[G.R. No. 103635. February 1, 1996] CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA.

DE PERALTA, ELENITA ESCONDE and BENJAMIN E SCONDE, petitioners, vs. HONORABLE COURT OF APPEALS and PEDRO ESCONDE, respondents. DECISION ROMERO, J.: This petition for review on certiorari seeks the reversal of the January 22, 1992 decisioni[1] in CA G.R. CV No. 26795 of the Court of Appeals affirming the Decision of the Regional Trial Court of Bataan, Branch 2.ii[2] The lower court declared that petitioners action for reconveyance of real property based on an implied trust has been barred by prescription and laches. Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the children of the late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde was one of the childreniii[3] and heirs of Andres Esconde. Andres is the brother of Estanislao Esconde, the original owner of the disputed lot who died without issue on April 1942. Survived by his only brother, Andres, Estanislao left an estate consisting of four (4) parcels of land in Samal, Bataan, namely: (a) Lot No. 1865 with 22,712 square meters; (b) Lot No. 1902 with 54,735 square meters; (c) Lot No. 1208 with 20,285 square meters; and (d) Lot No. 1700 with 547 square meters. Eulogio died in April, 1944 survived by petitioners and private respondent. At that time, Lazara and Ciriaca, Eulogios sisters, had already died without having partitioned the estate of the late Estanislao Esconde. On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed a deed of extrajudicial partition,iv[4] with the heirs of Lazara identified therein as the Party of the First Part, that of Ciriaca, the Party of the Second Part and that of Eulogio, the Party of the Third Part. Since the children of Eulogio, with the exception of Constancia, were then all minors, they were represented by their mother and judicial guardian, petitioner Catalina Buan vda. de Esconde who renounced and waived her usufructuary rights over the parcels of land in favor of her children in the same deed. Salient provisions of the deed state as follows: 1. TO ARTURO DOMINGUEZ, minor, Party of the First Part is adjudicated: (a) (b) Lot No. 1865 of Samal Cadastre; Portion of Lot No. 1208, Samal Cadastre, which portion has an area of FIVE (5) Luang;

2. TO JOVITA BUAN, RICARDO BUAN, and MELODY and LEOPOLDO OCONER, are adjudicated Lot No. 1902 Samal Cadastre, and to de (sic) divided as follows: (a) Jovita Buan - Undivided one-third (1/3) share;
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(b) (c) (d)

Ricardo Buan - Undivided one-third (1/3) share; Melody Oconer - Undivided one-sixth (1/6) share; Leopoldo Oconer - Undivided one-sixth (1/6) share;

3. TO CONSTANCIA, PEDRO, BENJAMIN and ELENITA, all Surnamed ESCONDE, are adjudicated, in undivided equal shares each, the following: (a) Lot No. 1208 Samal Cadastre, subject to the encumbrance of the right of ownership of Arturo Dominguez on the FIVE LUANG; 4. TO PEDRO ESCONDE is adjudicated exclusively Lot No. 1700 of the Cadastral Survey of Samal; (Italics supplied.) The deed bears the thumbmark of Catalina Buan and the signature of Constancia Esconde, as well as the approval and signature of Judge Basilio Bautista.v[5] Pursuant to the same deed, transfer certificates of title were issued to the new owners of the properties.vi[6] Transfer Certificate of Title No. 394 for Lot No. 1700 was issued on February 11, 1947 in the name of private respondent but Catalina kept it in her possession until she delivered it to him in 1949 when private respondent got married. Meanwhile, Benjamin constructed the family home on Lot No. 1698-Bvii[7] which is adjacent to Lot No. 1700. A portion of the house occupied an area of twenty (20) square meters, more or less, of Lot No. 1700. Benjamin also built a concrete fence and a common gate enclosing the two (2) lots, as well as an artesian well within Lot No. 1700. Sometime in December, 1982, Benjamin discovered that Lot No. 1700 was registered in the name of his brother, private respondent. Believing that the lot was co-owned by all the children of Eulogio Esconde, Benjamin demanded his share of the lot from private respondent.viii[8] However, private respondent asserted exclusive ownership thereof pursuant to the deed of extrajudicial partition and, in 1985 constructed a buho fence to segregate Lot No. 1700 from Lot No. 1698-B . Hence, on June 29, 1987, petitioners herein filed a complaint before the Regional Trial Court of Bataan against private respondent for the annulment of TCT No. 394. They further prayed that private respondent be directed to enter into a partition agreement with them, and for damages (Civil Case No. 5552). In its decision of July 31, 1989, the lower court dismissed the complaint and the counterclaims. It found that the deed of extrajudicial partition was an unenforceable contract as far as Lot No. 1700 was concerned because petitioner Catalina Buan vda. de Esconde, as mother and judicial guardian of her children, exceeded her authority as such in donating the lot to private respondent or waiving the rights thereto of Benjamin and Elenita in favor of private respondent.

