff-appellee in this case was not able to show by clear
preponderance of evidence that his son and the defendant-appellant were not financially
capable of purchasing said property. Neither was plaintiff-appellee able to prove by clear
preponderance of evidence (i.e., credible documentary evidence) that the money used to
purchase the said properties really came from him. (And even if we assume that it came from
him, it would still not establish an implied trust, as it would again be considered a donation, or a
gift, by express mandate of the saving clause of Art. 1448 of the Civil Code, as heretofore
stated).
If anything, what is clear from the evidence at bench is that Alexander and the defendant-
appellant were not exactly bereft of the means, the financial capability or resources, in their
own right, to purchase, or acquire, the Meridien Condominium and the Wack-Wack property.
Page 49 of 166
Bus. Org. I Cases – Page 3 Syllabus

The evidence on record shows that Alexander Ty was 31 years old when he purchased the
Meridien Condominium and was 33 years old when he purchased the Wack-Wack property. In
short, when he purchased these properties, he had already been working for at least nine years.
He had a car care business and a beer garden business. He was actively engaged in the
business dealings of several family corporations, from which he received emoluments and other
benefits. As a matter of fact, Alexander and plaintiff-appellee had common interest in various
family corporations of which they were stockholders, and officers and directors, such as:
International Paper Industries, Inc.; Agro-Industries Specialists Services, Inc.; Hi-Professional
Drillings and Manufacturing, Inc.; MVR-TV Picture Tube, Inc.; Crown Consumer Products, Inc.;
Philippine Crystal Manufacturing Corporation; and Union Emporium, Inc.
Furthermore, at the time of his death, the son Alexander was Vice-President of Union Ajinomoto
(Exh. "40"); Executive Vice-President of Royal Porcelain Corporation (Exh. "40-A"); Treasurer of
Polymart Paper Industries, Inc. (Exh. "40-B"); General Manager of Hornblower Sales Enterprises
and Intercontinental Paper Industries, Inc. (Exh. "40-C"); President of High Professional Drilling and
Manufacturing, Inc. (Exh. "40-D"); President of Crown Consumer Products, Inc. (Exh. "40-E");
(Executive Vice-President of MVR-TV Picture Tube, Inc. (Exh."40-F"); and Director of ABT Enterprise,
Inc. (Exh. "40-G"). He even had a controlling interest in ABT Enterprises, which has a majority
interest in Union Ajinomoto, Inc.
What is more, the tax declaration receipts for the Wack-Wack property covering the years 2000-
2004, and the tax declaration receipts for the Meridien Condominium covering the years 2000-
2001, showed that to his date it is still the estate of Alexander that is paying for the real estate
taxes thereon.
In the context of this formidable circumstances, we are constrained to overturn the judgment
of the trial court, which made these findings:
Based on the facts at hand and the applicable law, the ineluctable conclusion is that a
fiduciary relationship or an implied trust existed between plaintiff and Alexander Ty with
the former as the owner, trustor and beneficiary and the latter as the trustee, concerning
the subject real properties. The death of Alexander automatically extinguished the said
fiduciary relationship, hence, plaintiff’s instant action to recover the subject properties
from the intestate estate of Alexander Ty is meritorious.
We do not agree. To belabor a point, we are not persuaded that an implied trust was created
concerning the subject properties. On the assumption, as elsewhere indicated, the plaintiff-
appellee at the very least, paid for part of its purchase price, the EDSA property is presumed to
be a gift, or donation, in favor of Alexander Ty, defendant-appellant’s late husband, following
the saving clause or exception in Art. 1448 of the Civil Code. To repeat, it is the saving clause, or
exception, not the general rule, that should here apply, the late Alexander Ty being the son of
Plaintiff-appellee.
Nor are we convinced, given the state of the evidence on record, that the plaintiff-appellee
paid for the price of the Meridien Condominium and the Wack-Wack property. Therefore, the
general rule announced in the first sentence of Art. 1448 of the Civil Code has no application in
this case. Or, if the article is to be applied at all, it should be the exception, or the saving clause,
that ought to apply here, the deceased Alexander Ty being the son, as stated, of plaintiff-
appellee.
To sum up: Since plaintiff-appellee has erected his case upon Art. 1448 of the Civil Code, a prime
example of an implied trust, viz.: that it was he who allegedly paid for the purchase price of
some of the realties subject of this case, legal title or estate over which he allegedly granted or
conveyed unto his son and namesake, Alexander Ty, for the latter to hold these realties in trust
for his siblings in case of his (plaintiff-appellee’s) demise, plaintiff-appellee is charged with the
burden of establishing the existence of an implied trust by evidence described or categorized
as "sufficiently strong," "clear and satisfactory," or "trustworthy." As will be presently discussed. Sad
to say, plaintiff-appellee has miserably failed to discharge that burden. For, if the records are
any indication, the evidence adduced by plaintiff-appellee on this score, can hardly merit the
descriptive attributes "sufficiently strong," or "clear and satisfactory," or "trustworthy."
Page 50 of 166
Bus. Org. I Cases – Page 3 Syllabus

If only to emphasize and reiterate what the Supreme Court has in the past declared about
implied trusts, these case law rulings are worth mentioning –
Where a trust is to be established by oral proof, the testimony supporting it must be
sufficiently strong to prove that the right of the alleged beneficiary with as much certainty
as if a document were shown. A trust cannot be established, contrary to the recitals of a
Torrens title, upon vague and inconclusive proof.
As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust
and its elements. While implied trusts may be proved by oral evidence, the evidence
must be trustworthy and received by the courts with extreme caution and should not be
made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated.
The route to the reversal of the trial court’s finding that an implied trust had been constituted
over the subject realties is, thus, indubitably clear.
As a final point, this Court finds that the plaintiff-appellee is not entitled to moral damages,
attorney’s fees and costs of litigation, considering that the instant case is clearly a vexatious and
unfounded suit by him filed against the estate of the late Alejandro Ty. Hence, all these awards
in the judgment a quo are hereby DELETED.8
The CA therefore reversed and set aside the judgment appealed from and entered another one
dismissing the complaint.
On October 18, 2004 the CA resolved to deny therein plaintiff-appellee’s motion for reconsideration.9
Hence, this petition.
Petitioner submits the following grounds:
IN REVERSING THE TRIAL COURT’S JUDGMENT, THE COURT OF APPEALS –
1. MADE FACTUAL FINDINGS GROUNDED ON MANIFESTLY MISTAKEN INFERENCES, SPECULATIONS,
SURMISES, OR CONJECTURES OR PREMISED ON THE ABSENCE OF, OR ARE CONTRADICTED BY, THE
EVIDENCE ON RECORD, AND WITHOUT CITATIONS OF THE SPECIFIC EVIDENCE ON WHICH THEY
ARE BASED.
2. RULED THAT THERE WAS A "PRESUMED DONATION", WHICH IS A MATTER NEVER RAISED AS AN
ISSUE IN THE CASE AS IT, IN FACT, CONFLICTS WITH THE PARTIES’ RESPECTIVE THEORIES OF THE CASE,
AND THUS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS
TO CALL FOR THIS HONORABLE COURT’S EXERCISE OF ITS POWER OF SUPERVISION.
3. APPLIED THE PROVISION ON PRESUMPTIVE DONATION IN FAVOR OF A CHILD IN ARTICLE 1448
OF THE CIVIL CODE DESPITE AB TY’S EXPRESS DECLARATION THAT HE DID NOT INTEND TO DONATE
THE SUBJECT PROPERTIES TO ALEXANDER AND THUS DECIDED A QUESTION OF SUBSTANCE NOT
THERETOFORE DETERMINED BY THIS HONORABLE COURT.
4. REQUIRED THAT THE IMPLIED TRUST BE PROVEN WITH DOCUMENTARY EVIDENCE AND THUS
DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND
JURISPRUDENCE.10
The Court disposes of the petition, as follows:
The EDSA Property
Petitioner contends that the EDSA property, while registered in the name of his son Alexander Ty, is
covered by an implied trust in his favor under Article 1448 of the Civil Code. This, petitioner argues, is
because he paid the price when the property was purchased and did so for the purpose of having
the beneficial interest of the property.
Article 1448 of the Civil Code provides:
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 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.

Page 51 of 166
Bus. Org. I Cases – Page 3 Syllabus

The CA conceded that at least part of the purchase price of the EDSA property came from petitioner.
However, it ruled out the existence of an implied trust because of the last sentence of Article 1448: 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.
Petitioner now claims that in so ruling, the CA departed from jurisprudence in that such was not the
theory of the parties.
Petitioner, however, forgets that it was he who invoked Article 1448 of the Civil Code to claim the
existence of an implied trust. But Article 1448 itself, in providing for the so-called purchase money
resulting trust, also provides the parameters of such trust and adds, in the same breath, the proviso:
"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." (Emphasis supplied.)
Stated otherwise, the outcome is the necessary consequence of petitioner’s theory and argument and
is inextricably linked to it by the law itself.
The CA, therefore, did not err in simply applying the law.
Article 1448 of the Civil Code is clear. If the person to whom the title is conveyed is the child of the one
paying the price of the sale, and in this case this is undisputed, NO TRUST IS IMPLIED BY LAW. The law,
instead, disputably presumes a donation in favor of the child.
On the question of whether or not petitioner intended a donation, the CA found that petitioner failed
to prove the contrary. This is a factual finding which this Court sees no reason the record to reverse.
The net effect of all the foregoing is that respondent is obliged to collate into the mass of the estate of
petitioner, in the event of his death, the EDSA property as an advance of Alexander’s share in the
estate of his father,11 to the extent that petitioner provided a part of its purchase price.
The Meridien Condominium and the Wack-Wack property.
Petitioner would have this Court overturn the finding of the CA that as regards the Meridien
Condominium and the Wack-Wack property, petitioner failed to show that the money used to
purchase the same came from him.
Again, this is clearly a factual finding and petitioner has advanced no convincing argument for this
Court to alter the findings reached by the CA.
The appellate court reached its findings by a thorough and painstaking review of the records and has
supported its conclusions point by point, providing citations from the records. This Court is not inclined
to reverse the same.
Among the facts cited by the CA are the sources of income of Alexander Ty who had been working
for nine years when he purchased these two properties, who had a car care business, and was actively
engaged in the business dealings of several family corporations, from which he received emoluments
and other benefits.12
The CA, therefore, ruled that with respect to the Meridien Condominium and the Wack-Wack property,
no implied trust was created because there was no showing that part of the purchase price was paid
by petitioner and, on the contrary, the evidence showed that Alexander Ty had the means to pay for
the same.
WHEREFORE, the petition is PARTLY GRANTED in that the Decision of the Court of Appeals dated July 27,
2004 and its Resolution dated October 18, 2004, in CA-G.R. No. 66053, are AFFIRMED, with
the MODIFICATION that respondent is obliged to collate into the mass of the estate of petitioner, in the
event of his death, the EDSA property as an advance of Alexander Ty’s share in the estate of his father,
to the extent that petitioner provided a part of its purchase price.
No costs.
SO ORDERED.

Page 52 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 110115 October 8, 1997

RODOLFO TIGNO AND SPOUSES EDUALINO and EVELYN CASIPIT, petitioners,
vs.
COURT OF APPEALS AND EDUARDO TIGNO, respondents.

PANGANIBAN, J.:

In denying this petition, the Court takes this occasion to apply the principles of implied trust. As an
exception to the general rule barring factual reviews in petitions under Rule 45, the Court wades into
the transcript of stenographic notes only to find that the Court of Appeals, indeed, correctly overturned
the trial court's findings of facts.
The Case
Petitioners challenge the Decision1 of Respondent Court of Appeals2 in CA-G.R. CV No. 29781
promulgated on October 15, 1992 and its Resolution3 promulgated on May 5, 1993. The dispositive
portion of the assailed Decision reads:4
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED
and another one ENTERED as follows:
1. Declaring plaintiff-appellant Eduardo M. Tigno as the true and lawful owner of the lands
described in the complaint;
2. Declaring the Deed of Sale executed by defendant-appellee Rodolfo M. Tigno in favor
of defendant-appellee spouses Edualino Casipit and Avelina Estrada as null and void
and of no effect; and
3. Ordering defendant-appellee Rodolfo M. Tigno to vacate the parcels of land
described in the complaint and surrender possession thereof to plaintiff-appellant
Eduardo M. Tigno.
With costs against defendants-appellees.
Petitioners' subsequent motion for reconsideration was "denied for lack of merit" in the assailed
Resolution.5
The Facts
Respondent Court adequately recited the facts of the case as follows:6
The facts from the standpoint of plaintiff-appellant's (herein private respondent's)
evidence are summarized in his brief, to wit:
Sometime in January, 1980, Bienvenido Sison, Remedios Sison and the heirs
of Isaac Sison, namely: Manuel Sison, Gerardo Sison and Adelaida Sison
appointed Dominador Cruz as agent to sell three (3) parcels of land
adjoining each other located at Padilla St., Lingayen, Pangasinan (TSN,
Sept. 5, 1989, pp. 6-8). These parcels of land belonging to the abovenamed
persons are more particularly described as follows:
Bienvenido Sison:
A parcel of fishpond situated at Padilla Street, Lingayen,
Pangasinan, with an area of 3006.67 square meters, more or
less, bounded on the North by Padilla Street, on the South by
Lots 1105, 1106, 1107, 1108, etc., on the East by alley, and on
the West by Alejandro Vinluan and Thomas Caldito: (Exh. B)
Heirs of Isaac Sison (i.e. Manuel, Gerardo and Adelaida Sison)
A parcel of fishpond, situated at Padilla Street, Lingayen,
Pangasinan, with an area of 3006.66 square meters, more or
less, bounded on the North by Padilla Street; On the South by
Page 53 of 166
Bus. Org. I Cases – Page 3 Syllabus

Bienvenido Sison, on the East by Alley, and on the West by

Mariano Sison; (Exh. A)
Remedios Sison
A parcel of unirrigated riceland (now fishpond) situated in
Poblacion, Lingayen, Pangasinan, containing an area of
3006.66 square meters, more or less, bounded on the North by
Padilla Street; on the East by Path; on the South by Dionisio
and Domingo Sison; and on the West by Path; (Exh. C)
Sometime in April 1980, Rodolfo Tigno learned that the abovedescribed
properties were for sale. Accordingly, he approached Cruz and told the
latter to offer these parcels of land to his brother, Eduardo Tigno, herein
appellant (TSN, Sept. 5, 1989, p. 9).
Pursuant thereto, Cruz and Rodolfo Tigno went to appellant's Makati office
to convince the latter to buy the properties earlier described. At first,
appellant was reluctant, but upon Rodolfo Tigno's prodding, appellant was
finally convinced to buy them (TSN, Sept. 5, 1989, pp. 9-11). In that meeting
between Cruz and appellant at the latter's office, it was agreed that each
parcel of land would cost Ten Thousand Pesos (P10,000.00) [TSN, Oct. 16,
1989, p. 9].
Having reached an agreement of sale, appellant then instructed Cruz to
bring the owners of these parcels of land to his ancestral house at Guilig
Street, Lingayen, Pangasinan on May 2, 1980, as he will be there to attend
the town fiesta (TSN, Sept. 5, 1989, p. 13).
After leaving appellant's office, Cruz and Rodolfo Tigno went to Manila City
Hall to visit the latter's uncle, Epifanio Tigno, who works there. At the Manila
City Hall, Cruz and Rodolfo Tigno intimated to Epifanio Tigno that appellant
has agreed to buy the 3 parcels of land abovedescribed (TSN, Sept. 5, 1989,
p. 19; TSN, Sept. 29, 1989, pp. 8-10).
After leaving Manila City Hall, Cruz and Rodolfo Tigno left for Lingayen,
Pangasinan (TSN, Sept. 5, 1989, p. 15).
On May 2, 1980, Cruz, together with Bienvenido Sison, Manuel Sison,
Adelaida Sison and Remedios Sison went to appellant's house at Guilig
Street, Lingayen, Pangasinan. At around 5:00 o'clock in the afternoon, the
abovenamed persons and appellant went to Atty. Modesto Manuel's
house at Defensores West Street, Lingayen, Pangasinan for the preparation
of the appropriate deeds of sale (TSN, Sept. 5, 1989, pp. 15-17).
At Atty. Manuel's house, it was learned that Bienvenido Sison failed to bring
the tax declarations relating to his property. Also, Remedios Sison had
mortgaged her property to a certain Mr. Tuliao, which mortgage was then
existent. Further, Manuel Sison did not have a Special Power of Attorney
from his sister in the United States of America to evidence her consent to
the sale. In view thereof, no deed of sale was prepared on that day (TSN,
Sept. 5, 1989, pp. 17-19).
However, despite the fact that no deed of sale was prepared by Atty.
Manuel, Remedios Sison, Bienvenido Sison and Manuel Sison asked
appellant to pay a fifty percent (50%) downpayment for the properties. The
latter acceded to the request and gave Five Thousand Pesos (P5,000.00)
each to the 3 abovenamed persons for a total of Fifteen Thousand Pesos
(P15,000.00) (TSN, Sept. 5, 1989, pp. 19-20). This was witnessed by Cruz and
Atty. Manuel. After giving the downpayment, appellant instructed Cruz
and Atty. Manuel to place the name of Rodolfo Tigno as "vendee" in the
deeds of sale to be subsequently prepared. This instruction was given to
enable Rodolfo Tigno to mortgage these properties at the Philippine
Page 54 of 166
Bus. Org. I Cases – Page 3 Syllabus

National Bank (PNB), Lingayen Branch, for appropriate funds needed for
the development of these parcels of land as "fishponds" (TSN, Sept. 27, 1989,
pp. 16-23).
On May 6, 1980, May 12, 1980 and June 12, 1980, the appropriate deeds of
sale (Exhs. A, B, C) were finally prepared by Atty. Manuel and signed by
Bienvenido Sison, the heirs of Isaac Sison (Manuel, Gerardo and Adelaida
Sison), and Remedios Sison, respectively. In all these deeds of sale, Rodolfo
Tigno was named as "vendee" pursuant to the verbal instruction of herein
appellant. Cruz, the agent in the sale, signed in these three (3) deeds of
sale as a witness (Exhs. A-2, B-l and C-l).
Sometime in the second week of July 1980, Cruz brought and showed these
deeds of sale to appellant in his Makati office. After seeing these
documents, appellant gave Cruz a Pacific Bank check in the amount of
Twenty Six Thousand Pesos (P26,000.00) representing the following:
a) P15,000.00 as the balance for the three (3)
parcels of land;
b) P6,000.00 representing Cruz's commission as
agent; and
c) P5,000.00 for capital gains tax, registration
and other incidental expense. (TSN, Sept. 5,
1989, pp. 39-41).
Upon encashment of this check at PNB, Lingayen Branch, Cruz paid
Remedios Sison, Manuel Sison and Bienvenido Sison, through Adelaida
Sison, the balance due them from appellant (TSN, Sept. 5, 1989, pp. 42-43).
On April 29, 1989, Rodolfo Tigno, without the knowledge and consent of
appellant, sold to Spouses Edualino Casipit and Avelina Casipit 508.56
square meters of the land previously owned by Bienvenido Sison (Exh. E). At
the time of sale, the Casipits were aware that the portion of the land they
bought was owned by appellant, not Rodolfo Tigno (TSN, Oct. 16, 1989, pp.
30-31; TSN, Nov. 6, 1989, p. 10).
On May 16, 1989, appellant learned that Rodolfo Tigno is "negotiating" a
portion of his land to the Casipits. Accordingly, appellant sent a letter (Exh.
D) to the Casipits advising them to desist from the intended sale, not
knowing that the sale was already consummated as early as April 29, 1989.
A few days thereafter, upon learning that the sale was already
consummated, appellant confronted the Casipits and Rodolfo Tigno and
asked them to annul the sale, but his request was not heeded (TSN, Oct. 16,
1989, pp. 29-32). (pp. 12-B to 12-j, rollo)
On May 24, 1989, the plaintiff filed Civil Case No. 16673 for "Reconveyance, Annulment
of Document, Recovery of Possession and Damages" against Rodolfo M. Tigno and
defendant spouses Edualino Casipit and Avelina Estrada. The complaint alleged, among
others, that plaintiff purchased the three (3) parcels of land in question so that his brother
Rodolfo Tigno, who was then jobless, could have a source of income as a caretaker of
the fishponds; that plaintiff and Rodolfo agreed that the latter would secure a loan from
the Philippine National Bank at Lingayen using said lands as collateral; that considering
the busy schedule of plaintiff, then as executive vice-president of an American firm
based in Makati, Metro Manila, it was made to appear in the deeds of sale that Rodolfo
M. Tigno was the vendee so that the latter could, as he actually did, secure a loan from
the PNB without need of plaintiff's signature and personal presence, the loan proceeds
to be used as seed capital for the fishponds; that there being trust and confidence as
brothers between plaintiff and defendant, the former instructed the Notary Public, who
prepared the Deeds of Sale, to put in said Deeds the name of Rodolfo M. Tigno as
vendee.
Page 55 of 166
Bus. Org. I Cases – Page 3 Syllabus

The plaintiff further averred in said Complaint that some time on May 16, 1989, when he
was in Lingayen, Pangasinan, he came to know from friends that Rodolfo was negotiating
the sale to defendant spouses of a portion of one of the parcels of land; that after
requesting in writing the defendant-spouses to desist from buying the land, and after
confronting Rodolfo himself, plaintiff found out upon verification with the Register of
Deeds of Lingayen, that Rodolfo had already sold on April 29, 1989 said portion of 508.56
square meters to his co-defendant spouses who had previous knowledge that plaintiff,
and not Rodolfo Tigno, is the real owner of said lands; that there being a violation of trust
and confidence by defendant Rodolfo, plaintiff demanded from said defendants the
reconveyance of said lands, the surrender of the possession thereof to him and the
cancellation of the Deed of Sale of said portion of 508.56 square meters, but all the
demands were unjustifiably refused.
In their Answer (pp. 8-11, records), defendants denied the material allegations of the
complaint and alleged, by way of special and affirmative defense, that Rodolfo M. Tigno
became the absolute and exclusive owner of the parcels of land having purchased the
same after complying with all legal requirements for a valid transfer and that in selling a
portion thereof to his co-defendants, he was merely exercising his right to dispose as
owner; and that defendant spouses Casipit acquired the portion of 508.56 square meters
in good faith and for value, relying upon the validity of the vendor's ownership.
After trial on the merits, the trial court7 dismissed the complaint and disposed as follows:8
Wherefore, in the light of the facts and circumstances discussed above, the court hereby
renders judgment against the plaintiff and in favor of the defendants.
1. Ordering the dismissal of the plaintiffs complaint for lack of basis in fact and in law;
2. Ordering the plaintiff to pay the defendants the sum of three thousand (P3,000.00)
pesos as atty's fees and further to pay the costs of the proceedings.
As earlier stated, Respondent Court reversed the trial court. Hence, this petition for review.
The Issues
Petitioners raise the following issues:9
I Evidence of record definitely show that the receipts of payments of
Petitioner Rodolfo Tigno for the fishponds in question are authenticated,
contrary to the decision of the Court of Appeals
II Documents and circumstances substantiate ownership of petitioner
Rodolfo Tigno
III No fiduciary relationship existed between Petitioner Rodolfo Tigno and
Private Respondent Eduardo Tigno
The main issue is whether the evidence on record proves the existence of an implied trust between
Petitioner Rodolfo Tigno and Private Respondent Eduardo Tigno. In petitions for review under Rule 45,
this Court ordinarily passes upon questions of law only. However, in the present case, there is a conflict
between the factual findings of the trial court and those of the Respondent Court. Hence, this Court
decided to take up and rule on such factual issue, as an exception to the general rule. A corollary
question is whether Petitioners Edualino and Evelyn Casipit are purchasers in good faith and for value
of a portion of the lots allegedly held in trust and whether they may thus acquire ownership over the
said property.
The Court's Ruling
The petition has no merit.
First Issue: Was an Implied Trust Created?
Implied trusts are those which are deducible by operation of law from the nature of the transaction as
matters of equity, independently of the particular intention of the parties. 10 An implied trust arises
where a person purchases land with his own money and takes conveyance thereof in the name of
another. In such a case, the property is held on resulting trust in favor of the one furnishing the
consideration for the transfer, unless a different intention or understanding appears. The trust which
results under such circumstances does not arise from a contract or an agreement of the parties, but
from the facts and circumstances; that is to say, the trust results because of equity and it arises by
Page 56 of 166
Bus. Org. I Cases – Page 3 Syllabus

implication or operation of law. 11 The species of implied trust raised by private respondent was
extensively discussed by the Court, through the learned Mr. Justice Hilario G. Davide, Jr., in Morales, et
al. vs. Court of Appeals, et al.: 12
A trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter. 13 The characteristics of a trust are:
1. It is a relationship;
2. it is a relationship of fiduciary character;
3. it is a relationship with respect to property, not one involving merely personal duties;
4. it involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another; and
5. it arises as a result of a manifestation of intention to create the relationship. 14
Trusts are either express or implied. Express trusts are created by the intention of the trustor
or of the parties, while implied trusts come into being by operation of law, 15 In turn,
implied trusts are either resulting or constructive trusts. Resulting trusts are based on the
equitable doctrine that valuable consideration and not legal title determines the
equitable title or interest and are presumed always to have been contemplated by the
parties. They arise from the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy the
demands of justice and prevent unjust enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right
to property which he ought not, in equity and good conscience, to hold. 16
A resulting trust is exemplified by Article 1448 of the Civil Code, which reads:
Art. 1448. There is an implied trust when property is sold, and the legal estate
is granted to one party but the price is paid by another for the purpose of
having the beneficial interest of the property. The former is the trustee, while
the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price
of the sale, no trust is implied by law, it being disputably presumed that
there is a gift in favor of the child.
The trust created under the first sentence of Article 1448 is sometimes referred to as
a purchase money resulting trust. 17 The trust is created in order to effectuate what the
law presumes to have been the intention of the parties in the circumstances that the
person to whom the land was conveyed holds it as trustee for the person who supplied
the purchase money. 18
To give rise to a purchase money resulting trust, it is essential that there be:
1. an actual payment of money, property or services, or an
equivalent, constituting valuable consideration;
2. and such consideration must be furnished by the alleged
beneficiary of a resulting trust. 19
There are recognized exceptions to the establishment of an implied resulting trust. The
first is stated in the last part of Article 1448 itself. Thus, where A pays the purchase money
and title is conveyed by absolute deed to A's child or to a person to whom A stands in
loco parentis and who makes no express promise, a trust does not result, the presumption
being that a gift was intended. Another exception is, of course, that in which an actual
contrary intention is proved. Also where the purchase is made in violation of an existing
statute and in evasion of its express provision, no trust can result in favor of the party who
is guilty of the fraud. 20
As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust
Page 57 of 166
Bus. Org. I Cases – Page 3 Syllabus

and its elements. 21 While implied trusts may be proved by oral evidence, 22 the evidence
must be trustworthy and received by the courts with extreme caution, and should not be
made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is
required because oral evidence can easily be fabricated. 23
In Chiao Liong Tan vs. Court of Appeals, we ruled: 24
A certificate of registration of a motor vehicle in one's name indeed creates a strong
presumption of ownership. For all practical purposes, the person in whose favor it has
been issued is virtually the owner thereof unless proved otherwise. In other words, such
presumption is rebuttable by competent proof.
The New Civil Code recognizes cases of implied trust other than those enumerated
therein. (fn: Art. 1447, New Civil Code) Thus, although no specific provision could be cited
to apply to the parties herein, it is undeniable that an implied trust was created when the
certificate of registration of the motor vehicle was placed in the name of petitioner
although the price thereof was not paid by him but by private respondent. The principle
that a trustee who puts a certificate of registration in his name cannot repudiate the trust
by relying on the registration is one of the well-known limitations upon a title. A trust, which
derives its strength from the confidence one reposes on another especially between
brothers, does not lose that character simply because of what appears in a legal
document.
Even under the Torrens System of land registration, this Court in some instances did away
with the irrevocability or indefeasibility of a certificate of title to prevent injustice against
the rightful owner of the property. (fn: Bornales v. IAC, G.R. No. 75336, 166 SCRA 524
[1988]; Amerol v. Bagumbayan, G.R. No. L-33261, 154 SCRA 403 [1987]; Cardiente v. IAC,
G.R. No. 73651, 155 SCRA 689 [1987].)
In this petition, petitioners deny that an implied trust was constituted between the brothers Rodolfo and
Eduardo. They contend that, contrary to the findings of Respondent Court, their Exhibit 16 25 and Exhibit
17 26 were fully authenticated by Dominador Cruz, an "instrumental witness." Hence, he should not be
allowed to vary the plain content of the two documents indicating that Rodolfo Tigno was the vendee.
We not persuaded. Witness Dominador Cruz did not authenticate the genuineness of Exhibit 16: 27
ATTY. BERMUDEZ:
As Exhibit "16" dated June 12, 1980 signed by Remedios Sison, is that the
document executed Remedios Sison?
ATTY. VIRAY:
That is only a xerox copy, we object, Your Honor.
ATTY. BERMUDEZ:
At any rate there was a receipt, is this the receipt?
A Maybe this or maybe not, sir.
ATTY. BERMUDEZ:
Q I am showing to you another document, which we respectfully request
that the same be marked as Exhibit "17".
In any event, these two exhibits are proof merely of the receipt of money by the seller; they do not
show that Rodolfo paid the balance of the purchase price. 28 On the other hand, Witness Dominador
Cruz was unshakable in testifying that Private Respondent Eduardo, though not named in the receipts
or in the deeds of sale, was definitely the real buyer: 29
COURT: (The Court will ask few questions.)
Q Do you know if there [is] a document executed between the brothers to
show the real vendee in these three deeds of absolute sale is Eduardo
Tigno?
A I don't know of any document because according to Eduardo Tigno it
will be placed in the name of his brother, Rodolfo Tigno so that it can be
used as collateral.
COURT:

Page 58 of 166
Bus. Org. I Cases – Page 3 Syllabus

Q Being the agent of this transaction did you not try to advice Eduardo
Tigno to be safe for him a document will have to be executed showing that
he is really the vendee?
A I also explained that matter to him I know that matter to happen in the
long run they will have dispute but Eduardo Tigno said he is his brother, he
have [sic] trust and confidence in his brother, sir.
COURT:
Q When did you give that advice?
A Before the preparation of the documents, sir.
Q Do you know already that it will be in the name of Rofolfo [sic] Tigno
before the execution?
A Yes, sir. During the time we have conversation on May 2, 1980, he
instructed me to place the name of Rodolfo Tigno in the document, Atty.
Manuel was present when he gave that advice, sir.
COURT:
Q What did Atty. Manuel advised [sic]?
A The reason for [sic] Eduardo Tigno have trust and confidence on his elder
brother, Rodolfo Tigno.
COURT: (Propounding questions)
Q So there is nothing written that will show that the money or purchase price
came from Eduardo Tigno, is that correct?
A None, sir. It's by trust and confidence,
Q Considering that you know that the money came from Eduardo Tigno,
why did you consent that the deed of absolute sale in the name of Rodolfo
Tigno and not Eduardo Tigno?
A Because Atty. Manuel called for Rodolfo Tigno because the document
was in the name of Rodolfo Tigno, sir.
Q The document is already defective, why did you not ask the preparation
of the document to be executed by Rodolfo Tigno accordingly that the
real owner who sold to you is the brother, Eduardo Tigno?
A I did not think of it, what I know is that the real owner is Eduardo Tigno, sir,
and has the power to disposed.
COURT:
Q Eduardo Tigno is the real owner, why did you agree that Rodolfo Tigno to
execute the document?
A Yes, sir. Atty. Manuel called for Rodolfo Tigno so I consented.
Aside from the "trust and confidence" reposed in him by his brother, Petitioner Rodolfo was named as
vendee in the deeds of sale to facilitate the loan and mortgage the brothers were applying for to
rehabilitate the fishponds. Be it remembered that private respondent was a Makati-based business
executive who had no time to follow up the loan application at the PNB branch in Lingayen,
Pangasinan and, at the same time, to tend the fish farm on a daily basis. Atty. Modesto Manuel, who
prepared and notarized the deeds of sale, unhesitatingly affirmed the unwritten agreement between
the two brothers: 30
ATTY. VIRAY:
Will you please tell the Court what is the reason, if ever there was, why the
plaintiff, Eduardo Tigno, instructed you to put the name of Rodolfo Tigno as
vendee in the papers?
ATTY. BERMUDEZ:
We object, Your Honor. The best witness to that is the plaintiff, Your Honor.
COURT:
Q Do you know the reason why Eduardo Tigno requested you to place the
name of his brother as vendee?
WITNESS:
Page 59 of 166
Bus. Org. I Cases – Page 3 Syllabus

A Eduardo Tigno requested me to place the name of his brother as vendee

so that the brother can use the lands as collateral for possible loan at the
PNB (Philippine National Bank), sir.
COURT:
Go ahead.
ATTY. VIRAY:
Q When was that when the plaintiff instructed you to place the name of his
brother, the defendant, Rodolfo Tigno as vendee in the documents so that
the defendant, Rodolfo Tigno, could use the properties as collateral for
possible loan to the PNB?
WITNESS:
A It was sometimes during a fiesta in Guilig when Eduardo Tigno and
Dominador Cruz, I think that was May 2, 1980, when Eduardo Tigno and
Dominador Cruz and some of the vendors went to my house and they
requested me to prepare the deeds of sale, sir.
In his direct examination, Atty. Manuel convincingly explained why Petitioner Rodolfo was named as
vendee: 31
ATTY. VIRAY:
Q When the plaintiff Eduardo Tigno instructed you to place the name of his
brother as the vendee in the deeds of sale you were to prepare, what did
you tell him or did you give any advice?
A Yes, sir. I certainly did, sir.
Q What advice?
A Why will I put the name of your brother as vendee when you were here
as real buyer who will give the money to the vendors? Why not you, I told
him, sir.
Q What else did you tell him?
A I remember he is to make Special Power of Attorney in order his brother
(sic) will execute the loan to the PNB, sir.
Q What did the plaintiff, Eduardo Tigno, tell you when you said it would be
best to execute the Special Power of Attorney instead of placing the name
directly in the deeds of sale, what is his answer?
A He acceded to my advised [sic], sir. All right, make the deeds of sale, he
said, agreeable to the deed of sale to my advised but when I told him that
It would take the document probably by the middle of June, he back [sic]
out, sir, because he told me he is going abroad and he may not be around
and then he instructed me to place the name of his brother as the vendee
not the plaintiff anymore, sir.
Q In other words, Mr. Witness, at first he was agreeable and that he would
execute Special Power of Attorney?
A Yes, sir.
Q Since he was going to the United States and he could not wait the
preparation of the documents he just instructed you to go ahead with the
first instruction, is that what you mean, Mr. Witness?
A Yes, sir. (Emphasis supplied.)
This testimony of Atty. Manuel was corroborated by Dominador Cruz who was the real estate agent
cum witness in all three deeds of sale. As a witness, he pointed out that Petitioner Rodolfo was named
as the vendee in the deeds of sale upon the order of private respondent: 32
ATTY. VIRAY:
Q When you said Atty. Manuel was not able to prepare the deed of sale
on May 2, 1980, what then happened in the house of Atty. Manuel?

Page 60 of 166
Bus. Org. I Cases – Page 3 Syllabus

A When Atty. Manuel was not able to prepare the document, my cousins
wanted to get advance payment, one half of ten thousand pesos, sir,
each.
ATTY. VIRAY:
Q Did Eduardo Tigno agreed [sic] to the request of your cousins to get one
half of the price of their land?
A He agreed to give five thousand pesos each but he prepared temporary
receipt fpr [sic] five thousand pesos, sir.
Q Who prepared the receipt?
A Atty. Manuel, sir.
Q By the way, how much all in all did Eduardo Tigno give on May 2, 1980 as
advanced consideration?
A P15,000.00, sir.
Q You mean to say five thousand pesos for each parcel of land?
A Yes, sir.
Q After the plaintiff, Eduardo Tigno paid the advanced payment for five
thousand pesos for each parcel of land, what else happened?
A When the three of us, I, Atty. Manuel and Eduardo Tigno were talking, I
heard Eduardo Tigno said to Attyl. [sic] Manuel that the deed of sale will be
placed in the name of my brother, Rodolfo because we will mortgage the
land with the P.N.B., the proceeds will be used in the development of the
fishpond. He requested that the buyer of the fishpond will be placed in the
name of the brother of Eduardo Tigno.
Q Who is that brother of Eduardo Tigno?
A Rodolfo Tigno.
xxx xxx xxx
Q How about the balance of the purchase price of the property, is there
any instruction made by Eduardo Tigno with respect to the payment
thereof?
A With respect to the balance after the preparation of the document they
will bring it to Eduardo Tigno for him to pay the balance, sir.
Q By the way, was the deed of sale to these parcels of land finally
executed?
A Yes, sir.
From the foregoing, it is clear that the name of Rodolfo Tigno appeared in the deeds of sale not for the
purpose of transferring ownership to him but only to enable him to hold the property in trust for his
brother, herein private respondent.
In the face of the credible and straightforward testimony of the two witnesses, Cruz and Manuel, the
probative value, if any, of the tax declarations being in the name of Petitioner Rodolfo is utterly minimal
to show ownership. Suffice it to say that these documents, by themselves, are not conclusive evidence
of ownership. 33
Contrary to petitioners' insistence, no delay may be imputed to private respondent. When private
respondent went to Pangasinan to pay the taxes on his property in Bugallon, he learned from his
relatives that his brother was negotiating the sale of a portion of the fishponds to Spouses Casipit. Failing
to find his brother, he immediately wrote a letter dated May 16, 1989 addressed to the Casipits advising
them to desist from buying the property because he was the real owner. On May 18, 1989, he
confronted Petitioner Edualino Casipit about the impending sale, only to learn that the sale had
already been consummated as early as April 29, 1989. 34 Failing to convince petitioners to annul the
sale, private respondent instituted this case on May 24, 1989 35 or five (5) days after learning from
Edualino of the consummation of the sale. 36 Before the institution of this case, private respondent had
no reason to sue. Indeed, he filed this case after only five days from learning of the infidelity of his
brother. Clearly, no delay may be attributed to private respondent.
We agree with the detailed disquisitions of the Court of Appeals on this point: 37
Page 61 of 166
Bus. Org. I Cases – Page 3 Syllabus

The trial court's conclusion that defendant-appellee is the true buyer and owner of the
lands in question, mainly relying on the Deeds of Sale where defendant Rodolfo's name
appears as vendee, and on the Tax Declarations and Tax payment receipts in his name,
must inevitably yield to the clear and positive evidence of plaintiff. Firstly, as has thus been
fully established, the only reason why defendant Rodolfo was made to appear as the
buyer in the Deeds of Sale was to facilitate their mortgage with the PNB Branch at
Lingayen to generate seed capital for the fishponds, out of which Rodolfo could derive
income. With Rodolfo's name as vendee, there would be no need anymore for the
personal presence of plaintiff-appellant who was very busy with his work in Manila.
Moreover, aside from the fact that plaintiff was to travel abroad for thirty (30) days
sometime in June, 1980, he could not have executed a Special Power of Attorney in favor
of Rodolfo, as the Deeds of Sale were not yet prepared on May 2, 1980. Thus, to enable
Rodolfo to mortgage the lands, his name was put as vendee in view of the mutural [sic]
trust and confidence existing between said parties who are brothers. Secondly, it is well-
settled that the tax declarations or the payments of real estate taxes on the land are not
conclusive evidence of ownership of the declarant or payor (De Guzman v. CA, et al., L-
47378, Feb. 27, 1987, and cases cited therein; Cited in II Regalado REMEDIAL LAW
COMPENDIUM, p. 563 [1988]). Since defendant Rodolfo is named as vendee in the Deeds
of Sale, it is only natural that Tax Declarations and the corresponding tax payment
receipts be in his name so as to effect payment thereof.
Petitioners contend that there was no "fiduciary relationship" created between the brothers Tigno.
Petitioners argue that Rodolfo Tigno "had exercised all the acts of dominion and ownership over the
fishponds in question," as nobody "shared in the produce of the fishponds for the past nine (9) years."
Therefore, Petitioner Rodolfo, "being the real purchaser" of the parcels of land, "could validly transfer
the ownership of a portion" to Spouses Casipit. 38
We firmly reject these contentions and need only to cite Respondent Court's incisive findings:
After a careful examination of the evidence on record, we hold that an implied trust was
created in favor of the plaintiff [private respondent herein] within the meaning of Article
1448 of the Civil Code, which provides:
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. . . . .
An implied trust arises where a person purchases land with his own money and takes
conveyance thereof in the name of another. In such case, the property is held on a
resulting trust in favor of the one furnishing the consideration for the transfer, unless a
different intention or understanding appears. (Lim vs. Court of Appeals, 65 SCRA 160)
In the earlier case of Heirs of Candelaria, et al. v. Romero, at al., 109 Phil. 500, the
Supreme Court elucidated on implied trust:
The trust alleged to have been created in our opinion, is an implied trust. As
held, in effect, by this Court in the case of Martinez v. Griño (42 Phil. 35),
where property is taken by a person under an agreement to hold it for or
convey it to another or the grantor, a resulting or implied trust arises in favor
of the person for whose benefit the property was intended.
xxx xxx xxx
It is also the rule that an implied trust arises where a person purchases land
with his own money and takes a conveyance thereof in the name of
another. In such a case, the property is held on a resulting trust in favor of
the one furnishing the consideration for the transfer, unless a different
intention or understanding appears. The trust which results under such
circumstances does not arise from contract or agreement on the parties,
but from the facts and circumstances, that is to say, it results because of
equity and arises by implication or operation of law.
Page 62 of 166
Bus. Org. I Cases – Page 3 Syllabus

We disagree with the trial court's ruling that if, indeed, a trust has been established, it is
an express trust which cannot be proved by parol evidence. It must be noted that Article
1441 of the Civil Code defines both express trust and implied trust in general terms, thus:
Art. 1441. Trusts are either express or implied. Express trust are created by
the intention of the trustor or of the parties. Implied trust come into being by
operation of law.
Specific instances or examples of implied trusts are given in the Civil Code, one of which
is described under Article 1448 quoted heretofore. Since Article 1448 is a specific
provision, it prevails over and qualifies Article 1441, which is a general provision, under the
rule generalia specialibus non derogant (Alcantara, Statutes, 1990 Ed., p. 101).
Therefore, since this case involves an implied trust falling under Article 1448, parol
evidence is allowed to prove its existence pursuant to Article 1457, Civil Code, which
states:
Art. 1457. An implied trust may be proved by oral evidence.
xxx xxx xxx
On the other hand, the record is replete with clear and convincing evidence to show
that (1) plaintiff Eduardo Tigno is the real buyer and true owner of the lands in question
and (2) defendant Rodolfo M. Tigno is merely a trustee constituted over said lands on
behalf of plaintiff.
It was established thru plaintiff's testimony that plaintiff paid P5,000.00 each, as first
installment, to the three vendors for a total of P15,000.00 (TSN, Sept. 5, 1989, pp. 19-20),
which was witnessed by Dominador Cruz and Atty. Manuel. Later, he gave a check to
Dominador Cruz, the agent, in the amount of P26,000.00, representing the following:
a) P15,000.00 as the balance for the three (3) parcels of land;
b) P6,000.00 representing Cruz's commission as agent;
c) P5,000.00 for capital gains tax, registration and other incidental
expenses. (TSN, Sept. 5, 1989, pp. 39-41).
When this check was encashed, Cruz paid the three vendors the balance due them (TSN,
Sept. 5, 1989, pp. 42-43). That plaintiff was able to pay these amounts is believable,
because plaintiff had the financial means to pay said amounts. At the time of the sale in
1980, plaintiff was an executive of Meryll Lynch, Pierce, Fennon S. Smith Phil., Inc., where
he received P311,700.79 in 1980 alone, as shown by his Certificate of Income Tax Withheld
on Wages for said year (Exhibit G for plaintiff).
Indeed, by express provision of the Civil Code, 39 oral evidence is admissible to establish a trust relation
between the Tigno brothers. Private respondent explained how this trust was created: 40
ATTY. VIRAY
Q When you said Dominador Cruz was able to bring the vendors at Guilig
street, Lingayen, what happened there?
A They came to our family home at Guilig street and we went to the house
of Atty. Modesto Manuel, sir.
Q Why did you go to the house of Atty. Manuel?
A For the executionof [sic] the deed of sale of the property I am going to
buy, sir.
Q Was the deed of sale finished on that day?
A No, sir.
Q What was the reason?
A The vendors did not bring the tax declarations, secondly, the other heirs
failed to get the power of attorney from their sister in United States.
Q When the deed of sale were not executed on that day, what transpired?
A The vendors requested for advance payment of P5,000.00 each for the
three parcels of land.
Q Did you agree to the request of the vendors for the advance payment
of P5,000.00 each for the three parcels of land?
Page 63 of 166
Bus. Org. I Cases – Page 3 Syllabus

A Yes, sir.
Q Did you comply?
A Yes, sir.
Q How much all in all?
A P15,000.00 in cash, sir.
Q Was there any receipt signed evidencing receipt for that?
A There was receipt for the P15,000.00
Q Where is that receipt now?
A I gave all the papers to him in my brown envelope, I trust [sic] him.
Q Do you remember in whose name the vendors allegedly to have
received the P15,000.00?
A In my name, received from Eduardo Tigno.
Q After giving the P15,000.00 advance payment which you said the deed
of sale were not executed because of some requirement were not
available, what happened next?
A I talked to Atty. Manuel separately from the vendors, and I told him to
prepare the deed of sale at that time and I told him to place my older
brother, Rodolfo Tigno as vendee because I have plan to mortgage the
property in PNB, Lingayen, sir.
xxx xxx xxx
Q Aside from instructing Atty. Manuel to place the name of your brother,
Rodolfo Tigno, did you also instruct Dominador Cruz for the payment of the
balance?
A Yes, sir.
Q What was your instruction to Dominador Cruz?
A I told Dominador Cruz, I am leaving for United States, I will be back first
week of July, after the completion of the papers, see me on the second
week of July and I will give the whole payment of the property.
Q And was the deed of sale covering the three parcels of land completed?
A Yes, sir.
Q Did Dominador Cruz bring the documents to you in your office in Makati?
A Yes, sir.
Q When was that?
A First week of July 1980, sir.
Q Did you give the payment of the balance?
A Yes, sir. After going over the documents, I issued to him a check payable
in the sum of P26,000.00.
The previously quoted testimonies of Modesto Manuel and Dominador Cruz substantially corroborate
private respondent's testimony.
On the other hand, Petitioner Rodolfo, although in possession of the deeds of sale in his name, failed
to present a single witness to corroborate his claim that he bought the property partly with his own
money and partly with the money he allegedly borrowed from a certain Jose Manaoat. His failure to
present Manaoat gives rise to a presumption that the latter's testimony, if given, would have been
unfavorable to the former. 41 Respondent Court did not give credence to the financial capacity of
Petitioner Rodolfo Tigno: 42
Defendant Rodolfo's denial of plaintiff's evidence, and his bare testimony that he was the
real buyer, without corroboration by other witnesses, cannot be given credence and do
not deserve belief. It was unlikely that he had the financial means to pay for the lands in
the total amount of P53,000.00. As testified to by Arnulfo Peralta (TSN, Sept. 29, 1988, pp.
36-37), Rodolfo was jobless then, and at one time or another was even supported
financially by plaintiff, as testified to by plaintiff (TSN, Oct. 16, 1989, pp. 11-12), which in
fact was confirmed by Rodolfo during his cross-examination (TSN, Oct. 18, 1989, pp. 6-7).
If indeed he was engaged in some piggery, as he claimed, his financial capability is
Page 64 of 166
Bus. Org. I Cases – Page 3 Syllabus

rendered doubtful by the fact that no evidence, other than his bare testimony, was
presented to show his income, like an income tax return. His bare testimony that he
borrowed P20,000.00 from Jose Manaoat to raise partly the amount of P53,000.00 lacks
credibility. Manaoat, who was in the best position to testify that Rodolfo borrowed money
from him, was never presented, which would gives rise to the presumption that his
testimony would be adverse to defendant, if presented. (Sec. 3[e], Rule 131, Rules of
Court).
From the foregoing, it is ineludible that Article 1448 of the Civil Code finds application in this case.
Although the deeds of sale were in the name of Petitioner Rodolfo, the purchase price was paid by
private respondent who was the real owner of the property. Petitioner Rodolfo is the trustee, and
private respondent is the beneficiary.
Second Issue: Are Petitioners Casipit Purchasers in Good Faith?
Spouses Edualino and Evelyn Casipit contend that they "are purchasers in good faith" and for valuable
consideration; thus, they cannot be deprived of the land they bought from Rodolfo Tigno. 43
This posturing is unacceptable. First, unrebutted is the emphatic testimony of private respondent that
Edualino was invited on May 2, 1980 to a picnic in the fishpond. At the picnic, private respondent
informed Petitioner Edualino Casipit that he was the owner of the property. On this point, private
respondent testified: 44
ATTY. VIRAY:
Q You said Edualino Casipit very well knew that the property is owned by
you, what made you say that the defendant Edualino Casipit very well
knew that you are the owner of the property he bought?
A Way back in 1980 when I gave the advance payment to the vendors, I
invited my friends and right there in the fishpond, we had small picnic and
that my father, and Boy Casipit were there.
ATTY. VIRAY:
Q What if you invited them, sign that from that time you were the one who
bought the parcels of land?
A Yes, sir.
Second, also uncontested is the testimony of Dominador Cruz that he met Edualino on April 24, 1989,
or five (5) days before the consummation of the sale between Rodolfo and Spouses Casipit. During
that meeting, Cruz told Edualino that he bought from private respondent a portion of the subject
property for the purpose of building a dike. Thereafter, Edualino asked Cruz to buy a portion of the
property from private respondent. 45
Third, and in any event, Spouses Casipit did not acquire absolute ownership over the property since
the apparent vendor, Petitioner Rodolfo, did not have the right to transfer ownership thereof. Be it
remembered that the fishponds were not registered under the Torrens system. Again, we cite public
respondent's ruling, which we find totally persuasive: 46
It is our well-considered opinion, however, that whether or not defendant-appellee
spouses are in good faith is entirely immaterial, because no valid sale in the first place
was made between defendant-appellees covering the portion of land in question. The
fact is, as established by the evidence on record, that defendant Rodolfo M. Tigno is not
the owner of the lands in question, but a mere trustee thereof, and could not have
transferred ownership of said lands, by way of sale, to his co-defendant-appellee
spouses. As a matter of basic principle in the law on sales, a person cannot transfer
ownership, by way of sale, of something over which he has no right to transfer. Thus,
Article 1459 of the Civil Code provides:
Art. 1459. The thing must be licit and the vendor must have a right to transfer
the ownership thereof at the time it is delivered. (Emphasis supplied)
Since defendant-appellee is not the owner of the lands in question, which are not
registered under the Torrens system, he could not by way of sale have transferred, as he
has no right to transfer, ownership of a portion thereof, at the time of delivery.

Page 65 of 166
Bus. Org. I Cases – Page 3 Syllabus

WHEREFORE, premises considered, the petition is hereby DENIED and the assailed Decision and
Resolution are AFFIRMED in toto. Costs against petitioners.
SO ORDERED.

Page 66 of 166
Bus. Org. I Cases – Page 3 Syllabus

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, Peña & Nolasco for private respondents.

BELLOSILLO, J.:

Sometime in 1965 respondent Dolores Sandoval wanted to buy two (2) lots in Dasmariñas 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
Page 67 of 166
Bus. Org. I Cases – Page 3 Syllabus

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
Page 68 of 166
Bus. Org. I Cases – Page 3 Syllabus

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 York 11 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) Tai-ping 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.

Page 69 of 166
Bus. Org. I Cases – Page 3 Syllabus

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
Page 70 of 166
Bus. Org. I Cases – Page 3 Syllabus

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, and Art. 1456 of the Civil
34

Code. 35Reconveyance is available in case of registration of property procured by fraud thereby

creating a constructive trust 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.

Page 71 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 108121 May 10, 1994

HERMINIA L. RAMOS and HEIRS OF HERMINIO RAMOS, petitioners,
vs.
HON. COURT OF APPEALS, SPOUSES HILARIO CELESTINO and LYDIA CELESTINO, respondents.
Leven S. Puno for petitioners.
Fernandez & Olivas for private respondents.

DAVIDE, JR., J.:

Invoking Rule 45 of the Rules of Court, petitioners seek the review and reversal of the decision of the
Court of Appeals of 30 September 1991 1 and its Resolution of 15 December 1992 2 in CA-G.R. CV No.
26544. 3 The challenged decision affirmed the joint decision 4 of Branch 95 of the Regional Trial
Court (RTC) of Quezon City in Civil Case No. Q-49272 and LRC Case
No. Q-3387(86), the dispositive portion of which reads as follows:
WHEREFORE, in LRC Case No. Q-3387 (86), the Court hereby renders judgment dismissing
said case with the petition and claims therein for lack of jurisdiction thereover; and in Civil
Case No. Q-49272, the Court hereby renders judgment dismissing defendant's
counterclaim for lack of merit and declaring plaintiffs to be the lawful owners of the
subject parcel of land designated as Lot 25, Block 86 of the subdivision plan Psd-68807,
with an area of 400 square meters, more or less, situated in Sikatuna Village, Diliman,
Quezon City, and covered by Transfer Certificate of Title No. 204173 of the Registry of
Deeds for Quezon City, as well as ordering defendants: (a) to execute a deed of absolute
sale in favor of plaintiffs, conveying and transferring the ownership of said parcel of land;
(b) to remove whatever improvements defendants have erected on said parcel of land;
(c) to vacate said parcel of land and deliver possession thereof to plaintiffs; and, (d)
jointly and severally to pay plaintiffs the sum of P20,000.00 as attorney's fees, as well as to
pay the costs of suit. Further, finding no satisfactory warrant therefor, the Court also
hereby dismisses the rest of plaintiff's claims. 5
Civil Case No. Q-49272 was an action for reconveyance filed by the spouses Hilario and Lydia Celestino
against Herminia Ramos and the heirs of Herminio Ramos praying that the plaintiffs be declared the
lawful owners of Lot No. 25, Block 86 of the subdivision plan Psd-68807 located at Sikatuna Village,
Diliman, Quezon City, and that the defendants be ordered to execute a deed of absolute sale over
the lot in favor of the plaintiffs, remove whatever improvements they have constructed thereon,
vacate the lot and deliver its possession to the plaintiffs, and to pay actual, moral, and exemplary
damages, attorney's fees, and the costs of the suit. 6 LRC Rec. Case No. Q-3387(86)
was a petition to declare void the order issued on 22 August 1985 by Branch 104 of the RTC of Quezon
City in LRC Case No. Q-3150(85) 7 ordering the cancellation of Transfer Certificate of Title (TCT) No.
204173 upon petition of Herminia Ramos.
The facts, as found by the trial court and adopted by the respondent Court of Appeals, are as follows:
From the evidence adduced at the joint trial of these related cases, the Court finds that
petitioner/plaintiff Lydia Celestino (referred to as Lydia hereinafter), married to plaintiff
Hilario Celestino, was employed in the economic research department of the Central
Bank of the Philippines from 1949 to 1983, while the late Herminio Ramos (Herminio,
hereinafter) — the deceased spouse of respondent/defendant Herminia L. Ramos
(Herminia hereinafter) and predecessor-in-interest of Herminia and the rest of defendants
— was employed during his lifetime in the same department of the Central Bank until his
retirement sometime in 1972.

Page 72 of 166
Bus. Org. I Cases – Page 3 Syllabus

Sometime in 1961, the now defunct People's Homesite & Housing Corporation (PHHC)
awarded the rights to buy certain parcels of land to employees of the Central Bank. As
a Central Bank employee, Herminio was awarded the rights to buy the parcel of land
designated as Lot 25, Block 86 of the subdivision plan Psd-68807, with an area of some
400 square meters, and situated in what is now known as Sikatuna Village in Diliman,
Quezon City, For the price of P3,800.00 payable in installments, Herminio then sold and
transferred to Lydia his said rights to buy said property, and Lydia paid said price in several
installments, the last installment being paid on May 21, 1962 (Exhs. A thru C). Having
acquired the rights to buy the property, Lydia assumed the obligation of paying to the
PHHC the purchase price thereof. Thus, Lydia paid to the PHHC the monthly amortizations
of P34.11 per month over a period of some 10 years ending sometime in 1974 when she
paid the last monthly amortization, thereby effecting the full payment of the purchase of
the subject land. During said period and thereafter, Lydia's friend, Cynthia Camacho,
who was then residing at the back of the subject property, acted as the property's
caretaker for Lydia, even as Lydia also had the land fenced.
When the corresponding transfer certificate of title — Transfer Certificate of Title (TCT) No.
204173 of the Registry of Deeds for Quezon City — was issued after the full payment of
the purchase price, the certificate was in the name of "HERMINIO T. RAMOS, of legal age,
Filipino, married to Herminia L. Ramos" (Exhs. 1-A & 6-A). Herminio and Herminia knew of
and consented to the delivery to Lydia of said title certificate's owner's duplicate copy
(Exh. D, also Exh. 1), and said copy since then has been in Lydia's possession and custody.
On or about November 26, 1974, Herminio, together with Herminia, executed in Lydia's
favor an irrevocable special power of attorney (Exh. E), in sum empowering Lydia to sell,
mortgage, or lease the subject property and to dispose of the proceeds thereof in any
manner she wants. Said special power of attorney was executed upon the advice of a
realty expert, one Isidro Gonzales, as a practical means of giving assurance to Lydia that
Herminio, together with his spouse Herminia, was in good faith and recognized the
existing implied trust relationship between them over the subject land, particularly in view
of the restriction annotated on the title certificate in sum to the effect that within one
year from said certificate's issuance no transfer or alienation of the property shall be
made without the PHHC's written consent (Exh. 1-B).
On August 22, 1985, Branch 104 of the Regional Trial Court of the National Capital Judicial
Region in Quezon City (referred to as RTC Branch 104 hereinafter) issued in its LTC Case
No. Q-3150 (85) an Order (Exh. 9), in sum cancelling and declaring null and void "the
owner's duplicate copy of Transfer Certificate of Title No. 204173 that was lost" and
ordering the Register of Deeds of Quezon City "to issue, upon payment of the required
fees, another owner's duplicate copy which shall contain annotations in, and
memorandum of the fact that it is issued in the place of the lost certificate of title, in all
respect be entitled to like faith and credit as the original duplicate for all purposes of
Presidential Decree No. 1529" and, accordingly, another owner's duplicate copy of TCT
No. 204173, with a memorandum of said order of RTC Branch 104 was issued by the
Register of Deeds of Quezon City (Exhs. 6 and 6-B). Said Order was issued upon Herminia's
petition, in sum claiming that the original owner's duplicate copy was lost and missing.
After having belatedly learned of the issuance of said Order of RTC Branch 104, Lydia on
March 21, 1986 filed her petition herein, docketed as LRC Case No. Q-3387 (86), in sum
praying that said Order of August 22, 1985 in LRC Case No. Q-3150 (85) be declared null
and void and without legal effect and that the new owner's duplicate copy issued and
delivered to Herminia be cancelled, on the ground that Herminia secured such new
owner's duplicate copy thru fraud and misrepresentation because she well knew that the
supposedly "lost" owner's duplicate copy was in Lydia's possession and custody.
Sometimes later, after having verified that Herminio had passed away in the early part of
1985 and that Herminia and his successors-in-interest were disputing the ownership of the
subject property and building thereon, Lydia together with her spouse Hilario Celestino
Page 73 of 166
Bus. Org. I Cases – Page 3 Syllabus

filed the complaint herein, docketed as Civil Case No. Q-49272, engaging the services of
counsel for the prosecution thereof. 8
The trial court's decision is premised on the following findings and conclusion:
The Court, upon the evidence adduced, finds that an implied or resulting trust was
created by operation of law when the subject property was sold by the PHHC, with the
legal title being vested in Herminio as the corresponding TCT was issued in his name, but
with the beneficial title, however, being vested in Lydia as she was the one who paid the
purchase price of the property out of her funds after Herminio had earlier sold and
transferred to her his rights to buy the property and she had fully paid him the purchase
price for said rights; accordingly, it appearing that instead of recognizing and abiding by
said trust, Herminia and the other defendants (who as Herminio's successor-in-interest
merely stepped into his shoes upon his death) have repudiated the trust by claiming the
property for themselves soon after Herminio's death in 1985, Lydia and her spouse Hilario
were fully warranted in bringing their said compliant herein, seeking as it does, the
enforcement of the trust thru defendants' execution of the corresponding conveyance
deed to the end that the true beneficial title may be reflected in the corresponding title
certificate; and, again, since
it was because of defendant's unwarranted repudiation of the trust
that plaintiffs were compelled to bring their complaint in Civil Case
No. Q-49272 and engage their counsel's services therefor, the Court finds that aside from
the principal relief sought in the complaint and the costs, recovery by plaintiffs from
defendants of the sum of P20,000.00) as reasonable attorney's fees is just and equitable .
...
The fact that Herminia knew of and consented to the subject transaction between
Herminio and Lydia is amply indicated by the special power of attorney, Exh. E, executed
in Lydia's favor by Herminio and Herminia sometime on November 26, 1974. No
reasonable explanation can be gleaned from the evidence adduced for Herminio's and
Herminia's execution of said special power of attorney other than the fact that they
recognized that it was Lydia who paid the purchase price of the subject property to the
PHHC out of her own funds and that she was the beneficial owner thereof. Of course,
Herminia would have the Court find that the signature appearing over her printed name
in Exh. E is not her signature. But, certainly, Herminia's bare claim cannot prevail against
the notary public's certificate in the acknowledgment portion of the document, in sum
asserting that both Herminio and Herminia personally appeared before the notary public,
that they are the same persons who executed the special power of attorney, and that
they acknowledged to the notary public that they understood the contents of the
document and that they executed the same as their voluntary act and deed; and
indeed, Herminia's specimen signatures (Exh. 2 thru 5), presented at the trial, cannot
properly be described as bearing no marked similarity, nay, identity, with the signature
appearing over her printed name Exh. E.
Then, again, the fact that Herminia apparently secured the tax declarations and paid
the realty taxes and penalties on the subject property only after Herminio's death in 1985
(Exhs. 7 thru 8-1), tends to indicate that Herminia herself never regarded Herminio and
herself as the subject property's owners in fee simple but, rather, merely as trustees for
Lydia — that is, until Herminia, together with the other defendants, repudiated the trust
soon after Herminio's death in 1985. 9
The defendants appealed from the decision to the Court of Appeals which docketed the appeal as
CA-G.R. CV No. 26544. In their belief, the defendants-appellants contended that the trial court erred
in holding that (1) Herminia Ramos knew of and consented to the transaction between her husband
and Lydia Celestino as evidenced by the special power of attorney; (2) the alleged special power of
attorney showed that the Ramos spouses recognized that it was Lydia Celestino who paid the
purchase price of the lot to the PHHC out of her own funds; (3) an implied or resulting trust was created
when the property was sold by the People's Homesite and Housing Corporation (PHHC) and issued to
Page 74 of 166
Bus. Org. I Cases – Page 3 Syllabus

Herminio Ramos with the beneficial title vesting in Lydia Celestino since she was the one who paid the
purchase price out of her own funds; (4) the plaintiff's action for reconveyance had not prescribed or
been barred by laches; (5) the plaintiffs are the lawful owners of the lot, and the defendants are
obligated
to execute a deed of absolute sale in favor of the former, remove their improvements on the lot, and
vacate the premises and deliver the possession of the lot to the former; and (6) attorney's fees are due
the plaintiffs. 10
In connection with the first three assigned errors, the appellants maintained in the alternative that even
assuming for the sake of argument that Herminio Ramos sold his rights over the lot in question to Lydia
Celestino, the transaction was unenforceable or void ab initio and no trust was created in view of the
following considerations: the alleged sale was not evidenced by any document, note, or
memorandum as required by the Statute of Frauds (Article 1403(2) (e), Civil Code); no document was
introduced to prove the alleged express trust as required in Article 1443 of the Civil Code; the
transaction
in question did not give rise to an implied trust under the Civil Code; Lydia Celestino is not qualified to
acquire the lot in question from the PHHC, a fact she admitted in her testimony; the PHHC did not give
its consent to the alleged sale, contrary to the conditions annotated at the back of TCT No. 204173 to
the effect that the vendee (Herminio Ramos) cannot sell or encumber the said parcel of land or any
part thereof without the written consent of the PHHC; the cause, object, or purpose of the alleged
transaction (sale of right over the lot) is contrary to law or the public policy that the award of lands
should only be to those who are not yet owners of land in Quezon City, or to morals since the
transaction circumvented the policy; and Herminio Ramos had no right to sell the land or any portion
thereof without the consent of his wife. 11
As aforestated, the Court of Appeals, in its Decision of 30 September 1991, affirmed the decision of the
trial court. In rejecting the appellants' first three assigned errors, it held that (a) the petitioners were
unable to overcome the presumption of the authenticity and genuineness of the special power of
attorney, a public document duly acknowledged before a notary public; 12 (b) the Statute of Frauds
applies only to executory contracts, while the action instituted by the appellees was "for reconveyance
based on resulting trust arising from a fully executed sale with nothing left to be done except the formal
execution
of the deed of conveyance"; "the documentary evidence showing the sale
of Herminia [sic] Ramos' right to purchase the lot is well-nigh conclusive"; 13
(c) neither the private respondents nor the trial court made any reference to an express trust under
Article 1437 of the Civil Code; what is present in this case is a resulting trust under Article 1448 14 of the
Civil Code wherein "the legal title to the lot was taken and given to Herminia Ramos and Herminio
Ramos; while the beneficial ownership thereof remained with the plaintiff"; 15 and
(d) "restriction of the sale of the property without the approval of the PHHC within one year from the
issuance of the title does not militate against and is not an element of a resulting trust." 16
As regards the fourth assigned error, the Court of Appeals ruled that the appellees' cause of action for
reconveyance had not yet prescribed for "the trust was a continuing and subsisting one" which the
special power of attorney recognized; the rule of prescription of implied or resulting trust does not apply
where a fiduciary relation exists and the trustee recognizes the trust; and if at
all, there was a repudiation of the trust, it "came about only after the death of Herminio when
defendants tried to claim the property for themselves in 1985." 17
The appellants then filed a Motion for Reconsideration and for Leave to Submit Additional Evidence,
dwelling at length on the admissibility and authenticity of the special power of attorney by reiterating
that Herminia Ramos' signature thereon is a forgery and alleging that the copy thereof was not
admissible in evidence as it was a mere photocopy and therefore not the best evidence; and that
they were able to obtain a certification from the Clerk of Court of the RTC of Manila that Atty. Ulpiano
P. Mosalla, before whom the special power of attorney was acknowledged, was not a duly
commissioned notary public for and in the City of Manila. They further reiterated the issues of
prescription, the absence of marital consent on the part of Herminia Ramos to the sale of her husband's
right over the lot, and the disqualification of Lydia Celestino to purchase the lot. 18
Page 75 of 166
Bus. Org. I Cases – Page 3 Syllabus

In its Resolution of 15 December 1992, 19 the Court of Appeals denied the aforesaid motion for
reconsideration with leave to submit additional evidence.
Hence this petition which was filed on 28 December 1992.
On 13 December 1993, after the submission of the comment to the petition, the reply thereon, and the
rejoinder to the latter, we gave due course to the petition and directed the parties to submit their
simultaneous memoranda, which they complied with.
Petitioners (defendants-appellants below) maintain that the Court of Appeals erred in holding that (a)
petitioner Herminia Ramos' signature on the special power of attorney is genuine; (b) there was an
implied trust in this case; and (c) the action for reconveyance had not yet prescribed.
As we see it, the second assigned error unravels the core and decisive issue in this case, i.e., the validity
of the transaction involving the lot in question between Herminio Ramos and Lydia Celestino. The
petitioners reiterate their thesis before the trial court and the Court of Appeals that no trust was
established in this case because (1) there is a restriction expressly imposed by the PHHC in the sale of
the land to Herminio Ramos, to wit:
Within a period of one year from the issuance of TCT by virtue of this deed no transfer or
alienation whatsoever of the property subject thereof whether in whole or in part shall be
made or registered w/out the written consent of the vendor and such transfer or
alienation may be made only in favor of person qualified to acquire land under the laws
of the Philippines. 20
and (2) even assuming arguendo that Herminio Ramos sold his rights over the lot, the sale was null and
void for being contrary to the public policy of awarding PHHC lots to Central Bank employees who are
not residential landowners. Private respondent Lydia Celestino, Herminio's vendee, was disqualified to
acquire any PHHC lot because she already owned a residential lot in Quezon City. This issue was raised
in the petitioners' special and affirmative defenses in their answer, 21 but the trial court did not meet or
resolve it squarely. It assumed that the transaction was valid. The Court of Appeals likewise did not
tackle this issue in its Decision of 30 September 1991 and Resolution of 15 December 1992. Just like the
trial court, it merely assumed the validity of the transaction.
The assumption, however, is without basis. As correctly pointed out by the petitioners, which the private
respondents failed to rebut, Lydia Celestino had candidly admitted in her testimony that although she
was a Central Bank employee, she was not qualified to acquire any PHHC lot under the agreement
entered into between the PHHC and the Central Bank because she is already the owner of a lot in
Quezon City. Thus, on cross-examination she declared:
Q Mrs. witness, you stated that the lots what you call Central Bank Village
were awarded to the employees of the Central Bank but you were not one
of the awardees. Why?
A I have here in Quezon City a property in my name and we are not
allowed to get another property.
Q So in other words, you are not qualified?
A Yes, sir. 22
On further cross-examination, she elaborated on her disqualification. Thus:
ATTY. ESPONAS (continuing):
Q You previously testified that the reason you are not one of the awardees
of a lot in that subdivision of the Central Bank, the reason was you were not
qualified, is it not?
A I was not qualified.
Q And the reason why you were not qualified is because you already own
a properly in Quezon City, is it not?
A I was only telling the truth. Yes.
Q And again the qualification in order to be qualified or be entitled to an
award in that subdivision of the central bank, you must not be an owner of
a lot in Quezon City.
xxx xxx xxx
A Yes, sir, you must not be an owner.
Page 76 of 166
Bus. Org. I Cases – Page 3 Syllabus

Q And up to now you are an owner of a lot in Quezon City?

A Yes, the same house that I claimed then.
xxx xxx xxx
Q Up to now you are still not qualified to own a lot in that subdivision?
xxx xxx xxx
WITNESS:
I am not qualified up to now. 23
Her disqualification is the probable reason why she did not submit for approval by the PHHC the transfer
in her favor of Herminio Ramos' right to buy the lot in question. The PHHC's approval was necessary for
the validity of
the transfer. In Ibay vs. Intermediate Appellate court, 24 which also involved a transfer of the right of an
awardee of a PHHC lot to a party disqualified to acquire a PHHC lot, this Court stated:
There is no need to quibble on or belabor further this point. As squarely ruled by the
respondent Court, Exhibit "1" is not to be considered a deed of sale of the property but
merely a transfer of Rosita Abando's rights as an applicant to one-half (1/2) of the lot. This
is so because at the date of its execution, Rosita was not yet the owner of the lot. The
document itself explicitly states that the PHHC is the registered owner of the property. The
approval of the PHHC is necessary for the transfer to be valid and effective. In the case
at bar, not only did the transfer lack the requisite approval, the same was categorically
disapproved by the latter, per its letter of 15 February 1960, because petitioner, under the
policy of the PHHC, is no longer qualified to acquire another PHHC lot. Resolution
No. 82 of the PHHC, adopted by its Board of Directors on 23 May 1951, provided that "the
sale of more than one lot per person shall not be permitted." 25 This policy is supported by
the law. One of the purposes of the PHHC was to acquire, develop, improve, subdivide,
lease and sell lands and construct, lease and sell buildings or any interest therein in the
cities and populous towns in the Philippines with the object of providing decent housing
for those who may be found unable otherwise to provide themselves therewith.
The same awareness of the fatal flaw of the transfer is the most logical explanation why Lydia Celestino
took no further action to secure a new transfer certificate of title despite the fact that she had always
been in the possession of TCT No. 204173 which was issued to Herminio Ramos on 21 November 1974
yet. 26 Instead of requiring Herminio Ramos to execute a deed of sale in her favor and to obtain the
PHHC's conformity thereto, she was satisfied with the special power of attorney, executed five days
after the issuance of the title, or on 26 November 1974, authorizing her to "SELL, MORTGAGE, LEASE, LET,
or RENT" this lot. 27 Such authority is inconsistent with Lydia Celestino's claim for ownership because the
grantor therein, Herminio Ramos, solemnly declared that he is "the owner in fee simple" of the lot
described in TCT No. 204173.
Finally, it was only on 21 March 1986, more than fifteen years after Herminio Ramos allegedly sold to
her his rights over the lot and about
twelve years after the certificate of title on the lot was issued to Herminio Ramos, when Lydia Celestino
first publicly revealed, by filing LRC Case
NO. Q-3387(86), that Herminio sold to her his rights thereon. All these merely suggest that Lydia did
everything to hide her disqualification to own the lot until she could no longer avoid the dangerous
precipice where she was brought by her clandestine transaction with Herminio Ramos.
The inevitable conclusion then is that Lydia Celestino, knowing of her disqualification to acquire a lot
from the PHHC at the subdivision reserved for qualified Central Bank employees, tried to get one
through the backdoor. Otherwise stated, she wanted to get indirectly that which she could not do so
directly. Having acted with evident bad faith, she did not come to court with clean hands when she
asked for the reconveyance of the property on the basis of a resulting trust under Article 1448 of the
Civil Code.
A resulting trust is an "intent-enforcing" trust, based on a finding by the court that in view of the
relationship of the parties their acts express an intent to have a trust, even though they did not use
language to that effect. The trust is said to result in law from the acts of the parties. However, if the
purpose of the payor of the consideration in having title placed in the name of another was to evade
Page 77 of 166
Bus. Org. I Cases – Page 3 Syllabus

some rule of the common or statute law, the courts will not assist the payor in achieving his improper
purpose by enforcing a resulting trust for him in accordance with the "clean hands" doctrine. The court
generally refuses to give aid to claims from rights arising out of an illegal transaction, such as where the
payor could not lawfully take title to land in his own name and he used the grantee as a mere dummy
to hold for him and enable him to evade the land
laws, 28 e.g., an alien who is ineligible to hold title to land, who pays for it and has the title put in the
name of a citizen.
Otherwise stated, as an exception to the law on trusts, "[a] trust or a provision in the terms of a trust is
invalid if the enforcement of the trust or provision would be against public policy, even though its
performance does not involve the commission of a criminal or tortious act by the trustee." 29 The parties
must necessarily be subject to the same limitations on allowable stipulations in ordinary contracts, i.e.,
their stipulations must not be contrary to law, morals, good customs, public order, or public
policy. 30 What the parties then cannot expressly provide in their contracts for being contrary to law
and public policy, they cannot impliedly or implicitly do so in the guise of a resulting trust.
Although the contract should be voided for being contrary to public policy, we deem it equitable to
allow the private respondents to recover what they had paid for the land with legal interest thereon
commencing from the date of the filing of the complaint in Civil Case No. Q-49272. Thus, she is entitled
to the return of the amount she had paid to Herminio in the sum of P3,800.00 and the refund of the
installments she had paid to the PHHC (P34.11 monthly for a period of ten years), with legal interest
thereon.
The foregoing discussions render unnecessary the resolution of the other issues raised by the parties.
WHEREFORE, the instant petition is GRANTED and the respondent Court of Appeals' Decision of 30
September 1991 and Resolution of 17 December 1992 in CA-G.R. CV No. 26544 as well as the joint
decision of the Regional Trial Court of Quezon City, Branch 95, in Civil Case No. Q-49272 and LRC Case
No. Q-3387(86) of 23 February 1990 are REVERSED and SET ASIDE. The latter two cases are ordered
DISMISSED. However, the petitioners are ordered to refund to the private respondents within thirty days
from the finality of this decision the sum of P3,800.00 and all the installments the latter had paid to the
PHHC for the purchase rice of the lot in question, with 6% per annum interest thereon computed from
the date of the filing of the complaint in Civil Case No. Q-49272 until payment. Let a copy of this
decision be furnished the National Housing Authority for its information and appropriate action as it
may deem necessary in the premises.
SO ORDERED.

Page 78 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-45027 January 27, 1992

BERNARDO DE LOS SANTOS, petitioner,
vs.
FAUSTINO B. REYES, THE HON. COURT OF APPEALS and SPOUSES BENJAMIN DIESTRO and AIDA
LAGAREJOS, respondents.
Pedro N. Belmi for petitioner.
Mariano H.G. Cervo for private respondents.

DAVIDE, JR., J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner urges this Court to
review and set aside the decision of the respondent Court of Appeals in C.A.-G.R. No. 41943-
R 1 promulgated on 23 July 1975, which affirmed in toto the decision of the then Court of First Instance
(now Regional Trial Court) of Rizal in Civil Case No. 8640, dated 12 February 1968, 2 dismissing herein
petitioner's complaint for reconveyance of a parcel of land located in Biga-a, San Roque, Angono,
Rizal, the dispositive portion of which reads as follows:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby dismisses this case and
declares the defendant Faustino B. Reyes the owner of the parcel of land subject of this
action.
Plaintiff is hereby ordered to pay the amount of ONE THOUSAND FIVE HUNDRED
(P1,500.00) PESOS as moral damages and for attorney's fees plus the costs of suit.
SO ORDERED. 3
In a bid to obtain a reversal of the trial court's decision, petitioner attempted to persuade the Court of
Appeals to agree with his proposition that the trial court:
I
. . . committed grave abuse of discretion in not considering the relevant documentary
evidence submitted by the plaintiff in support of his cause of action alleged in the
complaint;
II
. . . erred in finding and concluding that plaintiff failed to substantiate his complaint and
did not even bother to contradict defendant Faustino Reyes' testimonies;
III
. . . erred in admitting and considering the oral testimony of defendant Faustino B. Reyes
in establishing express trust over the parcel of land in question over and above the
objection of the plaintiff; and
IV
. . . erred in finding and holding that the present action of plaintiff is clearly unfounded
and without merit. 4
Respondent Court was not persuaded. Its rejection of the assigned errors deserves to be quoted:
As to the first assignment of error, appellant has no reason to complain that the trial court
did not consider the documents that he presented as his only evidence (Exhs. A, A-1 to
K). In ruling in favor of the appellees and against appellant, it cannot be seriously asserted
that the trial court did not give due regard to the prima-facie effect or value of
appellant's documentary evidence, particularly the deed of sale (Exhibit A), the
certificate of title, TCT No. 59373 in the name of his wife Virginia T. Reyes (Exh. B), the tax
declaration also in her name (Exh. K), and the extrajudicial settlement affidavit of
appellant Reyes (Exh. C). Otherwise, the court should not have found it necessary to

Page 79 of 166
Bus. Org. I Cases – Page 3 Syllabus

enter, as it did, into a thorough, extensive analysis of the evidence of the appellee, both
testimonial and documentary (Exh. 1).
It cannot, likewise, be denied that appellant failed to contradict the testimony of
appellee Reyes to the effect that he placed the land in question in the name of his
daughter, Virginia, only to conform with the requirement of the hacienda-owner, Justa
G. Vda de Guido, that no one person can buy more than two lots at a time, and that
since the sale, the property had been taken into his possession up to the time it was sold,
the products thereof having been received by appellee Reyes even after her daughter's
marriage to appellant. This unrebutted testimony of appellee Reyes could not have been
evaluated except by weighing it against the documentary evidence of appellant. But
with appellant giving no testimony to rebut that of appellee Reyes, the lower court
cannot be said to be in error, as claimed by appellant (2nd assignment of error), in finding
that "plaintiff failed to substantiate his complaint and did not even bother to contradict
defendant Faustino Reyes" testimony.
The observation of the lower court that appellant failed to substantiate his complaint is
glaringly true with respect to the allegation that the baby of Virginia T. Reyes died after
the mother died of coronary embolism on the same date she gave delivery (sic) to the
baby girl. This allegation was specifically denied in the answer of appellee Reyes, who
repeated his averment therein in his testimony in court that the baby was born dead
because its head was crushed when extracted from the mother's womb with forceps.
Yet, appellant did not take the witness stand to deny this fact. None of his documentary
evidence on the sole reliance of which he rested his case relates to how the baby was
born — alive or dead. This point is precisely the most decisive factor in determining the
merit of his claim to have inherited the property in question from the child, because the
latter inherited it from its mother. It was incumbent upon him to prove that the child was
born alive and died after the mother has (sic) died earlier, as required by Art. 43 of the
Civil Code which provides:
Art. 43. If there is a doubt, as between two or more persons who are called
to succeed each other, as to which of them died first, whoever alleges the
death of one prior to the other, shall prove the same in the absence of
proof, it is presumed that they died at the same time and there shall be no
transmission of rights from one to the other.
Not only did appellant failed (sic) to discharge the duty imposed upon him for having
alleged the death of his wife prior to that of his child, but also failed to contradict the
positive and categorical testimony of appellee Reyes that the child was born dead. The
alleged admission in the answer of the appellees spouses to substantiate the allegation
of the appellant in his complaint is ineffective against the specific denial in appellee
Reyes' answer, repeated in his testimony. With this particular matter in issue, it is Reyes
who is directly concerned, and the supposed admission of the appellee-spouses who are
complete strangers to the family of appellant and Reyes, can have no binding force and
effect upon the latter. Hence, on the opposing claims as to who would inherit the
property in question, that of appellee must be sustained as the lower court ruled
correctly. With this finding alone, the dismissal of the complaint would be in order and
fully justified.
Moreover, as allegedly intimated, the lower court's finding that the land was actually
owned by Faustino B. Reyes, notwithstanding that the title was in the name of Virginia T.
Reyes, pursuant to the deed of sale where the latter was made to appear as the buyer,
finds convincing support from the evidence of record. It was clearly explained why both
the deed of sale and the certificate of title mentioned Virginia T. Reyes as the owner. The
explanation was fully supported by the agreement (kasunduan) duly notarized on June
15, 1955 (Exh. 1) which shows that Faustino Reyes was the buyer of three lots with a total
consideration of P14,000.00. At the time of the execution of this agreement, he paid
P11,000.00, leaving only a balance of P3,000.00 which he paid later. Virginia, then only
Page 80 of 166
Bus. Org. I Cases – Page 3 Syllabus

18 years of age, could not paid (sic) the price of the lot in question. By no stretch of the
imagination can it be asserted that she bought the land herself as the deed of sale
purports to show. The extrajudicial adjudication affidavit of appellee Reyes (Exh. C) can
not, under the circumstances just noted, be read as an admission of Reyes that her
daughter, Virginia, was the owner of the land, as appellant contends. It is evident that
the execution of this document was resorted to only as the most practical and
expeditious way to transfer the land from the name of Virginia T. Reyes to that of appellee
Reyes. It cannot have a greater probative value than the deed of sale (Exh. A) and the
certification of title (Exh. B) relied upon by appellant, which have already been shown to
be of no avail against the clear and convincing evidence of appellee.
There is no question of trust involved under the proven facts of the case, as appellant
raises in his third assignment of error. The court a quo made no finding as to the existence
or non-existence of one. As cited by appellant himself, Article 1448, New Civil Code,
provides:
There is an implied trust when property is sold, and the legal estate is
granted to one party but the practice 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. (Emphasis supplied).
The disputable presumption of a gift as created in the aforequoted provision has been
amply overcome by the evidence of appellee Reyes, as already demonstrated. If it was
a gift, the land should have been taken possession of by appellant at least after he
married his wife as the supposed beneficiary. They then should have enjoyed also the
fruits, and also paid for the tax. No evidence, however, of such payment was presented.
To all appearances, appellant knew as a fact that his wife never was the owner of the
land, not even as a gift under the legal provision he cited. Otherwise, it should not have
taken him almost seven long years to assert ownership with the filing of the present action.
That this action is a mere afterthought, stirred by a legal mind with a gambling instinct is
not just a mild surmise, considering how long it took the appellant to file it in court and its
contingent nature. It may be well to remember, however, that lawsuits are not won by
chance, as by the turn of the dice, or how the cards fall on the gambling table — not
while the courts sit, anyway. 5
Petitioner could not accept the second defeat. Invoking this Court's authority under Rule 45 of the Rules
of Court, he filed the instant petition on 27 December 1976. 6 Private respondents filed their
Comment 7 in compliance with the resolution of 26 January 1977. 8 Petitioner was directed to file a
Reply thereto, which he complied with on 11 July 1977. 9
The Court gave due course to the petition. 10
In his Brief filed on 26 September 1977, 11 petitioner imputes upon the respondent court the commission
of the following "grave errors of law and/or abuse of discretion" by:
I
. . . misinterpreting and/or disregarding the probative value of the purely public
documentary evidence adduced by herein petitioners as against the oral testimony of
private respondent Faustino B. Reyes, which, aside from being self-serving, was
impeached by his own solemn declaration contained in the affidavit of extrajudicial
declaration, Exhibit "C", executed prior to the instant controversy, contrary to the well
established and long settled rule of jurisprudence that public documents should be
accorded the highest probative value and they can only be invalidated by beyond
proponderance (sic), clear, conclusive, convincing and strong evidence.
II
. . . declaring private respondent Faustino B. Reyes as the owner of the parcel of land in
question notwithstanding the undisputed facts that said parcel of land was registered
Page 81 of 166
Bus. Org. I Cases – Page 3 Syllabus

under Act No. 496, as amended, under Transfer Certificate of Title No. 59573, Registry of
Rizal, in the name of the late Virginia T. Reyes, and declared for taxation purposes in the
name of the latter under Tax Declaration No. 2323, Exhibits "B" and "K", respectively.
III
. . . admitting the oral testimony of respondent Faustino B. Reyes tending to establish an
alleged trust, either express or implied, which oral testimony was vehemently objected to
by the herein petitioners, in utter violations (sic) of Articles 1431, 1443 and 1448, New Civil
Code.
IV
. . . holding and concluding that the late Virginia T. Reyes and the baby girl died at the
same time, overlooking the clear admission in the pleading of disinterested respondents
spouses Benjamin Diestro and Aida Legarejos, represented by same (sic) counsel for
respondent Faustino B. Reyes, that the baby girl was born alive; and, in misinterpreting as
well as in misapplying Article 43, New Civil Code, in the case at bar. 12
In their Brief on 23 December 1977, 13 respondents met squarely the issues raised by the petitioners.
The petition is not impressed with merit as nothing in the pleadings points to any reversible error which
respondent court committed.
However disguised, the assigned errors are a repetition of what petitioner raised before the respondent
court, which, with the exception of the third assigned error, involve questions of fact.
Well-settled is the general rule that the jurisdiction of this Court in cases brought before it from the Court
of Appeals is limited to reviewing or revising errors of law; findings of fact of the latter are conclusive. 14 It
is not the function of this Court to analyze or weigh such evidence all over again. It is only in exceptional
cases where this Court may review findings of the fact of the Court of Appeals. In Medina vs. Asistio,
Jr., 15 this Court took occasion to enumerate such exceptional circumstances, to wit:
It is a well-settled rule in this jurisdiction that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Rules of Court, this Court being bound by the
findings of fact made by the Court of Appeals. The rule, however, is not without
exception. Thus, findings of fact by the Court of Appeals may be passed upon and
reviewed by this Court in the following instances, none of which obtain in the instant
petition:
(1) When the conclusion is a finding grounded entirely on speculation, surmises or
conjectures (Joaquin v. Navarro, 93 Phil. 257 [1953]); (2) When the inference made is
manifestly mistaken, absurd or impossible (Luna v. Linatok, 74 Phil. 15 [1942]); (3) When
there is a grave abuse of discretion (Buyco v. People, 95 Phil. 453 [1955]); (4) When the
judgment is based on a misapprehension of facts (Cruz v. Sosing, L-4875, Nov. 27, 1953);
(5) When the findings of fact are conflicting (Casica v. Villaseca, L-9590 Ap. 30, 1957;
unrep.); (6) When the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and appellee
(Evangelista v. Alto Surety and Insurance Co., 103 Phil. 401 [1958]); (7) The findings of the
Court of Appeals are contrary to those of the trial court (Garcia v. Court of Appeals, 33
SCRA 622 [1970]; Sacay v. Sandiganbayan, 142 SCRA 593 [1986]); (8) When the findings
of fact are conclusions without citation of specific evidence on which they are based
(Ibid.,); (9) When the facts set forth in the petition as well as in the petitioners' main and
reply briefs are not disputed by the respondents (Ibid.,) and (10) The finding of fact of the
Court of Appeals is premised on the supposed absence of evidence and is contradicted
by the evidence on record (Salazar v. Gutierrez, 33 SCRA 242 [1970]).
The third assigned error raises a question of law. Unfortunately, however, petitioner miserably failed to
demonstrate that respondent court committed any error which warrants reversal. In the first
place, estoppel was not raised by him in the Brief he submitted to the respondent Court. He cannot
raise it for the first time in this petition. In the second place, petitioner assumes that an express trust over
an immovable was created when it was made to appear that the land in question was sold to and
registered in the name of Faustino Reyes' daughter, Virginia — wife of petitioner — to conform with the
limitation imposed by the vendor that no vendee could purchase from the former more than two lots.
Page 82 of 166
Bus. Org. I Cases – Page 3 Syllabus

Consequently, pursuant to Article 1444 of the Civil Code, such a trust cannot be proved by parol
evidence. If his assumption is correct, Article 1444 is applicable and both the trial court and the
respondent Court then erred in admitting the oral testimony of Faustino Reyes concerning the facts
surrounding the "sale" of the lot in favor of Virginia. Unfortunately, the assumption is wrong. There is
neither an express nor implied trust in this case. The applicable provision of the Civil Code, as correctly
pointed out by respondent Court, is Article 1448 which provides as follows:
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. (Emphasis supplied).
Accordingly, testimonial evidence, such as that offered by Faustino Reyes, that the land was not given
as a gift to Virginia, was properly allowed to rebut the disputable presumption established in the
foregoing article.
WHEREFORE, for lack of merit, the instant petition is hereby DISMISSED with costs against petitioner.
IT IS SO ORDERED.

Page 83 of 166
Bus. Org. I Cases – Page 3 Syllabus

SECOND DIVISION
G.R. No. 138842 October 18, 2000
NATIVIDAD P. NAZARENO, MAXIMINO P. NAZARENO, JR., petitioners,
vs.
COURT OF APPEALS, ESTATE OF MAXIMINO A. NAZARENO, SR., ROMEO P. NAZARENO and ELIZA
NAZARENO, respondents.
DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision1 of the Court of Appeals in CA-GR CV No. 39441
dated May 29, 1998 affirming with modifications the decision of the Regional Trial Court, Branch 107,
Quezon City, in an action for annulment of sale and damages.
The facts are as follows:
Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died on April 15, 1970, while
Maximino, Sr. died on December 18, 1980. They had five children, namely, Natividad, Romeo, Jose,
Pacifico, and Maximino, Jr. Natividad and Maximino, Jr. are the petitioners in this case, while the estate
of Maximino, Sr., Romeo, and his wife Eliza Nazareno are the respondents.
During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired properties in Quezon City
and in the Province of Cavite. It is the ownership of some of these properties that is in question in this
case.
It appears that after the death of Maximino, Sr., Romeo filed an intestate case in the Court of First
Instance of Cavite, Branch XV, where the case was docketed as Sp. Proc. No. NC-28. Upon the
reorganization of the courts in 1983, the case was transferred to the Regional Trial Court of Naic, Cavite.
Romeo was appointed administrator of his father’s estate.
In the course of the intestate proceedings, Romeo discovered that his parents had executed several
deeds of sale conveying a number of real properties in favor of his sister, Natividad. One of the deeds
involved six lots in Quezon City which were allegedly sold by Maximino, Sr., with the consent of Aurea,
to Natividad on January 29, 1970 for the total amount of ₱47,800.00. The Deed of Absolute Sale reads
as follows:
DEED OF ABSOLUTE SALE
KNOW ALL MEN BY THESE PRESENTS:
I, MAXIMINO A. NAZARENO, Filipino, married to Aurea Poblete-Nazareno, of legal age and a resident
of the Mun. of Naic, Prov. of Cavite, Philippines,
-WITNESSETH-
That I am the absolute registered owner of six (6) parcels of land with the improvements thereon
situated in Quezon City, Philippines, which parcels of land are herewith described and bounded as
follows, to wit:
"TRANS. CERT. OF TITLE NO. 140946"
"A parcel of land (Lot 3-B of the subdivision plan Psd-47404, being a portion of Lot 3, Block D-3 described
on plan Bsd-10642, G.L.R.O. Record No.) situated in the Quirino District, Quezon City. Bounded on the
N., along line 1-2 by Lot 15, Block D-3 of plan Bsd - 10642; along line 2-3 by Lot 4, Block D-3 of plan Bsd-
10642; along line 3-4 by Aurora Boulevard (Road Lot-1, Bsd-10642); and along line 4-1 by Lot 3-D of the
subdivision plan. Beginning at a point marked "1" on plan, being S.29 deg. 26’E., 1156.22 m. from B.L.L.M.
9, Quezon City,
thence N. 79 deg. 53’E., 12.50 m. to point 2;
thence S. 10 deg. 07’E., 40.00 m. to point 3;
thence S. 79 deg. 53’W., 12.50 m. to point 4;
thence N. 10 deg. 07’W., 40.00 m. to the point
of beginning; containing an area of FIVE HUNDRED (500) SQUARE METERS. All points referred to are
indicated on the plan and are marked on the ground as follows: points "1" and "4" by P.L.S. Cyl. Conc.
Mons. bearings true; date of the original survey, April 8-July 15, 1920 and that of the subdivision survey,
March 25, 1956."
"TRANS. CERT. OF TITLE NO. 132019"
Page 84 of 166
Bus. Org. I Cases – Page 3 Syllabus

"A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970 being a portion of Lot 6, Pcs-4786,
G.L.R.O. Rec. No. 917) situated in Quirino District Quezon City. Bounded on the NW., along line 1-2, by
Lot 1, Block 93; on the NE., along line 2-3, by Road Lot 101; on the SE., along line 3-4, by Road Lot 100;
on the SW., along line 4-1, by Lot 4, Block 93; all of the subdivision plan. Beginning at point marked "1"
on plan, being S. 65 deg. 40’ 3339.92 m. from B.L.L.M. No. 1, Marikina, Rizal;
thence N. 23 deg. 28 min. E., 11.70 m. to point "2";
thence S. 66 deg. 32 min. E., 18.00 m. to point "3";
thence S. 23 deg. 28 min. W., 11.70 m. to point "4";
thence N. 66 deg. 32. min. W., 18.00 m. to the point
of beginning; containing an area of TWO HUNDRED TEN SQUARE METERS AND SIXTY SQUARE
DECIMETERS (210.60). All points referred to are indicated on the plan and are marked on the ground
by B.L. Cyl. Conc. Mons. 15 x 60 cm.; bearings true; date of the original survey, Nov. 10, 1920 and Jan.
31-March 31, 1924 and that of the subdivision survey, February 1 to September 30, 1954. Date approved
- March 9, 1962."
"TRANS. CERT. OF TITLE NO. 118885"
"A parcel of land (Lot No. 10, of the consolidation and subdivision plan Pcs-988, being a portion of the
consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record
No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No.
4 of the consolidation and subdivision plan; on the SE., by Lot No. 11 of the consolidation and
subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; and on the NW.,
by Lot No. 9 of the consolidation and subdivision plan. Beginning at a point marked "1" on the plan,
being S. 7 deg. 26’W., 4269.90 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00’E., 12.00 m. to point "2";
thence S. 64 deg. 59’W., 29.99 m. to point "3";
thence N. 25 deg. 00’W., 12.00 m to point "4";
thence N. 64 deg. 59’E., 29.99 m. to the point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points
referred to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.;
bearings true; declination 0 deg. 50’E., date of the original survey, April 8 to July 15, 1920, and that of
the consolidation and subdivision survey, April 24 to 26, 1941."
"TRANS. CERT. OF TITLE NO. 118886"
"A parcel of land (Lot No. 11, of the consolidation and subdivision plan Pcs-988, being a portion of the
consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record
No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No.
4 of the consolidation and subdivision plan; on the SE., by Lot No. 12 of the consolidation and
subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; on the NW., by Lot
No. 10 of the consolidation and subdivision plan. Beginning at a point marked "1" on plan, being S. 79
deg. 07’W., 4264.00 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 64 deg. 59’W., 29.99 m. to point "2";
thence N. 25 deg. 00’W., 12.00 m. to point "3";
thence N. 64 deg. 59’E., 29.99 m. to point "4";
thence S. 26 deg. 00’E., 12.00 m. to the point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points
referred to are indicated on the plan and on the ground, are marked by P.L.S. Conc. Mons. 15 x 60
cm.; bearings true; declination 0 deg. 50’E.; date of the original survey, April 8 to July 15, 1920, and that
of the consolidation and subdivision survey, April 24 to 26, 1941."
"A parcel of land (Lot No. 13 of the consolidation and subdivision plan Pcs-988, being a portion of the
consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record
No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No.
4 of the consolidation and subdivision plan; on the SE., by Lot No. 14, of the consolidation; and
subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; and on the NW.,
by Lot No. 12, of the consolidation and subdivision plan. Beginning at the point marked "1" on plan,
being S.78 deg. 48’W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
Page 85 of 166
Bus. Org. I Cases – Page 3 Syllabus

thence S. 64 deg. 58’W., 30.00 m. to point "2";

thence N. 25 deg. 00’W., 12.00 m. to point "3";
thence N. 64 deg. 59’E., 29.99 m. to point "4";
thence S.25 deg. 00’E., 12.00 m. to point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360, more or less. All points
referred to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.;
bearings true; declination 0 deg. 50’E., date of the original survey, April 8 to July 15, 1920, and that of
the consolidation and subdivision survey, April 24 to 26, 1941."
"A parcel of land (Lot No. 14, of the consolidation and subdivision plan Pcs-988, being a portion of the
consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record
No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No.
4 of the consolidation and subdivision plan; on the SE., by Lot No. 15, of the consolidation and
subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; and on the NW.,
by Lot No. 13 of the consolidation and subdivision plan. Beginning at the point marked "1" on plan,
being S.78 deg. 48’W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;
thence S. 25 deg. 00’E., 12.00 m. to point "2";
thence S. 65 deg. 00’W., 30.00 m. to point "3";
thence S. 65 deg. 00’W., 12.00 m. to point "4";
thence N.64 deg. 58’E., 30.00 m. to the point of
beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points
referred to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.;
bearings true; declination 0 deg. 50’E., date of the original survey, April 8 to July 15, 1920, and that of
the consolidation and subdivision survey, April 24 to 26, 1941."
That for and in consideration of the sum of FORTY THREE THOUSAND PESOS (P43,000.00) PHILIPPINE
CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident
of the Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is acknowledged to my entire
satisfaction, I do hereby CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said Natividad P.
Nazareno, her heirs, administrators and assigns, all my title, rights, interests and participations to the
abovedescribed parcels of land with the improvements thereon, with the exception of LOT NO. 11
COVERED BY T.C.T. NO. 118886, free of any and all liens and encumbrances; and
That for and in consideration of the sum of FOUR THOUSAND EIGHT HUNDRED PESOS (P4,800.00)
PHILIPPINE CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single, of legal age
and a resident of the Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is acknowledged
to my entire satisfaction, I do hereby CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said
Natividad P. Nazareno, her heirs, administrators and assigns, all my title, rights, interests and
participations in and to Lot No. 11 covered by T.C.T. No. 118886 above-described, free of any and all
liens and encumbrances, with the understanding that the title to be issued in relation hereto shall be
separate and distinct from the title to be issued in connection with Lots Nos. 13 and 14, although
covered by the same title.
IN WITNESS WHEREOF, I have hereunto signed this deed of absolute sale in the City of Manila,
Philippines, this 29th day of January, 1970.2
By virtue of this deed, transfer certificates of title were issued to Natividad, to wit: TCT No. 162738 (Lot
3-B),3 TCT No. 162739 (Lot 3),4 TCT No. 162735 (Lot 10),5 TCT No. 162736 (Lot 11),6 and TCT No. 162737 (Lots
13 and 14),7 all of the Register of Deeds of Quezon City.
Among the lots covered by the above Deed of Sale is Lot 3-B which is registered under TCT No. 140946.
This lot had been occupied by Romeo, his wife Eliza, and by Maximino, Jr. since 1969. Unknown to
Romeo, Natividad sold Lot 3-B on July 31, 1982 to Maximino, Jr.,8 for which reason the latter was issued
TCT No. 293701 by the Register of Deeds of Quezon City.9
When Romeo found out about the sale to Maximino, Jr., he and his wife Eliza locked Maximino, Jr. out
of the house. On August 4, 1983, Maximino, Jr. brought an action for recovery of possession and
damages with prayer for writs of preliminary injunction and mandatory injunction with the Regional Trial
Court of Quezon City. On December 12, 1986, the trial court ruled in favor of Maximino, Jr. In CA-G.R.
CV No. 12932, the Court of Appeals affirmed the decision of the trial court.10
Page 86 of 166
Bus. Org. I Cases – Page 3 Syllabus

On June 15, 1988, Romeo in turn filed, on behalf of the estate of Maximino, Sr., the present case for
annulment of sale with damages against Natividad and Maximino, Jr. The case was filed in the
Regional Trial Court of Quezon City, where it was docketed as Civil Case No. 88-58.11 Romeo sought
the declaration of nullity of the sale made on January 29, 1970 to Natividad and that made on July 31,
1982 to Maximino, Jr. on the ground that both sales were void for lack of consideration.
On March 1, 1990, Natividad and Maximino, Jr. filed a third-party complaint against the spouses Romeo
and Eliza.12They alleged that Lot 3, which was included in the Deed of Absolute Sale of January 29,
1970 to Natividad, had been surreptitiously appropriated by Romeo by securing for himself a new title
(TCT No. 277968) in his name.13They alleged that Lot 3 is being leased by the spouses Romeo and Eliza
to third persons. They therefore sought the annulment of the transfer to Romeo and the cancellation
of his title, the eviction of Romeo and his wife Eliza and all persons claiming rights from Lot 3, and the
payment of damages.
The issues having been joined, the case was set for trial. Romeo presented evidence to show that
Maximino and Aurea Nazareno never intended to sell the six lots to Natividad and that Natividad was
only to hold the said lots in trust for her siblings. He presented the Deed of Partition and Distribution
dated June 28, 1962 executed by Maximino Sr. and Aurea and duly signed by all of their children,
except Jose, who was then abroad and was represented by their mother, Aurea. By virtue of this deed,
the nine lots subject of this Deed of Partition were assigned by raffle as follows:
1. Romeo - Lot 25-L (642 m2)
2. Natividad - Lots 23 (312 m2) and 24 (379 m2)
3. Maximino, Jr. - Lots 6 (338 m2) and 7 (338 m2)
4. Pacifico - Lots 13 (360 m2) and 14 (360 m2)
5. Jose - Lots 10 (360 m2) and 11 (360 m2)
Romeo received the title to Lot 25-L under his name,14 while Maximino, Jr. received Lots 6 and 7 through
a Deed of Sale dated August 16, 1966 for the amount of ₱9,500.00.15 Pacifico and Jose’s shares were
allegedly given to Natividad, who agreed to give Lots 10 and 11 to Jose, in the event the latter came
back from abroad. Natividad’s share, on the other hand, was sold to third persons 16 because she
allegedly did not like the location of the two lots. But, Romeo said, the money realized from the sale
was given to Natividad.
Romeo also testified that Lot 3-B was bought for him by his father, while Lot 3 was sold to him for
₱7,000.00 by his parents on July 4, 1969.17 However, he admitted that a document was executed by his
parents transferring six properties in Quezon City, i.e., Lots 3, 3-B, 10, 11, 13, and 14, to Natividad.
Romeo further testified that, although the deeds of sale executed by his parents in their favor stated
that the sale was for a consideration, they never really paid any amount for the supposed sale. The
transfer was made in this manner in order to avoid the payment of inheritance taxes.18 Romeo denied
stealing Lot 3 from his sister but instead claimed that the title to said lot was given to him by Natividad
in 1981 after their father died.
Natividad and Maximino, Jr. claimed that the Deed of Partition and Distribution executed in 1962 was
not really carried out. Instead, in December of 1969, their parents offered to sell to them the six lots in
Quezon City, i.e., Lots 3, 3-B, 10, 11, 13 and 14. However, it was only Natividad who bought the six
properties because she was the only one financially able to do so. Natividad said she sold Lots 13 and
14 to Ros-Alva Marketing Corp.19 and Lot 3-B to Maximino, Jr. for ₱175,000.00.20 Natividad admitted that
Romeo and the latter’s wife were occupying Lot 3-B at that time and that she did not tell the latter
about the sale she had made to Maximino, Jr.
Natividad said that she had the title to Lot 3 but it somehow got lost. She could not get an original copy
of the said title because the records of the Registrar of Deeds had been destroyed by fire. She claimed
she was surprised to learn that Romeo was able to obtain a title to Lot 3 in his name.
Natividad insisted that she paid the amount stated in the Deed of Absolute Sale dated January 29,
1970. She alleged that their parents had sold these properties to their children instead of merely giving
the same to them in order to impose on them the value of hardwork.
Natividad accused Romeo of filing this case to harass her after Romeo lost in the action for recovery
of possession (Civil Case No. Q-39018) which had been brought against him by Maximino, Jr. It appears

Page 87 of 166
Bus. Org. I Cases – Page 3 Syllabus

that before the case filed by Romeo could be decided, the Court of Appeals rendered a decision in
CA-GR CV No. 12932 affirming the trial court’s decision in favor of Maximino, Jr.
On August 10, 1992, the trial court rendered a decision, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered declaring the nullity of the Deed of Sale dated January 29,
1970. Except as to Lots 3, 3-B, 13 and 14 which had passed on to third persons, the defendant Natividad
shall hold the rest in trust for Jose Nazareno to whom the same had been adjudicated. The Register of
Deeds of Quezon City is directed to annotate this judgment on Transfer Certificate of Titles Nos. 162735
and 162736 as a lien in the titles of Natividad P. Nazareno.
The defendants’ counterclaim is dismissed. Likewise, the third-party complaint is dismissed.
The defendants are hereby directed to pay to the plaintiff jointly and severally the sum of ₱30,000 as
and for attorney’s fees. Likewise, the third-party plaintiff is directed to pay the third-party defendant’s
attorney’s fees of ₱20,000.
All other claims by one party against the other are dismissed.
SO ORDERED.21
Natividad and Maximino, Jr. filed a motion for reconsideration. As a result, on October 14, 1992 the trial
court modified its decision as follows:
WHEREFORE, the plaintiff’s Partial Motion for Reconsideration is hereby granted. The judgment dated
August 10, 1992 is hereby amended, such that the first paragraph of its dispositive portion is
correspondingly modified to read as follows:
"WHEREFORE, judgment is hereby rendered declaring the nullity of the Deeds of Sale dated January
29, 1970 and July 31, 1982.
"Except as to Lots 3, 13 and 14 which had passed on to third person, the defendant Natividad shall
hold the rest OF THE PROPERTIES COVERED BY THE DEED OF SALE DATED JANUARY 29, 1970 (LOTS 10 and
11) in trust for Jose Nazareno to whom the same had been adjudicated.
"The Register of Deeds of Quezon City is directed to annotate this judgment on Transfer Certificates of
Title No. 162735 and 162736 as a lien on the titles of Natividad P. Nazareno.
"LIKEWISE, THE SAID REGISTER OF DEEDS IS DIRECTED TO CANCEL TCT NO. 293701 (formerly 162705) OVER
LOT 3-B AND RESTORE TCT NO. 140946 IN THE NAME OF MAXIMINO NAZARENO SR. AND AUREA
POBLETE."22
On appeal to the Court of Appeals, the decision of the trial court was modified in the sense that titles
to Lot 3 (in the name of Romeo Nazareno) and Lot 3-B (in the name of Maximino Nazareno, Jr.), as well
as to Lots 10 and 11 were cancelled and ordered restored to the estate of Maximino Nazareno, Sr. The
dispositive portion of the decision dated May 29, 1998 reads:
WHEREFORE, the appeal is GRANTED. The decision and the order in question are modified as follows:
1. The Deed of Absolute Sale dated 29 January 1970 and the Deed of Absolute Sale dated 31
July 1982 are hereby declared null and void;
2. Except as to Lots 13 and 14 ownership of which has passed on to third persons, it is hereby
declared that Lots 3, 3-B, 10 and 11 shall form part of the estate of the deceased Maximino
Nazareno, Sr.;
3. The Register of Deeds of Quezon City is hereby ordered to restore TCT No. 140946 (covering
Lot 3-B), TCT No. 132019 (covering Lot 3), TCT No. 118885 (covering Lot 10), and TCT No. 118886
(covering Lot 11).23
Petitioners filed a motion for reconsideration but it was denied in a resolution dated May 27, 1999.
Hence this petition.
Petitioners raise the following issues:
1. WHETHER OR NOT THE UNCORROBORATED TESTIMONY OF PRIVATE RESPONDENT ROMEO P.
NAZARENO CAN DESTROY THE FULL FAITH AND CREDIT ACCORDED TO NOTARIZED DOCUMENTS
LIKE THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) EXECUTED BY THE DECEASED
SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE IN FAVOR OF PETITIONER NATIVIDAD
P. NAZARENO.
2. WHETHER OR NOT THE RESPONDENT COURT GROSSLY MISAPPRECIATED THE FACTS OF THE CASE
WITH RESPECT TO THE VALIDITY OF THE SAID DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970
(EXH. 1) IN THE LIGHT OF THE FOLLOWING:
Page 88 of 166
Bus. Org. I Cases – Page 3 Syllabus

A) THE DOCUMENTARY EVIDENCE, ALL OF WHICH ARE NOTARIZED, EXECUTED BY THE

DECEASED SPOUSES DURING THEIR LIFETIME INVOLVING SOME OF THEIR CONJUGAL
PROPERTIES.
B) THE EXECUTION OF AN EXTRA-JUDICIAL PARTITION WITH WAIVER OF RIGHTS AND
CONFIRMATION OF SALE DATED MAY 24, 1975 (EXH. 14A) OF THE ESTATE OF AUREA
POBLETE BY THE DECEASED MAXIMINO A. NAZARENO, SR. AND THEIR CHILDREN
INVOLVING THE ONLY REMAINING ESTATE OF AUREA POBLETE THUS IMPLIEDLY ADMITTING
THE VALIDITY OF PREVIOUS DISPOSITIONS MADE BY SAID DECEASED SPOUSES ON THEIR
CONJUGAL PROPERTIES, HALF OF WHICH WOULD HAVE BECOME A PART OF AUREA
POBLETE’S ESTATE UPON HER DEMISE.
C) THE ADMISSION MADE BY MAXIMINO A. NAZARENO, SR. IN HIS TESTIMONY IN OPEN
COURT ON AUGUST 13, 1980 DURING HIS LIFETIME IN CIVIL CASE NO. NC-712 (EXH. 81, 81B)
THAT HE HAD SOLD CERTAIN PROPERTIES IN FAVOR OF NATIVIDAD P. NAZARENO THUS
BELYING THE CLAIM OF ROMEO P. NAZARENO THAT THE DEED OF ABSOLUTE SALE DATED
JANUARY 29, 1970 IS ONE AMONG THE DOCUMENTS EXECUTED BY THE DECEASED SPOUSES
TO BE WITHOUT CONSIDERATION.
D) THE ADMISSIONS MADE BY ROMEO P. NAZARENO HIMSELF CONTAINED IN A FINAL
DECISION OF THE RESPONDENT COURT IN CA-GR CV NO. 12932 DATED AUGUST 31, 1992
AND AN ANNEX APPEARING IN HIS ANSWER TO THE COMPLAINT IN CIVIL CASE NO. Q-
39018 (EXH. 11-B) INVOLVING LOT 3B, ONE OF THE PROPERTIES IN QUESTION THAT THE SAID
PROPERTY IS OWNED BY PETITIONER NATIVIDAD P. NAZARENO.
E) THE PARTIAL PROJECT OF PARTITION DATED MAY 24, 1995 WHICH WAS APPROVED BY
THE INTESTATE COURT IN SP. PROC. NO. NC-28 AND EXECUTED IN ACCORDANCE WITH THE
LATTER COURT’S FINAL ORDER DATED JULY 9, 1991 DETERMINING WHICH WERE THE
REMAINING PROPERTIES OF THE ESTATE.
3. WHETHER OR NOT THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 EXECUTED BY THE
DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE DURING THEIR LIFETIME
INVOLVING THEIR CONJUGAL PROPERTIES IS AN INDIVISIBLE CONTRACT? AND IF SO WHETHER OR
NOT UPON THEIR DEATH, THE ESTATE OF MAXIMINO A. NAZARENO, SR. ALONE CAN SEEK THE
ANNULMENT OF SAID SALE?
4. WHETHER OR NOT THE SALE OF LOT 3 UNDER THE DEED OF ABSOLUTE SALE DATED JANUARY 29,
1970 IN FAVOR OF PETITIONER NATIVIDAD P. NAZARENO, IS VALID CONSIDERING THAT AS PER THE
ORDER OF THE LOWER COURT DATED NOVEMBER 21, 1990. ROMEO NAZARENO ADMITTED THAT
HE DID NOT PAY THE CONSIDERATION STATED IN THE DEED OF ABSOLUTE SALE DATED JULY 4, 1969
EXECUTED BY THE DECEASED SPOUSES IN HIS FAVOR (EXH. M-2).
5. WHETHER OR NOT AS A CONSEQUENCE, THE TITLE ISSUED IN THE NAME OF ROMEO P.
NAZARENO, TCT NO. 277968 (EXH. M) SHOULD BE CANCELLED AND DECLARED NULL AND VOID
AND A NEW ONE ISSUED IN FAVOR OF NATIVIDAD P. NAZARENO PURSUANT TO THE DEED OF
ABSOLUTE SALE EXECUTED IN THE LATTER’S FAVOR ON JANUARY 29, 1970 BY THE DECEASED
SPOUSES.24
We find the petition to be without merit.
First. Petitioners argue that the lone testimony of Romeo is insufficient to overcome the presumption of
validity accorded to a notarized document.
To begin with, the findings of fact of the Court of Appeals are conclusive on the parties and carry even
more weight when these coincide with the factual findings of the trial court. This Court will not weigh
the evidence all over again unless there is a showing that the findings of the lower court are totally
devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.25 The lone
testimony of a witness, if credible, is sufficient. In this case, the testimony of Romeo that no consideration
was ever paid for the sale of the six lots to Natividad was found to be credible both by the trial court
and by the Court of Appeals and it has not been successfully rebutted by petitioners. We, therefore,
have no reason to overturn the findings by the two courts giving credence to his testimony.
The fact that the deed of sale was notarized is not a guarantee of the validity of its contents. As held
in Suntay v. Court of Appeals:26
Page 89 of 166
Bus. Org. I Cases – Page 3 Syllabus

Though the notarization of the deed of sale in question vests in its favor the presumption of regularity,
it is not the intention nor the function of the notary public to validate and make binding an instrument
never, in the first place, intended to have any binding legal effect upon the parties thereto. The
intention of the parties still and always is the primary consideration in determining the true nature of a
contract.
Second. Petitioners make capital of the fact that in C.A.-G.R. CV No. 12932, which was declared final
by this Court in G.R. No. 107684, the Court of Appeals upheld the right of Maximino, Jr. to recover
possession of Lot 3-B. In that case, the Court of Appeals held:
As shown in the preceding disquisition, Natividad P. Nazareno acquired the property in dispute by
purchase in 1970. She was issued Transfer Certificate of Title No. 162738 of the Registry of Deeds of
Quezon City. When her parents died, her mother Aurea Poblete-Nazareno in 1970 and her father
Maximino A. Nazareno, Sr. in 1980, Natividad P. Nazareno had long been the exclusive owner of the
property in question. There was no way therefore that the aforesaid property could belong to the
estate of the spouses Maximino Nazareno, Sr. and Aurea Poblete. The mere fact that Romeo P.
Nazareno included the same property in an inventory of the properties of the deceased Maximino A.
Nazareno, Sr. will not adversely affect the ownership of the said realty. Appellant Romeo P. Nazareno’s
suspicion that his parents had entrusted all their assets under the care and in the name of Natividad P.
Nazareno, their eldest living sister who was still single, to be divided upon their demise to all the
compulsory heirs, has not progressed beyond mere speculation. His barefaced allegation on the point
not only is without any corroboration but is even belied by documentary evidence. The deed of
absolute sale (Exhibit "B"), being a public document (Rule 132, Secs. 19 and 23, Revised Rules on
Evidence), is entitled to great weight; to contradict the same, there must be evidence that is clear,
convincing and more than merely preponderant (Yturralde vs. Aganon, 28 SCRA 407; Favor vs. Court
of Appeals, 194 SCRA 308). Defendants-appellants’ own conduct disproves their claim of co-ownership
over the property in question. Being themselves the owner of a ten-unit apartment building along
Stanford St., Cubao Quezon City, defendants-appellants, in a letter of demand to vacate addressed
to their tenants (Exhibits "P", "P-1" and "P-2") in said apartment, admitted that the house and lot located
at No. 979 Aurora Blvd., Quezon City where they were residing did not belong to them. Also, when they
applied for a permit to repair the subject property in 1977, they stated that the property belonged to
and was registered in the name of Natividad P. Nazareno. Among the documents submitted to support
their application for a building permit was a copy of TCT No. 162738 of the Registry of Deeds of Quezon
City in the name of Natividad Nazareno (Exhibit "O" and submarkings; tsn March 15, 1985, pp. 4-5).27
To be sure, that case was for recovery of possession based on ownership of Lot 3-B. The parties in that
case were Maximino, Jr., as plaintiff, and the spouses Romeo and Eliza, as defendants. On the other
hand, the parties in the present case for annulment of sale are the estate of Maximino, Sr., as plaintiff,
and Natividad and Maximino, Jr., as defendants. Romeo and Eliza were named third-party defendants
after a third-party complaint was filed by Natividad and Maximino, Jr. As already stated, however, this
third-party complaint concerned Lot 3, and not Lot 3-B.
The estate of a deceased person is a juridical entity that has a personality of its own.28 Though Romeo
represented at one time the estate of Maximino, Sr., the latter has a separate and distinct personality
from the former. Hence, the judgment in CA-GR CV No. 12932 regarding the ownership of Maximino,
Jr. over Lot 3-B binds Romeo and Eliza only, and not the estate of Maximino, Sr., which also has a right
to recover properties which were wrongfully disposed.
Furthermore, Natividad’s title was clearly not an issue in the first case. In other words, the title to the
other five lots subject of the present deed of sale was not in issue in that case. If the first case resolved
anything, it was the ownership of Maximino, Jr. over Lot 3-B alone.
Third. Petitioners allege that, as shown by several deeds of sale executed by Maximino, Sr. and Aurea
during their lifetime, the intention to dispose of their real properties is clear. Consequently, they argue
that the Deed of Sale of January 29, 1970 should also be deemed valid.
This is a non-sequitur. The fact that other properties had allegedly been sold by the spouses Maximino,
Sr. and Aurea does not necessarily show that the Deed of Sale made on January 29, 1970 is valid.
Romeo does not dispute that their parents had executed deeds of sale. The question, however, is
whether these sales were made for a consideration. The trial court and the Court of Appeals found
Page 90 of 166
Bus. Org. I Cases – Page 3 Syllabus

that the Nazareno spouses transferred their properties to their children by fictitious sales in order to
avoid the payment of inheritance taxes.
Indeed, it was found both by the trial court and by the Court of Appeals that Natividad had no means
to pay for the six lots subject of the Deed of Sale.
All these convince the Court that Natividad had no means to pay for all the lots she purportedly
purchased from her parents. What is more, Romeo’s admission that he did not pay for the transfer to
him of lots 3 and 25-L despite the considerations stated in the deed of sale is a declaration against
interest and must ring with resounding truth. The question is, why should Natividad be treated any
differently, i.e., with consideration for the sale to her, when she is admittedly the closest to her parents
and the one staying with them and managing their affairs? It just seems without reason. Anyway, the
Court is convinced that the questioned Deed of Sale dated January 29, 1970 (Exh. "A" or "1") is simulated
for lack of consideration, and therefore ineffective and void.29
In affirming this ruling, the Court of Appeals said:
Facts and circumstances indicate badges of a simulated sale which make the Deed of Absolute Sale
dated 29 January 1970 void and of no effect. In the case of Suntay vs. Court of Appeals (251 SCRA 430
[1995]), the Supreme Court held that badges of simulation make a deed of sale null and void since
parties thereto enter into a transaction to which they did not intend to be legally bound.
It appears that it was the practice in the Nazareno family to make simulated transfers of ownership of
real properties to their children in order to avoid the payment of inheritance taxes. Per the testimony
of Romeo, he acquired Lot 25-L from his parents through a fictitious or simulated sale wherein no
consideration was paid by him. He even truthfully admitted that the sale of Lot 3 to him on 04 July 1969
(Deed of Absolute Sale, Records, Vol. II, p. 453) likewise had no consideration. This document was
signed by the spouses Max, Sr. and Aurea as vendors while defendant-appellant Natividad signed as
witness.30
Fourth. Petitioners argue further:
The Deed of Absolute Sale dated January 29, 1970 is an indivisible contract founded on an indivisible
obligation. As such, it being indivisible, it can not be annulled by only one of them. And since this suit
was filed only by the estate of Maximino A. Nazareno, Sr. without including the estate of Aurea Poblete,
the present suit must fail. The estate of Maximino A. Nazareno, Sr. can not cause its annulment while its
validity is sustained by the estate of Aurea Poblete.31
An obligation is indivisible when it cannot be validly performed in parts, whatever may be the nature
of the thing which is the object thereof. The indivisibility refers to the prestation and not to the object
thereof.32 In the present case, the Deed of Sale of January 29, 1970 supposedly conveyed the six lots
to Natividad. The obligation is clearly indivisible because the performance of the contract cannot be
done in parts, otherwise the value of what is transferred is diminished. Petitioners are therefore mistaken
in basing the indivisibility of a contract on the number of obligors.
In any case, if petitioners’ only point is that the estate of Maximino, Sr. alone cannot contest the validity
of the Deed of Sale because the estate of Aurea has not yet been settled, the argument would
nonetheless be without merit. The validity of the contract can be questioned by anyone affected by
it.33 A void contract is inexistent from the beginning. Hence, even if the estate of Maximino, Sr. alone
contests the validity of the sale, the outcome of the suit will bind the estate of Aurea as if no sale took
place at all.
Fifth. As to the third-party complaint concerning Lot 3, we find that this has been passed upon by the
trial court and the Court of Appeals. As Romeo admitted, no consideration was paid by him to his
parents for the Deed of Sale. Therefore, the sale was void for having been simulated. Natividad never
acquired ownership over the property because the Deed of Sale in her favor is also void for being
without consideration and title to Lot 3 cannot be issued in her name.
Nonetheless, it cannot be denied that Maximino, Sr. intended to give the six Quezon City lots to
Natividad. As Romeo testified, their parents executed the Deed of Sale in favor of Natividad because
the latter was the only "female and the only unmarried member of the family."34 She was thus entrusted
with the real properties in behalf of her siblings. As she herself admitted, she intended to convey Lots
10 and 11 to Jose in the event the latter returned from abroad. There was thus an implied trust
constituted in her favor.1âwphi1 Art. 1449 of the Civil Code states:
Page 91 of 166
Bus. Org. I Cases – Page 3 Syllabus

There is also an implied trust when a donation is made to a person but it appears that although the
legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only
a part thereof.
There being an implied trust, the lots in question are therefore subject to collation in accordance with
Art. 1061 which states:
Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate
any property or right which he may have received from the decedent, during the lifetime of the latter,
by way of donation, or any other gratuitous title, in order that it may be computed in the determination
of the legitime of each heir, and in the account of the partition.
As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva Marketing, Corp. on April 20, 197935 will
have to be upheld for Ros-Alva Marketing is an innocent purchaser for value which relied on the title
of Natividad. The rule is settled that "every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind
the certificate to determine the condition of the property."36
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

Page 92 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 47354 March 21, 1989
HORACIO G. ADAZA and FELICIDAD MARUNDAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and VIOLETA G. ADAZA, assisted by her husband LINO
AMOR, respondents.
Nitorreda Law 0ffice for petitioners.
Pacatang & Pacatang Law Offices for private respondents.

FELICIANO, J.:

In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6) children: petitioner
Horacio, Homero, Demosthenes, respondent Violeta, Teresita and Victor, Jr.
The head of the family, Victor Adaza, Sr., died in 1956, while the wife died in 1971. During his lifetime,
Victor Adaza, Sr. executed a Deed of Donation dated 10 June 1953, covering the parcel of land
subject matter of this case, with an area of 13.3618 hectares, located at Sinonok, Dapitan City,
Zamboanga del Norte, in favor of respondent Violeta, then still single. The donation was accepted in
the same instrument, which both donor and donee acknowledged before Notary Public ex
officio Milagros C. Galeposo. The land donated was then part of the public domain, being disposable
public land, and had been held and cultivated by Victor Adaza, Sr. for many years. Violeta, with the
aid of her brother Horacio, filed a homestead application covering the land involved. This application
was in due course approved and a free patent issued to her on 3 October 1956. As a result thereof, on
26 January 1960, an Original Certificate of Title No. P-11111 was issued in her name. She declared the
property in her name under Tax Declaration No. 9808.
The record does not show when Violeta Adaza got married. But in 1962, Violeta and her husband Lino
Amor, obtained a loan from the Philippine National Bank which they secured with a mortgage on the
land covered by OCT No. P-11111. The land was, and continued to be administered by Violeta's
brother, Homero Adaza.
Petitioner Horacio Adaza was appointed Provincial Fiscal of Davao Oriental in 1967. He accordingly
moved from Dapitan City to Davao Oriental.
Four (4) years later, petitioner Horacio came back to Dapitan City for the town fiesta. He invited
respondent Violeta and the other brothers and sister for a family gathering in his house. There, Horacio
asked Violeta to sign a Deed of Waiver which had been prepared in respect of the property in Sinonok
donated by their father Victor Adaza, Sr.. This Deed stated that the Sinonok property was owned in
common by Violeta and her brother Horacio G. Adaza, even though the certificate of title had been
issued in her name only. The Deed also provided for the waiver, transfer and conveyance by Violeta
in favor of Horacio of one-half (1/2) of the Sinonok property, together with all improvements existing in
that one-half (1/2) portion. Violeta signed this Deed of Waiver: the Deed was also signed by petitioner
Horacio and Homero Adaza as witnesses. The full text of this Deed of Waiver follows:
DEED OF WAIVER
KNOW ALL MEN BY THESE PRESENTS:
I, VIOLETA G. ADAZA, of legal age, married to Lino Amor, Filipino, with residence and
postal address at Dapitan City, am the absolute owner in fee simple of a parcel of land
situated in Dapitan City, known as Lot No. Psu-141743, with an area of 13.3618 hectares
more or less, covered by TRANSFER CERTIFICATE OF TITLE NO. T- 11111, (sic) of the Registry
of Property of Zamboanga del Norte, and declared for taxation purposes under Tax
Declaration No. 2926 (sic), with an assessed value of P4,340.00.
Whereas, aforesaid property is owned in common by me and my brother, HORACIO G.
ADAZA, although the certificate of title was issued only in my sole name;

Page 93 of 166
Bus. Org. I Cases – Page 3 Syllabus

NOW, THEREFORE, for and in consideration of the premises aforestated, I do hereby

WAIVE, TRANSFER, RELINQUISH AND CONVEY unto the said HORACIO G. ADAZA, of legal
age, married to Felicidad Marundan, Filipino, and a resident of Dapitan City, all my rights,
interest, participation and ownership over the ONE-HALF (1/2) PORTION of the aforesaid
property, together with all the improvements, found and existing over the said one-half.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 28th day of July, 1971, at
Dapitan City, Philippines.
(SGD.) VIOLETA G. ADAZA
Signed in my presence:
(SGD.) ILLEGIBLE (SGD.) ILLEGIBLE
Republic of the Philippines)
City of Dapitan ) S.S.
(SGD.) ILLEGIBLE
Before me, this 28th day of July, 1971, at Dapitan City, personally appeared VIOLETA G.
ADAZA, with Res. Certificate No. A2825141, issued at Dapitan City, Jan. 7,1971, known to
me and to me known to be the same person who executed the foregoing instrument
and she acknowledged to me that the same is her free and voluntary act and deed.
WITNESS MY HAND AND SEAL, on the date and at the place first above stated.
(SGD.) GODARDO AD. JACINTO
Notary Public
Until December 31, 1972
Doc. No. 138
Page No. 50
Book No. VI
Series of 1971, p. 6, Folder of Exhibits,
Exh. 4. 1
A few months later, or on 12 October 1971, respondent Violeta joined by her husband, Lino Amor, filed
a complaint (docketed as Civil Case No. 2213) for annulment of the Deed of Waiver and for damages,
against petitioner spouses Horacio and Felisa M. Adaza. In this Complaint, 2 Violeta and her husband
alleged, among other things: (1) that she was absolute owner of the land in question by virtue of the
unconditional donation executed by their father Victor Adaza, Sr.: (2) that she was registered owner
of the same land; (3) that she had signed the Deed of Waiver because of petitioner Horacio's fraud,
misrepresentation and undue influence; and (4) that because of the malicious acts and conduct of
petitioner Horacio, she and her husband were entitled to P5,000.00 as moral damages, P2,000.00 as
exemplary damages. P1,000.00 as attorney's fees and P500.00 as litigation expenses.
In their Answer, 3 petitioner Adaza spouses contended that petitioner Horacio and his sister respondent
Violeta were co-owners of the disputed land although the same had been registered under Violeta's
name alone, and that Violeta's ownership was subject to Horacio's rights as co-owner and to the
obligation to keep or use the property for the benefit of their parents while either of them was still alive.
Petitioners further contended that Violeta had executed the Deed of Waiver freely and voluntarily.
They also interposed a counterclaim for accounting of the value of his interest and of his share in the
income from the land and for reconveyance of half of the disputed land.
On 31 May 1974, the trial court rendered a Decision 4 declaring the Deed of Waiver as valid and
binding upon respondent Violeta. The Dispositive portion of this Decision read as follows:
IN VIEW OF FOREGOING CONSIDERATIONS, the Court is of the opinion and so holds that
the preponderance of evidence is in favor of the defendants and against that of
plaintiffs, wherefore, judgment is hereby rendered as follows:
1) Declaring the Deed of Waiver executed by the plaintiff (Violeta G. Adaza) in favor of
defendant (Horacio G. Adaza), valid for all legal purpose
2) Declaring the defendant, Horacio G. Adaza, the owner of one-half (1/2) undivided
portion of the parcel of land, including the improvements found thereon, covered by
Original Certificate of Title No. P-11111 (Exhibit 'N'), containing an area of 13.3618
hectares, assessed under Tax Declaration No. 9708 (Exhibit 'E') at P 3,000.00.
Page 94 of 166
Bus. Org. I Cases – Page 3 Syllabus

3) Ordering the plaintiffs to pay to the defendants the sum of P 10,500.00 corresponding
to one-half (1/2) share of the proceeds of the land in question, from January 1972 up to
the end of the year 1973 and the further sum of the price of copra every three (3) months,
until the possession of the one-half (1/2) undivided portion of the land, object of this case,
is delivered to the defendants.
Plaintiffs shall pay costs.
IT IS SO ORDERED.
Being unhappy with the trial court's decision, respondent Violeta and her husband appealed to the
Court of Appeals where their appeal was docketed as C.A.-G.R. No. 55929-R. In a Decision 5 dated 15
July 1977, the Court of Appeals reversed the decision of the trial court. The Court of Appeals agreed
with the finding of the trial court that the Deed of Waiver had been signed voluntarily, if reluctantly, by
Violeta. The appellate court, however, held that such Deed was without cause or consideration,
because the land had been, in the view of the appellate court, unconditionally donated to Violeta
alone. The Court of Appeals further held that the Deed of Waiver could not be regarded as a gratuitous
contract or a donation, said Deed being "congenitally bad" in form because it was not drawn
according to the requirements of Articles 749 and 1270 of the Civil Code. Petitioner's Motion for
Reconsideration was denied.
In the instant Petition for Review, petitioners insist once more that respondent Violeta was not the sole
owner of the disputed land but on the contrary held one-half (1/2) thereof in trust for petitioner Horacio
and that this fact of co-ownership was sufficient consideration to sustain the validity of the Deed of
Waiver.
The principal issue raised here thus relates to the ownership of the 13.3618 hectares of land covered by
OCT No. P-11111.
Since Violeta traced her title to and based her claim of ownership upon the Deed of Donation
executed by their father, it is necessary to examine this Deed of Donation. That Deed of Donation is
noteworthy for its inclusion of a paragraph that was crossed-out. The crossed-out provision reads:
That the donee shall share one-half (1/2) of the entire property with one of her brothers
or sisters after the death of the donor.
The next succeeding paragraph reads thus:
That the donee do [sic] hereby receive and accept this gift and donation made in her
favor by the donor, not subject to any condition, and do hereby express her appreciation
and gratefulness for the kindness and generosity of the donor. (Rollo, p. 50).
Petitioner Horacio testified before the trial court that it had been the intention of their father to donate
the parcel of land covered by the Deed of Donation to him and to Violeta, as shown by the above
provision which was ultimately crossed-out. Petitioner Horacio further testified that he himself had
crossed-out the aforementioned provision, with the consent of his father, to make it appear that the
land was being donated solely to Violeta, in order to facilitate the issuance of the title in her name. It
seems worthwhile recalling that at the time of execution of the donation by the father, the land was
still public disposable land and that the final issuance of title was still about seven (7) years down the
road. Clearly, in itself, the crossing out of the above-quoted paragraph was at least an ambiguous act.
The Court of Appeals took what appears to us as a too literal view of the matter, that is, that the effect
of the crossing-out of that paragraph was precisely to render the donation a simple and unconditional
one, such that respondent Violeta was not obliged to share the property with her brother Horacio. If,
indeed, in the view of the Court of Appeals, an informal agreement had been reached during the
lifetime of the parties' father that the subject property would become the property of Horacio and
Violeta in equal shares, such informal agreement, if reached before the execution of the Deed of
Donation, would have to be deemed superseded by the Deed of Donation itself. Upon the other hand,
the Court of Appeals' decision reasoned, if such informal agreement had been reached after
execution of the Deed of Donation on 10 June 1953, then that agreement, to be effective, must
assume the form of another deed of donation to be executed by Violeta in favor of Horacio and
covering a one-half (1/2) share in the property.
We take a different view. We believe that the critical question relates to the reality of the intent
ascribed to the donor and father of Horacio and Violeta to make the two (2) co-owners of the property
Page 95 of 166
Bus. Org. I Cases – Page 3 Syllabus

in question. Assuming such an intent is sufficiently shown, it must be respected and implemented
through whatever medium is available under our civil law.
We turn to the question of the intent of the donor. Petitioner Horacio claimed that that intent was
precisely to make both Violeta and himself co-owners of the land then being donated to Violeta. Put
a little differently, according to petitioner Horacio, though respondent Violeta alone was to be the
registered owner, she was to share the land donated by the father with Horacio on an equal sharing
basis. We think this intent is evidenced, firstly, by the Deed of Waiver executed by Violeta and quoted
in full earlier. The Deed of Waiver is important because there Violeta acknowledged that she owned
the land in common with her brother Horacio although the certificate of title bore only her name. As
noted earlier, respondent Violeta strove mightily to convince both the trial court and the Court of
Appeals that she had signed the Deed of Waiver by reason of fraud, misrepresentation and undue
influence exercised upon her by her brother Horacio. However, both the trial court and the Court of
Appeals reached the conclusion that Violeta had in fact voluntarily signed the Deed of Waiver, even
though she had done so with reluctance. The Deed of Waiver had been signed by Violeta in the
presence of Horacio and of her other brothers Homero Adaza and Victor Adaza, Jr. and her sister
Teresita Adaza. 6 An aunt, Pilar Adaza Soller, was also at that time present in the same house if not in
the same room at that precise moment. 7 The record is bereft of any indication of any evil intent or
malice on the part of Homero, Victor, Jr. and Teresita that would suggest deliberate collusion against
their sister Violeta. Equally important were the testimonies of Homero Adaza and Teresita Adaza, both
of whom explicitly stated that their father had executed the Deed of Donation with the understanding
that the same would be divided between Horacio and Violeta, that Violeta had signed the Deed of
Waiver freely and voluntarily, and that their brother Horacio had not threatened and forced her to do
so.8 The evidence also showed that on the same occasion of the signing of the Deed of Waiver by
respondent Violeta, another brother Victor Adaza, Jr. had also executed a similar Deed of Waiver
covering one-half (1/2) share of another piece of property at Tiwalos, Dapitan City (also titled in Victor,
Jr.'s name only) in favor of his sister Teresita Adaza. 9 The trial court pointed out that Victor Adaza, Sr.
and Rosario Gonzales left four (4) parcels of land which were divided among their six (6) children, as
follows:
l. Parcel I - located at Sinonok, Dapitan City Tax Declaration No. 9708 (Exhibit 'E') to be
divided between Horacio G. Adaza and Violeta G. Adaza, with an area of 13.3618
hectares (land in dispute).
2. Parcel II - located at Tiwalos, Dapitan City to be divided between Victor Adaza, Jr. and
Teresita G. Adaza (Exhibit '5') with an area of 9.6379 hectares.
3. Parcel III - located at Apao adjudicated to Demosthenes G. Adaza (already sold to
Dionisio Tan), with an area of seven (7) hectares.
4. Parcel IV - located at Sokon Dapitan City, allocated to Homero G. Adaza (already sold
to Tecson).10
Evidently, the parties' parents made it a practice, for reasons of their own, to have lands acquired by
them titled in the name of one or another of their children. Three (3) of the four (4) parcels acquired by
the parents were each placed in the name of one of the children. The land in Tiwalos Dapitan City,
intended for Victor, Jr. and Teresita, was placed in the name of Victor, Jr. The parcel located in Sokon
Dapitan City, intended for Homero was placed in the name of petitioner Horacio,11 while the parcel
in Sinonok, Dapitan City, was titled in Violeta's name.
The trial court also pointed to respondent Violeta's "[t]wo (2) letters to defendant [petitioner Horacio],
written to the latter in Davao City (Exhibits '1' and '2') acknowledging that the defendant is the co-
owner of one-half (1/2) share of said land, titled in her name. In said letters (Exhibits '1' and '2') plaintiff
(respondent Violeta) is requesting the defendant [petitioner Horacio] not to be in a hurry to divide the
lot in question (Exhibit '2-C') and get his one-half share in order [that she could] meet her obligations." 12
Finally, it may be noted that this is not a case of an older brother exploiting or cheating his younger
sister. On the contrary, the evidence showed that petitioner Horacio had taken care of his father and
mother and of his sister Violeta, that petitioner Horacio had been quite relaxed and unworried about
the title remaining in the name of his sister alone until Violeta had gotten married and her husband

Page 96 of 166
Bus. Org. I Cases – Page 3 Syllabus

began to show what petitioner thought was undue and indelicate interest in the land in
Sinonok. 13 THUS, the trial court found, among other things:
12. That from 1946 to 1968, the property in Sinonok covered by Original Certificate of Title
No. P-11111 (Exhibits 'D', 'D- l' to 'D-3') had been administered by Homero Adaza, and the
income from said land was spent for the expenses of their parents and the plaintiff
[Violeta] who was studying at that time.
13. That defendant waived his share from the [income from the] land in litigation in favor
of plaintiffs [Violeta and her husband] who were hard-up at that time for they had a child
who was suffering from a brain ailment; that it was also agreed upon that the share of
the defendant in said parcel will be used for the expenses of their mother (at that time
bedridden).
14. That defendant voluntarily relinguished his one-half (1/2) share of the income of the
land now in litigation in favor of plaintiff during the lifetime of their mother, Rosar io
Gonzales Adaza, subject to the condition that his (Horacio's) share of the proceeds shall
be spent for the expenses of their mother who was at that time bedridden .14
All the above circumstances lead this Court to the conclusion which Violeta had admitted in the Deed
of Waiver, that is, that the "property [here involved] is owned in common by [her] and [her] brother,
Horacio G. Adaza, although the certificate of title was issued only in [her] name." We believe and so
hold that this statement is an admission that she held half of the land in trust for petitioner Horacio. The
execution of the Deed of Donation of 10 June 1953 by respondent Violeta's father created an implied
trust in favor of Violeta's brother, petitioner Horacio Adaza, in respect of half of the property
donated.15 Article 1449 of the Civil Code is directly in point:
Art. 1449. There is also an implied trust when a donation is made to a person but it appears
that although the legal estate is transmitted to the donee, he nevertheless is either to
have no beneficial interest or only a part thereof.
Respondent Violeta and her husband also contended that the long delay and inaction on the part of
Horacio in taking any steps for reconveyance of the one-half (1/2) share claimed by him, indicates
lack of any color of right over the said one-half (1/2) share. It was also argued by the two (2) that
considering that twelve (12) years had passed since OCT No. P-11111 was issued and more than
nineteen (19) years since the Deed of Donation was executed, the counterclaim for partition and
reconveyance of Horacio's alleged one-half share was barred by laches, if not by prescription. Again,
we rule for the petitioners. In determining whether delay in seeking to enforce a right constitutes laches,
the existence of a confidential relationship based upon, for instance, consanguinity, is an important
circumstance for consideration. Delay in a situation where such circumstance exists, should not be as
strictly construed as where the parties are complete strangers vis-a-vis each other. The doctrine of
laches is not to be applied mechanically as between near relatives; 16 the fact that the parties in the
instant case are brother and sister tends to explain and excuse what would otherwise appears as long
delay. Moreover, continued recognition of the existence of the trust precludes the defense of
laches.17 The two (2) letters noted above sent by respondent Violeta to petitioner Horacio, one in 1969
and the other in 1971, show that Violeta as late as 1971 had recognized the trust imposed on her by
law. Conversely, Horacio's reliance upon his blood relationship with his sister and the trust and
confidence normally connoted in our culture by that relationship, should not be taken against him.
Petitioners' counter-claim in the trial court for partition and reconveyance cannot be regarded as
barred whether by laches or by prescription.
WHEREFORE, the Petition for Review is hereby GRANTED. The Decision dated 15 July 1977 of the Court
of Appeals in C.A.-G.R. No. 55929-R is SET ASIDE and the Decision dated 31 May 1974 of the then Court
of First Instance, Branch 2, Dipolog City in Civil Case No. 2213 is REINSTATED. No pronouncement as to
costs.
SO ORDERED.

Page 97 of 166
Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74449 August 20, 1993
IMELDA A. NAKPIL, petitioner
vs.

INTERMEDIATE APPELLATE COURT, CARLOS J. VALDES and CAVAL REALTY CORPORATION,

respondents.
Eliseo B. Alampay for petitioner.

Romero, Lagman, torres, Arrieta & Evangelista Law Offices and Bengozn, Zarraga, Narciso, Cudala,
Pecson, Azcuña & Bengzon Law Offices for respondents.
BELLOSILLO, J.:
PULONG MAULAP, a summer residence in Baguio City along historic Moran Street, is the subject of this
bitter and protracted legal battle for ownership between two families earlier associated for years in
close, kinship-like relations.
Pinggoy and Charlie were the best of friends, their closeness dating back to their high school days in
La Salle, and later, at the Philippine Law School. Treating each other more than just brothers, Charlie
easily became Pinggoy's confidant, and later, his lawyer, accountant, auditor, and on some
occasions, a business and financial consultant. Their relationship extended to their families. Pinggoy
became the godfather of Charlie's second son, while Charlie became the godfather of Pinggoy's
youngest.
But the close relationship had to end. On 8 July 1973, tragedy struck. While the two families were
vacationing at the beach house of the Valdeses in Bagac, Bataan, Pinggoy drowned. As expected,
Charlie went to the succor of Pinggoy's distressed wife Nena. He acted as the legal counsel and
accountant of Nena, who became the administratrix of her husband's estate.
However, since then things have changed. In fact, towards the end of 1978, the question arose as to
who between the Nakpils and the Valdeses should own Pulong Maulap.
On 21 March 1979, petitioner instituted an action for reconveyance with damages for breach of trust
before the Regional Trial Court of Baguio City against respondents Carlos "Charlie" Valdes and Caval
Realty Corporation. She alleged in her complaint that her husband Jose "Pinggoy" Nakpil prior to his
death had requested Valdes to purchase Pulong Maulap and thereafter register the sale and hold the
title thereto in trust for him (Pinggoy Nakpil), which respondent Valdes did. But after her husband's
death, Valdes concealed and suppressed all information regarding the trust agreement; instead, he
transferred Pulong Maulap in the name of respondent Caval Realty Corporation, which is 99.7% owned
by him, in exchange for 1,500 shares of stock.
Respondent Valdes, on the other hand, denied the existence of any trust agreement over Pulong
Maulap. He averred that he bought the summer residence for himself with his own funds and without
any participation of the late Nakpil; neither was it bought in trust for the latter. Valdes claims that he
only informed Pinggoy Nakpil of the acquisition of Pulong Maulap, and Pinggoy merely showed interest
in buying the property if he could have the money. Meanwhile, considering their avowed friendship,
he (Valdes) offered the usufruct of the property to the Nakpils who in turn agreed to shoulder its
maintenance expenses, real estate taxes, fire insurance premiums and servicing of interest on the
mortgage obligation constituted on the property.
From the records it appears that the Valdeses bought Pulong Maulap for P150,000.00 with respondent
Valdes giving a downpayment of P50,000.00 and assuming the vendors' mortgage obligation of
P100,000.00 with the Philippine National Bank (PNB), which he reduced to P75,000.00 by paying
P25,000.00. On 12 July 1965, a deed of sale was executed and Transfer Certificate of Title No. 10247
was thereafter issued in the name of Valdes. As agreed, in the early part of May 1965, even before the
execution of the deed of sale in favor of the Valdeses, the Nakpils moved in and stayed a Pulong
Maulap even until after Pinggoy's death.
Page 98 of 166
Bus. Org. I Cases – Page 3 Syllabus

Meanwhile, in order to facilitate the servicing of the mortgage obligation over Pulong Maulap, the loan
was transferred to the First United Bank (FUB) where Pinggoy Nakpil was then a vice-president. Valdes
borrowed P75,000.00 from FUB with which he paid PNB, and at the same time constituted in favor of
FUB a mortgage over Pulong Maulap. He also borrowed P65,000.00 from FUB to finance the repair and
renovation of Pulong Maulap.
Petitioner submits that respondent Valdes had recognized her late husband's ownership of Pulong
Maulap on the basis among others of the following documents: (a) "Exh. "H," a letter dated 28 March
1969 sent by Carlos J. Valdes & Co., an accounting firm owned by respondent Valdes, to the City
Treasurer of Baguio remitting to the latter, "[o]n behalf of (our) their clients, Mr. Jose Nakpil . . . the
following FUB checks for the payment of their 1969 real estate taxes" on Pulong Maulap; (b) Exh. "J,"
letter of Valdes to petitioner dated 24 August 1973 with the latter's handwritten conforme, date and
signature —
Dear Nena,
At the First United Bank, there are two loans in my name:
PN # ERB-893/73 for P65,000.00
PN # 644/72 for P75,000.00
In addition, there fell due on note #ERB 893/73, P3,976.00 representing interest as of July
22, 1973. On the loan of P75,000.00, there is an interest payable of, P750.00 a month.
Both of these loans, while in my name, were obtained by Pinggoy for his person. . . .
As we agreed, I will take over the total loan of P140,000.00 and pay all of the interests
due on the notes. It is likewise understood between us that you will continue occupying
the premises at Moran St., free of any encumbrance or payment, for 5 years starting
August 1, 1973.
It is likewise understood that real property taxes will be paid by us but maintenance
expenses shall be shouldered by you.
As I said, this letter is purely for the record.
Sincerely,
(SGD.) CHARLIE JV,
and, (c) Exh. "L," another letter of Valdes to petitioner dated 17 September 1974 —
Dear Comadre,
Our records show that the P75,000.00 initially advanced for the Moran property still
remains unpaid.
Under these circumstances, you could add to the present purchase price, P75,000.00 plus
interest therein at 12% for 5 years or:
Present Purchase Price: P255,056.64; Add: Unpaid account—P75,000.00; Interest for 5
years at 12% — P45,000.00 = P120,000.00; Total — P375,056.64.
Sincerely,
(SGD.) CHARLIE JV.
The records likewise show that on 13 February 1978, Valdes assigned Pulong Maulap to Caval Realty
Corporation, for which Transfer Certificate of Title No. T-28484 was issued on 23 March 1978. Later, after
petitioner allegedly received a P2,000,000.00— offer for Pulong Maulap from Pasay City Mayor Pablo
Cuneta, she wrote Valdes demanding a reconveyance to enable her to effect the sale and reimburse
the latter from the proceeds thereof for the advances he made. On 30 December 1978, Valdes
allegedly told petitioner that he could not execute the deed of conveyance because Pulong
Maulap was his and he had no intention of selling it.
On 7 July 1983, the Regional Trial Court 1 rendered a decision holding that a trust relationship existed 2
From the two letters of Valdes, Exhibits "J" and "L", it would appear that while the
downpayment of P50,000.00 and the further sum of P25,000.00 paid to PNB were paid but
of his personal funds, the same was considered by him as a loan to Nakpil; and while the
remaining P75,000.00, representing the balance of the mortgage indebtedness of the
Garcias to the PNB, was liquidated with the proceeds of a loan from FUB, the said loan,
although in the name of Valdes, was actually Nakpil's. In other words, the property was

Page 99 of 166
Bus. Org. I Cases – Page 3 Syllabus

acquired with funds partly loaned by Valdes to Nakpil and partly borrowed by Nakpil
from FUB albeit in Valdes' name.
To the mind of the Court, Exhibit's "J" and "L" are confirmatory of a pre-existing express
trust relationship between Valdes and the late Nakpil over the property in dispute,
conformity with the theory of the plaintiff, whereunder Valdes is the trustee and Nakpil,
the trustor and, at the same time, beneficiary. . . .
Assuming that Exhibits "J" and "L" could no stand as proof of an express trust, still the Court
believes that they could, as they indeed are, proof of an implied trust under Article 1450
of the Civil Code. . . .
Nevertheless, the trial court dismissed the petition for reconveyance on the ground that petitioner, by
conforming to Exh. "J" and acquiescing with Exh. "L," the very documents she presented to prove the
existence of a trust relationship, has waived her right over Pulong Maulap 3
. . . the Court is inclined to believe that the real agreement between the plaintiff and the
defendant Valdes under Exhibits "J" or "5" and "L" is that Valdes was to take over the two
FUB loans of the plaintiff's late husband in consideration of the plaintiff giving up her claim
to the disputed property, but with a right to continued occupancy for a period of five
years, free from any encumbrance or payment, except maintenance expenses, and
under an option yet in favor of the latter to purchase back the property within the
stipulated five years upon the payment of the said FUB loans, including interests, plus the
further sum of P75,000.00 initially advanced by Valdes on the property, also with interests,
or the total amount of P375,056.64.
Under the agreement, the Court is of the view that the plaintiff has waived whatever right
she may have over the property, and she would be in estoppel to revive or assert he
same unless she could prove that she has complied with the terms and the conditions
she agreed on. To hold otherwise would be tantamount to placing Valdes in a very
disadvantegious position. . . .
Furthermore, petitioner's letter dated 31 July 1978, the last day of the five-year period stipulated in Exh.
"J," sent to respondent Valdes and his wife, which states —
Dear Aida and Charlie,
I hope that when this letter reaches you it finds you and your family in the best of health
and happiness. My children and I are enjoying these too, thank god. We have also
managed to adapt contentedly through all the various pressures and strains we have
been subjected to since Pinggoy's death. It is amazing how we humans can endure so
much of these when met with acceptance and humility. Honestly, I cannot claim credit
to the latter virtue. Many times in the past, during my darkest moments, believe me,
humility was farthest from my thoughts.
With regard to our Moran property, a thought occured to me that if I may be able to
raise the amount necessary to pay back your advances for "Pulong Maulap" (this is the
name I gave the property, remember?), would you be willing to reconvey the property
to us as soon as I reimburse your advances?
Of course, as I said this is just an idea because at present, although we are in the final
stages of winding-up the estate, the results are still hazy and uncertain. I understand from
Linda Asuncion that so much will depend on the generosity of my in-laws; hence, so be
it!
Thank you again for the help you have given me and my children. For you and your
family, I offer to god all the "Purgatory" He gives me here on earth.
Sincerely,
(SGD.) Nena A.
Nakpil,
was construed by the trial court as "more an expression of her (petitioner's) resignation to her having
lost the property than a demand for reconveyance. 4
Not satisfied with the decision of the trial court, both parties appealed to respondent Intermediate
Appellate Court which on 17 December 1985 5 reversed the trial court and ruled that "[f]rom the
Page 100 of 166
Bus. Org. I Cases – Page 3 Syllabus

foregoing facts, it is quite evident there was no trust at all. . . . 6 On 21 April 1986, the motion of herein
petitioner to reconsider the decision of respondent appellate court was denied for "absolute lack of
merit."
Petitioner, in this petition for review, argues that respondent Intermediate Appelate Court did not only
err in holding that the documents she presented were insufficient to prove the existence of a trust
relationship but it also failed to rule that the trial court's interpretation of petitioner's conformity to Exh.
"J" as a waiver was, in essence, a pactum commissorium, and therefore null and void.
Respondent Valdes, on the other hand, maintains that no direct proof has been presented to sustain
that he was merely instructed by petitioner's late husband to purchase the disputed property, and
thereafter register and hold title thereto in trust for the latter; neither could there have been an implied
trust pursuant to Art. 1450 of the Civil Code 7since this provision refers only to instances where the
purchase price of the property sold is paid by the lender for the benefit of the borrower or buyer of the
property. Here, Valdes bought the disputed property using his own funds. The late Nakpil came into
the picture only after the sale to Valdes was consummated, and only as an offeror to buy the property,
not from the former owners, but from Valdes. Furthermore, Valdes contends the Exhs. "J" and "L" cannot
amount to pactum commissorium since the elements thereof, i.e., existence of a creditor-debtor
relationship; the obligation is secured by pledge or mortgage of certain properties over which the
debtor has title; and, ownership of the property passes to the creditor by mere default of debtor, are
not present.
Thus, the issues before us are: whether Art. 1450 of the Civil Code applies; and, if it so applies, whether
petitioner can still compel reconveyance of Pulong Maulap from respondent Valdes.
Implied trusts, which may either be resulting or constructive, are those which, without being express,
are deducible from the nature of the transaction as matters of intent, or which are superinduced on
the transaction by operation of law as matter of equity, independently of the particular intention of
the parties. 8 Article 1450, which petitioner invokes in the case at bar, is an illustration of an implied trust
which is constructive. 9
Article 1450 presupposes a situation where a person, using his own funds, purchases a certain piece of
land in behalf of another who, in the meantime, may not have sufficient funds to purchase the land.
The property is then transferred in the name of the trustee, the person who paid for the land, until he is
reimbursed by the beneficiary, the person for whom the land is purchased. It is only after the
beneficiary reimburses the trustee of the purchase price that the former can compel conveyance of
the purchased property from the latter.
From the evidence adduced, it may be concluded that respondent Valdes, using his own funds,
purchased Pulong Maulap in behalf of the late Nakpil. This is based on the letters to petitioner of Valdes
where he categorically admitted that "[b]oth of these loans, while in my (respondent Valdes) name,
were obtained by Pinggoy (the late Nakpil) for his person, 10 and that the "P75,000.00 initially advanced
for the Moran property still remains unpaid. 11
It is evident from these letters that while the balance of P75,000.00 on the mortgage of the vendors
with PNB was liquidated from the proceeds of a loan respondent obtained from FUB, such loan was
actually secured by the late Nakpil by merely using Valdes' name. Such is also the case with respect
to another FUB loan amounting to P65,000.00, the proceeds of which were used to finance the repair
and renovation of Pulong Maulap. And, while the downpayment of P50,000.00 and the partial
payment of P25,000.00 to PNB came from the personal funds of Valdes, he considered them as
advances to the late Nakpil. Otherwise, Valdes would never have deemed the amount as "unpaid" in
his letter to petitioner of 17 September 1974.
The letter of Valdes to the City Treasurer of Baguio made while remitting payment of real estate taxes
is also enlightening. It provided therein that the payment being tendered was "[o]n behalf" of the
Nakpil's, 12 which is an express recognition of the implied trust.
Consequently, respondent Valdes is estopped from claiming that he bought Pulong Maulap for
himself, and not merely in trust for the late Nakpil, as this contention is belied by the facts. Hence, we
rule that constructive trust under Art. 1450 of the New Civil Code existed between the parties.

Page 101 of 166

Bus. Org. I Cases – Page 3 Syllabus

However, petitioner cannot as yet redeem and compel conveyance of the property. For, Valdes must
still be reimbursed for the advances he made on the disputed property, such reimbursement being
a conditio sine qua non for compelling conveyance under Art. 1450.
The period within which to compel conveyance of Pulong Maulap is not imprescriptible. The rule is well-
settled that an action for reconveyance based on an implied or constructive trust prescibes in ten (10)
years. 13 But, in the case before us, petitioner could still compel conveyance of the disputed property
from respondent provided the former reimburses the latter for all his expenses. After all, Valdes never
repudiated the constructive trust during the lifetime of the late Jose Nakpil. On the contrary, he
expressly recognized it. The prescriptive period therefore did not begin to run until after he repudiated
the trust. 14 And such repudiation came when Valdes excluded Pulong Maulap from the list of
properties of the late Jose Nakpil submitted to the intestate court 15 in 1973. Even then, the present
action for conveyance was filed in 1979 or well within the ten-years period.
At first blush, it may seem that after the death of Jose Nakpil on 8 July 1973, petitioner ceded ownership
of Pulong Maulap to Valdes by way of dacion en pago 16as shown by her acquiescence to Exh. "J". A
careful examination of said Exh. "J" does not show however that petitioner, as administratrix of the
estate of the late Jose Nakpil, released or surrendered the latter's interest over Pulong Maulap to
respondent. Thus, there can be no dacion en pago to speak of since ownership of the thing delivered
was never transferred of the creditor. The trust relations between the parties was therefore never
extinguished. Besides, petitioner could not have waived the interest of her children with the late Jose
M. Nakpil who are her co-heirs to the Nakpil estate.
The fact that there was no transfer of ownership intended by the parties under their arrangement
during the five-year period to pay can further be bolstered by Exh. "I-2", 18an annex to the claim filed
against the estate proceedings of the late Jose Nakpil by his brother, Angel Nakpil, which was
prepared by Carlos J. Valdes & Co., the accounting firm of herein respondent. Exhibit "I-2", which is a
list of the application of the proceeds of various FUB loans contracted as of 31 December 1973 by the
late Jose Nakpil, whether in his name or that of others, contains the two (2) loans contracted in the
name of respondent. If ownership of Pulong Maulap was already transferred or ceded to Valdes, these
loans should not have been included in the list.
Indeed, as we view it, what the parties merely agreed to under the arrangement outlined in Exh. "J"
was that respondent Valdes would undertake to "take over the total loan of P140,000.00 and pay all
of the interests due on the notes" while the heirs of the late Jose Nakpil would continue to live in the
disputed property for five (5) years without any remuneration save for regular maintenance
expenses. 19This does not mean, however, that if at the end of the five-year period petitioner failed to
reimburse Valdes for his advances, which respondent computed to be P375,056.64 as of 31 July 1978
per his letter to petitioner of 17 September 1974, Valdes could already automatically assume ownership
of Pulong Maulap. Instead, the remedy of respondents Carlos J. Valdes and Caval Realty Corporation
was to proceed against the estate of the late Jose M. Nakpil and/or the property itself.
The arrangement entered into between the parties, whereby Pulong Maulap was to be "considered
sold to him (respondent) . . . 20 in case petitioner fails to reimburse Valdes, must then be construed as
tantamount to a pactum commissorium 21 which is expressly prohibited by Art. 2088 of the Civil
Code. 22For, there was to be automatic appropriation of the property by Valdes in the event of failure
of petitioner to pay the value of the advances. Thus, contrary to respondent's manifestations, all the
elements of a pactum commissorium were present: there was a creditor-debtor relationship between
the parties; the property was used as security for the loan; and, there was automatic appropriation by
respondent of Pulong Maulap in case of default of petitioner.
In fine, we conclude that there was a constructive trust between the parties under Art. 1450 of the New
Civil Code. Consequently, petitioner may redeem and compel conveyance of the disputed property
but only after reimbursing respondent the sum of P375,056.64, with legal interest from 31 July 1978, the
amount advanced by Valdes for the purchase of the Pulong Maulap.
WHEREFORE, the petition is GRANTED. The assailed decision of the then Intermediate Appellate Court
which affirmed that of the Regional Trial Court is SET ASIDE.
Private respondents Carlos J. Valdes and Caval Realty Corporation are ordered jointly and severally
to RECONVEYPulong Maulap to petitioner Imelda A. Nakpil and the heirs of the late Jose M. Nakpil
Page 102 of 166
Bus. Org. I Cases – Page 3 Syllabus

upon reimbursement by the latter of the advances of private respondent Carlos J. Valdes amounting
to P375.056.64, with legal interest from 31 July 1978 until fully paid.
Private respondents are further ordered to pay the costs of suit.
SO ORDERED.

Page 103 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 112260 June 30, 1997

JOVITA YAP ANCOG, and GREGORIO YAP, JR., petitioners,
vs.
COURT OF APPEALS, ROSARIO DIEZ, and CARIDAD YAP, respondents.

MENDOZA, J.:

This is a petition for review of the decision 1 of the Court of Appeals in CA-CR. No. CV-19650, affirming
the dismissal by the Regional Trial Court 2 of Bohol of an action for partition of a parcel of land which
petitioners had filed.
The land, with improvements thereon, was formerly the conjugal property of the spouses Gregorio Yap
and Rosario Diez. In 1946, Gregorio Yap died, leaving his wife, private respondent Rosario Diez, and
children, petitioners Jovita Yap Ancog and Gregorio Yap, Jr., and private respondent Caridad Yap as
his heirs.
In 1954 and again 1958, Rosario Diez obtained loans from the Bank of Calape, secured by a mortgage
on the disputed land, which was annotated on its Original Certificate of Title No. 622. When Rosario
Diez applied again for a loan to the bank, offering the land in question as security, the bank's lawyer,
Atty. Narciso de la Serna, suggested that she submit an extrajudicial settlement covering the disputed
land as a means of facilitating the approval of her application. The suggestion was accepted and on
April 4, 1961, Atty. de la Serna prepared an extrajudicial settlement, which the heirs, with the exception
of petitioner Gregorio Yap, Jr., then only 15 years old, signed. The document was notarized by Atty. de
la Serna on April 12, 1961. As a result, OCT No. 622 was cancelled and Transfer Certificate of Title No.
3447 (T-2411) was issued on April 13, 1961. On April 14, 1961, upon the execution of a real estate
mortgage on the land, the loan was approved by the bank.
Rosario Diez exercised rights of ownership over the land. In 1985, she brought an ejectment suit against
petitioner Jovita Yap Ancog's husband and son to evict them from the ground floor of the house built
on the land for failure to pay rent. Shortly thereafter, petitioner Jovita Ancog learned that private
respondent Rosario Diez had offered the land for sale.
Petitioner Ancog immediately informed her younger brother, petitioner Gregorio Yap, Jr., who was
living in Davao, of their mother's plan to sell the land. On June 6, 1985, they filed this action for partition
in the Regional Trial Court of Bohol where it was docketed as Civil Case No. 3094. As private respondent
Caridad Yap was unwilling to join in the action against their mother, Caridad was impleaded as a
defendant.
Petitioners alleged that the extrajudicial instrument was simulated and therefore void. They claimed
that in signing the instrument they did not really intend to convey their interests in the property to their
mother, but only to enable her to obtain a loan on the security of the land to cover expenses for
Caridad's school fees and for household repairs.
At the pre-trial conference, the parties stipulated:
1. That the parcel of land in question originally belonged to the conjugal partnership of
spouses Gregorio Yap and Rosario Diez Yap;
2. That Gregorio Yap, Jr. is the legitimate child of spouses Gregorio Yap and Rosario Diez
Yap;
3. That Gregorio Yap is not a party in the execution of the Extra Judicial Settlement of the
Estate dated April 4, 1961;
4. That all the encumbrances found in TCT No. (3447) T-2411 which is now marked as Exh.
C for the plaintiffs and Exh. 2 for the defendants as Entry No. 6719, 6720, 11561 and 11562
are admitted by the plaintiffs subject to the condition that the Extra Judicial Settlement

Page 104 of 166

Bus. Org. I Cases – Page 3 Syllabus

of Estate dated April 4, 1961, was made by the parties that the same was only for the
purpose of securing a loan with the Philippine National Bank. 3
The trial court rendered judgment dismissing petitioners' action. It dismissed petitioners' claim that the
extrajudicial settlement was simulated and held it was voluntarily signed by the parties. Observing that
even without the need of having title in her name Rosario Diez was able to obtain a loan using the land
in question as collateral, the court held that the extrajudicial settlement could not have been simulated
for the purpose of enabling her to obtain another loan. Petitioners failed to overcome the presumptive
validity of the extrajudicial settlement as a public instrument.
The court instead found that petitioner Ancog had waived her right to the land, as shown by the fact
that on February 28, 1975, 4 petitioner's husband, Ildefonso Ancog, leased the property from private
respondent Diez. Furthermore, when the spouses Ancog applied for a loan to the Development Bank
of the Philippines using the land in question as collateral, they accepted an appointment from Rosario
Diez as the latter's attorney-in-fact. 5
The court also found that the action for partition had already prescribed. The registration of the land
under private respondent Rosario Diez's name amounted to a repudiation of the co-ownership.
Therefore, petitioners had ten (10) years from April 13, 1961 within which to bring an action to recover
their share in the property. While it is true that petitioner Gregorio Yap, Jr. was a minor at the time the
extrajudicial settlement was executed, his claim, according to the court, was barred by laches.
On appeal, the Court of Appeals upheld the validity of the extrajudicial settlement and sustained the
trial court's dismissal of the case. The appellate court emphasized that the extrajudicial settlement
could not have been simulated in order to obtain a loan, as the new loan was merely "in addition to"
a previous one which private respondent Diez had been able to obtain even without an extrajudicial
settlement. Neither did petitioners adduce evidence to prove that an extrajudicial settlement was
indeed required in order to obtain the additional loan. The appellate court held that considering
petitioner Jovita Yap Ancog's educational attainment (Master of Arts and Bachelor of Laws), it was
improbable that she would sign the settlement if she did not mean it to be such. Hence, this petition.
Petitioners contend that the Court of Appeals erred:
I. IN SUSTAINING THE TRIAL COURT RULING THAT THE CONTESTED EXTRAJUDICIAL
SETTLEMENT (EXHIBIT "B") IS NOT A SIMULATED ONE;
II. IN BLOATING THE EDUCATIONAL BACKGROUND OF PETITIONER JOVITA YAP ANCOG
AND USING THE SAME AS ARGUMENT AGAINST HER CLAIM THAT SAID EXHIBIT "B" WAS
INDEED A SIMULATED DOCUMENT;
III. IN SUSTAINING THE TRIAL COURT'S RULING THAT PETITIONERS' ACTION FOR PARTITION HAS
PRESCRIBED;
IV. IN RULING THAT PETITIONER GREGORIO YAP, JR., ONE OF THE CO-OWNERS OF THE
LITIGATED PROPERTY, HAD LOST HIS RIGHTS TO THE PROPERTY THROUGH PRESCRIPTION OR
LACHES.
We hold that both the trial court and the Court of Appeals correctly acted in upholding the
extrajudicial settlement but erred in ruling that petitioner Gregorio Yap, Jr. was barred by laches from
recovering his share in the property in question.
To begin with, it is settled that the findings of facts of the Court of Appeals are conclusive upon the
parties and are not reviewable by this Court when they are an affirmation of the findings of the trial
court. 6 In this case, the trial court and the Court of Appeals found no evidence to show that the
extrajudicial settlement was required to enable private respondent Rosario Diez to obtain a loan from
the Bank of Calape. Petitioners merely claimed that the extrajudicial settlement was demanded by
the bank.
To the contrary, that the heirs (Jovita Yap Ancog and Caridad Yap) meant the extrajudicial settlement
to be fully effective is shown by the fact that Rosario Diez performed acts of dominion over the entire
Land, beginning with its registration, without any objection from them. Instead, petitioner Jovita Ancog
agreed to lease the land from her mother, private respondent Rosario Diez, and accepted from her a
special power of attorney to use the land in question as collateral for a loan she was applying from the
DBP. Indeed it was private respondent Diez who paid the loan of the Ancogs in order to secure the
release of the property from mortgage.
Page 105 of 166
Bus. Org. I Cases – Page 3 Syllabus

Petitioner Jovita Yap Ancog contends that she could not have waived her share in the land because
she is landless. For that matter, private respondent Caridad Yap is also landless, but she signed the
agreement. 7 She testified that she did so out of filial devotion to her mother.
Thus, what the record of this case reveals is the intention of Jovita Ancog and Caridad Yap to cede
their interest in the land to their mother Rosario Diez. It is immaterial that they had been initially
motivated by a desire to acquire a loan. Under Art. 1082 of the Civil Code, 8 every act which is intended
to put an end to indivision among co-heirs is deemed to be a partition even though it should purport
to be a sale, an exchange, or any other transaction.
We hold, however, that the Court of Appeals erred in ruling that the claim of petitioner Gregorio Yap,
Jr. was barred by laches. In accordance with Rule 74, §1 9 of the Rules of Court, as he did not take part
in the partition, he is not bound by the settlement. 10 It is uncontroverted that, at the time the
extrajudicial settlement was executed, Gregorio Yap, Jr. was a minor. For this reason, he was not
included or even informed of the partition.
Instead, the registration of the land in Rosario Diez's name created an implied trust in his favor by
analogy to Art. 1451 of the Civil Code, which provides:
When land passes by succession to any person and he causes the legal title to be put in
the name of another, a trust is established by implication of law for the benefit of the true
owner.
In the case of O'Laco v. Co Cho Chit, 11 Art. 1451 was held as creating a resulting trust, which is founded
on the presumed intention of the parties. As a general rule, it arises 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. 12 In this case, the records
disclose that the intention of the parties to the extrajudicial settlement was to establish a trust in favor
of petitioner Yap, Jr. to the extent of his share. Rosario Diez testified that she did not claim the entire
property, 13 while Atty. de la Serna added that the partition only involved the shares of the three
participants. 14
A cestui que trust may make a claim under a resulting trust within 10 years from the time the trust is
repudiated. 15Although the registration of the land in private respondent Diez's name operated as a
constructive notice of her claim of ownership, it cannot be taken as an act of repudiation adverse to
petitioner Gregorio Yap, Jr.'s claim, whose share in the property was precisely not included by the
parties in the partition. Indeed, it has not been shown whether he had been informed of her exclusive
claim over the entire property before 1985 when he was notified by petitioner Jovita Yap Ancog of
their mother's plan to sell the property. 16
This Court has ruled that for prescription to run in favor of the trustee, the trust must be repudiated by
unequivocal acts made known to the cestui que trust and proved by clear and conclusive evidence.
Furthermore, the rule that the prescriptive period should be counted from the date of issuance of the
Torrens certificate of title applies only to the remedy of reconveyance under the Property Registration
Decree. 17 Since the action brought by petitioner Yap to claim his share was brought shortly after he
was informed by Jovita Ancog of their mother's effort to sell the property, Gregorio Yap, Jr.'s claim
cannot be considered barred either by prescription or by laches.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that this case is
REMANDED to the Regional Trial Court for the determination of the claim of petitioner Gregorio Yap, Jr.
SO ORDERED.

Page 106 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171717 December 15, 2010
RAMON B. BRITO, SR., Petitioner,
vs.
SEVERINO D. DIANALA, VIOLETA DIANALA SALES, JOVITA DIANALA DEQUINTO, ROSITA DIANALA,
CONCHITA DIANALA and JOEL DEQUINTO, Respondents.
DECISION
PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to annul and set aside the Decision1 dated
January 12, 2005 and Resolution2 dated February 13, 2006 of the Court of Appeals (CA) in CA-G.R. CV
No. 70009. The assailed Decision set aside the Joint Orders 3 dated June 29, 2000 of the Regional Trial
Court (RTC) of Negros Occidental, Branch 60, Cadiz City, while the questioned Resolution denied
petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Subject of the present petition is a parcel of land located at Barrio Sicaba, Cadiz City, Negros
Occidental. The said tract of land is a portion of Lot No. 1536-B, formerly known as Lot No. 591-B,
originally owned by a certain Esteban Dichimo and his wife, Eufemia Dianala, both of whom are
already deceased.
On September 27, 1976, Margarita Dichimo, assisted by her husband, Ramon Brito, Sr., together with
Bienvenido Dichimo, Francisco Dichimo, Edito Dichimo, Maria Dichimo, Herminia Dichimo, assisted by
her husband, Angelino Mission, Leonora Dechimo, assisted by her husband, Igmedio Mission, Felicito,
and Merlinda Dechimo, assisted by her husband, Fausto Dolleno, filed a Complaint for Recovery of
Possession and Damages with the then Court of First Instance (now Regional Trial Court) of Negros
Occidental, against a certain Jose Maria Golez. The case was docketed as Civil Case No. 12887.
Petitioner's wife, Margarita, together with Bienvenido and Francisco, alleged that they are the heirs of
a certain Vicente Dichimo, while Edito, Maria, Herminia, Leonora, Felicito and Merlinda claimed to be
the heirs of one Eusebio Dichimo; that Vicente and Eusebio are the only heirs of Esteban and Eufemia;
that Esteban and Eufemia died intestate and upon their death Vicente and Eusebio, as compulsory
heirs, inherited Lot No. 1536-B; that, in turn, Vicente and Eusebio, and their respective spouses, also died
intestate leaving their pro indiviso shares of Lot No. 1536-B as part of the inheritance of the
complainants in Civil Case No. 12887.
On July 29, 1983, herein respondents filed an Answer-in-Intervention claiming that prior to his marriage
to Eufemia, Esteban was married to a certain Francisca Dumalagan; that Esteban and Francisca bore
five children, all of whom are already deceased; that herein respondents are the heirs of Esteban and
Francisca's children; that they are in open, actual, public and uninterrupted possession of a portion of
Lot No. 1536-B for more than 30 years; that their legal interests over the subject lot prevails over those
of petitioner and his co-heirs; that, in fact, petitioner and his co-heirs have already disposed of their
shares in the said property a long time ago.
On November 26, 1986, the trial court issued an Order dismissing without prejudice respondents'
Answer-in-Intervention for their failure to secure the services of a counsel despite ample opportunity
given them.
Civil Case No. 12887 then went to trial.
Subsequently, the parties in Civil Case No. 12887 agreed to enter into a Compromise Agreement
wherein Lot No. 1536-B was divided between Jose Maria Golez, on one hand, and the heirs of Vicente,
namely: Margarita, Bienvenido, and Francisco, on the other. It was stated in the said agreement that
the heirs of Eusebio had sold their share in the said lot to the mother of Golez. Thus, on September 9,
1998, the Regional Trial Court (RTC) of Bacolod City, Branch 45 rendered a decision approving the said
Compromise Agreement.

Page 107 of 166

Bus. Org. I Cases – Page 3 Syllabus

Thereafter, TCT No. T-12561 was issued by the Register of Deeds of Cadiz City in the name of Margarita,
Bienvenido and Francisco.
On January 18, 1999, herein petitioner and his co-heirs filed another Complaint for Recovery of
Possession and Damages, this time against herein respondents. The case, filed with the RTC of Cadiz
City, Branch 60, was docketed as Civil Case No. 548-C. Herein respondents, on the other hand, filed
with the same court, on August 18, 1999, a Complaint for Reconveyance and Damages against
petitioner and his co-heirs. The case was docketed as Civil Case No. 588-C.
The parties filed their respective Motions to Dismiss. Thereafter, the cases were consolidated.
On June 29, 2000, the RTC issued Joint Orders, disposing as follows:
WHEREFORE, in view of the foregoing, this Court hereby orders the following:
1. The Motion to Dismiss Civil Case No. 548-C is hereby GRANTED and Civil Case No. 548[-C] is
hereby ordered DISMISSED for violation of the rule on forum shopping;
2. The Motion to Dismiss Civil Case No. 588-C is likewise hereby GRANTED and the Complaint
dated August 13, 1999 is hereby DISMISSED for want of jurisdiction.
3. All counterclaims in both cases, Civil Case No. 548-C and 588-C are likewise ordered
DISMISSED.
SO ORDERED.4
The parties filed their respective motions for reconsideration, but both were denied by the RTC in an
Order dated October 5, 2000.
Herein respondents then appealed the case to the CA praying that the portion of the RTC Joint Orders
dismissing Civil Case No. 588-C be declared null and void and that the case be decided on the merits.
On January 12, 2005, the CA rendered judgment disposing as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the
appeal filed in this case and SETTING ASIDE, as we hereby set aside, the Joint Order[s] dated June 29,
2000 of the RTC of Cadiz City, Branch 60, dismissing Civil Case No. 588-C. Further, let the entire records
of this case be remanded to the court a quo for the trial and hearing on the merits of Civil Case No.
588-C.
SO ORDERED.5
Petitioner filed a Motion for Reconsideration, but the CA denied it in a Resolution dated February 13,
2006.
Hence, the instant petition with the following assigned errors:
I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LOWER COURT HAS THE
JURISDICTION TO HEAR THE RECONVEYANCE CASE OF THE HEREIN PLAINTIFFS-APPELLANTS
BEFORE THE REGIONAL TRIAL COURT OF NEGROS OCCIDENTAL, BRANCH 60, CADIZ CITY.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE AMENDMENT OF THE
DECISION IN CIVIL CASE NO. 12887 IS NOT TANTAMOUNT TO ANNULMENT OF THE SAID DECISION.
THE HONORABLE COURT IS WITHOUT JURISDICTION TO TAKE COGNIZANCE OF THIS CASE.6
In his first assigned error, petitioner claims that the CA erred in holding that respondents are not parties
in Civil Case No. 12887 contending that, since their Answer-in-Intervention was admitted, respondents
should be considered parties in the said case. Petitioner also avers that, being parties in Civil Case No.
12887, respondents are bound by the judgment rendered therein.
The Court is not persuaded.
It is true that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time
to file answer, for reconsideration of a default judgment, and to lift order of default with motion for
reconsideration, are considered voluntary submission to the jurisdiction of the court.7 In the present
case, when respondents filed their Answer-in-Intervention they submitted themselves to the jurisdiction
of the court and the court, in turn, acquired jurisdiction over their persons. Respondents, thus, became
parties to the action. Subsequently, however, respondents' Answer-in-Intervention was dismissed
without prejudice. From then on, they ceased to be parties in the case so much so that they did not
have the opportunity to present evidence to support their claims, much less participate in the
compromise agreement entered into by and between herein petitioner and his co-heirs on one hand
and the defendant in Civil Case No. 12887 on the other. Stated differently, when their Answer-in-
Intervention was dismissed, herein respondents lost their standing in court and, consequently, became
Page 108 of 166
Bus. Org. I Cases – Page 3 Syllabus

strangers to Civil Case No. 12887. It is basic that no man shall be affected by any proceeding to which
he is a stranger, and strangers to a case are not bound by judgment rendered by the court. 8 Thus,
being strangers to Civil Case No. 12887, respondents are not bound by the judgment rendered therein.
Neither does the Court concur with petitioner's argument that respondents are barred by prescription
for having filed their complaint for reconveyance only after more than eight years from the discovery
of the fraud allegedly committed by petitioner and his co-heirs, arguing that under the law an action
for reconveyance of real property resulting from fraud prescribes in four years, which period is reckoned
from the discovery of the fraud.
In their complaint for reconveyance and damages, respondents alleged that petitioner and his co-
heirs acquired the subject property by means of fraud.
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes, by
operation of law, a trustee of an implied trust for the benefit of the real owner of the property. An action
for reconveyance based on an implied trust prescribes in ten years, the reckoning point of which is the
date of registration of the deed or the date of issuance of the certificate of title over the property.9 Thus,
in Caro v. Court of Appeals,10 this Court held as follows:
x x x The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154
SCRA 396, illuminated what used to be a gray area on the prescriptive period for an action to reconvey
the title to real property and, corollarily, its point of reference:
x x x It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil
Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can
only be brought within the following periods after the right of action accrues:
xxx xxx xxx
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case
shall not be deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an
offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property
and the title thereto in favor of the true owner. In this context, and vis-a-vis prescription, Article 1144 of
the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx xxx x x x (Italics supplied.)
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten
years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well settled that an action for reconveyance based on an
implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the
property. The only discordant note, it seems, is Balbin vs. Medalla, which states that the prescriptive
period for a reconveyance action is four years. However, this variance can be explained by the
erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25,
1948, hence Section 43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until
August 30, 1950 as mentioned earlier. It must be stressed, at this juncture, that article 1144 and article
1456, are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil
Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an
action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529,
which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the rights of any innocent holder of
the decree of registration on the original petition or application, x x x.
Page 109 of 166
Bus. Org. I Cases – Page 3 Syllabus

This provision should be read in conjunction with Article 1456 of the Civil Code, x x x
xxxx
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in
favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article
1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for the
reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the
issuance of the certificate of title. x x x11
In the instant case, TCT No. T-12561 was obtained by petitioner and his co-heirs on September 28, 1990,
while respondents filed their complaint for reconveyance on August 18, 1999. Hence, it is clear that the
ten-year prescriptive period has not yet expired.
The Court, likewise, does not agree with petitioner's contention that respondents are guilty of laches
and are already estopped from questioning the decision of the RTC in Civil Case No. 12887 on the
ground that they slept on their rights and allowed the said decision to become final.
In the first place, respondents cannot be faulted for not appealing the decision of the RTC in Civil Case
No. 12887 simply because they are no longer parties to the case and, as such, have no personality to
assail the said judgment.
Secondly, respondents' act of filing their action for reconveyance within the ten-year prescriptive
period does not constitute an unreasonable delay in asserting their right. The Court has ruled that,
unless reasons of inequitable proportions are adduced, a delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would bar relief.12 Laches is recourse in
equity.13 Equity, however, is applied only in the absence, never in contravention, of statutory law.14
Moreover, the prescriptive period applies only if there is an actual need to reconvey the property as
when the plaintiff is not in possession thereof.15 Otherwise, if the plaintiff is in possession of the property,
prescription does not commence to run against him.16 Thus, when an action for reconveyance is
nonetheless filed, it would be in the nature of a suit for quieting of title, an action that is
imprescriptible.17 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 rationale for the rule being, that his undisturbed possession provides 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 the
one who is in possession.18
In the present case, there is no dispute that respondents are in possession of the subject property as
evidenced by the fact that petitioner and his co-heirs filed a separate action against respondents for
recovery of possession thereof. Thus, owing to respondents' possession of the disputed property, it
follows that their complaint for reconveyance is, in fact, imprescriptible. As such, with more reason
should respondents not be held guilty of laches as the said doctrine, which is one in equity, cannot be
set up to resist the enforcement of an imprescriptible legal right.
In his second assignment of error, petitioner argues that the objective of respondents in filing Civil Case
No. 588-C with the RTC of Cadiz City was to have the decision of the RTC of Bacolod City in Civil Case
No. 12887 amended, which is tantamount to having the same annulled. Petitioner avers that the RTC
of Cadiz City has no jurisdiction to act on Civil Case No. 588-C, because it cannot annul the decision
of the RTC of Bacolod City which is a co-equal court.
The Court does not agree.
The action filed by respondents with the RTC of Cadiz City is for reconveyance and
damages.1awphi1 They are not seeking the amendment nor the annulment of the Decision of the RTC
of Bacolod City in Civil Case No. 12887. They are simply after the recovery of what they claim as their
rightful share in the subject lot as heirs of Esteban Dichimo.
As earlier discussed, respondents' Answer-in-Intervention was dismissed by the RTC of Bacolod City
without prejudice. This leaves them with no other option but to institute a separate action for the
protection and enforcement of their rights and interests. It will be the height of inequity to declare
herein petitioner and his co-heirs as exclusive owners of the disputed lot without giving respondents the
opportunity to prove their claims that they have legal interest over the subject parcel of land, that it
forms part of the estate of their deceased predecessor and that they are in open, and uninterrupted
Page 110 of 166
Bus. Org. I Cases – Page 3 Syllabus

possession of the same for more than 30 years. Much more, it would be tantamount to a violation of
the constitutional guarantee that no person shall be deprived of property without due process of law.19
WHEREFORE, the instant petition is DENIED. The assailed Decision dated January 12, 2005 and Resolution
dated February 13, 2006 of the Court of Appeals in CA-G.R. CV No. 70009 are AFFIRMED.
SO ORDERED.

Page 111 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 159941 August 17, 2011
HEIRS OF SPOUSES TEOFILO M. RETERTA and ELISA RETERTA, namely: EDUARDO M. RETERTA, CONSUELO
M. RETERTA, and AVELINA M. RETERTA, Petitioners,
vs.
SPOUSES LORENZO MORES and VIRGINIA LOPEZ, Respondents.
DECISION
BERSAMIN, J.:

The original and exclusive jurisdiction over a complaint for quieting of title and reconveyance involving
friar land belongs to either the Regional Trial Court (RTC) or the Municipal Trial Court (MTC). Hence, the
dismissal of such a complaint on the ground of lack of jurisdiction due to the land in litis being friar land
under the exclusive jurisdiction of the Land Management Bureau (LMB) amounts to manifest grave
abuse of discretion that can be corrected through certiorari.
The petitioners, whose complaint for quieting of title and reconveyance the RTC had dismissed, had
challenged the dismissal by petition for certiorari, but the Court of Appeals (CA) dismissed their petition
on the ground that certiorari was not a substitute for an appeal, the proper recourse against the
dismissal. They now appeal that ruling of the CA promulgated on April 25, 2003.1
Antecedents
On May 2, 2000, the petitioners commenced an action for quieting of title and reconveyance in the
RTC in Trece Martires City (Civil Case No. TM-983),2 averring that they were the true and real owners of
the parcel of land (the land) situated in Trez Cruzes, Tanza, Cavite, containing an area of 47,708 square
meters, having inherited the land from their father who had died on July 11, 1983; that their late father
had been the grantee of the land by virtue of his occupation and cultivation; that their late father and
his predecessors in interest had been in open, exclusive, notorious, and continuous possession of the
land for more than 30 years; that they had discovered in 1999 an affidavit dated March 1, 1966 that
their father had purportedly executed whereby he had waived his rights, interests, and participation in
the land; that by virtue of the affidavit, Sales Certificate No. V-769 had been issued in favor of
respondent Lorenzo Mores by the then Department of Agriculture and Natural Resources; and that
Transfer Certificate of Title No. T-64071 had later issued to the respondents.
On August 1, 2000, the respondents, as defendants, filed a motion to dismiss, insisting that the RTC had
no jurisdiction to take cognizance of Civil Case No. TM-983 due to the land being friar land, and that
the petitioners had no legal personality to commence Civil Case No. TM-983.
On October 29, 2001, the RTC granted the motion to dismiss, holding:3
Considering that plaintiffs in this case sought the review of the propriety of the grant of lot 2938 of the
Sta. Cruz de Malabon Friar Lands Estate by the Lands Management Bureau of the defendant Lorenzo
Mores through the use of the forged Affidavit and Sales Certificate No. V-769 which eventually led to
the issuance of T.C.T. No. T-64071 to defendant Lorenzo Mores and wife Virginia Mores, and considering
further that the land subject of this case is a friar land and not land of the public domain, consequently
Act No. 1120 is the law prevailing on the matter which gives to the Director of Lands the exclusive
administration and disposition of Friar Lands. More so, the determination whether or not fraud had been
committed in the procurement of the sales certificate rests to the exclusive power of the Director of
Lands. Hence this Court is of the opinion that it has no jurisdiction over the nature of this action. On the
second ground relied upon by the defendants in their Motion To Dismiss, suffice it to state that the Court
deemed not to discuss the same.
IN VIEW OF THE FOREGOING, let this instant case be dismissed as it is hereby dismissed.
SO ORDERED.
The petitioners then timely filed a motion for reconsideration, but the RTC denied their motion for
reconsideration on February 21, 2002.4

Page 112 of 166

Bus. Org. I Cases – Page 3 Syllabus

On May 15, 2002, therefore, the petitioners assailed the dismissal via petition for certiorari, but the CA
dismissed the petition on April 25, 2003, holding: 5
Thus, the basic requisite for the special civil action of certiorari to lie is that there is no appeal, nor any
plain, speedy and adequate remedy in the ordinary course of law.
In the case at bench, when the court rendered the assailed decision, the remedy of the petitioners
was to have appealed the same to this Court. But petitioners did not. Instead they filed the present
special civil action for certiorari on May 15, 2002 after the decision of the court a quo has become
final.
The Order dismissing the case was issued by the court a quo on 29 October 2001, which Order was
received by the petitioners on November 16, 2001. Petitioners filed a motion for reconsideration dated
November 26, 2001 but the same was denied by the court a quo on 21 February 2002. The Order
denying the motion for reconsideration was received by the petitioners on 20 March 2002.
Petitioners filed this petition for certiorari on May 15, 2002. Certiorari, however cannot be used as a
substitute for the lost remedy of appeal.
In Bernardo vs. Court of Appeals, 275 SCRA 423, the Supreme Court had the following to say:
"We have time and again reminded members of the bench and bar that a special civil action for
certiorari under Rule 65 lies only when "there is no appeal nor plain, speedy and adequate remedy in
the ordinary course of law." Certiorari cannot be allowed when a party to a case fails to appeal a
judgment despite the availability of that remedy, certiorari not being a substitute for lost appeal. The
remedies of appeal and certiorari are mutually exclusive and not alternative or successive."
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED.
SO ORDERED.
On September 9, 2003, the CA denied the petitioners’ motion for reconsideration.6
Hence, this appeal.
Issues
The petitioners submit that:
I.
IT IS REVERSIBLE ERROR OF THE HONORABLE COURT OF APPEALS TO DISREGARD THE PROVISIONS OF
SECTION 1, RULE 41, SECOND PARAGRAPH, SUBPARAGRAPH (a), AND SECTION 9, RULE 37, 1997 RULES
OF COURT;
II.
IT IS REVERSIBLE ERROR FOR THE HONORABLE COURT OF APPEALS TO APPLY THE RULING IN THE CASE OF
ROSETE vs. COURT OF APPEALS, 339 SCRA 193, 199, NOTWITHSTANDING THE FACT THAT THE 1997 RULES
OF CIVIL PROCEDURE ALREADY TOOK EFFECT ON JULY 1, 1997.
III.
IT IS REVERSIBLE ERROR FOR THE HONORABLE COURT OF APPEALS IN NOT FINDING THAT THE TRIAL JUDGE
GRAVELY ABUSED ITS DISCRETION WHEN IT DISMISSED THE COMPLAINT RULING THAT IT HAS NO
JURISDICTION OVER THE NATURE OF THE ACTION, AND IN NOT FINDING THAT THE TRIAL JUDGE HAS
JURISDICTION OVER THE SAME.7
Briefly stated, the issue is whether or not the CA erred in dismissing the petition for certiorari.
Ruling
The appeal is meritorious.
1.
Propriety of certiorari as remedy
against dismissal of the action
The CA seems to be correct in dismissing the petition for certiorari, considering that the order granting
the respondents’ motion to dismiss was a final, as distinguished from an interlocutory, order against
which the proper remedy was an appeal in due course. Certiorari, as an extraordinary remedy, is not
substitute for appeal due to its being availed of only when there is no appeal, or plain, speedy and
adequate remedy in the ordinary course of law.8
Nonetheless, the petitioners posit that a special civil action for certiorari was their proper remedy to
assail the order of dismissal in light of certain rules of procedure, specifically pointing out that the
second paragraph of Section 1 of Rule 37 of the Rules of Court ("An order denying a motion for new
Page 113 of 166
Bus. Org. I Cases – Page 3 Syllabus

trial or reconsideration is not appealable, the remedy being an appeal from the judgment or final
order") prohibited an appeal of a denial of the motion for reconsideration, and that the second
paragraph of Section 1 of Rule 41 of the Rules of Court ( "No appeal may be taken from: xxx An order
denying a motion for new trial or reconsideration") expressly declared that an order denying a motion
for reconsideration was not appealable. They remind that the third paragraph of Section 1 of Rule 41
expressly provided that in the instances "where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65."
The petitioners’ position has no basis.
For one, the order that the petitioners really wanted to obtain relief from was the order granting the
respondents’ motion to dismiss, not the denial of the motion for reconsideration. The fact that the order
granting the motion to dismiss was a final order for thereby completely disposing of the case, leaving
nothing more for the trial court to do in the action, truly called for an appeal, instead of certiorari, as
the correct remedy.
The fundamental distinction between a final judgment or order, on one hand, and an interlocutory
order, on the other hand, has been outlined in Investments, Inc. v. Court of Appeals,9 viz:
The concept of ‘final’ judgment, as distinguished from one which has ‘become final’ (or ‘executory’
as of right [final and executory]), is definite and settled. A ‘final’ judgment or order is one that finally
disposes of a case, leaving nothing more to be done by the Court in respect thereto, e.g., an
adjudication on the merits which, on the basis of the evidence presented at the trial declares
categorically what the rights and obligations of the parties are and which party is in the right; or a
judgment or order that dismisses an action on the ground, for instance, of res judicata or prescription.
Once rendered, the task of the Court is ended, as far as deciding the controversy or determining the
rights and liabilities of the litigants is concerned. Nothing more remains to be done by the Court except
to await the parties’ next move (which among others, may consist of the filing of a motion for new trial
or reconsideration, or the taking of an appeal) and ultimately, of course, to cause the execution of the
judgment once it becomes ‘final’ or, to use the established and more distinctive term, ‘final and
executory.’
xxx
Conversely, an order that does not finally dispose of the case, and does not end the Court’s task of
adjudicating the parties’ contentions and determining their rights and liabilities as regards each other,
but obviously indicates that other things remain to be done by the Court, is ‘interlocutory,’ e.g., an
order denying a motion to dismiss under Rule 16 of the Rules, or granting a motion for extension of time
to file a pleading, or authorizing amendment thereof, or granting or denying applications for
postponement, or production or inspection of documents or things, etc. Unlike a ‘final’ judgment or
order, which is appealable, as above pointed out, an ‘interlocutory’ order may not be questioned on
appeal except only as part of an appeal that may eventually be taken from the final judgment
rendered in the case.
Moreover, even Section 9 of Rule 37 of the Rules of Court, cited by the petitioners, indicates that the
proper remedy against the denial of the petitioners’ motion for reconsideration was an appeal from
the final order dismissing the action upon the respondents’ motion to dismiss. The said rule explicitly
states thusly:
Section 9. Remedy against order denying a motion for new trial or reconsideration. – An order denying
a motion for new trial or reconsideration is not appealable, the remedy being an appeal from the
judgment or final order.
The restriction against an appeal of a denial of a motion for reconsideration independently of a
judgment or final order is logical and reasonable. A motion for reconsideration is not putting forward a
new issue, or presenting new evidence, or changing the theory of the case, but is only seeking a
reconsideration of the judgment or final order based on the same issues, contentions, and evidence
either because: (a) the damages awarded are excessive; or (b) the evidence is insufficient to justify
the decision or final order; or (c) the decision or final order is contrary to law.10 By denying a motion for
reconsideration, or by granting it only partially, therefore, a trial court finds no reason either to reverse
or to modify its judgment or final order, and leaves the judgment or final order to stand. The remedy
from the denial is to assail the denial in the course of an appeal of the judgment or final order itself.
Page 114 of 166
Bus. Org. I Cases – Page 3 Syllabus

The enumeration of the orders that were not appealable made in the 1997 version of Section 1, Rule
41 of the Rules of Court – the version in force at the time when the CA rendered its assailed decision
on May 15, 2002 – included an order denying a motion for new trial or motion for reconsideration, to
wit:
Section 1. Subject of appeal. — An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these Rules to be
appealable.
No appeal may be taken from:
(a) An order denying a motion for new trial or reconsideration;
(b) An order denying a petition for relief or any similar motion seeking relief from judgment;
(c) An interlocutory order;
(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judgment by consent, confession or compromise
on the ground of fraud, mistake or duress, or any other ground vitiating consent;
(f) An order of execution;
(g) A judgment or final order for or against one or more of several parties or in separate claims,
counterclaims, cross-claims and third-party complaints, while the main case is pending, unless
the court allows an appeal therefrom; and
(h) An order dismissing an action without prejudice.
In all the above instances where the judgment or final order is not appealable, the aggrieved party
may file an appropriate special civil action under Rule 65. (n)
It is true that Administrative Matter No. 07-7-12-SC, effective December 27, 2007, has since amended
Section 1, Rule 41, supra, by deleting an order denying a motion for new trial or motion for
reconsideration from the enumeration of non-appealable orders, and that such a revision of a
procedural rule may be retroactively applied. However, to reverse the CA on that basis would not be
right and proper, simply because the CA correctly applied the rule of procedure in force at the time
when it issued its assailed final order.
2.
RTC or MTC has jurisdiction over the action
The settled rule precluding certiorari as a remedy against the final order when appeal is available
notwithstanding, the Court rules that the CA should have given due course to and granted the petition
for certiorari for two exceptional reasons, namely: (a) the broader interest of justice demanded that
certiorari be given due course to avoid the undeserved grossly unjust result that would befall the
petitioners otherwise; and (b) the order of the RTC granting the motion to dismiss on ground of lack of
jurisdiction over the subject matter evidently constituted grave abuse of discretion amounting to
excess of jurisdiction.
On occasion, the Court has considered certiorari as the proper remedy despite the availability of
appeal, or other remedy in the ordinary course of law. In Francisco Motors Corporation v. Court of
Appeals,11 the Court has declared that the requirement that there must be no appeal, or any plain
speedy and adequate remedy in the ordinary course of law admits of exceptions, such as: (a) when it
is necessary to prevent irreparable damages and injury to a party; (b) where the trial judge capriciously
and whimsically exercised his judgment; (c) where there may be danger of a failure of justice; (d)
where an appeal would be slow, inadequate, and insufficient; (e) where the issue raised is one purely
of law; (f) where public interest is involved; and (g) in case of urgency.
Specifically, the Court has held that the availability of appeal as a remedy does not constitute sufficient
ground to prevent or preclude a party from making use of certiorari if appeal is not an adequate
remedy, or an equally beneficial, or speedy remedy. It is inadequacy, not the mere absence of all
other legal remedies and the danger of failure of justice without the writ, that must usually determine
the propriety of certiorari.12 A remedy is plain, speedy and adequate if it will promptly relieve the
petitioner from the injurious effects of the judgment, order, or resolution of the lower court or
agency.13 It is understood, then, that a litigant need not mark time by resorting to the less speedy
remedy of appeal in order to have an order annulled and set aside for being patently void for failure
of the trial court to comply with the Rules of Court.14
Page 115 of 166
Bus. Org. I Cases – Page 3 Syllabus

Nor should the petitioner be denied the recourse despite certiorari not being available as a proper
remedy against an assailed order, because it is better on balance to look beyond procedural
requirements and to overcome the ordinary disinclination to exercise supervisory powers in order that
a void order of a lower court may be controlled to make it conformable to law and justice.15 Verily, the
instances in which certiorari will issue cannot be defined, because to do so is to destroy the
comprehensiveness and usefulness of the extraordinary writ. The wide breadth and range of the
discretion of the court are such that authority is not wanting to show that certiorari is more discretionary
than either prohibition or mandamus, and that in the exercise of superintending control over inferior
courts, a superior court is to be guided by all the circumstances of each particular case "as the ends
of justice may require." Thus, the writ will be granted whenever necessary to prevent a substantial
wrong or to do substantial justice.16
The petitioners’ complaint – self-styled as being for the "quieting of title and reconveyance, declaration
of nullity of affidavit & Sales Certificate, reconveyance and damages" – would challenge the efficacy
of the respondents’ certificate of title under the theory that there had been no valid transfer or
assignment from the petitioners’ predecessor in interest to the respondents of the rights or interests in
the land due to the affidavit assigning such rights and interests being a forgery and procured by fraud.
The petitioners’ cause of action for reconveyance has support in jurisprudence bearing upon the
manner by which to establish a right in a piece of friar land. According to Arayata v. Joya, 17 in order
that a transfer of the rights of a holder of a certificate of sale of friar lands may be legally effective, it is
necessary that a formal certificate of transfer be drawn up and submitted to the Chief of the Bureau
of Public Lands for his approval and registration. The law authorizes no other way of transferring the
rights of a holder of a certificate of sale of friar lands. In other words, where a person considered as a
grantee of a piece of friar land transfers his rights thereon, such transfer must conform to certain
requirements of the law. Under Director of Lands v. Rizal,18 the purchaser in the sale of friar lands under
Act No. 1120 is already treated by law as the actual owner of the lot purchased even before the
payment of the full payment price and before the execution of the final deed of conveyance, subject
to the obligation to pay in full the purchase price, the role or position of the Government becoming
that of a mere lien holder or mortgagee.19
Thus, pursuant to Section 16 of Act No. 1120,20 had grantee Teofilo Reterta perfected his title, the
petitioners as his heirs would have succeeded him and taken title from him upon his death. By law,
therefore, should the execution of the deed in favor of the respondents be held invalid, the interests of
Teofilo Reterta should descend to the petitioners and the deed should issue in their favor. Adding
significance to the petitioners’ claim was their allegation in the complaint that they were in possession
of the land. Moreover, as alleged in the petitioners’ opposition to the motion to dismiss of the
respondents, Teofilo Reterta had partially paid the price of the land.21
Given the foregoing, the petitioners’ complaint made out a good case for reconveyance or reversion,
and its allegations, if duly established, might well warrant the reconveyance of the land from the
respondents to the petitioners. It did not matter that the respondents already held a certificate of title
in their names. In essence, an action for reconveyance respects the incontrovertibility of the decree
of registration but seeks the transfer of the property to its rightful and legal owner on the ground of its
having been fraudulently or mistakenly registered in another person’s name. There is no special ground
for an action for reconveyance, for it is enough that the aggrieved party asserts a legal claim in the
property superior to the claim of the registered owner, and that the property has not yet passed to the
hands of an innocent purchaser for value.22 On this score, it is also worthy to stress that the title of a
piece of a friar land obtained by a grantee from the Government without conforming with the
requirements set by the law may be assailed and nullified.
Was the petitioners’ action for reconveyance within the jurisdiction of the regular court?
We answer the query in the affirmative.
The law governing jurisdiction is Section 19 (2) of Batas Pambansa Blg. 129,23 as amended by Republic
Act No. 7691,24 which provides:
Section 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall exercise exclusive original jurisdiction:
xxx
xxx
Page 116 of 166
Bus. Org. I Cases – Page 3 Syllabus

(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein,
where the assessed value of the property involved exceeds Twenty thousand pesos (₱20,000.00) or for
civil actions in Metro Manila, where such value exceeds Fifty thousand pesos (₱50,000.00) except
actions for forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which
is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts;
xxx
Conformably with the provision, because an action for reconveyance or to remove a cloud on one’s
title involves the title to, or possession of, real property, or any interest therein, exclusive original
jurisdiction over such action pertained to the RTC, unless the assessed value of the property did not
exceed ₱20,000.00 (in which instance the MTC having territorial jurisdiction would have exclusive
original jurisdiction). Determinative of which regular court had jurisdiction would be the allegations of
the complaint (on the assessed value of the property) and the principal relief thereby sought.25
The respondents’ reliance on Section 12 and Section 18 of Act No. 1120 to sustain their position that
the Bureau of Public Lands (now LMB) instead had exclusive jurisdiction was without basis. The provisions
read:
Section 12. xxx the Chief of the Bureau of Public Lands shall give the said settler and occupant a
certificate which shall set forth in detail that the Government has agreed to sell to such settler and
occupant the amount of land so held by him, at the price so fixed, payable as provided in this Act at
the office of the Chief of Bureau of Public Lands xxx and that upon the payment of the final installment
together with all accrued interest the Government will convey to such settler and occupant the said
land so held by him by proper instrument of conveyance, which shall be issued and become effective
in the manner provided in section one hundred and twenty-two of the Land Registration Act xxx.
Section 18. No lease or sale made by Chief of the Bureau of Public Lands under the provisions of this
Act shall be valid until approved by the Secretary of the Interior.1awphi1
As the provisions indicate, the authority of LMB under Act No. 1120, being limited to the administration
and disposition of friar lands, did not include the petitioners’ action for reconveyance. LMB ceases to
have jurisdiction once the friar land is disposed of in favor of a private person and title duly issues in the
latter’s name. By ignoring the petitioners’ showing of its plain error in dismissing Civil Case No. TM-983,
and by disregarding the allegations of the complaint, the RTC acted whimsically and capriciously.
Given all the foregoing, the RTC committed grave abuse of discretion amounting to lack of jurisdiction.
The term grave abuse of discretion connotes whimsical and capricious exercise of judgment as is
equivalent to excess, or lack of jurisdiction.26 The abuse must be so patent and gross as to amount to
an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason
of passion or hostility.27
The dismissal of Civil Case No. TM-983, unless undone, would leave the petitioners bereft of any remedy
to protect their substantial rights or interests in the land. As such, they would suffer grave injustice and
irreparable damage. In that situation, the RTC’s dismissal should be annulled through certiorari, for the
task of the remedy was to do justice to the unjustly aggrieved.28
WHEREFORE, the Court grants the petition for certiorari; sets aside the decision the Court of Appeals
promulgated on April 25, 2003; and directs Branch 23 of the Regional Trial Court in Trece Martires City
to resume the proceedings in Civil Case No. TM-983 with dispatch.
The respondents shall pay the costs of suit.
SO ORDERED.

Page 117 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157852 December 15, 2010
HEIRS OF DOMINGO VALIENTES, Petitioners,
vs.
Hon. REINERIO (Abraham) B. RAMAS, Acting Presiding Judge, RTC, Branch 29, 9th Judicial Region, San
Miguel, Zamboanga del Sur and Vilma V. Minor, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:

This is a Petition for Certiorari assailing the Decision1 of the Court of Appeals dated August 16, 2002 and
the subsequent Resolution denying reconsideration dated January 16, 2003 in CA-G.R. SP No. 68501.
Petitioners claim that they are the heirs of Domingo Valientes who, before his death, was the owner of
a parcel of land in Gabay, Margosatubig, Zamboanga del Sur then covered by Original Certificate of
Title (OCT) No. P-18,208 of the Register of Deeds of Zamboanga del Sur. In 1939, Domingo Valientes
mortgaged the subject property to secure his loan to the spouses Leon Belen and Brigida Sescon
(spouses Belen). In the 1950s, the Valientes family purportedly attempted, but failed, to retrieve the
subject property from the spouses Belen. Through an allegedly forged document captioned VENTA
DEFINITIVA purporting to be a deed of sale of the subject property between Domingo Valientes and
the spouses Belen, the latter obtained Transfer Certificate of Title (TCT) No. T-5,427 in their name.
On February 28, 1970, Maria Valientes Bucoy and Vicente Valientes, legitimate children of the late
Domingo Valientes, had their Affidavit of Adverse Claim2 duly entered in the Memorandum of
Encumbrances at the back of TCT No. T-5,427. Upon the death of the spouses Belen, their surviving heirs
Brigida Sescon Belen and Maria Lina Belen executed an extra-judicial settlement with partition and
sale in favor of private respondent Vilma Valencia-Minor, the present possessor of the subject property.
On June 20, 1979, herein private respondent Minor filed with the then Court of First Instance of
Pagadian City a "PETITION FOR CANCELLATION OF MEMORANDUM OF ENCUMBRANCE APPEARING IN
TCT NO. T-5,427 OF THE REGISTRY OF DEEDS OF ZAMBOANGA DEL SUR," which was docketed as SPL
Case No. 1861.3 On July 31, 2000, the Regional Trial Court (RTC) granted Minor’s prayer to allow the
Register of Deeds to have the title to the subject property transferred to her name.
In the meantime, on August 20, 1998, petitioners filed a Complaint before the RTC of San Miguel,
Zamboanga del Sur for the "CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO. T-5,427,
RECONVEYANCE, WITH ACCOUNTING, RECEIVERSHIP AND APPLICATION FOR A WRIT OF PRELIMINARY
PROHIBITORY INJUNCTION PLUS DAMAGES." The Complaint was docketed as Civil Case No. 98-021.4
Private respondent Minor filed an Omnibus Motion to Dismiss Civil Case No. 98-021 on the grounds of
forum shopping and litis pendentia. On August 3, 2000, the RTC issued an order in open court ruling
that forum shopping does not apply. On September 22, 2000, private respondent Minor filed a Motion
for Reconsideration5 of the August 3, 2000 Order. On May 7, 2001, the RTC issued an Order granting the
Motion for Reconsideration by dismissing Civil Case No. 98-021 on the ground of forum
shopping.6 Petitioners filed a Motion for Reconsideration7 on May 30, 2001, but the same was denied
by the RTC in its Order8 dated September 18, 2001.
On November 12, 2001, petitioners filed with the Court of Appeals a Petition for Certiorari9 assailing the
RTC Orders dated May 7, 2001 and September 18, 2001. Petitioners raised the sole issue of whether the
trial court was correct in finding that Civil Case No. 98-021 constitutes forum shopping, litis pendentia
or res judicata with SPL Case No. 186. The Petition was docketed as CA-G.R. SP No. 68501.
The Court of Appeals rendered its assailed Decision on said petition on August 16, 2002. Despite
agreeing with petitioners that there was no forum shopping, litis pendentia or res judicata in the filing
of Civil Case No. 98-021, the Court of Appeals, asserting that it has the discretion to review matters not
otherwise assigned as errors on appeal if it finds that their consideration is necessary at arriving at a
complete and just resolution of the case,10 held that Civil Case No. 98-021 cannot prosper on the
grounds of prescription and laches.
Page 118 of 166
Bus. Org. I Cases – Page 3 Syllabus

Hence, this Petition for Certiorari, wherein petitioners raised the following grounds for assailing the Court
of Appeals’ Decision:
I
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR IN EXCESS OF JURISDICTION WHEN IT APPLIED PRESCRIPTION IN THE PRESENT PETITION, AFTER ALL,
WHEN SHE DID NOT APPEAL THE DECISION OF THE HONORABLE REGIONAL TRIAL COURT DISMISSING THE
COMPLAINT ON THE SOLE GROUND OF RES JUDICATA, PRIVATE RESPONDENT IS DEEMED TO HAVE
ALREADY WAIVED THE DEFENSE OF PRESCRIPTION.
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR IN EXCESS OF JURISDICTION IN DISMISSING THE COMPLAINT ON THE GROUND OF PRESCRIPTION, THE
PRESENT ACTION, ALTHOUGH CAPTIONED FOR CANCELLATION OF TRANSFER CERTIFICATE OF TITLE NO.
T-5,427, RECONVEYANCE AND ETC., SUBSTANTIALLY, IS FOR QUIETING OF TITLE, HENCE, PRESCRIPTION
WILL NOT LIE.
III
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR IN EXCESS OF JURISDICTION IN APPLYING THE CASES OF TENIO-OBSEQUIO VERSUS COURT OF
APPEALS, 330 SCRA 88, AND DECLARO VS. COURT OF APPEALS, 346 SCRA 57 WHEN FACTS OBTAINING
IN SAID CASES ARE NOT ATTENDANT IN THE PRESENT CASE FOR CANCELLATION OF TRANSFER CERTIFICATE
OF TITLE NO. T-5,427 ON THE GROUND OF FORGERY OR BY REASON OF FORGED DOCUMENT CAPTIONED
VENTA DEFINITIVA.
IV
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR IN EXCESS OF JURISDICTION WHEN IT [RENEGED] FROM ITS SOLEMN DUTY TO RENDER SUBSTANTIAL
JUSTICE DUE THE PARTIES RATHER THAN THE SANCTIFICATION OF TECHNICAL RULES OR EQUITY ON
PRESCRIPTION.11
Authority of the Court of Appeals to Dismiss the Complaint on the Grounds of Prescription and Laches
Despite Respondent’s Failure to Appeal the Dismissal Order
Petitioners recount that private respondent Minor interposed prescription as one of her grounds for the
dismissal of the case in her Answer with Affirmative Defenses. When private respondent Minor’s Motion
to Dismiss was denied by the RTC in open court, she filed a Motion for Reconsideration dwelling on
forum shopping, litis pendentia and/or res judicata.12 The trial court proceeded to dismiss the case on
the ground of forum shopping.13 Petitioners now claim before us that private respondent Minor’s failure
to appeal the RTC’s dismissal of the complaint on the sole ground of forum shopping constituted a
waiver of the defense of prescription. Petitioners further argue that the consideration by the Court of
Appeals of grounds not assigned as errors in the Appellee’s Brief runs contrary to the precepts of fair
play, good taste and estoppel.14
We rule in favor of private respondent Minor on this issue.
Firstly, it stretches the bounds of credulity for petitioners to argue that a defendant in a case should
appeal the dismissal order she prayed for just because other grounds for dismissal were not considered
by the court.
Secondly, and more importantly, Section 1, Rule 9 of the Rules of Court provides:
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings
or the evidence on record that the court has no jurisdiction over the subject matter, that there is
another action pending between the same parties for the same cause, or that the action is barred by
a prior judgment or by statute of limitations, the court shall dismiss the claim.
The second sentence of this provision does not only supply exceptions to the rule that defenses not
pleaded either in a motion to dismiss or in the answer are deemed waived, it also allows courts to
dismiss cases motu proprio on any of the enumerated grounds – (1) lack of jurisdiction over the subject
matter; (2) litis pendentia; (3) res judicata; and (4) prescription – provided that the ground for dismissal
is apparent from the pleadings or the evidence on record.

Page 119 of 166

Bus. Org. I Cases – Page 3 Syllabus

We therefore rule that private respondent Minor cannot be deemed to have waived the defense of
prescription, and that the Court of Appeals may consider the same motu proprio. Furthermore, as
regards the pronouncement by the Court of Appeals that Civil Case No. 98-021 is likewise heavily
infirmed with laches, we rule that the Court of Appeals is not in error when it considered the same motu
proprio. While not included in the above enumeration under Section 1, Rule 9 of the Rules of Court, we
have ruled in previous cases that laches need not be specifically pleaded and may be considered by
the court on its own initiative in determining the rights of the parties.15
Having thus determined the authority of the Court of Appeals to dismiss the Complaint on the grounds
of prescription and laches despite private respondent Minor’s failure to appeal the dismissal Order, We
shall now proceed to determine whether or not prescription or laches has already set in to bar the filing
of Civil Case No. 98-021.
Imprescriptibility of Quieting of Title
After the Court of Appeals ruled in favor of petitioners on the issue of whether Civil Case No. 98-021 is
already barred by forum shopping, res judicata or litis pendentia, the appellate court, nevertheless,
affirmed the dismissal order, but on the grounds of prescription and laches:
Be that as it may, this Court is imbued with sufficient discretion to review matters, not otherwise assigned
as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just
resolution of the case (Heirs of Ramon Durano, Sr. vs. Uy, 344 SCRA 238).
The case cannot prosper because an action for reconveyance is a legal remedy granted to a
landowner whose property has been wrongfully or erroneously registered in another’s name, which
must be filed within ten years from the issuance of the title since such issuance operates as a
constructive notice (Declaro vs. Court of Appeals, 346 SCRA 57). Where a party has neglected to assert
his rights over a property in question for an unreasonably long period, he is estopped from questioning
the validity of another person’s title to the property (Ibid.) Long inaction and passivity in asserting one’s
rights over a disputed property precludes him from recovering said property (Po Lam vs. Court vs. Court
of Appeals, 347 SCRA 86).
In conclusion, petitioners’ cause of action has already prescribed and now heavily infirmed with
laches.16
Petitioners claim that although the complaint was captioned for "CANCELLATION OF TRANSFER
CERTIFICATE OF TITLE NO. T-5,427, RECONVEYANCE, WITH ACCOUNTING, RECEIVERSHIP, AND
APPLICATION FOR A WRIT OF PRELIMINARY PROHIBITORY INJUNCTION PLUS DAMAGES," the complaint is
substantially in the nature of an action to quiet title which allegedly does not prescribe. Petitioners also
allege that the cases cited by the Court of Appeals in ruling that prescription has set in, particularly
that of Declaro v. Court of Appeals,17 which in turn cites Tenio-Obsequio v. Court of Appeals,18 are
inapplicable to the case at bar since neither fraud nor forgery was attendant in said cases.
As regards petitioners’ claim that the complaint in Civil Case No. 98-021 is really one of quieting of title
which does not prescribe, it appears that petitioners are referring to the doctrine laid down in the often-
cited case of Heirs of Jose Olviga v. Court of Appeals,19 wherein we held:
With regard to the issue of prescription, this Court has ruled a number of times before that an 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 (Vda. de Portugal vs. IAC, 159 SCRA 178). But this rule applies only
when the plaintiff 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.20
The cause of action of petitioners in Civil Case No. 98-021, wherein they claim that private respondent
Minor’s predecessor-in-interest acquired the subject property by forgery, can indeed be considered
as that of enforcing an implied trust. In particular, Article 1456 of the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
However, the Court made a clear distinction in Olviga: when the plaintiff in such action is not in
possession of the subject property, the action prescribes in ten years from the date of registration of
the deed or the date of the issuance of the certificate of title over the property. When the plaintiff is in
Page 120 of 166
Bus. Org. I Cases – Page 3 Syllabus

possession of the subject property, the action, being in effect that of quieting of title to the property,
does not prescribe. In the case at bar, petitioners (who are the plaintiffs in Civil Case No. 98-021) are
not in possession of the subject property. Civil Case No. 98-021, if it were to be considered as that of
enforcing an implied trust, should have therefore been filed within ten years from the issuance of TCT
No. T-5,427 on December 22, 1969. Civil Case No. 98-021 was, however, filed on August 20, 1998, which
was way beyond the prescriptive period.
As an alternative argument, petitioners claim that the prescriptive period for filing their complaint is
thirty years, pursuant to Article 1141 of the Civil Code, in connection with Articles 1134 and 1137 thereof,
which respectively provide:
Art. 1141. Real actions over immovables prescribe after thirty years.
This provision is without prejudice to what is established for the acquisition of ownership and other real
rights by prescription.
Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary
prescription through possession of ten years.
Art. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted
adverse possession thereof for thirty years, without need of title or of good faith.
The theory of petitioners is that the Motion to Dismiss hypothetically admits the allegations of the
complaint, including the allegations thereon that the spouses Belen were successful in fraudulently
acquiring TCT No. T-5,427 in their favor by means of the forged VENTA DEFINITIVA. Thus, for purposes of
ruling on a Motion to Dismiss, it is hypothetically admitted that private respondent Minor’s predecessors-
in-interest are in bad faith. The applicable prescriptive period, therefore, is that provided in Article 1141
in relation to Article 1137 of the Civil Code, which is thirty years. Civil Case No. 98-021 was filed on
August 20, 1998, 28 years and eight months from the issuance of TCT No. T-5,427 on December 22, 1969.
Articles 1141, 1134 and 1137 of the Civil Code, however, are general rules on prescription which should
give way to the special statute on registered lands, Presidential Decree No. 1529, otherwise known as
the Property Registration Decree. Under the Torrens System as enshrined in P.D. No. 1529, the decree
of registration and the certificate of title issued become incontrovertible upon the expiration of one
year from the date of entry of the decree of registration, without prejudice to an action for damages
against the applicant or any person responsible for the fraud.21
As previously discussed, however, we have allowed actions for reconveyance based on implied trusts
even beyond such one-year period, for such actions respect the decree of registration as
incontrovertible. We explained this in Walstrom v. Mapa, Jr.22:
We have ruled before in Amerol vs. Bagumbaran that notwithstanding the irrevocability of the Torrens
title already issued in the name of another person, he can still be compelled under the law to reconvey
the subject property to the rightful owner. The property registered is deemed to be held in trust for the
real owner by the person in whose name it is registered. After all, the Torrens system was not designed
to shield and protect one who had committed fraud or misrepresentation and thus holds title in bad
faith.
In an action for reconveyance, the decree of registration is respected as incontrovertible. What is
sought instead is the transfer of the property, in this case the title thereof, which has been wrongfully or
erroneously registered in another person's name, to its rightful and legal owner, or to one with a better
right. This is what reconveyance is all about.1avvphi1
Yet, the right to seek reconveyance based on an implied or constructive trust is not absolute nor is it
imprescriptible. An action for reconveyance based on an implied or constructive trust must perforce
prescribe in ten years from the issuance of the Torrens title over the property.23
As discussed above, Civil Case No. 98-021 was filed more than 28 years from the issuance of TCT No. T-
5,427. This period is unreasonably long for a party seeking to enforce its right to file the appropriate
case. Thus, petitioners’ claim that they had not slept on their rights is patently unconvincing.
As a final note, it should be pointed out that in choosing to file a Petition for Certiorari before this Court,
petitioners are required to prove nothing less than grave abuse of discretion on the part of the Court
of Appeals. We have consistently held that "certiorari will not be issued to cure errors in proceedings or
correct erroneous conclusions of law or fact. As long as a court acts within its jurisdiction, any alleged
errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment
Page 121 of 166
Bus. Org. I Cases – Page 3 Syllabus

which are reviewable by timely appeal and not by a special civil action of certiorari." 24 In the case at
bar, petitioners proved neither grave abuse of discretion, nor even a simple error of judgment on the
part of the Court of Appeals. The present petition should, therefore, fail.
WHEREFORE, the present Petition for Certiorari is DISMISSED. The Decision of the Court of Appeals dated
August 16, 2002 and the Resolution dated January 16, 2003 in CA-G.R. SP No. 68501 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

Page 122 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 157784 December 16, 2008
RICHARD B. LOPEZ, in his capacity as Trustee of the Trust Estate of the Late JULIANA LOPEZ-
MANZANO,petitioner,
vs.
COURT OF APPEALS, CORAZON LOPEZ, FERNANDO LOPEZ, ROBERTO LOPEZ, represented by
LUZVIMINDA LOPEZ, MARIA ROLINDA MANZANO, MARIA ROSARIO MANZANO SANTOS, JOSE
MANZANO, JR., NARCISO MANZANO (all represented by Attorney-in-fact, MODESTO RUBIO), MARIA
CRISTINA MANZANO RUBIO, IRENE MONZON and ELENA MANZANO, respondents.
DECISION
TINGA, J.:

This is a petition for review on certiorari 1under Rule 45 of the 1997 Rules of Civil Procedure, assailing the
Decision2and Resolution3 of the Court of Appeals in CA-G.R. CV No. 34086. The Court of Appeals'
decision affirmed the summary judgment of the Regional Trial Court (RTC), Branch 10, Balayan,
Batangas, dismissing petitioner's action for reconveyance on the ground of prescription.
The instant petition stemmed from an action for reconveyance instituted by petitioner Richard B. Lopez
in his capacity as trustee of the estate of the late Juliana Lopez Manzano (Juliana) to recover from
respondents several large tracts of lands allegedly belonging to the trust estate of Juliana.
The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their union did not bear any
children. Juliana was the owner of several properties, among them, the properties subject of this
dispute. The disputed properties totaling more than 1,500 hectares consist of six parcels of land, which
are all located in Batangas. They were the exclusive paraphernal properties of Juliana together with a
parcel of land situated in Mindoro known as Abra de Ilog and a fractional interest in a residential land
on Antorcha St., Balayan, Batangas.
On 23 March 1968, Juliana executed a notarial will,4 whereby she expressed that she wished to
constitute a trust fund for her paraphernal properties, denominated as Fideicomiso de Juliana Lopez
Manzano (Fideicomiso), to be administered by her husband. If her husband were to die or renounce
the obligation, her nephew, Enrique Lopez, was to become administrator and executor of
the Fideicomiso. Two-thirds (2/3) of the income from rentals over these properties were to answer for
the education of deserving but needy honor students, while one-third 1/3 was to shoulder the expenses
and fees of the administrator. As to her conjugal properties, Juliana bequeathed the portion that she
could legally dispose to her husband, and after his death, said properties were to pass to
her biznietos or great grandchildren.
Juliana initiated the probate of her will five (5) days after its execution, but she died on 12 August 1968,
before the petition for probate could be heard. The petition was pursued instead in Special
Proceedings (S.P.) No. 706 by her husband, Jose, who was the designated executor in the will. On 7
October 1968, the Court of First Instance, Branch 3, Balayan, Batangas, acting as probate court,
admitted the will to probate and issued the letters testamentary to Jose. Jose then submitted an
inventory of Juliana's real and personal properties with their appraised values, which was approved by
the probate court.
Thereafter, Jose filed a Report dated 16 August 1969, which included a proposed project of partition.
In the report, Jose explained that as the only compulsory heir of Juliana, he was entitled by operation
of law to one-half (1/2) of Juliana's paraphernal properties as his legitime, while the other one-half (1/2)
was to be constituted into the Fideicomiso. At the same time, Jose alleged that he and Juliana had
outstanding debts totaling P816,000.00 excluding interests, and that these debts were secured by real
estate mortgages. He noted that if these debts were liquidated, the "residuary estate available for
distribution would, value-wise, be very small."
From these premises, Jose proceeded to offer a project of partition. The relevant portion pertaining to
the Fideicomiso stated, thus:
Page 123 of 166
Bus. Org. I Cases – Page 3 Syllabus

PROJECT OF PARTITION
14. Pursuant to the terms of the Will, one-half (1/2) of the following properties, which are not
burdened with any obligation, shall be constituted into the "Fidei-comiso de Juliana Lopez
Manzano" and delivered to Jose Lopez Manzano as trustee thereof:
Location Title No. Area (Sq. M.) Improvements

Abra de Ilog, Mindoro TCT - 540 2,940,000 pasture, etc.

Antorcha St. Balayan, TCT - 1217-A 13,040 Residential

Batangas (1/6 thereof)
and all those properties to be inherited by the decedent, by intestacy, from her sister,
Clemencia Lopez y Castelo.
15. The other half (1/2) of the aforesaid properties is adjudicated to Jose Lopez Manzano as heir.
Then, Jose listed those properties which he alleged were registered in both his and Juliana's names,
totaling 13 parcels in all. The disputed properties consisting of six (6) parcels, all located in Balayan,
Batangas, were included in said list. These properties, as described in the project of partition, are as
follows:
Location Title No. Area (Sq. M.) Improvements

Pantay, Calaca, 91,283 coconuts

Batangas

Mataywanak, OCT- 485,486 sugar

Tuy, Batangas 29[6]94

Patugo, OCT-2807 16,757,615 coconut,

Balayan, sugar, citrus,
Batangas pasteur

Cagayan, TCT-1220 411,331 sugar

Balayan,
Batangas

Pook, Baayan TCT-1281 135,922 sugar

Batangas

Bolbok, Balayan, TCT-18845 444,998 sugar

Batangas

Calzada, TCT 1978 2,312 sugar

Balayan,
Batangas

Gumamela, TCT-2575 829

Balayan,
Batangas

Bombon, 4,532
Balayan,
Batangas

Parañaque, TCT-282340 800 residential

Rizal

Page 124 of 166

Bus. Org. I Cases – Page 3 Syllabus

Parañaque, TCT-11577 800 residential

Rizal

Modesto St., TCT-52212 137.8 residential

Manila
and the existing sugar quota in the name of the deceased with the Central Azucarera Don Pedro at
Nasugbo.
16. The remaining ¼ shall likewise go to Jose Lopez Manzano, with the condition to be annotated on
the titles thereof, that upon his death, the same shall pass on to Corazon Lopez, Ferdinand Lopez, and
Roberto Lopez:
Location Title No. Area (Sq. M.) Improvements

Dalig, Balayan, TCT-10080 482,872 sugar

Batangas

San Juan, Rizal TCT-53690 523 residential

On 25 August 1969, the probate court issued an order approving the project of partition. As to the
properties to be constituted into the Fideicomiso, the probate court ordered that the certificates of
title thereto be cancelled, and, in lieu thereof, new certificates be issued in favor of Jose as trustee of
the Fideicomiso covering one-half (1/2) of the properties listed under paragraph 14 of the project of
partition; and regarding the other half, to be registered in the name of Jose as heir of Juliana. The
properties which Jose had alleged as registered in his and Juliana's names, including the disputed lots,
were adjudicated to Jose as heir, subject to the condition that Jose would settle the obligations
charged on these properties. The probate court, thus, directed that new certificates of title be issued
in favor of Jose as the registered owner thereof in its Order dated 15 September 1969. On even date,
the certificates of title of the disputed properties were issued in the name of Jose.
The Fideicomiso was constituted in S.P No. 706 encompassing one-half (1/2) of the Abra de Ilog lot on
Mindoro, the 1/6 portion of the lot in Antorcha St. in Balayan, Batangas and all other properties
inherited ab intestato by Juliana from her sister, Clemencia, in accordance with the order of the
probate court in S.P. No. 706. The disputed lands were excluded from the trust.
Jose died on 22 July 1980, leaving a holographic will disposing of the disputed properties to
respondents. The will was allowed probate on 20 December 1983 in S.P. No. 2675 before the RTC of
Pasay City. Pursuant to Jose's will, the RTC ordered on 20 December 1983 the transfer of the disputed
properties to the respondents as the heirs of Jose. Consequently, the certificates of title of the disputed
properties were cancelled and new ones issued in the names of respondents.
Petitioner's father, Enrique Lopez, also assumed the trusteeship of Juliana's estate. On 30 August 1984,
the RTC of Batangas, Branch 9 appointed petitioner as trustee of Juliana's estate in S.P. No. 706. On 11
December 1984, petitioner instituted an action for reconveyance of parcels of land with sum of money
before the RTC of Balayan, Batangas against respondents. The complaint5 essentially alleged that Jose
was able to register in his name the disputed properties, which were the paraphernal properties of
Juliana, either during their conjugal union or in the course of the performance of his duties as executor
of the testate estate of Juliana and that upon the death of Jose, the disputed properties were included
in the inventory as if they formed part of Jose's estate when in fact Jose was holding them only in trust
for the trust estate of Juliana.
Respondents Maria Rolinda Manzano, Maria Rosario Santos, Jose Manzano, Jr., Narciso Manzano,
Maria Cristina Manzano Rubio and Irene Monzon filed a joint answer6 with counterclaim for damages.
Respondents Corazon, Fernando and Roberto, all surnamed Lopez, who were minors at that time and
represented by their mother, filed a motion to dismiss,7 the resolution of which was deferred until trial
on the merits. The RTC scheduled several pre-trial conferences and ordered the parties to submit pre-
trial briefs and copies of the exhibits.

Page 125 of 166

Bus. Org. I Cases – Page 3 Syllabus

On 10 September 1990, the RTC rendered a summary judgment,8 dismissing the action on the ground
of prescription of action. The RTC also denied respondents' motion to set date of hearing on the
counterclaim.
Both petitioner and respondents elevated the matter to the Court of Appeals. On 18 October 2002,
the Court of Appeals rendered the assailed decision denying the appeals filed by both petitioner and
respondents. The Court of Appeals also denied petitioner's motion for reconsideration for lack of merit
in its Resolution dated 3 April 2003.
Hence, the instant petition attributing the following errors to the Court of Appeals:
I. THE COURT OF APPEAL'S CONCLUSION THAT PETITIONER'S ACTION FOR [RECONVEYANCE] HAS
PRESCRIBED TAKING AS BASIS SEPTEMBER 15, 1969 WHEN THE PROPERTIES IN DISPUTE WERE
TRANSFERRED TO THE NAME OF THE LATE JOSE LOPEZ MANZANO IN RELATION TO DECEMBER 12,
1984 WHEN THE ACTION FOR RECONVEYANCE WAS FILED IS ERRONEOUS.
II. THE RESPONDENT COURT OF APPEALS CONCLUSION IN FINDING THAT THE FIDUCIARY RELATION
ASSUMED BY THE LATE JOSE LOPEZ MANZANO, AS TRUSTEE, PURSUANT TO THE LAST WILL AND
TESTAMENT OF JULIANA LOPEZ MANZANO WAS IMPLIED TRUST, INSTEAD OF EXPRESS TRUST IS
EQUALLY ERRONEOUS.
None of the respondents filed a comment on the petition. The counsel for respondents Corazon,
Fernando and Roberto, all surnamed Lopez, explained that he learned that respondents had migrated
to the United States only when the case was pending before the Court of Appeals.9 Counsel for the
rest of the respondents likewise manifested that the failure by said respondents to contact or
communicate with him possibly signified their lack of interest in the case.10 In a Resolution dated 19
September 2005, the Court dispensed with the filing of a comment and considered the case submitted
for decision.11
The core issue of the instant petition hinges on whether petitioner's action for reconveyance has
prescribed. The resolution of this issue calls for a determination of whether an implied trust was
constituted over the disputed properties when Jose, the trustee, registered them in his name.
Petitioner insists that an express trust was constituted over the disputed properties; thus the registration
of the disputed properties in the name of Jose as trustee cannot give rise to prescription of action to
prevent the recovery of the disputed properties by the beneficiary against the trustee.
Evidently, Juliana's testamentary intent was to constitute an express trust over her paraphernal
properties which was carried out when the Fideicomiso was established in S.P. No. 706.12 However, the
disputed properties were expressly excluded from the Fideicomiso. The probate court adjudicated the
disputed properties to Jose as the sole heir of Juliana. If a mistake was made in excluding the disputed
properties from the Fideicomiso and adjudicating the same to Jose as sole heir, the mistake was not
rectified as no party appeared to oppose or appeal the exclusion of the disputed properties from
the Fideicomiso. Moreover, the exclusion of the disputed properties from the Fideicomiso bore the
approval of the probate court. The issuance of the probate court's order adjudicating the disputed
properties to Jose as the sole heir of Juliana enjoys the presumption of regularity.13
On the premise that the disputed properties were the paraphernal properties of Juliana which should
have been included in the Fideicomiso, their registration in the name of Jose would be erroneous and
Jose's possession would be that of a trustee in an implied trust. 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
The provision on implied trust governing the factual milieu of this case is provided in Article 1456 of the
Civil Code, which states:
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.
In Aznar Brothers Realty Company v. Aying,15 the Court differentiated two kinds of implied trusts, to wit:
x x x In turn, implied trusts are either resulting or constructive trusts. These two are differentiated
from each other as follows:

Page 126 of 166

Bus. Org. I Cases – Page 3 Syllabus

Resulting trusts are based on the equitable doctrine that valuable consideration and not legal
title determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature of circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold.16
A resulting trust is 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 itself. 17 Specific examples of
resulting trusts may be found in the Civil Code, particularly Arts. 1448,18 1449,19 1451,20 145221 and 1453.22
A constructive trust is created, not by any word evincing a direct intention to create a trust, but by
operation of law in order to satisfy the demands of justice and to prevent unjust enrichment.23 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.24 Constructive trusts are illustrated in Arts. 1450,25 1454,26145527 and 1456.28
The disputed properties were excluded from the Fideicomiso at the outset. Jose registered the disputed
properties in his name partly as his conjugal share and partly as his inheritance from his wife Juliana,
which is the complete reverse of the claim of the petitioner, as the new trustee, that the properties are
intended for the beneficiaries of the Fideicomiso. Furthermore, the exclusion of the disputed properties
from the Fideicomiso was approved by the probate court and, subsequently, by the trial court having
jurisdiction over the Fideicomiso. The registration of the disputed properties in the name of Jose was
actually pursuant to a court order. The apparent mistake in the adjudication of the disputed properties
to Jose created a mere implied trust of the constructive variety in favor of the beneficiaries of
the Fideicomiso.
Now that it is established that only a constructive trust was constituted over the disputed properties,
may prescription for the recovery of the properties supervene?
Petitioner asserts that, if at all, prescription should be reckoned only when respondents caused the
registration of the disputed properties in their names on 13 April 1984 and not on 15 September 1969,
when Jose registered the same in his name pursuant to the probate court's order adjudicating the
disputed properties to him as the sole heir of Juliana. Petitioner adds, proceeding on the premise that
the prescriptive period should be counted from the repudiation of the trust, Jose had not performed
any act indicative of his repudiation of the trust or otherwise declared an adverse claim over the
disputed properties.
The argument is tenuous.
The right to seek reconveyance based on an implied or constructive trust is not absolute. It is subject
to extinctive prescription.29 An action for reconveyance based on implied or constructive trust
prescribes in 10 years. This period is reckoned from the date of the issuance of the original certificate
of title or transfer certificate of title. Since such issuance operates as a constructive notice to the whole
world, the discovery of the fraud is deemed to have taken place at that time.30
In the instant case, the ten-year prescriptive period to recover the disputed property must be counted
from its registration in the name of Jose on 15 September 1969, when petitioner was charged with
constructive notice that Jose adjudicated the disputed properties to himself as the sole heir of Juana
and not as trustee of the Fideicomiso.
It should be pointed out also that Jose had already indicated at the outset that the disputed properties
did not form part of the Fideicomiso contrary to petitioner's claim that no overt acts of repudiation may
be attributed to Jose.It may not be amiss to state that in the project of partition submitted to the
probate court, Jose had indicated that the disputed properties were conjugal in nature and, thus,
excluded from Juliana's Fideicomiso. This act is clearly tantamount to repudiating the trust, at which
point the period for prescription is reckoned.
In any case, the rule that a trustee cannot acquire by prescription ownership over property entrusted
to him until and unless he repudiates the trust applies only to express trusts and resulting implied trusts.
Page 127 of 166
Bus. Org. I Cases – Page 3 Syllabus

However, in constructive implied trusts, prescription may supervene even if the trustee does not
repudiate the relationship. Necessarily, repudiation of said trust is not a condition precedent to the
running of the prescriptive period.31 Thus, for the purpose of counting the ten-year prescriptive period
for the action to enforce the constructive trust, the reckoning point is deemed to be on 15 September
1969 when Jose registered the disputed properties in his name.
WHEREFORE, the instant petition for review on certiorari is DENIED and the decision and resolution of the
Court of Appeals in CA-G.R. CV No. 34086 are AFFIRMED. Costs against petitioner.
SO ORDERED.

Page 128 of 166

Bus. Org. I Cases – Page 3 Syllabus

THIRD DIVISION
G.R. No. 128254 January 16, 2004
HEIRS OF POMPOSA SALUDARES represented by ISABEL DATOR, petitioners,
vs.
COURT OF APPEALS, JOSE DATOR and CARMEN CALIMUTAN, respondents.
DECISION
CORONA, J.:

Assailed in the instant petition for review on certiorari is the July 31, 1996 decision1 of the Court of
Appeals reversing the August 27, 1992 decision2 of the Regional Trial Court of Lucena City, Branch 56,
which in turn dismissed private respondents’ petition for reconveyance on the ground of prescription
of action.
At the core of the present controversy is a parcel of land, known as Lot 5793, measuring 8,916 square
meters, located at Mahabang Parang, Lucban, Quezon. The land formed part of the conjugal
properties of spouses Juan Dator and Pomposa Saludares, known as the Tanza estate.
Pomposa died on May 1, 1923, leaving herein petitioners, Enrica, Petra, Restituto, Amado, Delfina,
Beata, Vicenta and Isabel, all surnamed Dator, as her compulsory heirs (hereinafter referred to as Heirs).
On February 28, 1940, the Heirs and their father Juan executed a deed of extra-judicial partition of the
share of Pomposa in the Tanza estate. The settlement conferred the eastern half of the Tanza estate to
Juan and the western half to the Heirs.
Before the aforementioned partition, Juan was in possession of the entire Tanza estate. After the
partition, the Heirs took possession of their share and had the same tenanted by a certain Miguel
Dahilig, husband of Petra, one of the Heirs, who in turn managed the land in behalf of the other siblings.
Juan, the father, remained in possession of his half of the land until his death on April 6, 1940.
On December 13, 1976, Isabel Dator applied for a free patent over the entire Tanza estate, including
Lot 5793, in behalf of the Heirs. On May 26, 1977, after all the requirements were complied with, the
Register of Deeds of Quezon awarded Free Patent No. 4A-2-8976 and issued Original Certificate of Title
(OCT) No. 0-23617 in the names of the Heirs.
Sometime in 1988, the Heirs were informed by their tenant that private respondents cut some 50
coconut trees located within the subject lot. Thus, the Heirs sent a letter,3 dated July 26, 1988, to private
respondents demanding an explanation for their intrusion into their property and unauthorized felling
of trees.
On August 25, 1988, private respondents retaliated by filing an action for reconveyance against
petitioners, docketed as civil case no. 88-121, in the Regional Trial Court of Lucena City. Private
respondents alleged in their complaint that: (a) they were the owners in fee simple and possessors of
Lot No. 5793; (b) they bought the land from the successors-in-interest of Petra Dator, one of the heirs;
(c) they were in possession of the subject land from 1966 to the present and (d) petitioner Isabel Dator
obtained free patent OCT P-23617 over Lot 5793 in favor of the Heirs by means of fraud and
misrepresentation. Thus, private respondents prayed for the cancellation of OCT P-23617 and the
issuance of a new title in their names.
In their answer, the Heirs denied having sold any portion of the Tanza estate to anyone. They alleged
that: (a) they and their predecessors-in-interest had been and were still in actual, continuous, adverse
and public possession of the subject land in the concept of an owner since time immemorial and (b)
title to Lot 5793 was issued in their favor after faithful compliance with all the requirements necessary
for the issuance of a free patent.
After trial, the lower court rendered a decision dismissing the action primarily on the ground of
prescription of action:
More telling is plaintiff Jose Dator’s admission that the adjacent lot which is 5794 is his and he
was a cadastral claimant, in fact, filed (sic) an application for free patent. By and large, if Jose
Dator was personally claiming rights on the property now denominated as Lot 5793, the Court is
intrigued and cannot see its way clear why Jose Dator did not file any protest in the application
of the heirs of Pomposa Saludares, neither had Jose Dator filed any petition for review within the
time frame, instead it took them eleven (11) long years to question the validity.
Page 129 of 166
Bus. Org. I Cases – Page 3 Syllabus

The doctrine of "stale demands" or laches is even applicable in the case at bar. "Laches means
the failure or neglect for an unreasonable length of time, to do that which by exercising
diligence could or should have been done earlier." (Marcelino versus Court of Appeals, G.R. No.
94422, June 26, 1992)
xxx xxx xxx
The issues with respect to ownership have already been amply discussed which brings us to the
issue as to whether or not the action has prescribed and whether the original certificate of title
in the name of the heirs of Pomposa Saludares is already indefeasible.
The action for reconveyance at bar was filed on August 28, 1988 or more than eleven (11) years
from the issuance of the title, a fact plaintiffs cannot deny. They cannot claim ignorance that
the defendants-heirs of Pomposa Saludares are applying for a free patent of Lot No. 5793
because notices were sent.
xxx xxx xxx
In the absence of competent and positive evidence that the title of the defendants has been
secured thru fraud which in the case at bar is wanting and which would necessarily invalidate
it, the presumption is it has been issued regularly in the absence of actual fraud.
There being no positive evidence presented which would establish actual fraud in the issuance
of Free Patent Title No. P-23617 in the defendants’ name, their title deserves recognition.
In like manner, in an action for reconveyance after the lapse of one year from the date of the
registration, actual fraud in securing the title must be proved (J.N. Tuazon Co., Inc. versus
Macalindog, G.R. No. L-15398, December 29, 1962, 6 SCRA 938).
The plaintiffs’ claim for reconveyance therefore cannot prosper.
WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs
ordering the dismissal of the case with costs against plaintiffs and declaring defendants, heirs of
Pomposa Saludares, as the rightful owners of the land.
The claim of defendants in the matter of attorney’s fees and litigation expenses not having been
proven by concrete evidence, the Court opts not to award the same.
SO ORDERED.4
On appeal, the appellate court reversed the trial court decision:
It is true that the Torrens title issued upon a free patent may not be cancelled after the lapse of ten
years from the date of its registration because the statute of limitations bars such cancellation. But this
doctrine has long been qualified thusly:
If the registered owner, be he the patentee or his successor-in-interest to whom the Free patent
was transferred or conveyed, knew that the parcel of land described in the patent and in the
Torrens belonged to another who together with his predecessors-in-interest were never in
possession thereof, then the statute barring an action to cancel a Torrens title issued upon a free
patent does not apply and the true owner may bring an action to have the ownership or title
to the land judicially settled and the Court in the exercise of its equity jurisdiction, without
ordering the cancellation of the Torrens title issued upon the patent, may direct the defendant,
the registered owner, to reconvey the parcel of land to the plaintiff who has been found to be
the true owner thereof. (Vital vs. Anore, et al., 90 Phil. 855, Underscoring ours.)
In this case, there is clear evidence to show that appellee Isabel had full knowledge that Lot 5793 had
been sold to her brother-in-law Miguel Dahilig and her sister Petra, that Lot 5793 no longer belonged to
her and to the heirs she claimed to represent. She was signatory to the deed of sale dated April 16,
1940 in favor of appellant. (Exh. I) With this knowledge, there is reason to conclude that appellant Isabel
misrepresented herself and the rest of the heirs as owners entitled to the free patent.
WHEREFORE, all the above considered, judgment is hereby rendered:
1. Reversing the August 27, 1992 decision of the court below;
2. Ordering the Register of Deeds of Quezon Province to cancel OCT No. P-23617 in the
name of the Heirs of Pomposa Saludares and to issue another for the same property in
the name of plaintiffs Jose Dator and Carmen Calimutan;
3. Ordering appellees to pay appellants ten thousand (P10,000.00) pesos for attorney’s
fees, and to pay the costs.
Page 130 of 166
Bus. Org. I Cases – Page 3 Syllabus

SO ORDERED.5
Aggrieved by the appellate court ruling, the Heirs filed the instant petition, assigning the following errors:
The Court of Appeals erred in tracing the history of the transactions involving the property way back
to the year 1923 and render judgment based on its findings, considering that petitioners are the
registered owners of the property under a torrens certificate of title which is conclusive, incontrovertible
and indefeasible.
The Court of Appeals erred when it did not consider that the complaint filed by the private respondents
for reconveyance and cancellation of title before the trial court eleven (11) years after a torrens title
over the property was issued in the name of the petitioners (had) prescribed.6
Notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to
reconvey the registered property to its true owner. The rationale for the rule is that reconveyance does
not set aside or re-subject to review the findings of fact of the Bureau of Lands. In an action for
reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the
transfer of the property or its title which has been wrongfully or erroneously registered in another
person’s name, to its rightful or legal owner, or to the one with a better right.7
Nevertheless, the right to seek reconveyance of registered property is not absolute because it is subject
to extinctive prescription. In Caro vs. Court of Appeals,8 the prescriptive period of an action for
reconveyance was explained:
Under the present Civil Code, we find that just as an implied or constructive trust is an offspring
of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property
and the title thereto in favor of the true owner. In this context, and vis-à-vis prescription, Article
1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of
action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx xxx xxx
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No.
1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any
innocent holder of the decree of registration on the original petition or application, x x x.
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title
thereto in favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree
No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the
prescriptive period for the reconveyance of fraudulently registered real property is ten (10) years
reckoned from the date of the issuance of the certificate of title.
There is but one instance when prescription cannot be invoked in an action for reconveyance,
that is, when the plaintiff is in possession of the land to be reconveyed.9
In a series of cases,10 this Court permitted the filing of an action for reconveyance despite the lapse of
ten years and declared that said action, when based on fraud, is imprescriptible as long as the land
has not passed to an innocent purchaser for value. But in all those cases including Vital vs. Anore11 on
which the appellate court based its assailed decision, the common factual backdrop was that the
registered owners were never in possession of the disputed property. Instead, it was the persons with
the better right or the legal owners of the land who had always been in possession of the same. Thus,
the Court allowed the action for reconveyance to prosper in those cases despite the lapse of more
than ten years from the issuance of title to the land. The exception was based on the theory that

Page 131 of 166

Bus. Org. I Cases – Page 3 Syllabus

registration proceedings could not be used as a shield for fraud or for enriching a person at the expense
of another.12
In the case at bar, however, it is the rule rather than the exception which should apply.
This Court does not normally review the factual findings of the Court of Appeals in a petition for review
under Rule 45 of the Rules of Court. But when the findings of fact of the appellate court differ from
those of the trial court, the Court in the exercise of its power of review may inquire into the facts of a
case.
The trial court declared the Heirs as having been in actual, open and continuous possession of the
disputed lot. On the other hand, the appellate court ruled that it was private respondents.
Private respondents presented documents purportedly showing a series of transactions which led to
the alleged transfer of ownership of Lot 5793 from the Heirs to them, namely: (1) a Kasulatan Ng
Pagbibilihang Lampasan,dated April 16, 1940, wherein the disputed lot was allegedly sold by the Heirs
to their sibling Petra Dator and her husband Miguel Dahilig; (2) an extra-judicial partition showing that,
upon the death of Miguel, his heirs Petra, Angel, Anatalia, Catalina, Felimon and Jacinto, inherited Lot
5793 and (3) two deeds of sale dated December 30, 1978 and March 15,1970 wherein Felimon and
Jacinto, and later Catalina, sold their undivided shares in Lot 5793 to private respondents.
Other than the presentation of these documents, however, private respondents failed to prove that
they were in actual, open and continuous possession of Lot 5793.
On the other hand, Isabel Dator, who testified for the Heirs, vehemently denied having signed
the Kasulatan Ng Pagbibilihang Lampasan and pointed out the absence of the signatures of her other
siblings Vicenta, Barcelisa and Adoracion.
The Heirs likewise presented proof of payment of realty taxes from 1956 to 1974 in the names of their
deceased parents, and from 1975 to 1988 in their names.
More importantly, the Heirs convincingly established their open and continuous occupation of the
entire Tanza estate, including Lot 5793, through their tenant Miguel Dahilig. After Miguel’s death, he
was succeeded by Marcelo Saludares who testified during the trial that: (a) the farm was under the
administration of Beata and Isabel Dator who took over its management after Petra Dator died; (b) he
had been consistently tending the land since 1947; (c) he was the one who planted the various crops
and trees thereon, except for some 100 coconut trees which he explained were planted by other
people in response to the Green Revolution project of then President Marcos.
Saludares identified each and every landmark and boundary of the subject lot. He also enumerated
all the trees planted on the subject lot and, when asked about the fruits of the land, he told the court
that he shared the harvest with the surviving Heirs.
In stark contrast, private respondents’ witness, farm worker Perpetuo Daya could not identify the
boundaries of the disputed property, its adjoining owners or recall the dates he worked and tilled the
subject lot.
Specially noteworthy was the fact that the recorded cadastral claimant of Lot 5793, Angel Dahilig,
testified that he executed a waiver in favor of the Heirs because they were the true owners of the
subject parcel of land.13
Furthermore, we note private respondent Jose Dator’s declaration that he was the cadastral claimant
of and free patent applicant for Lot 5794 which was adjacent to Lot 5793. This being the case, we find
private respondents’ inaction difficult to understand, considering that they were among those who
received notices of petitioners’ free patent application dated January 2, 1979 from the Bureau of
Lands.14
If private respondents indeed owned Lot 5793, they should have filed an application for free patent
for it just as they did for Lot 5794, or at least opposed the Heirs’ application for free patent over Lot
5793, to protect their interests. As a matter of fact, they were aware that the Heirs’ tenant, Marcelo
Saludares, repeatedly harvested the fruits of Lot 5793.
But even assuming that private respondents indeed validly acquired Lot 5793 in 1966 as they claimed,
they nevertheless slept on their right to secure title thereto. Their unexplained inaction for more than 11
years rendered their demand for reconveyance stale. Vigilantibus sed non dormientibus jura
subverniunt. The law aids the vigilant, not those who sleep on their rights. This legal precept finds perfect
application in the case at bar.
Page 132 of 166
Bus. Org. I Cases – Page 3 Syllabus

Accordingly, we find that the Court of Appeals committed reversible error in disregarding the ten-year
prescriptive period for the reconveyance of registered real property and in giving due course to said
action despite the lapse of more than 11 years from the issuance of title thereto, which was clearly
barred by prescription.
WHEREFORE, the petition is hereby granted. The decision of the Court of Appeals, dated July 31, 1996,
is REVERSED and SET ASIDE and the decision of the Regional Trial Court, dated August 27, 1992, is
REINSTATED.
SO ORDERED.

Page 133 of 166

Bus. Org. I Cases – Page 3 Syllabus

FIRST DIVISION
G.R. No. 144225 June 17, 2003
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and
EDITHA B. SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S.
ESPIRITU and ELIZABETH TUAZON, Petitioners,
vs.
SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, Respondents.
DECISION
CARPIO, J.:

The Case
Before us is a petition for review assailing the Decision1 of the Court of Appeals dated 26 November
1999 affirming the decision2 of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-
94. Petitioners also question the Resolution of the Court of Appeals dated 26 July 2000 denying
petitioners’ motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters ("Subject Land") in Barrio Culis, Mabiga, Hermosa,
Bataan is the subject of controversy in this case. The registered owners of the Subject Land were
petitioner spouses, Godofredo Alfredo ("Godofredo") and Carmen Limon Alfredo ("Carmen"). The
Subject Land is covered by Original Certificate of Title No. 284 ("OCT No. 284") issued to Godofredo and
Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras ("Armando") and Adelia Lobaton
Borras ("Adelia"), filed a complaint for specific performance against Godofredo and Carmen before
the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the Subject
Land for ₱7,000.00 with the Development Bank of the Philippines ("DBP"). To pay the debt, Carmen and
Godofredo sold the Subject Land to Armando and Adelia for ₱15,000.00, the buyers to pay the DBP
loan and its accumulated interest, and the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which signed
the release of mortgage and returned the owner’s duplicate copy of OCT No. 284 to Godofredo and
Carmen. Armando and Adelia subsequently paid the balance of the purchase price of the Subject
Land for which Carmen issued a receipt dated 11 March 1970. Godofredo and Carmen then delivered
to Adelia the owner’s duplicate copy of OCT No. 284, with the document of cancellation of mortgage,
official receipts of realty tax payments, and tax declaration in the name of Godofredo. Godofredo
and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to the
Natanawans, the old tenants of the Subject Land. Armando and Adelia then took possession of the
Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land and
were cutting trees under instructions of allegedly new owners of the Subject Land. Subsequently,
Armando and Adelia discovered that Godofredo and Carmen had re-sold portions of the Subject
Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of Bataan.
Armando and Adelia discovered that Godofredo and Carmen had secured an owner’s duplicate
copy of OCT No. 284 after filing a petition in court for the issuance of a new copy. Godofredo and
Carmen claimed in their petition that they lost their owner’s duplicate copy. Armando and Adelia
wrote Godofredo and Carmen complaining about their acts, but the latter did not reply. Thus,
Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the following persons as
additional defendants: the spouses Arnulfo Savellano and Editha B. Savellano, Danton D. Matawaran,
the spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth Tuazon ("Subsequent Buyers"). The
Subsequent Buyers, who are also petitioners in this case, purchased from Godofredo and Carmen the
subdivided portions of the Subject Land. The Register of Deeds of Bataan issued to the Subsequent
Buyers transfer certificates of title to the lots they purchased.
Page 134 of 166
Bus. Org. I Cases – Page 3 Syllabus

In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively "petitioners") argued
that the action is unenforceable under the Statute of Frauds. Petitioners pointed out that there is no
written instrument evidencing the alleged contract of sale over the Subject Land in favor of Armando
and Adelia. Petitioners objected to whatever parole evidence Armando and Adelia introduced or
offered on the alleged sale unless the same was in writing and subscribed by Godofredo. Petitioners
asserted that the Subsequent Buyers were buyers in good faith and for value. As counterclaim,
petitioners sought payment of attorney’s fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus Lobaton,
Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and Mildred
Lobaton. Petitioners presented two witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The dispositive
portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the spouses Adelia
Lobaton Borras and Armando F. Borras, and against the defendant-spouses Godofredo Alfredo and
Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr.
and Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No.
284) executed by the spouses Godofredo Alfredo and Camen Limon Alfredo in favor of spouses
Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and
Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses
Arnulfo Sabellano and Editha B. Sabellano; Transfer Certificates of Title Nos. T-163268 and 163272
in the names of spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of Title Nos.
T-163269 and T-163271 in the name of Danton D. Matawaran; and Transfer Certificate of Title No.
T-163270 in the name of Elizabeth Tuazon, as null and void and that the Register of Deeds of
Bataan is hereby ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute
and deliver a good and valid Deed of Absolute Sale of the disputed parcel of land (covered
by OCT No. 284) in favor of the spouses Adelia Lobaton Borras and Armando F. Borras within a
period of ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their
owner’s duplicate copy of OCT No. 284 issued to them by virtue of the Order dated May 20,
1992 of the Regional Trial Court of Bataan, Dinalupihan Branch, to the Registry of Deeds of
Bataan within ten (10) days from the finality of this decision, who, in turn, is directed to cancel
the same as there exists in the possession of herein plaintiffs of the owner’s duplicate copy of
said OCT No. 284 and, to restore and/or reinstate OCT No. 284 of the Register of Deeds of Bataan
to its full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute
and/or return the amount of the respective purchase prices and/or consideration of sale of the
disputed parcels of land they sold to their co-defendants within ten (10) days from the finality of
this decision with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of ₱20,000.00
as and for attorney’s fees and litigation expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants’ counterclaims are hereby dismissed for lack of merit.
SO ORDERED.3
Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the trial court,
thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is hereby
AFFIRMED in its entirety. Treble costs against the defendants-appellants.
SO ORDERED.4
On 26 July 2000, the Court of Appeals denied petitioners’ motion for reconsideration.
Page 135 of 166
Bus. Org. I Cases – Page 3 Syllabus

The Ruling of the Trial Court

The trial court ruled that there was a perfected contract of sale between the spouses Godofredo and
Carmen and the spouses Armando and Adelia. The trial court found that all the elements of a contract
of sale were present in this case. The object of the sale was specifically identified as the 81,524-square
meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by the Registry of
Deeds of Bataan. The purchase price was fixed at ₱15,000.00, with the buyers assuming to pay the
sellers’ ₱7,000.00 DBP mortgage loan including its accumulated interest. The balance of the purchase
price was to be paid in cash to the sellers. The last payment of ₱2,524.00 constituted the full settlement
of the purchase price and this was paid on 11 March 1970 as evidenced by the receipt issued by
Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo and
Carmen delivered to Armando and Adelia the Subject Land; (2) Armando and Adelia treated as their
own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over to
Armando and Adelia documents such as the owner’s duplicate copy of the title of the Subject Land,
tax declaration, and the receipts of realty tax payments in the name of Godofredo; and (4) the DBP
cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and
Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a
ratification, of the verbal sale between the sellers and the buyers. The trial court ruled that the Statute
of Frauds is not applicable because in this case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of the
Subsequent Buyers testified in court on how they purchased their respective lots. The Subsequent Buyers
totally depended on the testimony of Constancia Calonso ("Calonso") to explain the subsequent sale.
Calonso, a broker, negotiated with Godofredo and Carmen the sale of the Subject Land which
Godofredo and Carmen subdivided so they could sell anew portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out that
Calonso did not inquire on the nature of the tenancy of the Natanawans and on who owned the
Subject Land. Instead, she bought out the tenants for ₱150,000.00. The buy out was embodied in a
Kasunduan. Apolinario Natanawan ("Apolinario") testified that he and his wife accepted the money
and signed the Kasunduan because Calonso and the Subsequent Buyers threatened them with
forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was asked to
produce the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could
not produce the documents, the agrarian officer told him that he would lose the case. Thus, Apolinario
was constrained to sign the Kasunduan and accept the ₱150,000.00.
Another indication of Calonso’s bad faith was her own admission that she saw an adverse claim on
the title of the Subject Land when she registered the deeds of sale in the names of the Subsequent
Buyers. Calonso ignored the adverse claim and proceeded with the registration of the deeds of sale.
The trial court awarded ₱20,000.00 as attorney’s fees to Armando and Adelia. In justifying the award
of attorney’s fees, the trial court invoked Article 2208 (2) of the Civil Code which allows a court to award
attorney’s fees, including litigation expenses, when it is just and equitable to award the same. The trial
court ruled that Armando and Adelia are entitled to attorney’s fees since they were compelled to file
this case due to petitioners’ refusal to heed their just and valid demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported by the evidence. Based
on these findings, the Court of Appeals also concluded that there was a perfected contract of sale
and the Subsequent Buyers were not innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof that
Godofredo and Carmen sold the Subject Land to Armando and Adelia upon payment of the balance
of the purchase price. The Court of Appeals found the recitals in the receipt as "sufficient to serve as
the memorandum or note as a writing under the Statute of Frauds."5 The Court of Appeals then
reiterated the ruling of the trial court that the Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia, Mildred
Lobaton, who explained why the title to the Subject Land was not in the name of Armando and Adelia.
Lobaton testified that Godofredo was then busy preparing to leave for Davao. Godofredo promised
Page 136 of 166
Bus. Org. I Cases – Page 3 Syllabus

that he would sign all the papers once they were ready. Since Armando and Adelia were close to the
family of Carmen, they trusted Godofredo and Carmen to honor their commitment. Armando and
Adelia had no reason to believe that their contract of sale was not perfected or validly executed
considering that they had received the duplicate copy of OCT No. 284 and other relevant documents.
Moreover, they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen signed the receipt
dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon,6 the appellate court ruled that a contract
of sale made by the wife without the husband’s consent is not void but merely voidable. The Court of
Appeals further declared that the sale in this case binds the conjugal partnership even if only the wife
signed the receipt because the proceeds of the sale were used for the benefit of the conjugal
partnership. The appellate court based this conclusion on Article 1617of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith because
they had constructive notice of the adverse claim of Armando and Adelia. Calonso, who brokered
the subsequent sale, testified that when she registered the subsequent deeds of sale, the adverse claim
of Armando and Adelia was already annotated on the title of the Subject Land. The Court of Appeals
believed that the act of Calonso and the Subsequent Buyers in forcibly ejecting the Natanawans from
the Subject Land buttresses the conclusion that the second sale was tainted with bad faith from the
very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer.
Nonetheless, the appellate court explained that since this action is actually based on fraud, the
prescriptive period is four years, with the period starting to run only from the date of the discovery of
the fraud. Armando and Adelia discovered the fraudulent sale of the Subject Land only in January
1994. Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on 2 February
1994 and filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights or
lose their rights by prescription.
The Court of Appeals sustained the award of attorney’s fees and imposed treble costs on petitioners.
The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and enforceable,
where (1) it was orally entered into and not in writing; (2) Carmen did not obtain the consent and
authority of her husband, Godofredo, who was the sole owner of the Subject Land in whose name the
title thereto (OCT No. 284) was issued; and (3) it was entered into during the 25-year prohibitive period
for alienating the Subject Land without the approval of the Secretary of Agriculture and Natural
Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged
perfection had been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject
Land issued to the Subsequent Buyers, innocent purchasers in good faith and for value whose individual
titles to their respective lots are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia ₱20,0000.00 as attorney’s fees and litigation
expenses and the treble costs, where the claim of Armando and Adelia is clearly unfounded and
baseless.
V
Whether petitioners are entitled to the counterclaim for attorney’s fees and litigation expenses, where
they have sustained such expenses by reason of institution of a clearly malicious and unfounded action
by Armando and Adelia.8
The Court’s Ruling
The petition is without merit.

Page 137 of 166

Bus. Org. I Cases – Page 3 Syllabus

In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of
facts.9 The factual findings of the appellate court are generally binding on this Court.10 This applies with
greater force when both the trial court and the Court of Appeals are in complete agreement on their
factual findings.11 In this case, there is no reason to deviate from the findings of the lower courts. The
facts relied upon by the trial and appellate courts are borne out by the record. We agree with the
conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and
Adelia was a perfected contract. A contract is perfected once there is consent of the contracting
parties on the object certain and on the cause of the obligation.12 In the instant case, the object of the
sale is the Subject Land, and the price certain is ₱15,000.00. The trial and appellate courts found that
there was a meeting of the minds on the sale of the Subject Land and on the purchase price of
₱15,000.00. This is a finding of fact that is binding on this Court. We find no reason to disturb this finding
since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the sellers and buyers
have performed their respective obligations under the contract. In a contract of sale, the seller
obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same, to
the buyer who obligates himself to pay a price certain to the seller.13 In the instant case, Godofredo
and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in actual physical
possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of
ownership of the Subject Land to Armando and Adelia.14 Ownership of the thing sold is transferred to
the vendee upon its actual or constructive delivery.15 Godofredo and Carmen also turned over to
Armando and Adelia the documents of ownership to the Subject Land, namely the owner’s duplicate
copy of OCT No. 284, the tax declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt
dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled their obligation to provide the
₱7,000.00 to pay the Dir obliagtion rmen. rchase pricend Adelia . fredo and Carmen do not deny the
existence of the cBP loan of Godofredo and Carmen, and to pay the latter the balance of ₱8,000.00
in cash. The ₱2,524.00 paid under the receipt dated 11 March 1970 was the last installment to settle
fully the purchase price. Indeed, upon payment to DBP of the ₱7,000.00 and the accumulated
interests, the DBP cancelled the mortgage on the Subject Land and returned the owner’s duplicate
copy of OCT No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute
of Frauds16provides that a contract for the sale of real property shall be unenforceable unless the
contract or some note or memorandum of the sale is in writing and subscribed by the party charged
or his agent. The existence of the receipt dated 11 March 1970, which is a memorandum of the sale,
removes the transaction from the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally
performed.17Thus, where one party has performed one’s obligation, oral evidence will be admitted to
prove the agreement.18 In the instant case, the parties have consummated the sale of the Subject
Land, with both sellers and buyers performing their respective obligations under the contract of sale.
In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits
under the contract.19 Godofredo and Carmen benefited from the contract because they paid their
DBP loan and secured the cancellation of their mortgage using the money given by Armando and
Adelia. Godofredo and Carmen also accepted payment of the balance of the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal
contract of sale because they have performed their obligations, and have accepted benefits, under
the verbal contract. 20 Armando and Adelia have also performed their obligations under the verbal
contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of
the Subject Land. The Statute of Frauds was enacted to prevent fraud.21 This law cannot be used to
advance the very evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is void
on two grounds. First, Carmen sold the Subject Land without the marital consent of Godofredo.
Page 138 of 166
Bus. Org. I Cases – Page 3 Syllabus

Second, the sale was made during the 25-year period that the law prohibits the alienation of land
grants without the approval of the Secretary of Agriculture and Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation or encumbrance
made by the husband of the conjugal partnership property without the consent of the wife is void.
However, when the sale is made before the effectivity of the Family Code, the applicable law is the
Civil Code.22
Article 173 of the Civil Code provides that the disposition of conjugal property without the wife’s
consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts
for the annulment of any contract of the husband entered into without her consent, when such
consent is required, or any act or contract of the husband which tends to defraud her or impair her
interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs,
after the dissolution of the marriage, may demand the value of property fraudulently alienated by the
husband.
In Felipe v. Aldon,23 we applied Article 173 in a case where the wife sold some parcels of land belonging
to the conjugal partnership without the consent of the husband. We ruled that the contract of sale
was voidable subject to annulment by the husband. Following petitioners’ argument that Carmen sold
the land to Armando and Adelia without the consent of Carmen’s husband, the sale would only be
voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are susceptible of
ratification.24 Godofredo ratified the sale when he introduced Armando and Adelia to his tenants as
the new owners of the Subject Land. The trial court noted that Godofredo failed to deny categorically
on the witness stand the claim of the complainants’ witnesses that Godofredo introduced Armando
and Adelia as the new landlords of the tenants.25 That Godofredo and Carmen allowed Armando and
Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredo’s
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an
action to annul the sale. He did not. The prescriptive period to annul the sale has long lapsed.
Godofredo’s conduct belies his claim that his wife sold the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the
DBP. We agree with the Court of Appeals that the sale redounded to the benefit of the conjugal
partnership. Article 161 of the Civil Code provides that the conjugal partnership shall be liable for debts
and obligations contracted by the wife for the benefit of the conjugal partnership. Hence, even if
Carmen sold the land without the consent of her husband, the sale still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to
Armando and Adelia as shown by this portion of Adelia’s testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.26
Petitioners raise this factual issue for the first time. The Court of Appeals could have passed upon this
issue had petitioners raised this earlier. At any rate, the cited testimony of Adelia does not convincingly
prove that Godofredo and Carmen did not deliver the Subject Land to Armando and Adelia. Adelia’s
cited testimony must be examined in context not only with her entire testimony but also with the other
circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie Limon
("Julie"), her classmate in college and the sister of Carmen. Earlier, Adelia’s own sister had secured the
title from the father of Carmen. However, Adelia’s sister, who was about to leave for the United States,
gave the title to Julie because of the absence of the other documents. Adelia’s sister told Adelia to
secure the title from Julie, and this was how Adelia obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer because the thing
sold is understood as delivered when it is placed in the control and possession of the vendee.27 To
repeat, Godofredo and Carmen themselves introduced the Natanawans, their tenants, to Armando
and Adelia as the new owners of the Subject Land. From then on, Armando and Adelia acted as the

Page 139 of 166

Bus. Org. I Cases – Page 3 Syllabus

landlords of the Natanawans. Obviously, Godofredo and Carmen themselves placed control and
possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and Natural
Resources to nullify the sale. Petitioners never raised this issue before the trial court or the Court of
Appeals. Litigants cannot raise an issue for the first time on appeal, as this would contravene the basic
rules of fair play, justice and due process.28 However, we will address this new issue to finally put an end
to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve
the sale, which was made within 25 years from the issuance of the homestead title. Section 118 of the
Public Land Act (Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally
constituted banking corporation, lands acquired under free patent or homestead provisions shall not
be subject to encumbrance or alienation from the date of the approval of the application and for a
term of five years from and after the date of the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years
after the issuance of title shall be valid without the approval of the Secretary of Agriculture and
Commerce, which approval shall not be denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land grant within five
years from the time that the patent or grant is issued.29 A violation of this prohibition renders a sale
void.30 This prohibition, however, expires on the fifth year. From then on until the next 20 years31 the land
grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the
alienation. The Secretary is required to approve the alienation unless there are "constitutional and legal
grounds" to deny the approval. In this case, there are no apparent constitutional or legal grounds for
the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale void.32 The absence
of approval by the Secretary does not nullify a sale made after the expiration of the 5-year period, for
in such event the requirement of Section 118 of the Public Land Act becomes merely directory 33 or a
formality.34 The approval may be secured later, producing the effect of ratifying and adopting the
transaction as if the sale had been previously authorized.35 As held in Evangelista v. Montano:36
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by the
Department Secretary "shall not be denied except on constitutional and legal grounds." There being
no allegation that there were constitutional or legal impediments to the sales, and no pretense that if
the sales had been submitted to the Secretary concerned they would have been disapproved,
approval was a ministerial duty, to be had as a matter of course and demandable if refused. For this
reason, and if necessary, approval may now be applied for and its effect will be to ratify and adopt
the transactions as if they had been previously authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for
Specific Performance. In reality, the ultimate relief sought by Armando and Adelia is the reconveyance
to them of the Subject Land. An action for reconveyance is one that seeks to transfer property,
wrongfully registered by another, to its rightful and legal owner.37 The body of the pleading or complaint
determines the nature of an action, not its title or heading.38 Thus, the present action should be treated
as one for reconveyance.39
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by
operation of law a trustee of an implied trust for the benefit of the real owner of the property. The
presence of fraud in this case created an implied trust in favor of Armando and Adelia. This gives
Armando and Adelia the right to seek reconveyance of the property from the Subsequent Buyers.40
To determine when the prescriptive period commenced in an action for reconveyance, plaintiff’s
possession of the disputed property is material. An action for reconveyance based on an implied trust
prescribes in ten years.41 The ten-year prescriptive period applies only if there is an actual need to
reconvey the property as when the plaintiff is not in possession of the property.42 However, if the plaintiff,
Page 140 of 166
Bus. Org. I Cases – Page 3 Syllabus

as the real owner of the property also remains in possession of the property, the prescriptive period to
recover title and possession of the property does not run against him. 43 In such a case, an action for
reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that
is imprescriptible.44
In this case, the appellate court resolved the issue of prescription by ruling that the action should
prescribe four years from discovery of the fraud. We must correct this erroneous application of the four-
year prescriptive period. In Caro v. Court of Appeals,45 we explained why an action for reconveyance
based on an implied trust should prescribe in ten years. In that case, the appellate court also
erroneously applied the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September
30, 1987,154 SCRA 396 illuminated what used to be a gray area on the prescriptive period for an action
to reconvey the title to real property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil
Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can
only be brought within the following periods after the right of action accrues:
xxx xxx xxx
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case
shall not be deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an
offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property
and the title thereto in favor of the true owner. In this context, and vis-a-vis prescription, Article 1144 of
the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx xxx xxx
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten
years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that,
illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an
implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the
property. The only discordant note, it seems, is Balbin vs. Medalla which states that the prescriptive
period for a reconveyance action is four years. However, this variance can be explained by the
erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June
25,1948, hence Section 43(3) of Act No. 190, was applied, the new Civil Code not coming into effect
until August 30, 1950 as mentioned earlier. It must be stressed, at this juncture, that article 1144 and
article 1456, are new provisions. They have no counterparts in the old Civil Code or in the old Code of
Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for
an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529,
which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the rights of any innocent holder of
the decree of registration on the original petition or application, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in
favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article
Page 141 of 166
Bus. Org. I Cases – Page 3 Syllabus

1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for the
reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the
issuance of the certificate of title xxx (Emphasis supplied)46
Following Caro, we have consistently held that an action for reconveyance based on an implied trust
prescribes in ten years.47 We went further by specifying the reference point of the ten-year prescriptive
period as the date of the registration of the deed or the issuance of the title.48
Had Armando and Adelia remained in possession of the Subject Land, their action for reconveyance,
in effect an action to quiet title to property, would not be subject to prescription. Prescription does not
run against the plaintiff in actual possession of the disputed land because such plaintiff has a right to
wait until his possession is disturbed or his title is questioned before initiating an action to vindicate his
right.49 His undisturbed possession gives him the continuing right to seek the aid of a court of equity to
determine the nature of the adverse claim of a third party and its effect on his title.50
Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove
away from the Subject Land the Natanawans, the tenants of Armando and Adelia.51 This created an
actual need for Armando and Adelia to seek reconveyance of the Subject Land. The statute of
limitation becomes relevant in this case. The ten-year prescriptive period started to run from the date
the Subsequent Buyers registered their deeds of sale with the Register of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February 1994, the
date of execution of their deeds of sale. The Register of Deeds issued the transfer certificates of title to
the Subsequent Buyers on 24 February 1994. Armando and Adelia filed the Complaint on 7 March 1994.
Clearly, prescription could not have set in since the case was filed at the early stage of the ten-year
prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or neglect, for an
unreasonable time, to do that which, by the exercise of due diligence, could or should have been
done earlier.52 It is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert
it.53 Armando and Adelia discovered in January 1994 the subsequent sale of the Subject Land and they
filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers, the co-
petitioners of Godofredo and Carmen, purchased and registered the Subject Land in good faith.
Petitioners argue that the testimony of Calonso, the person who brokered the second sale, should not
prejudice the Subsequent Buyers. There is no evidence that Calonso was the agent of the Subsequent
Buyers and that she communicated to them what she knew about the adverse claim and the prior
sale. Petitioners assert that the adverse claim registered by Armando and Adelia has no legal basis to
render defective the transfer of title to the Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando and
Adelia. The settled rule is when ownership or title passes to the buyer, the seller ceases to have any title
to transfer to any third person.54 If the seller sells the same land to another, the second buyer who has
actual or constructive knowledge of the prior sale cannot be a registrant in good faith.55 Such second
buyer cannot defeat the first buyer’s title.56 In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.57
Thus, to merit protection under the second paragraph of Article 1544 58 of the Civil Code, the second
buyer must act in good faith in registering the deed.59 In this case, the Subsequent Buyers’ good faith
hinges on whether they had knowledge of the previous sale. Petitioners do not dispute that Armando
and Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8 February 1994. The
Subsequent Buyers purchased their respective lots only on 22 February 1994 as shown by the date of
their deeds of sale. Consequently, the adverse claim registered prior to the second sale charged the
Subsequent Buyers with constructive notice of the defect in the title of the sellers,60 Godofredo and
Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent
Buyers the existence of the adverse claim. The registration of the adverse claim on 8 February 1994
constituted, by operation of law, notice to the whole world.61 From that date onwards, the Subsequent
Page 142 of 166
Bus. Org. I Cases – Page 3 Syllabus

Buyers were deemed to have constructive notice of the adverse claim of Armando and Adelia. When
the Subsequent Buyers purchased portions of the Subject Land on 22 February 1994, they already had
constructive notice of the adverse claim registered earlier.62 Thus, the Subsequent Buyers were not
buyers in good faith when they purchased their lots on 22 February 1994. They were also not registrants
in good faith when they registered their deeds of sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers’ individual titles to their respective lots are not absolutely indefeasible. The
defense of indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate
of title with notice of a flaw in his title.63 The principle of indefeasibility of title does not apply where fraud
attended the issuance of the titles as in this case.64
Attorney’s Fees and Costs
We sustain the award of attorney’s fees. The decision of the court must state the grounds for the award
of attorney’s fees. The trial court complied with this requirement.65 We agree with the trial court that if
it were not for petitioners’ unjustified refusal to heed the just and valid demands of Armando and
Adelia, the latter would not have been compelled to file this action.
The Court of Appeals echoed the trial court’s condemnation of petitioners’ fraudulent maneuverings
in securing the second sale of the Subject Land to the Subsequent Buyers. We will also not turn a blind
eye on petitioners’ brazen tactics. Thus, we uphold the treble costs imposed by the Court of Appeals
on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs against
petitioners.
SO ORDERED.

Page 143 of 166

Bus. Org. I Cases – Page 3 Syllabus

FIRST DIVISION
G.R. No. 104223 July 12, 2001
TIBURCIO SAMONTE, petitioner,
vs.
COURT OF APPEALS, EUGENIA DANGO GADIANO, TEOFILO GADIANO, PETRONILO DANGO FELICIANA
DANGO, NONILO MARAVE and GERONIMO DANGO, respondents.
KAPUNAN, J.:

Tiburcio Samonte (petitioner) filed this petition for review on certiorari seeking to reverse and set aside
the Decision, dated November 29, 1991, of the Court of Appeals (CA) in CA-G.R CV No. 16645. He
likewise seeks the reversal of CA Resolution, dated February 21, 1992, which denied his motion for
reconsideration.
The parcel of land (Lot No.216) subject of this dispute is situated in Nasipit, Agusan del Norte, and
originally covered by Original Certificate of Title No. RO-238(555) issue in the names Apolonia Abao
and her daughter Irenea Tolero, pro indiviso. It contained an area of 12,753 square meters. Two cases
were separately filed in the Regional Trial Court, Branch II of Nasipit, Agusan del Norte involving the
entire lot. Both cases were filed by the surviving heirs of Apolonia Abao and Irenea Tolero.1 These heirs,
children of Irenea Tolero and grand children of Apolonia Abao, are the respondents in this
case.1âwphi1.nêt
The first case, Civil Case No.1672, was an action for quieting of title and recovery of possession of a
parcel of land which originally formed part of the entire property. Said parcel of land was denominated
as Lot 216-B-2-G and covered by Transfer Certificate of Title (TCT) No. RT-899 in the name of Irenea
Tolero. The defendants named therein were spouses Andres and Amanda Lacho.
The second case, Civil Case No.1816, is similarly an action for quieting of title and recovery of
possession. Unlike the first case, however, Civil Case No.1816 involve the entire Lot 216. The complaint
therein sought the annulment of several certificates of title covering portions of Lot 216 and the
reinstatement of OCT No. RO-238 (555). The defendants in the second wase were Nicolas Jadol, Beatriz
Jadol, Jacobo Tagorda, Henry Jadol, Aurelio Rotor and herein petitioner.
The present case stems only from the latter case (Civil Case No. 1816) and, as culled from the CA
decision, the facts relevant herein are as follows:
Civil Case No.1816
(CA-G.R CV No. 16645)
From the pleadings and the evidence adduced by the parties the following are not disputed or
deemed admitted: that Lot 216 of the Cadastral survey of Nasipit, containing an area of 12,753
square meters, more or less, situated at Anislagan, Nasipit, Agusan (now del Norte) is covered
by Original Certificate of Title (OCT) No. R0-238 issue in 1927 in the name of Apolonia Abao and
Irenea Tolero in equal undivided shares (Exhibit E); that OCT No. RO-238 was administratively
reconstituted on August 8, 1957 and the assigned number of the reconstituted title is OCT No.
RO-238 (555) (Exhibit D identical to Exhibit-Samonte); that on August 8, 1957, based on an
affidavit of Extra-judicial Settlement and Confirmation of Sale (Exhibit D-1), OCT No. RO-238 (555)
was cancelled and lieu thereof Transfer Certificate of Title (TCT) No. RT-476 was issued in the
name of Irenea Tolero, 1/2 share and Nicolas Jadol, 1/2 share (Exhibit C identical to Exhibit 3-
Samonte); that on February 13, 1959, based on subdivision plan, subdividing Lot 216 into Lot 216-
A and Lot 216-B, the Register of Deeds of Agusan (now del Norte) cancelled TCT No. RT-476 and
issued in its place TCT No. RT-553 in the name of Tiburcio Samonte for Lot 216-A (Exhibit 2-
Samonte) and TCT No. RT-554, Irenea Tolero and Nicolas Jadol for Lot 216-B (Exhibit B); that on
February 13, 1959 based on a subdivision plan subdividing Lot 216-B to 216-B-1 and 216-B-2, TCT
No. RT-554 was cancelled and in its place TCT No. RT-555 was issued in the name of Jacob B.
Tagorda for Lot 216-B-1 and TCT No. 556 in the name of Irenea Tolero and Nicolas Jadol for Lot
216- B-2.
Plaintiffs in their evidence claim ownership over the entire lot, Lot 216, as one-half(1/2) of the
area of 12, 753 square meters was registered in the name of their mother Irenea Tolero (Exhibit
E) the other half was registered in the name of their and grandmother, Apolonia Abao. After
Page 144 of 166
Bus. Org. I Cases – Page 3 Syllabus

Apolonia Abao died during the Japanese occupation and Irenea Tolero died in 1945, they
inherited and became owners of Lot 216. Plaintiffs questioned the series of cancellation of the
certificate of title starting from OCT No. RO-238 (555) and the Deed of Extrajudicial Settlement
and Confirmation of Sale executed by Ignacio Atupan on August 7, 1957 (Exhibit D-1)
adjudicating one-half(1/2) of the area of Lot 216. Plaintiffs maintain that Ignacio Atupan is not
a son of Apolonia Abao but he only grew up while living with Apolonia Abao. That when Lot 216
was subdivided into two (2) lots, Lot 216-A and Lot 216-A (sic) which was made as one of the
basis in the cancellation of TCT No. 476 and issuance of TCT No. 553 and TCT No. 554 on February
13, 1959, the plaintiffs or their predecessors-in-interest have not signed any document agreeing
as to the manner how Lot 216 was to be divided, nor have they consented to the partition of
the same.
Defendant Samonte in his evidence claim that he bought portions of the Lot 216 in good faith
as he was made to believe that all the papers in possession of his vendors were all in order. One
of the documents presented by him is a Deed of Absolute Sale executed in 1939 (Exhibit 8-
Samonte ). He has been in open, continuous, adverse and exclusive possession of the portions
of Lot 216 he bought for more than 20 years and have declared the land for taxation purposes
(Exhibits 5 and 7-Samonte) and have paid the real estate taxes thereon (Exhibit 6 to 6-K, inclusive
Samonte). The portions he bought is now covered by TCT No. RT-553 (Exhibit 2-Samonte) and
TCT No. RT-1658 (Exhibit 4-Samonte).
Defendant Jadols claim that they became owners of one-half(1/2) portion of Lot 216 by
purchase from Ignacio Atupan and Apolonia Abao on September 15, 1939 as shown by a
document notarized by Jacobo Bello (Exhibit 1-Jadol) and signed by lrenea Tolero (Exhibit 1-D
Jadol) as a witness. They were in possession since they bought the land. The land is covered by
Tax Declaration No. 1630 (Exhibit 2-Jadol) and Tax Declaration No. 1676 (Exhibit 3-Jadol) in their
name (Decision, pp. 36-39).2
Initially, the two cases were heard independently of each other. It was discovered, however, that they
were intimately related. Accordingly, the court a quo jointly tried the two cases. After due trial, the trial
court rendered separate decisions, both in favor of the plaintiffs therein. The dispositive portion
particularly of the decision in Civil Case No. 1816 reads:
Civil Case No. 1816
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiffs and against
the defendants:
a) declaring plaintiffs co-owners of the entire of (sic ) Lot 216 being the surviving heirs of Apolonia
Abao and Irenea Tolero;
b) directing the reinstatement of Original Certificate of Title No. RO-238(555);
c) directing the cancellation of Transfer Certificate of Title No. RT - 476 and all subsequent
certificates of title derived therefrom which are all declared null and void;
d) declaring the subdivision survey of Lot 216 null and void and ineffectual;
e) directing the defendants to vacate the premises of Lot 216 and to remove all their
improvements therefrom as they are builders in bad faith;
f) directing defendants Jadol and Samonte to pay jointly and severally the plaintiffs the sum of
P20,000.00 for the use and occupation of the land;
g) directing defendants Jadol and Samonte to pay P5,000.00 as attorney's fees;
h) ordering the dismissal of the counterclaims of defendants; and
i) directing the defendants Jadol and Samonte to pay the costs.
SO ORDERED.3
Plaintiffs were likewise declared the lawful owners of Lot 216-B-2-G in Civil Case No. 1672. Defendants
therein were ordered to, among others, vacate the premises and remove the improvements made
thereon.4
The defendants in the two cases respectively appealed the aforesaid decisions to the CA. The CA
ordered the consolidation of the two appeals. Thereafter, the CA rendered the decision of November
29, 1991 affirming the decisions of the trial court and dismissing the appeals. Petitioner then filed the
instant petition assailing particularly the decision in CA-G.R. CV No. 16645. He alleges that:
Page 145 of 166
Bus. Org. I Cases – Page 3 Syllabus

I
THE HONORABLE COURT OF APPEALS ERRED AS A MATTER OF LAW IN DEPARTING FROM THE
PREVAILING DOCTRINE SUPPORTED BY THE WEIGHT OF AUTHORITIES THAT "THE DISCOVERY OF THE
FRAUD IS DEEMED TO HAVE TAKEN PLACE AT THE TIME OF THE REGISTRATION" (CARANTES VS.
COURT OF APPEALS, 76 SCRA 514);5
II
THE COURT OF APPEALS ERRED AS A MATTER OF LAW AND JURISPRUDENCE IN NOT HOLDING THAT
HEREIN PETITIONER WAS A BUYER IN GOOD FAITH FOR VALUE, HENCE HE IS PROTECTED BY LAW.6
The petition is bereft of merit.
It is not disputed that Ignacio Atupan caused the fraudulent cancellation of OCT No. RO-238 (555). The
trial court found that Atupan, on the basis of his Affidavit of Extrajudicial Settlement and Confirmation
Sale," adjudicated unto himself one-half of Lot 216 by misrepresenting himself as the sole, heir of
Apolonia Abao. Atupan, in said affidavit, likewise confirmed the two deeds of sale allegedly executed
by him and Abao on September 15 and 16, 1939, covering the latter's one-half lot in favor of Nicolas
Jadol. The trial court found Atupan's affidavit, dated August 7, 1957, to be tainted with fraud because
he falsely claimed therein that he was the sole heir of Abao when in fact, he merely lived and grew up
with her. Jadol and his wife, Beatriz, knew about this fact. Despite this knowledge, however, the Jadol
spouses still presented the affidavit of Atupan before the Register of Deeds of the Province of Agusan
when they caused the cancellation of OCT No. RO-238 (555) and issuance of TCT No. RT-476 in their
names covering that portion owned by Abao.
The trial court concluded that the incorporation of the statement in Atupan's affidavit confirming the
alleged execution of the aforesaid deeds of sale was intended solely to facilitate the issuance of the
certificate of title in favor of the Jadol spouses. It was noted that the documents evidencing the
alleged transactions were not presented in the Register of Deeds. It was further pointed out that the
Jadol spouses only sought the registration of these transactions in 1957, eighteen (18) years supposedly
took place or twelve (12) years after Abao died.
Based on the foregoing facts, the CA, on appeal, ruled that the cancellation of OCT No. RO-238(555)
and the consequent issuance of TCT No. RT-476 in its place in the name of the Jadol spouses were
effected through fraudulent means and that they (spouses Jadol) not only had actual knowledge of
the fraud but were also guilty of bad faith.7
Nonetheless, petitioner contends that respondent's action in the court a quo had already prescribed.
Generally, an action for reconveyance of real property based on the fraud may be barred by the
statute of limitations which require that the action must be commenced within four (4) years from the
discovery of fraud, and in case of registered land, such discovery is deemed to have taken place from
the date of the registration of title.8
Article 1456 of the Civil Code, however, 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.
As it had been indubitably established that fraud attended the registration of a portion of the subject
property, it can be said that the Jadol spouses were trustees thereof on behalf of the surviving heirs of
Abao. An action based on implied or constructive trust prescribes in ten (10) years from the time of its
creation or upon the alleged fraudulent registration of the property.9
Petitioner, as successor-in-interest of the Jadol Spouses, now argues that the respondents' action for
reconveyance, filed only in 1975, had long prescribed considering that the Jadol spouses caused the
registration of a portion of the subject lot in their names way back in August 8, 1957. It is petitioner's
contention that since eighteen years had already lapsed from the issuance of TCT No. RT-476 until the
time when respondents filed the action in the court a quo in 1975, the same was time-barred.
Petitioner's defense of prescription is untenable. The general rule that the discovery of fraud is deemed
to have taken place upon the registration of real property because it is considered a constructive
notice to all persons"10does not apply in this case. Instead, the CA correctly applied the ruling in Adille
vs. Court of Appeals11 which is substantially on all fours with the present case.

Page 146 of 166

Bus. Org. I Cases – Page 3 Syllabus

In Adille, petitioner therein executed a deed of extrajudicial partition misrepresenting himself to be the
sole heir of his mother when in fact she had other children. As a consequence, petitioner therein was
able to secure title to the land in his name alone. His siblings then filed a case for partition on the
ground that said petitioner was only a trustee on an implied trust of the property. Among the issues
resolved by the Court in that case was prescription. Said petitioner registered the property in 1955 and
the claim of private respondents therein was presented in 1974.
The Court's resolution of whether prescription had set in therein is quite apropos to the instant case:
It is true that registration under the Torrens system is constructive notice of title, but it has likewise
been our holding that the Torrens title does not furnish a shield for fraud. It is therefore no
argument to say that the act of registration is equivalent to notice of repudiation, assuming
there was one, notwithstanding the long-standing rule that registration operates as a universal
notice of title.
For the same reason, we cannot dismiss private respondents' claims commenced in 1974 over
the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years,
reckoned from the date of the registration of the property, we, as we said, are not prepared to
count the period from such a date in this case. We note the petitioner's sub rosa efforts to get
hold of the property exclusively for himself beginning with his fraudulent misrepresentation in his
unilateral affidavit of extrajudicial settlement that he is "the only heir and child of his mother
Feliza with the consequence that he was able to secure title in his name [alone]." Accordingly,
we hold that the right of the private respondents commenced from the time they actually
discovered the petitioner's act of defraudation. According to the respondent Court of Appeals,
they "came to know [of it] apparently only during the progress of the litigation." Hence,
prescription is not a bar. 12
In this case, the CA reckoned the prescriptive period from the time respondents had actually
discovered the fraudulent act of Atupan which was, as borne out by the records, only during the trial
of Civil Case No. 1672.13Citing Adille, the CA rightfully ruled that respondents' action for reconveyance
had not yet prescribed.
On the issue of whether petitioner is a buyer in bad faith as he claims, the Court likewise holds in the
negative: It was established during the trial by the court a quo that he knew that respondents were the
only surviving heirs of Irenea Tolero. Despite this knowledge, petitioner still bought a portion of the
subject lot from the Jadol spouses on July 20, 1957, when the same was still registered under OCT No.
RO-238(555) in the name of Abao and Tolero.
With respect to this particular lot therefore, petitioner cannot pretend to be a purchaser in good faith.
It is axiomatic that one who buys from a person who is not a registered owner is not a purchaser in
good faith. 14
Moreover, With respect to the other portion which petitioner bought from Jacobo Tagorda, the trial
court held that he was, as in the first case, a buyer in bad faith. The general rule is that a person dealing
with registered land has a right to rely on the Torrens certificate of title and to dispense with the need
of making further inquiries.15
This rule, however, admits of exceptions; 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 the title of the property in litigation. 16 One who
falls within the exception can neither be denominated an innocent purchaser for value nor a
purchaser in good faith; and hence does not merit the protection of the law. 17
The CA established that petitioner is not a purchaser in good faith with respect to this portion of the
subject property, thus:
xxx While it may be true that the second portion was purchased by Samonte from Tagorda in
whose name the same was then registered under TCT No. RT -555, Samonte was previously
charged with the fact that Jadol lacked the capacity to transmit title over any part of the
subject property including that portion which the latter sold to Tagorda. Thus, Samonte was
clearly in bad faith when he sought the registration of the deed of sale of July 10, 1972 which
effected the cancellation of TCT No. RT-555 and the issuance of TCT No. 1658 in his favor. xxx 18
Page 147 of 166
Bus. Org. I Cases – Page 3 Syllabus

Petitioner cannot now claim that he already acquired valid title to the property. The inscription in the
registry, to be effective, must be made in good faith. The defense of indefeasibility of a Torrens Title
does not extend to a transferee who takes the certificate of title with notice of a flaw. A holder in bad
faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a
shield for, frauds. 19
In fine, there is no compelling reason to deviate from the salutary rule that findings and conclusions of
the trial court, especially if affirmed by the appellate court, are accorded utmost respect by this
Court.1âwphi1.nêt
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision, dated November 29, 1991 of
the Court of Appeals and its Resolution, dated February 21, 1992, in CA-G.R. CV No. 16645
are AFFIRMED in toto.
SO ORDERED.

Page 148 of 166

Bus. Org. I Cases – Page 3 Syllabus

THIRD DIVISION
G.R. No. 124118 March 27, 2000
MARINO, RENATO, LETICIA, IMELDA, ALICIA, LIGAYA, and ZENAIDA, all surnamed
ADRIANO, petitioners,
vs.
COURT OF APPEALS, CELESTINA, MANOLO and AIDA, all surnamed ADRIANO, respondents.
GONZAGA-REYES, J.:

Petition for review on certiorari of the Decision of the Court of Appeals, Second Division,1 affirming in
toto the Joint Order of the Regional Trial Court of Lucena City, Branch 55,2 which dismissed Civil Case
No. 88-115 for annulment of will and ordered the disposition of the estate of Lucio Adriano in
accordance with the provisions of his last will and testament in Spec. Proc. No. 4442.
The pertinent facts are as follows:
The testator, Lucio Adriano also known as Ambrocio Adriano, married Gliceria Dorado on October 29,
1933. Out of their lawful marriage, they had three children, namely, Celeste, Manolo, and Aida, private
respondents in this case. Sometime in 1942 or prior thereto. Lucio and Gliceria separated, and Gliceria
settled in Rizal, Laguna where she died on June 11, 1968. Also in 1942 or even earlier, Lucio cohabited
with Vicente Villa, with whom he had eight children Marino, Renato, Leticia, Imelda, Maria Alicia,
Ligaya, Jose Vergel, and Zenaida, all surnamed Adriano. All his children by Vicenta Villa are named
petitioners in the instant case, with the exception of Jose Vergel, who died before the inception of the
proceedings.
On November 22, 1968, or five months after the death of Gliceria, Lucio married Vicenta. Lucio and
Vicenta and their children lived in Candelaria, Quezon until the spouses separated in 1972.3
On October 10, 1980, Lucio executed a last will and testament disposing of all his properties, and
assigning among others, his second wife Vicenta and all his children by his first and second marriage
as devisees and legatees therein. Among the properties bequeathed in the will were a 45,000 square
meter lot and the residential house, rice mill, warehouse and equipment situated thereon located in
Candelaria, Quezon and registered under Transfer Certificate of Title ("TCT") No. T-56553 in the Registry
of Deeds of Quezon4 , which was disposed of in the following manner; (1) to private respondents, Lucio's
children by his first wife, 10,000 square meters of the disputed property, including the warehouse, rice
mill, and equipment situated thereon; (2) to Vicenta and petitioners, his children by his second
marriage the remaining 35,000 square meters, and (3) to private respondents, the residential house
also within the same property.5
On February 11, 1981, Lucio died and private respondent Celestina Adriano, who was instituted in
Lucio's will as its executrix, filed a petition for the probate of the will on February 18, 1981 before the
RTC of Lucena City. The probate case was docketed as Spec. Proc. No. 4442. After due hearing and
despite the Opposition filed by Vicenta, the RTC allowed the probate of the will and directed the
issuance of letters testamentary to petitioner-executrix Celestina Adriano in an Order dated August 22,
1983. On November 10, 1983, Vicenta appealed said Order to the then Intermediate Appellate Court,
which in turn affirmed the probate of the will. Vicenta died on July 2, 1985.6
On August 17, 1988, and while the proceedings for settlement of estate were pending before the RTC,
petitioners instituted an action for annulment of Lucio Adriano's will which was docketed as Civil Case
No. 88-115. In the complaint plaintiffs-petitioners alleged that before the marriage of Lucio and their
mother, Vicenta, on November 22, 1968, the two lived together as husband and wife and as such,
acquired properties which became the subject of inventory and administration in Spec. Proc. No. 4442.
Plaintiffs claimed that the properties bequeathed in Lucio's will are undivided "civil partnership and/or
conjugal properties of Lucio Adriano and Vicenta Villa", and thus, the will sought to be probated should
be declared void and ineffective insofar as it disposes of the rightful share or properties of Vicenta.7
It is also not disputed that the contested properties in Civil Case No. 88-115 and Spec. Proc. No. 4442
were also the subject of a complaint filed sometime in 1980 by Vicenta against Lucio, docketed with
the then Court of First Instance of Quezon, Lucena City, Branch II as Civil Case No. 7534 wherein Vicenta
sought the provisional partition or separation of the properties pendente lite. The case was dismissed
on January 28, 1991 without prejudice, for lack of interest.
Page 149 of 166
Bus. Org. I Cases – Page 3 Syllabus

Spec. Proc. No. 4442 and Civil Case No. 88-115 were consolidated and jointly heard by the RTC.
The trial court favored the evidence of private respondents, which indicated that the purchase money
for the contested properties came from the earnings of Lucio in a business partnership that he entered
into in 1947, or during the subsistence of his marriage to Gliceria. The trial court further found that Lucio's
initial capital infusion of P15,000.00 in the business partnership was in fact obtained from the conjugal
fund of his first marriage. The evidence of private respondents is thus summarized by the trial court.
Defendants evidence, on the other hand tends to show that the original common fund of Lucio
(Ambrocio) Adriano in the amount of P15,000.00 was invested by Lucio Adriano in a partnership
called the "Central Rice Mill & Co." which was formed and organized on November 30, 1947.
Such initial investment came from the savings of Lucio Adriano and Gliceria Dorado before
World War II, which was earned by said spouses by means of ambulant peddling of betel nuts
and ikmo leaves and, subsequently, by the selling of (a) variety (of) goods and rice retailing at
a market stall which they acquired at the public market of Candelaria, Quezon. On these
savings, spouses Lucio Adriano and Gliceria Dorado added the proceeds of the sale of a
"Fairbanks" rice mill during the Japanese occupation sometime between the years 1943 and
1944. The same rice mill was then located at the south end of Gonzales Street near the public
marker of Candelaria, Quezon, and was acquired by the same spouses through their joint efforts
and industry made from the time of their marriage in 1933.
It is likewise shown by defendants' evidence that on January 8, 1951, the Articles of Co-
Partnership of "Central Rice Mill & Co." was amended and its name was changed to "Quezon
Central Rice Mill & Co." Lucio Adriano then made a new investment into the partnership out of
savings from the conjugal partnership with Gliceria Dorado for the period of 1947 until 1950 in
the amount of P18,750.00 (Exhibit "1-A") thereby increasing his investment to P33,750.00 (par. 7(c)
of Amended Articles of Co-Partnership, Exhibit "1-A"). On January 22, 1952, another partnership
called "The Lessee of the Quezon Central Rice Mill" as formed by Lucio (Ambrocio) Adriano and
four (4) partners and he invested the amount of P25,000.00 (Exhibit "2") thereby making his total
capital investment reach the amount of P58,750.00.
On May 3, 1952, Lucio Adriano bought the share of Tan Kim Alias "Joaquin Tan", a partner who
withdrew from the partnership of the Quezon Central Rice Mill & Co. and who, in consideration
of the sum of P34,342.55 executed a Deed of Sale and Mortgage (Exhibit "3") in favor of Lucio
Adriano covering his proportional share in the properties of the partnership consisting of two (2)
rice mills, two (2) diesel engines and a camarin, which are situated at Candelaria, Quezon. Lucio
Adriano declared these properties in his name for taxation, purposes under TCT Property Index
No. 22-11-01-043-B (Exhibit "4") and Tax Declaration No. 564 (Exhibit "5")
All in all, the withdrawals made out of the savings of the conjugal partnership of Lucio Adriano
and his wife, Gliceria Dorado, are the following:
1. Upon signing of the contract of sale and mortgage (Exhibit "3"), Lucio Adriano paid the
sum of P10,342.45 and the balance of P24,000.00, as reflected in the statement of
account of Tan Kim as receivables from Lucio Adriano (Exhibit "6") were settled on
subsequent dates;
2. Original copy of a receipt dated May 3, 1953 (Exhibit "7") covering expenses of
registration of Exhibit "3" in the sum of P160.00;
3. Handwritten list of registration expenses (Exhibit "8"); and
4. Originals of receipts covering amounts paid by Lucio Adriano to Tan Kim on various
dates from June 3, 1953 (Exhibits "9" to "20", inclusive) in the aggregate sum of P24,492.15.
It likewise appears from the evidence of the defendants that by the end of 1953, the total
capital investment of Lucio Adriano taken from his conjugal partnership with his first wife, Gliceria
Dorado, reached the amount of P94,744.88. In the late part of 1954, however, the same
partnership was dissolved by means of a verbal agreement reached by Lucio Adriano and his
partners and this resulted to an equal division of the partnership properties with the left portion
thereof going to Tan Kang and Tan Giam and the right portion, to Lucio Adriano and Francisco
Ramirez. Furthermore, by the end of 1955, Francisco Ramirez withdrew his share totalling
P16,250.00 in favor of Lucio Adriano, who acquired the same, and from that time on, the latter
Page 150 of 166
Bus. Org. I Cases – Page 3 Syllabus

became the sole owner of the rice mill which he latter registered as the "Adriano Central Rice
Mill". When the partnership was finally dissolved in 1955, the total capital investment of Lucio
Adriano therein was P110,994.88, consisting of the fruit or income of his common fund with
Gliceria Dorado, which was cumulatively used in the acquisition of other properties listed in the
inventory submitted to this Court by the administratrix and defendant, Celestina Adriano de
Arcilla on February 19, 1987.8
The decretal portion of the Order dated May 8, 1991 issued by the RTC of Lucena City reads:
WHEREFORE, judgment is hereby rendered as follows:
1. In Civil Case No. 88-115, this Court finds and so holds that no cogent reasons or grounds
exist to affect adversely, if not nullify, the testamentary dispositions and provisions
contained in the Last Will and Testament of the late Lucio (Ambrocio) Adriano.
Accordingly, the complaint filed in this case is hereby ordered dismissed with costs
against plaintiffs.
In like manner, the counterclaim is hereby ordered dismissed.
2. In Spec. Proc. No. 4442, it is hereby ordered that the settlement, liquidation, and
partitioning of the estate of the late Lucio (Ambrocio) Adriano, more particularly the
delivery of the respective shares of his heirs, the plaintiffs and defendants, be effected
and implemented in accordance with the testamentary provisions set forth in the Last
Will and Testament of the testator, Lucio (Ambrocio) Adriano.
SO ORDERED.9
The Court of Appeals dismissed petitioners' appeal for lack of merit, and affirmed in toto the Joint Order
of the RTC of Lucena City.
As elevated before us, the petition takes issue only in respect of the property covered by TCT No. T-
56553. Petitioners insist that it was erroneous of respondent court not to have upheld the co-ownership
of Vicenta to 1/2 of said property, and to have declared the entire property as belonging to the
conjugal partnership of Lucio and Gliceria. The petition essentially relies on the following grounds: (1)
TCT No. T-56553, issued to "Spouses, LUCIO ADRIANO and VICENTA VILLA" 10 , constitutes conclusive and
indefeasible evidence of Vicenta's co-ownership in the property, 11 and (2) the Deed of Sale dated
March 15, 1964, as annotated in OCT No. O-9198 12 , the mother title of TCT No. T-56553, designates
Vicenta Villa as a co-vendee. Petitioners maintain that the Deed of Sale, being the "best evidence" of
the contents thereof, proves Vicenta's co-ownership in the land.
We see no reason to reverse respondent court. Petitioners' insistence that a co-ownership of properties
existed between Lucio and Vicenta during their period of cohabitation before their marriage in 1968 is
without lawful basis considering that Lucio's marriage with Gliceria was then subsisting. The co-
ownership in Article 144 of the Civil Code 13 requires that the man and woman living together as
husband and wife without the benefit of marriage must not in any way be incapacitated to
marry. 14 Considering that the property was acquired in 1964, or while Lucio's marriage with Gliceria
subsisted, such property is presumed to be conjugal unless it be proved that it pertains exclusively to
the husband or to the wife. 15 Thus, we ruled in Pisueñe vs. Heirs of Petra Unating and Aquilino Villar16 that
the prima facie presumption that properties acquired during the marriage are conjugal cannot prevail
over a court's specific finding reached in adversarial proceedings to the contrary.
As found by both the trial court and respondent court in this case, not only did petitioners fail to
overcome the presumption of conjugality of the disputed property, private respondents have also
presented sufficient evidence to support their allegation that the property was in fact purchased by
Lucio with proceeds of the conjugal fund of his first marriage. This factual finding, which is clearly borne
out by the evidence on record, is binding and conclusive upon us and will not be disturbed.
Although in cases of common-law relations where an impediment to marry exists, equity would dictate
that property acquired by the man and woman through their joint endeavor should be allocated to
each of them in proportion to their respective efforts, 17 petitioners in the instant case have not
submitted any evidence that Vicenta actually, contributed to the acquisition of the property in
question.
We cannot agree with petitioners' bare and expedient assertion that, because the title to the property
was registered in the name of both Lucio and Vicenta, she should thereby be deemed owner to half
Page 151 of 166
Bus. Org. I Cases – Page 3 Syllabus

of it. A certificate of title under the Torrens system is aimed to protect dominion, and should certainly
not be turned into an instrument for deprivation of ownership. 18 Because a just and complete resolution
of this case could only be arrived at by determining the real ownership of the contested property,
evidence apart from or contrary to the certificate of title bears considerable importance. 19 This
assumes peculiar force in the instant situation where the heirs of a lawful pre-existing marriage stand to
be deprived. Thus, in Belcodero vs. Court of Appeals, 20 we held that property acquired by a man while
living with a common-law wife during the subsistence of his marriage is conjugal property, even when
the property was titled in the name of the common-law wife. In such cases, a constructive trust is
deemed to have been created by operation of Article 1456 of the Civil Code over the property which
lawfully pertains to the conjugal partnership of the subsisting marriage.
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.1âwphi1
In Vicenta's case, it is clear that her designation as a co-owner of the property in TCT No. T-56553 is a
mistake which needs to be rectified by the application of the foregoing provisions of Article 1456 and
the ruling in Belcodero. The principle that a trustee who takes a Torrens title in his or her name cannot
repudiate the trust by relying on the registration, is a well-known exception to the principle of
conclusiveness of a certificate of title. 21
On petitioners' second ground, we note that the Deed of Sale dated March 15, 1964 which purportedly
designates Vicenta as a co-buyer of the property was not even presented in evidence. The entry in
OCT No. 0-9198 of the Deed of Sale bears no weight in proving Vicenta's supposed co-ownership,
applying petitioners' own argument that the document itself, the Deed of Sale in the instant case, is
the best evidence of its contents. The memorandum in the OCT is not admissible as evidence of the
contents of said Deed of Sale, but only of the fact of its execution, its presentation for notation, and its
actual notation for purposes of constructive notice to the public of the preferential rights created and
affecting that property. 22 Besides, even if said Deed of Sale was submitted in evidence, it still has no
bearing because it could not be said to affect or bind third parties to the sale, such as private
respondents herein.1âwphi1.nêt
WHEREFORE, the Decision in CA-G.R. CV No. 41509 is hereby AFFIRMED.
SO ORDERED.

Page 152 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 205867 February 23, 2015
MARIFLOR T. HORTIZUELA, represented by JOVIER TAGUFA, Petitioner,
vs.
GREGORIA TAGUFA, ROBERTO TAGUFA and ROGELIO LUMABAN, Respondents.
DECISION
MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 13,
2012 Decision1 and the January 25, 2013 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No.
122648 which reversed and set aside the July 1, 2011 Decision 3 of the Regional Trial Court, Branch 22,
Cabagan, Isabela (RTC), in an action for reconveyance and recovery of possession.
The Facts:
The undisputed facts were succinctly summarized in the August 31, 2010 Decision4 of the 3rd Municipal
Circuit Trial Court, Tumauini-Delfin Albano, Tumauini, Isabela (MCTC) before which a complaint5 for
Reconveyance and Recovery of Possession with Damages was filed by petitioner Mariflor Tagufa
Hortizuela (Hortizuela)represented by Jovier Tagufa against respondents Gregoria Tagufa, Roberto
Tagufa and Rogelio Lumaban (respondents). As quoted by the CA, said undisputed facts are:
Gleaned from the joint testimonies of R[u]nsted Tagufa xxx and Jovier Tagufa xxx are the following
facts:
The property involved in this case is a parcel of land located at District IV, Tumauini, Isabela containing
an area of 539 square meters, more or less, and covered by OCT No. P-84609 of the Registry of Deeds
of Isabela. By virtue of the special power of attorney xxx executed by Mariflor Tagufa Hortizuela, Jovier
Tagufa instituted this case against herein defendants praying for the peaceful surrender of the above-
described property unto them and further ordering defendant Gregoria Tagufa to reconvey in
plaintiff’s favor the same property which was titled under her name via fraud.
Before it was titled in the name of Defendant Tagufa, said property was originally owned by plaintiff’s
parents, Spouses Epifanio Tagufa and Godofreda Jimenez. Although untitled, the spouses mortgaged
the property with the Development Bank of the Philippines (DBP, for brevity). For failure to redeem the
property, DBP foreclosed the same and sold it to Atty. Romulo Marquez xxx who, in turn, sold it back to
Runsted Tagufa, husband of defendant Gregoria Tagufa, on April 4, 2002 xxx using the fund sent by
plaintiff Hortizuela who was in America and with the agreement that Runsted will reconvey the said
property to her sister when demanded. However, plaintiff discovered that the same unregistered
property was titled in the name of Gregoria Tagufa under OCT No. P-84609 of the Registry of Deeds of
Isabela xxx. Investigating further, plaintiff discovered that Gregoria Tagufa was able to title the said
property by virtue of a free patent application before the Department of Environment and Natural
Resources (DENR) and the execution of a Deed of Extrajudicial Settlement of the Estate of the late
Spouses Leandro Tagufa and Remedios Talosig dated May 9,2003 xxx. Plaintiff now seeks to recover
possession of the said property which is presently occupied by Gregoria Tagufa and her co-defendants
and have the same be reconveyed unto them.6
In its Order, dated May 5, 2010,the MCTC granted the motion to declare defendants in default and
allowed Hortizuela to present her evidence ex parte. Thereafter, on August 31, 2010, the MCTC
dismissed the complaint for lack of merit ruling that "in the judicious analysis by this court, plaintiffs have
resorted to a wrong cause of action."7
Not in conformity, Hortizuela appealed to the RTC. In its July 1, 2011 Decision, the RTC reversed the
MCTC ruling. The decretal portion of the RTC decision reads as follows: WHEREFORE, premises
considered, the appeal is hereby granted and the Decision dated August 31, 2010, is hereby REVERSED
and judgment is hereby rendered as follows:
1. Ordering the defendant Gregorio Tagufa to reconvey to the plaintiff Mariflor Tagufa Hortizuela
the land described in paragraph 4 of the complaint;
Page 153 of 166
Bus. Org. I Cases – Page 3 Syllabus

2. Ordering the defendants to vacate the same land and to surrender the peaceful possession
thereof to the plaintiff;
3. Ordering the defendants to pay to the plaintiff the following amounts, jointly and severally:
a) Fifty Thousand (₱50,000.00) Pesos as Moral Damages;
b) Twenty Thousand (₱20,000.00) Pesos as Attorney’s Fees.
SO DECIDED.8
Respondents filed a motion for reconsideration, but it was denied by the RTC.
The reversal being unacceptable to them, respondents filed a petition for review before the CA
questioning the RTC decision. This time, the case was disposed in their favor. According to the CA,
although Hortizuela filed with the MCTC a complaint for reconveyance and recovery of possession of
the subject lot, she was also questioning the validity of the Torrens title, Original Certificate of Title
(OCT)No. P-846609.9 The CA pointed out that this was in contravention of Section 48 of Presidential
Decree (P.D.)No. 1529 which provides:
Sec. 48. Certificate not subject to collateral attack.- A certificate of title shall not be subject to collateral
attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance
with law
It cited the well-settled rule that a Torrens title could not be collaterally attacked; that the issue of
whether or not the title was fraudulently issued, could only be raised in an action expressly instituted for
that purpose; and that an action for reconveyance and recovery of possession was not the direct
action contemplated by law.10 Hence, the dispositive portion of the CA decision reads in this wise:
WHEREFORE, premises considered, the Decision dated July 1, 2011 rendered by the Regional Trial Court
of Cabagan, Isabela, is hereby REVERSED and SET ASIDE. The present Complaint for reconveyance and
recovery of possession with damages is DISMISSED.
SO ORDERED.11
Hortizuela filed a motion for reconsideration, but it was denied in a Resolution, 12 dated January 25,
2013.
Hence, this petition.
ISSUE
WHETHER OR NOT AN ACTIONFOR RECONVEYANCE AND RECOVERY OF POSSESSION CONSTITUTES AN
INDIRECT OR COLLATERAL ATTACK ON THE VALIDITY OF THE SUBJECT CERTIFICATE OF TITLE WHICH IS
PROSCRIBED BY LAW.
Hortizuela claims that respondent Gregoria Tagufa (Gregoria),being the wife of Runsted, was certainly
aware that the subject land was actually sold by Atty. Romulo Marquez (Atty. Marquez) to her
(Hortizuela). Runsted, only acted as attorney-in-fact in the sale transaction. Thus, the action for
reconveyance was not a collateral attack on the said title because Hortizuela was not seeking the
nullification of the title, but rather the reconveyance of the property, covered by the said title, which
Gregoria was holding in trust for her benefit as the real owner. Gregoria should, therefore, reconvey
the property and its title to her, being the rightful owner.
Position of Respondents
Respondents counter that although Hortizuela’s complaint was denominated as one for
reconveyance and recovery of possession, its main objective was to nullify the title held by Gregoria
over the subject property. For said reason, the complaint would amount to a collateral attack on the
title which was proscribed under the principle of indefeasibility of a Torrens title. To rule that the action
for reconveyance was not a collateral one would result in the nullity of the decree of registration.
Another argument that respondents want this Court to consider in resolving the subject petition is the
fact that the overriding reason why Hortizuela chose to file a complaint for reconveyance and
recovery of possession was that she failed to avail of the remedy provided under Section 38 13 of Act
496 within the prescribed period of one (1) year, counted from the issuance of the free patent by the
government.
Finally, granting that the title over the property would be nullified and the property be reconveyed to
Hortizuela, still the latter would be ineligible to own the same pursuant to Batas Pambansa (B.P.) Blg.
223 which requires, among others, that an applicant for a free patent must be a Filipino citizen.
Hortizuela, by her own admission, is an American citizen who has been residing in Las Vegas, Nevada.
Page 154 of 166
Bus. Org. I Cases – Page 3 Syllabus

The Court’s Ruling

The Court finds the petition meritorious.
The Court is not unmindful of the principle of indefeasibility of a Torrens title and Section 48 of P.D. No.
1528 where it is provided that a certificate of title shall not be subject to collateral attack. 14 A Torrens
title cannot be altered, modified or cancelled except in a direct proceeding in accordance with law.
When the Court says direct attack, it means that the object of an action is to annul or set aside such
judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an
action to obtain a different relief, an attack on the judgment or proceeding is nevertheless made as
an incident thereof.15 In its decision, the MCTC wrote:
Obviously, the bone of contention in this case are the deed of sale by and between Romulo Marquez
and Runsted Tagufa, the estranged husband of defendant Gregoria Tagufa, and OCT No. P-84609
registered in the name of Gregoria Tagufa who, according to the plaintiff, fraudulently caused the
titling of the same.
In their lamentations, plaintiff pointed out the following indicia of fraud committed by GregoriaTagufa
that would allegedly justify reconveyance:
First, Gregoria Tagufa made it appear in the extrajudicial settlement of the estate of spouses Leandro
Tagufa and Remedios Talosig that she is an heir when, in truth, she is only a grand daughter-in-law,
Second, she already knew when she applied for free patent that plaintiff was already the owner of the
land she was applying for;
Third, she already knew that when she applied for free patent that plaintiff’s parents were not anymore
the owners of the land as the same was mortgaged with the DBP; and
Fourth, defendant has never been in actual possession of the property when she applied for it.
All in all, plaintiff argued, Gregoria Tagufa never acquired any valid right or legal title over the property.
Studying the merits of this case and removing all its superfluities, plaintiffs plainly question the title
generated in the name of defendant Gregoria Tagufa having been obtained by fraud and
misrepresentation. However, in the judicious analysis by this court, plaintiffs have resorted to a wrong
cause of action.16
From the foregoing, it can be deduced that the MCTC was convinced that fraud was attendant in the
registration of the land but was not convinced that reconveyance was an accepted remedy. Contrary
to the pronouncements of the MCTC and the CA, however, the complaint of Hortizuela was not a
collateral attack on the title warranting dismissal. As a matter of fact, an action for reconveyance is a
recognized remedy, an action in personam, available to a person whose property has been wrongfully
registered under the Torrens system in another’s name. In an action for reconveyance, the decree is
not sought to be set aside. It does not seek to set aside the decree but, respecting it as incontrovertible
and no longer open to review, seeks to transfer or reconvey the land from the registered owner to the
rightful owner. Reconveyance is always available as long as the property has not passed to an
innocent third person for value.17 There is no quibble that a certificate of title, like in the case at bench,
can only be questioned through a direct proceeding. The MCTC and the CA, however, failed to take
into account that in a complaint for reconveyance, the decree of registration is respected as
incontrovertible and is not being questioned. What is being sought is the transfer of the property
wrongfully or erroneously registered in another's name to its rightful owner or to the one with a better
right. If the registration of the land is fraudulent, the person in whose name the land is registered holds
it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property.18
The fact that Gregoria was able to secure a title in her name does not operate to vest ownership upon
her of the subject land. "Registration of a piece of land under the Torrens System does not create or
vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence
of ownership or title over the particular property described therein. It cannot be used to protect a
usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it
permit one to enrich himself at the expense of others. Its issuance in favor of a particular person does
not foreclose the possibility that the real property may be co-owned with persons not named in the
certificate, or that it may be held in trust for another person by the registered owner."19
Furthermore, respondents’ argument that the overriding reason why Hortizuela chose to file a
complaint for reconveyance and recovery of possession was that she failed to avail of the remedy
Page 155 of 166
Bus. Org. I Cases – Page 3 Syllabus

provided under Section 38 of Act 496 within the prescribed period of one (1) year, counted from the
issuance of the patent by the government, is weak. As was similarly held in Cervantes v. CA, 20 with the
land obtained by respondent Gregoria through fraudulent machinations by means of which a free
patent and a title were issued in her name, she was deemed to have held it in trust for the benefit of
Hortizuela who was prejudiced by her actions. Article 1456 provides: ARTICLE 1456. If property is
acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property comes.
The remedy of reconveyance, based on Section 53 of P.D. No. 1529 and Article 1456, prescribes in ten
(10) years from the issuance of the Torrens title over the property.
The Court is not unaware of the rule that a fraudulently acquired free patent may only be assailed by
the government in an action for reversion pursuant to Section 101 of the Public Land Act. 21 In Sherwill
Development Corporation v. Sitio Sto. Niño Residents Association, Inc.,22 this Court pointed out that:
x x x It is to the public interest that one who succeeds in fraudulently acquiring title to a public land
should not be allowed to benefit therefrom, and the State should, therefore, have an even existing
authority, thru its duly-authorized officers, to inquire into the circumstances surrounding the issuance of
any such title, to the end that the Republic, thru the Solicitor General or any other officer who may be
authorized by law, may file the corresponding action for the reversion of the land involved to the public
domain, subject thereafter to disposal to other qualified persons in accordance with law. In other
words, the indefeasibility of a title over land previously public is not a bar to an investigation by the
Director of Lands as to how such title has been acquired, if the purpose of such investigation is to
determine whether or not fraud had been committed in securing such title in order that the
appropriate action for reversion may be filed by the Government.23
An action for reconveyance is proper
The foregoing rule is, however, not without exception. A recognized exception is that situation where
plaintiff-claimant seeks direct reconveyance from defendant of publicland unlawfully and in breach
of trust titled by him, on the principle of enforcement of a constructive trust. This was the ruling in
Larzano v. Tabayag, Jr.,24 where it was written:
A private individual may bring an action for reconveyance of a parcel of land even if the title thereof
was issued through a free patent since such action does not aim or purport to re-open the registration
proceeding and set aside the decree of registration, but only to show that the person who secured
the registration of the questioned property is not the real owner thereof.
In Roco, et al. v. Gimeda, we stated that if a patent had already been issued through fraud or mistake
and has been registered, the remedy of a party who has been injured by the fraudulent registration is
an action for reconveyance, thus:
It is to be noted that the petition does not seek for a reconsideration of the granting of the patent or
of the decree issued in the registration proceeding. The purpose is not to annul the title but to have it
conveyed to plaintiffs. Fraudulent statements were made in the application for the patent and no
notice thereof was given to plaintiffs, nor knowledge of the petition known to the actual possessors
and occupants of the property. The action is one based on fraud and under the law, it can be instituted
within four years from the discovery of the fraud. (Art. 1146, Civil Code, as based on Section 3,
paragraph 43 of Act No. 190.) It is to be noted that as the patent here has already been issued, the
land has the character of registered property in accordance with the provisions of Section 122 of Act
No. 496, as amended by Act No. 2332, and the remedy of the party who has been injured by the
fraudulent registration is an action for reconveyance. (Director of Lands vs. Registered of Deeds, 92
Phil., 826; 49 Off. Gaz. [3] 935; Section 55 of Act No. 496.)
In the same vein, in Quiñiano, et al. v. Court of Appeals, et al., we stressed that:
The controlling legal norm was set forth in succinct language by Justice Tuason in a 1953 decision,
Director of Lands v. Register of Deeds of Rizal. Thus: "The sole remedy of the land owner whose property
has been wrongfully or erroneously registered in another's name is, after one year from the date of the
decree, not to set aside the decree, as was done in the instant case, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of
justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for
value, for damages." Such a doctrine goes back to the 1919 landmark decision of Cabanos v. Register
Page 156 of 166
Bus. Org. I Cases – Page 3 Syllabus

of Deeds of Laguna. If it were otherwise the institution of registration would, to quote from Justice Torres,
serve "as a protecting mantle to cover and shelter bad faith ...." In the language of the then Justice,
later Chief Justice, Bengzon: "A different view would encourage fraud and permit one person unjustly
to enrich himself at the expense of another." It would indeed be a signal failing of any legal system if
under the circumstances disclosed, the aggrieved party is considered as having lost his right to a
property to which he is entitled. It is one thing to protect an innocent third party; it is entirely a different
matter, and one devoid of justification, if [deceit] would be rewarded by allowing the perpetrator to
enjoy the fruits of his nefarious deed. As clearly revealed by the undeviating line of decisions coming
from this Court, such an undesirable eventuality is precisely sought to be guarded against. So it has
been before; so it should continue to be. (Citations omitted)
In this case, in filing the complaint for reconveyance and recovery of possession, Hortizuela was not
seeking a reconsideration of the granting of the patent or the decree issued in the registration
proceedings. What she was seeking was the reconveyance of the subject property on account of the
fraud committed by respondent Gregoria. An action for reconveyance is a legal and equitable
remedy granted to the rightful landowner, whose land was wrongfully or erroneously registered in the
name of another, to compel the registered owner to transfer or reconvey the land to him.25 Thus, the
RTC did not err in upholding the right of Hortizuela to ask for the reconveyance of the subject property.
To hold otherwise would be to make the Torrens system a shield for the commission of fraud. To reiterate,
The fact that petitioner was able to secure a title in her name did not operate to vest ownership upon
her of the subject land.1âwphi1 Registration of a piece of land under the Torrens System does not
create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an
evidence of ownership or title over the particular property described therein. It cannot be used to
protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither
does it permit one to enrich himself at the expense of others. Its issuance in favor of a particular person
does not foreclose the possibility that the real property may be co-owned with persons not named in
the certificate, or that it may be held in trust for another person by the registered owner.26
Finally, respondents' supposition that Hortizuela was ineligible to own the subject property pursuant to
B.P. Blg. 223 because she was no longer a Filipino citizen cannot be considered for having been raised
only for the first time on appeal. It must be noted that points of law, theories, issues, and arguments not
brought to the attention of the trial court ought not to be considered by a reviewing court, as these
cannot be raised for the first time on appeal.27 The reason therefor is due process.
WHEREFORE, the petition is GRANTED. The September 13, 2012 Decision and the January 25, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 122648 are hereby REVERSED and SET ASIDE. The
July 1, 2011 Decision of the Regional Trial Court, Branch 22, Cabagan, Isabela, is hereby RE INST A TED.
SO ORDERED.

Page 157 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169617 April 4, 2007
HEIRS OF ZOILO ESPIRITU AND PRIMITIVA ESPIRITU, Petitioners,
vs.
SPOUSES MAXIMO LANDRITO AND PAZ LANDRITO, Represented by ZOILO LANDRITO, as their Attorney-
in-Fact, Respondents.
DECISION
CHICO-NAZARIO, J.:

This is a petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision of the
Court of Appeals,1 dated 31 August 2005, reversing the Decision rendered by the trial court on 13
December 1995. The Court of Appeals, in its assailed Decision, fixed the interest rate of the loan
between the parties at 12% per annum, and ordered the Spouses Zoilo and Primitiva Espiritu (Spouses
Espiritu) to reconvey the subject property to the Spouses Landrito conditioned upon the payment of
the loan.
Petitioners DULCE, BENLINDA, EDWIN, CYNTHIA, AND MIRIAM ANDREA, all surnamed ESPIRITU, are the
only children and legal heirs of the Spouses Zoilo and Primitiva Espiritu, who both died during the
pendency of the case before the Honorable Court of Appeals.2
Respondents Spouses Maximo and Paz Landrito (Spouses Landrito) are herein represented by their son
and attorney-in-fact, Zoilo Landrito.3
On 5 September 1986, Spouses Landrito loaned from the Spouses Espiritu the amount of ₱350,000.00
payable in three months. To secure the loan, the Spouses Landrito executed a real estate mortgage
over a five hundred forty (540) square meter lot located in Alabang, Muntinlupa, covered by Transfer
Certificate of Title No. S-48948, in favor of the Spouses Espiritu. From the ₱350,000.00 that the Landritos
were supposed to receive, ₱17,500.00 was deducted as interest for the first month which was
equivalent to five percent of the principal debt, and ₱7,500.00 was further deducted as service fee.
Thus, they actually received a net amount of ₱325,000.00. The agreement, however, provided that the
principal indebtedness earns "interest at the legal rate."4
After three months, when the debt became due and demandable, the Spouses Landrito were unable
to pay the principal, and had not been able to make any interest payments other than the amount
initially deducted from the proceeds of the loan. On 29 December 1986, the loan agreement was
extended to 4 January 1987 through an Amendment of Real Estate Mortgage. The loan was
restructured in such a way that the unpaid interest became part of the principal, thus increasing the
principal to ₱385,000. The new loan agreement adopted all other terms and conditions contained in
first agreement.5
Due to the continued inability of the Spouses Landritos to settle their obligations with the Spouses
Espiritu, the loan agreement was renewed three more times. In all these subsequent renewals, the same
terms and conditions found in the first agreement were retained. On 29 July 1987, the principal was
increased to ₱507,000.00 inclusive of running interest. On 11 March 1988, it was increased to
₱647,000.00. And on 21 October 1988, the principal was increased to ₱874,125.00.6 At the hearing
before the trial court, Zoilo Espiritu testified that the increase in the principal in each amendment of the
loan agreement did not correspond to the amount delivered to the Spouses Landrito. Rather, the
increase in the principal had been due to unpaid interest and other charges.7
The debt remained unpaid. As a consequence, the Spouses Espiritu foreclosed the mortgaged
property on 31 October 1990. During the auction sale, the property was sold to the Spouses Espiritu as
the lone bidder. On 9 January 1991, the Sheriff’s Certificate of Sale was annotated on the title of the
mortgaged property, giving the Spouses Landrito until 8 January 1992 to redeem the property. 8
The Spouses Landrito failed to redeem the subject property although they alleged that they
negotiated for the redemption of the property as early as 30 October 1991. While the negotiated price
for the land started at ₱1,595,392.79, it was allegedly increased by the Spouses Espiritu from time to
Page 158 of 166
Bus. Org. I Cases – Page 3 Syllabus

time. Spouses Landrito allegedly tendered two manager’s checks and some cash, totaling
₱1,800,000.00 to the Spouses Espiritu on 13 January 1992, but the latter refused to accept the same.
They also alleged that the Spouses Espiritu increased the amount demanded to ₱2.5 Million and gave
them until July 1992 to pay the said amount. However, upon inquiry, they found out that on 24 June
1992, the Spouses Espiritu had already executed an Affidavit of Consolidation of Ownership and
registered the mortgaged property in their name, and that the Register of Deeds of Makati had already
issued Transfer Certificate of Title No. 179802 in the name of the Spouses Espiritu. On 9 October 1992,
the Spouses Landrito, represented by their son Zoilo Landrito, filed an action for annulment or
reconveyance of title, with damages against the Spouses Espiritu before Branch 146 of the Regional
Trial Court of Makati.9 Among the allegations in their Complaint, they stated that the Spouses Espiritu,
as creditors and mortgagees, "imposed interest rates that are shocking to one’s moral senses."10
The trial court dismissed the complaint and upheld the validity of the foreclosure sale. The trial court
ordered in its Decision, dated 13 December 1995:11
WHEREFORE, all the foregoing premises considered, the herein complaint is hereby dismissed forthwith.
Without pronouncements to costs.
The Spouses Landrito appealed to the Court of Appeals pursuant to Rule 41 of the 1997 Rules of Court.
In its Decision dated 31 August 2005, the Court of Appeals reversed the trial court’s decision, decreeing
that the five percent (5%) interest imposed by the Spouses Espiritu on the first month and the varying
interest rates imposed for the succeeding months contravened the provisions of the Real Estate
Mortgage contract which provided that interest at the legal rate, i.e., 12% per annum, would be
imposed. It also ruled that although the Usury Law had been rendered ineffective by Central Bank
Circular No. 905, which, in effect, removed the ceiling rates prescribed for interests, thus, allowing
parties to freely stipulate thereon, the courts may render void any stipulation of interest rates which are
found iniquitous or unconscionable. As a result, the Court of Appeals set the interest rate of the loan at
the legal rate, or 12% per annum.12
Furthermore, the Court of Appeals held that the action for reconveyance, filed by the Spouses Landrito,
is still a proper remedy. Even if the Spouses Landrito failed to redeem the property within the one-year
redemption period provided by law, the action for reconveyance remained as a remedy available to
a landowner whose property was wrongfully registered in another’s name since the subject property
has not yet passed to an innocent purchaser for value.13
In the decretal portion of its Decision, the Court of Appeals ruled14:
WHEREFORE, the instant appeal is hereby GRANTED. The assailed Decision dated December 13, 1995
of the Regional Trial Court of Makati, Branch 146 in Civil Case No. 92-2920 is hereby REVERSED and SET
ASIDE, and a new one is hereby entered as follows: (1) The legal rate of 12% per annum is hereby FIXED
to be applied as the interest of the loan; and (2) Conditioned upon the payment of the loan,
defendants-appellees spouses Zoilo and Primitiva Espiritu are hereby ordered to reconvey Transfer
Certificate of Title No. S-48948 to appellant spouses Maximo and Paz Landrito.
The case is REMANDED to the Trial Court for the above determination.
Hence, the present petition. The following issues were raised:15
I
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE
TRIAL COURT AND ORDERING HEREIN PETITIONERS TO RECONVEY TRANSFER CERTIFICATE OF TITLE NO.
18918 TO HEREIN RESPONDENTS, WITHOUT ANY FACTUAL OR LEGAL BASIS THEREFOR.
II
THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT HEREIN PETITIONERS UNILATERALLY
IMPOSED ON HEREIN RESPONDENTS THE ALLEGEDLY UNREASONABLE INTERESTS ON THE MORTGAGE
LOANS.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT HEREIN RESPONDENTS’
ATTORNEY-IN-FACT IS NOT ARMED WITH AUTHORITY TO FILE AND PROSECUTE THIS CASE.
The petition is without merit.
The Real Estate Mortgage executed between the parties specified that "the principal indebtedness
shall earn interest at the legal rate." The agreement contained no other provision on interest or any
Page 159 of 166
Bus. Org. I Cases – Page 3 Syllabus

fees or charges incident to the debt. In at least three contracts, all designated as Amendment of Real
Estate Mortgage, the interest rate imposed was, likewise, unspecified. During his testimony, Zoilo Espiritu
admitted that the increase in the principal in each of the Amendments of the Real Estate Mortgage
consists of interest and charges. The Spouses Espiritu alleged that the parties had agreed on the interest
and charges imposed in connection with the loan, hereunder enumerated:
1. ₱17,500.00 was the interest charged for the first month and ₱7,500.00 was imposed as service fee.
2. ₱35,000.00 interest and charges, or the difference between the ₱350,000.00 principal in the Real
Estate Mortgage dated 5 September 1986 and the ₱385,000.00 principal in the Amendment of the Real
Estate Mortgage dated 29 December 1986.
3. ₱132,000.00 interest and charges, or the difference between the ₱385,000.00 principal in the
Amendment of the Real Estate Mortgage dated 29 December 1986 and the ₱507,000.00 principal in
the Amendment of the Real Estate Mortgage dated 29 July 1987.
4. ₱140,000.00 interest and charges, or the difference between the ₱507,000.00 principal in the
Amendment of the Real Estate Mortgage dated 29 July 1987 and the ₱647,000.00 principal in the
Amendment of the Real Estate Mortgage dated 11 March 1988.
5. ₱227,125.00 interest and charges, or the difference between the ₱647,000.00 principal in the
Amendment of the Real Estate Mortgage dated 11 March 1988 and the ₱874,125 principal in the
Amendment of the Real Estate Mortgage dated 21 October 1988.
The total interest and charges amounting to ₱559,125.00 on the original principal of ₱350,000 was
accumulated over only two years and one month. These charges are not found in any written
agreement between the parties. The records fail to show any computation on how much interest was
charged and what other fees were imposed. Not only did lack of transparency characterize the
aforementioned agreements, the interest rates and the service charge imposed, at an average of
6.39% per month, are excessive.
In enacting Republic Act No. 3765, known as the "Truth in Lending Act," the State seeks to protect its
citizens from a lack of awareness of the true cost of credit by assuring the full disclosure of such costs.
Section 4, in connection with Section 3(3)16 of the said law, gives a detailed enumeration of the specific
information required to be disclosed, among which are the interest and other charges incident to the
extension of credit. Section 617 of the same law imposes on anyone who willfully violates these
provisions, sanctions which include civil liability, and a fine and/or imprisonment.
Although any action seeking to impose either civil or criminal liability had already prescribed, this Court
frowns upon the underhanded manner in which the Spouses Espiritu imposed interest and charges, in
connection with the loan. This is aggravated by the fact that one of the creditors, Zoilo Espiritu, a lawyer,
is hardly in a position to plead ignorance of the requirements of the law in connection with the
transparency of credit transactions. In addition, the Civil Code clearly provides that:
Article 1956. No interest shall be due unless it has been stipulated in writing.
The omission of the Spouses Espiritu in specifying in the contract the interest rate which was actually
imposed, in contravention of the law, manifested bad faith.
In several cases, this Court has been known to declare null and void stipulations on interest and charges
that were found excessive, iniquitous, and unconscionable. In the case of Medel v. Court of
Appeals,18 the Court declared an interest rate of 5.5% per month on a ₱500,000.00 loan to be excessive,
iniquitous, unconscionable and exorbitant. Even if the parties themselves agreed on the interest rate
and stipulated the same in a written agreement, it nevertheless declared such stipulation as void and
ordered the imposition of a 12% yearly interest rate. In Spouses Solangon v. Salazar, 19 6% monthly
interest on a ₱60,000.00 loan was likewise equitably reduced to a 1% monthly interest or 12% per
annum. In Ruiz v. Court of Appeals,20 the Court found a 3% monthly interest imposed on four separate
loans with a total of ₱1,050,000.00 to be excessive and reduced the interest to a 1% monthly interest or
12% per annum.
In declaring void the stipulations authorizing excessive interest and charges, the Court declared that
although the Usury Law was suspended by Central Bank Circular No. 905, s. 1982, effective on 1 January
1983, and consequently parties are given a wide latitude to agree on any interest rate, nothing in the
said Circular grants lenders carte blanche authority to raise interest rates to levels which will either
enslave their borrowers or lead to a hemorrhaging of their assets.21
Page 160 of 166
Bus. Org. I Cases – Page 3 Syllabus

Stipulation authorizing iniquitous or unconscionable interests are contrary to morals, if not against the
law. Under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning.
They cannot be ratified nor the right to set up their illegality as a defense be waived.22 The nullity of the
stipulation on the usurious interest does not, however, affect the lender’s right to recover the principal
of the loan.23 Nor would it affect the terms of the real estate mortgage. The right to foreclose the
mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors
to pay the debt due. The debt due is to be considered without the stipulation of the excessive interest.
A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed.
While the terms of the Real Estate Mortgage remain effective, the foreclosure proceedings held on 31
Ocotber 1990 cannot be given effect. In the Notice of Sheriff’s Sale24 dated 5 October 1990, and in the
Certificate of Sale25 dated 31 October 1990, the amount designated as mortgage indebtedness
amounted to ₱874,125.00. Likewise, in the demand letter26 dated 12 December 1989, Zoilo Espiritu
demanded from the Spouses Landrito the amount of ₱874,125.00 for the unpaid loan. Since the debt
due is limited to the principal of ₱350,000.00 with 12% per annum as legal interest, the previous demand
for payment of the amount of ₱874,125.00 cannot be considered as a valid demand for payment. For
an obligation to become due, there must be a valid demand.27 Nor can the foreclosure proceedings
be considered valid since the total amount of the indebtedness during the foreclosure proceedings
was pegged at ₱874,125.00 which included interest and which this Court now nullifies for being
excessive, iniquitous and exorbitant. If the foreclosure proceedings were considered valid, this would
result in an inequitable situation wherein the Spouses Landrito will have their land foreclosed for failure
to pay an over-inflated loan only a small part of which they were obligated to pay.
Moreover, it is evident from the facts of the case that despite considerable effort on their part, the
Spouses Landrito failed to redeem the mortgaged property because they were unable to raise the
total amount, which was grossly inflated by the excessive interest imposed. Their attempt to redeem
the mortgaged property at the inflated amount of ₱1,595,392.79, as early as 30 October 1991, is
reflected in a letter, which creditor-mortgagee Zoilo Landrito acknowledged to have received by
affixing his signature herein.28 They also attached in their Complaint copies of two checks in the
amounts of ₱770,000.00 and ₱995,087.00, both dated 13 January 1992, which were allegedly refused
by the Spouses Espiritu.29 Lastly, the Spouses Espiritu even attached in their exhibits a copy of a
handwritten letter, dated 27 January 1994, written by Paz Landrito, addressed to the Spouses Espiritu,
wherein the former offered to pay the latter the sum of ₱2,000,000.00.30 In all these instances, the
Spouses Landrito had tried, but failed, to pay an amount way over the indebtedness they were
supposed to pay – i.e., ₱350,000.00 and 12% interest per annum. Thus, it is only proper that the Spouses
Landrito be given the opportunity to repay the real amount of their indebtedness.
Since the Spouses Landrito, the debtors in this case, were not given an opportunity to settle their debt,
at the correct amount and without the iniquitous interest imposed, no foreclosure proceedings may
be instituted. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct
amount of the unpaid obligation and the failure of the debtor to pay the said amount.31 In this case, it
has not yet been shown that the Spouses Landrito had already failed to pay the correct amount of the
debt and, therefore, a foreclosure sale cannot be conducted in order to answer for the unpaid debt.
The foreclosure sale conducted upon their failure to pay ₱874,125 in 1990 should be nullified since the
amount demanded as the outstanding loan was overstated; consequently it has not been shown that
the mortgagors – the Spouses Landrito, have failed to pay their outstanding obligation. Moreover, if
the proceeds of the sale together with its reasonable rates of interest were applied to the obligation,
only a small part of its original loans would actually remain outstanding, but because of the
unconscionable interest rates, the larger part corresponded to said excessive and iniquitous interest.
As a result, the subsequent registration of the foreclosure sale cannot transfer any rights over the
mortgaged property to the Spouses Espiritu. The registration of the foreclosure sale, herein declared
invalid, cannot vest title over the mortgaged property. The Torrens system does not create or vest title
where one does not have a rightful claim over a real property. It only confirms and records title already
existing and vested. It does not permit one to enrich oneself at the expense of another.32 Thus, the
decree of registration, even after the lapse of one (1) year, cannot attain the status of indefeasibility.

Page 161 of 166

Bus. Org. I Cases – Page 3 Syllabus

Significantly, the records show that the property mortgaged was purchased by the Spouses Espiritu
and had not been transferred to an innocent purchaser for value. This means that an action for
reconveyance may still be availed of in this case.33
Registration of property by one person in his or her 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.34 This is based on Article 1465 of the Civil
Code which states that:
Art. 1465. If property acquired through mistakes or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for benefit of the person from whom the property comes.
The action for reconveyance does not prescribe until after a period of ten years from the date of the
registration of the certificate of sale since the action would be based on implied trust.35 Thus, the action
for reconveyance filed on 31 October 1992, more than one year after the Sheriff’s Certificate of Sale
was registered on 9 January 1991, was filed within the prescription period.
It should, however, be reiterated that the provisions of the Real Estate Mortgage are not annulled and
the principal obligation stands. In addition, the interest is not completely removed; rather, it is set by
this Court at 12% per annum. Should the Spouses Landrito fail to pay the principal, with its recomputed
interest which runs from the time the loan agreement was entered into on 5 September 1986 until the
present, there is nothing in this Decision which prevents the Spouses Espiritu from foreclosing the
mortgaged property.
The last issue raised by the petitioners is whether or not Zoilo Landrito was authorized to file the action
for reconveyance filed before the trial court or even to file the appeal from the judgment of the trial
court, by virtue of the Special Power of Attorney dated 30 September 1992. They further noted that the
trial court and the Court of Appeals failed to rule on this issue.36
The Special Power of Attorney37 dated 30 September 1992 was executed by Maximo Landrito, Jr., with
the conformity of Paz Landrito, in connection with the mortgaged property. It authorized Zoilo Landrito:
2. To make, sign, execute and deliver corresponding pertinent contracts, documents, agreements and
other writings of whatever nature or kind and to sue or file legal action in any court of the Philippines,
to collect, ask demands, encash checks, and recover any and all sum of monies, proceeds, interest
and other due accruing, owning, payable or belonging to me as such owner of the afore-mentioned
property. (Emphasis provided.)
Zoilo Landrito’s authority to file the case is clearly set forth in the Special Power of Attorney. Furthermore,
the records of the case unequivocally show that Zoilo Landrito filed the reconveyance case with the
full authority of his mother, Paz Landrito, who attended the hearings of the case, filed in her behalf,
without making any protest.38 She even testified in the same case on 30 August 1995. From the acts of
Paz Landrito, there is no doubt that she had authorized her son to file the action for reconveyance, in
her behalf, before the trial court.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of
the Court of Appeals, promulgated on 31 August 2005, fixing the interest rate of the loan between the
parties at 12% per annum, and ordering the Spouses Espiritu to reconvey the subject property to the
Spouses Landrito conditioned upon the payment of the loan together with herein fixed rate of interest.
Costs against the petitioners.
SO ORDERED.

Page 162 of 166

Bus. Org. I Cases – Page 3 Syllabus

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 169901 August 3, 2011
PHILIPPINE NATIONAL BANK, Petitioner,
vs.
CIRIACO JUMAMOY and HEIRS OF ANTONIO GO PACE, represented by ROSALIA PACE, Respondents.
DECISION
DEL CASTILLO, J.:

A PARTY enters into an agreement or contract with an eye to reap benefits therefrom or be relieved
of an oppressive economic condition. The other party likewise assumes that the agreement would be
advantageous to him. But just like in any other human undertaking, the end-result may not be as sweet
as expected.
The problem could not be resolved by any other means but to litigate.
Courts, however, are not defenders of bad bargains. At most, they only declare the rights and
obligations of the parties to the contract in order to preserve sanctity of the same.
We are confronted in this case with this legal predicament.1
This Petition for Review on Certiorari assails the February 28, 2005 Decision2 of the Court of Appeals (CA)
in CA-G.R. CV No. 73743 which dismissed petitioner Philippine National Bank’s (PNB’s) appeal from the
July 30, 2001 Decision3 of the Regional Trial Court (RTC), Branch 18, Digos City, Davao del Sur. Said
Decision of the RTC ordered PNB to reconvey to respondent Ciriaco Jumamoy (Ciriaco) a portion of
the parcel of land subject of this case.
Likewise assailed in this petition is the September 28, 2005 Resolution4 of the CA denying PNB’s Motion
for Reconsideration.
Factual Antecedents
On December 27, 1989, the RTC, Branch 19, of Digos City, Davao del Sur, rendered a Decision 5 in Civil
Case No. 2514 (a case for Reconveyance and Damages), ordering the exclusion of 2.5002 hectares
from Lot 13521. The trial court found that said 2.5002 hectares which is part of Lot 13521, a 13,752-square
meter parcel of land covered by Original Certificate of Title (OCT) No. P-49526 registered in the name
of Antonio Go Pace (Antonio) on July 19, 1971 actually pertains to Sesinando Jumamoy (Sesinando),
Ciriaco’s predecessor-in-interest. The RTC found that said 2.5002-hectare lot was erroneously included
in Antonio’s free patent application which became the basis for the issuance of his OCT. It then ordered
the heirs of Antonio (the Paces [represented by Rosalia Pace (Rosalia)]) to reconvey said portion to
Ciriaco. In so ruling, the RTC acknowledged Ciriaco’s actual and exclusive possession, cultivation, and
claim of ownership over the subject lot which he acquired from his father Sesinando, who occupied
and improved the lot way back in the early 1950s.7
The December 27, 1989 RTC Decision became final and executory but the Deed of
Conveyance8 issued in favor of Ciriaco could not be annotated on OCT No. P-4952 since said title was
already cancelled. Apparently, Antonio and his wife Rosalia mortgaged Lot 13521 to PNB as security
for a series of loans dated February 25, 1971, April 26, 1972, and May 11, 1973.9 After Antonio and
Rosalia failed to pay their obligation, PNB foreclosed the mortgage on July 14, 1986 10 and title to Lot
13521 was transferred to PNB under Transfer Certificate of Title (TCT) No.T-23063. Moreover, the Deed
of Conveyance could not be annotated at the back of OCT No. P-4952 because PNB was not
impleaded as a defendant in Civil Case No. 2514.
Thus, in February 1996, Ciriaco filed the instant complaint against PNB and the Paces for Declaration
of Nullity of Mortgage, Foreclosure Sale, Reconveyance and Damages,11 docketed as Civil Case No.
3313 and raffled to Branch 18 of RTC, Digos City, Davao del Sur.
In his complaint, Ciriaco averred that Antonio could not validly mortgage the entire Lot 13521 to PNB
as a portion thereof consisting of 2.5002 hectares belongs to him (Ciriaco), as already held in Civil Case
No. 2514. He claimed that PNB is not an innocent mortgagee/purchaser for value because prior to the
execution and registration of PNB’s deed of sale with the Register of Deeds, the bank had prior notice
Page 163 of 166
Bus. Org. I Cases – Page 3 Syllabus

that the disputed lot is subject of a litigation. It would appear that during the pendency of Civil Case
No. 2514, a notice of lis pendens was annotated at the back of OCT No. P-4952 as Entry No. 16554712 on
November 28, 1988.
The Paces did not file any answer and were declared in default.13 Meanwhile PNB filed its Amended
Answer14denying for lack of knowledge and information Ciriaco’s claim of ownership and reliance on
the judgment in Civil Case No. 2514. It argued that it is a mortgagee and a buyer in good faith since
at the time of the mortgage, Antonio’s certificate of title was "clean" and "devoid of any adverse
annotations." PNB also filed a cross-claim against the Paces.
Instead of having a full-blown trial, Ciriaco and PNB opted to submit the case for decision based on
their respective memoranda.
Ruling of the Regional Trial Court
In its July 30, 2001 Decision,15 the RTC ordered the partial nullification of the mortgage and the
reconveyance of the subject lot claimed by Ciriaco. The RTC found that PNB was not a
mortgagee/purchaser in good faith because it failed to take the necessary steps to protect its interest
such as sending a field inspector to the area to determine the real owner, its occupants, its
improvements and its boundaries.
The dispositive portion of the RTC Decision reads:
WHEREFORE, it is hereby ordered that defendant PNB shall reconvey, by the proper instrument of
reconveyance, that portion of the land owned and claimed by plaintiff CIRIACO JUMAMOY.
The claim for damages by all the parties are hereby DISMISSED for lack of proper basis.
SO ORDERED.16
PNB filed a Motion for Reconsideration.17 It argued that the trial court erred in finding that it is not an
innocent mortgagee for value due to its alleged failure to send its field inspector to the area
considering that such matter was never alleged in Ciriaco’s complaint. PNB claimed that Ciriaco
merely stated in his complaint that the bank is not an innocent mortgagee for value because it had
already constructive notice that the subject land is under litigation by virtue of the notice of lis pendens
already annotated on Antonio’s title when PNB consolidated in its name the title for Lot 13521. PNB
however argued that at the time of the constitution and registration of the mortgage in 1971, Antonio’s
title was clean as the notice of lis pendens was annotated only in 1988. And since there was no cause
to arouse suspicion, it may rely on the face of the Torrens title. As for its cross-claim against the heirs of
Antonio, PNB prayed that a hearing be set.
Ciriaco filed an Opposition to the Motion for Reconsideration.18 He insisted that PNB cannot validly
claim that it is an innocent mortgagee based on its reliance on Antonio’s Torrens title because when it
first granted Antonio’s loan application, the subject property was still untitled and unregistered.
On January 7, 2002, the RTC denied PNB’s motion for reconsideration.19
PNB thus filed its appeal with the CA.
Ruling of the Court of Appeals
In its Decision of February 28, 2005,20 the CA affirmed the RTC’s ruling that PNB is not an innocent
mortgagee/purchaser. The CA reiterated that the business of a bank or a financial institution is imbued
with public interest thus it is obliged to exercise extraordinary prudence and care by looking beyond
what appears on the title. The CA pointed out that in this case, PNB failed to prove that it conducted
an investigation on the real condition of the mortgaged property. Had the bank done so, it could have
discovered that Ciriaco had possession of the disputed lot for quite some time. Moreover, the CA held
that PNB could not validly claim that it merely relied on the face of a "clean" Torrens title because when
the disputed lot was first mortgaged in 1971, the same was still an untitled and unregistered land. It
likewise ruled that Ciriaco’s action for reconveyance is based on implied trust and is imprescriptible
because the land has always been in his possession.
Anent PNB’s cross-claim against the Paces, the CA gave due course thereto and ordered the records
remanded to the RTC for further proceedings.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, herein appeal is hereby DISMISSED and the decision of the trial court
is hereby AFFIRMED with MODIFICATION, giving due course to the cross-claim of the defendant-
appellant PNB against the Heirs of ANTONIO GO PACE as represented by ROSALIA PACE. Accordingly,
Page 164 of 166
Bus. Org. I Cases – Page 3 Syllabus

let the entire records of this case be remanded to the lower court for further proceedings of the said
cross-claim.
SO ORDERED.21
PNB moved for a reconsideration.22 However, the CA sustained its ruling in a Resolution23 dated
September 28, 2005.
Hence, this petition.
Issues
PNB ascribed upon the CA the following errors:
A. THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION IN DECLARING THAT
PNB FAILED TO QUALIFY AS AN INNOCENT MORTGAGEE FOR VALUE IN THE ABSENCE OF EVIDENCE
TO ESTABLISH THIS FACT.
B. THE COURT OF APPEALS ERRED IN ORDERING THE PARTIAL NULLIFICATION OF THE REAL ESTATE
MORTGAGE EXECUTED IN FAVOR OF PNB IN DISREGARD OF THE LAW AND ESTABLISHED
JURISPRUDENCE ON THE MATTER.
C. THE COURT OF APPEALS ERRED IN ORDERING THE PARTIAL NULLIFICATION OF PNB’S TITLE
CONTRARY TO THE LAW AND ESTABLISHED JURISPRUDENCE ON THE MATTER.
D. THE COURT OF APPEALS ERRED IN DENYING PNB’S MOTION FOR RECONSIDERATION AND
SUSTAINING RESPONDENT JUMAMOY’S INVOCATION OF THE RULING OF THE SUPREME COURT IN
SPOUSES FLORENTINO AND FRANCISCA TOMAS VS. PNB (98 SCRA 280) INSTEAD OF THE
LANDMARK CASE OF LILIA Y. GONZALES VS. IAC AND RURAL BANK OF PAVIA, INC. (157 SCRA
587) WHICH IS THE ONE APPLICABLE TO THE INSTANT CASE.
E. THE COURT OF APPEALS ERRED IN ORDERING PNB TO RECONVEY THE PORTION OF LAND
CLAIMED BY RESPONDENT JUMAMOY NOTWITHSTANDING THE FACT THAT IT IS APPARENT FROM
THE COMPLAINT THAT RESPONDENT JUMAMOY’S ACTION FOR RECONVEYANCE IS ALREADY
BARRED BY PRESCRIPTION.24
In essence, PNB contends that the lower courts grievously erred in declaring that it is not an innocent
mortgagee/purchaser for value. PNB also argues that Ciriaco’s complaint is barred by prescription. TCT
No. T-23063 was issued on March 23, 1990, while Ciriaco filed his complaint only six years thereafter.
Thus, the one-year period to nullify PNB’s certificate of title had lapsed, making PNB’s title indefeasible.
Moreover, PNB claims that an action for reconveyance prescribes in four years if based on fraud, or,
10 years if based on an implied trust, both to be counted from the issuance of OCT No. P-4952 in July
1971 which constitutes as a constructive notice to the whole world. Either way, Ciriaco’s action had
already prescribed since it took him 17 years to file his first complaint for reconveyance in Civil Case
No. 2514 and around 23 years to file his second complaint in Civil Case No. 3313.
Our Ruling
We deny the petition.
PNB is not an innocent purchaser/ mortgagee for value.
Undoubtedly, our land registration statute extends its protection to an innocent purchaser for value,
defined as "one who buys the property of another, without notice that some other person has a right
or interest in such property and pays the full price for the same, at the time of such purchase or before
he has notice of the claims or interest of some other person in the property."25 An "innocent purchaser
for value" includes an innocent lessee, mortgagee, or other encumbrancer for value .26
Here, we agree with the disposition of the RTC and the CA that PNB is not an innocent purchaser for
value. As we have already declared:
A banking institution is expected to exercise due diligence before entering into a mortgage contract.
The ascertainment of the status or condition of a property offered to it as security for a loan must be a
standard and indispensable part of its operations.27 (Emphasis ours.)
PNB’s contention that Ciriaco failed to allege in his complaint that PNB failed to take the necessary
precautions before accepting the mortgage is of no moment. It is undisputed that the 2.5002-hectare
portion of the mortgaged property has been adjudged in favor of Ciriaco’s predecessor-in-interest in
Civil Case No. 2514. Hence, PNB has the burden of evidence that it acted in good faith from the time
the land was offered as collateral. However, PNB miserably failed to overcome this burden. There was
no showing at all that it conducted an investigation; that it observed due diligence and prudence by
Page 165 of 166
Bus. Org. I Cases – Page 3 Syllabus

checking for flaws in the title; that it verified the identity of the true owner and possessor of the land;
and, that it visited subject premises to determine its actual condition before accepting the same as
collateral.
Both the CA and the trial court correctly observed that PNB could not validly raise the defense that it
relied on Antonio’s clean title. The land, when it was first mortgaged, was then unregistered under our
Torrens system. The first mortgage was on February 25, 1971 28 while OCT No. P-4952 was issued on July
19, 1971. Since the Paces offered as collateral an unregistered land, with more reason PNB should have
proven before the RTC that it had verified the status of the property by conducting an ocular inspection
before granting Antonio his first loan. Good faith which is a question of fact could have been proven
in the proceedings before the RTC, but PNB dispensed with the trial proper and let its opportunity to
dispute factual allegations pass. Had PNB really taken the necessary precautions, it would have
discovered that a large portion of Lot 13521 is occupied by Ciriaco.
Ciriaco’s action for reconveyance is inprescriptible.
Also, the incontrovertibility of a title does not preclude a rightful claimant to a property from seeking
other remedies because it was never the intention of the Torrens system to perpetuate fraud. As
explained in Vda. de Recinto v. Inciong:29
The mere possession of a certificate of title under the Torrens system does not necessarily make the
possessor a true owner of all the property described therein for he does not by virtue of said certificate
alone become the owner of the land illegally included. It is evident from the records that the petitioner
owns the portion in question and therefore the area should be conveyed to her. The remedy of the
land owner whose property has been wrongfully or erroneously registered in another's name is, after
one year from the date of the decree, not to set aside the decree, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the ordinary court of
justice for reconveyance or, if the property has passed into the hands of an innocent purchaser for
value, for damages. (Emphasis supplied.)
"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."30 An action
for reconveyance based on implied trust prescribes in 10 years as it is an obligation created by law,31 to
be counted from the date of issuance of the Torrens title over the property.32 This rule, however, applies
only when the plaintiff or the person enforcing the trust is not in possession of the property.1avvphi1
In Vda. de Cabrera v. Court of Appeals,33 we said that there is no prescription when in an action for
reconveyance, the claimant is in actual possession of the property because this in effect is an action
for quieting of title:
[S]ince 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.34
In Ciriaco’s case, as it has been judicially established that he is in actual possession of the property he
claims as his and that he has a better right to the disputed portion, his suit for reconveyance is in effect
an action for quieting of title. Hence, petitioner’s defense of prescription against Ciriaco does not lie.
WHEREFORE, the petition is DENIED. The February 28, 2005 Decision and September 28, 2005 Resolution
of the Court of Appeals in CA-G.R. CV No. 73743 are hereby AFFIRMED.
SO ORDERED.

Page 166 of 166