Because of the unenforceability of the deed, a trust relationship was created with private respondent as trustee and Benjamin and Elenita as beneficiaries. The court said: Although the parties to the partition did not either contemplate or express it in said document, the resulting trust arose or was created by operation of Article 1456 of the new Civil Code, which reads: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The persons from whom the two-thirds portion of Lot 1700 came are plaintiffs Benjamin and Elenita Esconde and the trustee was defendant Pedro Esconde, who acquired such portion through mistake by virtue of the subject partition. The mistake was the allotment or assignment of such portion to Pedro Esconde although it had rightfully belonged to said two plaintiffs more than two (2) years before.ix[9] However, the lower court ruled that the action had been barred by both prescription and laches. Lot No. 1700 having been registered in the name of private respondent on February 11, 1947, the action to annul such title prescribed within ten (10) years on February 11, 1957 or more than thirty (30) years before the action was filed on June 29, 1987. Thus, even if Art. 1963 of the old Civil Code providing for a 30-year prescriptive period for real actions over immovable properties were to be applied, still, the action would have prescribed on February 11, 1977. Hence, petitioners elevated the case to the Court of Appeals which affirmed the lower courts decision. The appellate court held that the deed of extrajudicial partition established an implied trust arising from the mistake of the judicial guardian in favoring one heir by giving him a bigger share in the hereditary property. It stressed that an action for reconveyance based on implied or constructive trust prescribes in ten (10) years counted from the registration of the property in the sole name of the co-heir.x[10] Petitioners are now before this Court charging the Court of Appeals with having erred in: (a) denying their appeal by reason of prescription and laches, and (b) not reversing the decision of the lower court insofar as awarding them damages is concerned. Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter.xi[11] Trusts are either express or implied. An express trust is created by the direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust.xii[12] No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.xiii[13] On the other hand, implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties.xiv[14] In turn, implied trusts are either resulting or constructive trusts. These two are differentiated from each other as follows:

Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to have been contemplated by the parties. They arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another. On the other hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.xv[15] While the deed of extrajudicial partition and the registration of Lot No. 1700 occurred in 1947 when the Code of Civil Procedure or Act No. 190 was yet in force, we hold that the trial court correctly applied Article 1456. In Diaz, et al. v. Gorricho and Aguado,xvi[16] the Court categorically held that while it is not a retroactive provision of the new Civil Code, Article 1456 merely expresses a rule already recognized by our courts prior to the Codes promulgation. This article provides: Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the Court stated: A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.xvii[17] In the case at bench, petitioner Catalina Buan vda. de Esconde, as mother and legal guardian of her children, appears to have favored her elder son, private respondent, in allowing that he be given Lot No. 1700 in its entirety in the extrajudicial partition of the Esconde estate to the prejudice of her other children. Although it does not appear on record whether Catalina intentionally granted private respondent that privileged bestowal, the fact is that, said lot was registered in private respondents name. After TCT No. 394 was handed to him by his mother, private respondent exercised exclusive rights of ownership therein to the extent of even mortgaging the lot when he needed money. If, as petitioners insist, a mistake was committed in allotting Lot No. 1700 to private respondent, then a trust relationship was created between them and private respondent. However, private respondent never considered himself a trustee. If he allowed his brother Benjamin to construct or make improvements thereon, it appears to have been out of tolerance to a brother.
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Consequently, if indeed, by mistake,xviii[18] private respondent was given the entirety of Lot No. 1700, the trust relationship between him and petitioners was a constructive, not resulting, implied trust. Petitioners, therefore, correctly questioned private respondents exercise of absolute ownership over the property. Unfortunately, however, petitioners assailed it long after their right to do so had prescribed. The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trustsxix[19] and resulting implied trusts.xx[20] However, in constructive implied trusts, prescription may supervenexxi[21] even if the trustee does not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period. Since the action for the annulment of private respondents title to Lot No. 1700 accrued during the effectivity of Act No. 190, Section 40 of Chapter III thereof applies. It provides: Sec. 40. Period of prescription as to real estate. - An action for recovery of title to, or possession of, real property, or an interest therein, can only be brought within ten years after the cause of such action accrues. Thus, in Heirs of Jose Olviga v. Court of Appeals,xxii[22] the Court ruled that the ten-year prescriptive period for an action for reconveyance of real property based on implied or constructive trust which is counted from the date of registration of the property, applies when the plaintiff is not in possession of the contested property. In this case, private respondent, not petitioners who instituted the action, is in actual possession of Lot No. 1700. Having filed their action only on June 29, 1987, petitioners action has been barred by prescription. Not only that. Laches has also circumscribed the action for, whether the implied trust is constructive or resulting, this doctrine applies.xxiii[23] As regards constructive implied trusts, the Court held in Diaz, et al. v. Gorricho and Aguadoxxiv[24] that: x x x in constructive trusts (that are imposed by law), there is neither promise nor fiduciary relation; the so-called trustee does not recognize any trust and has no intent to hold for the beneficiary; therefore, the latter is not justified in delaying action to recover his property. It is his fault if he delays; hence, he may be estopped by his own laches. It is tragic that a land dispute has once again driven a wedge between brothers. However, credit must be given to petitioner Benjamin Escondexxv[25] for resorting to all means possible in arriving at a settlement between him and his brother in accordance with Article 222 of the Civil Code.xxvi[26] Verbally and in two letters,xxvii[27] he demanded that private respondent give him and his sisters their share in Lot No. 1700. He even reported the matter to the barangay authorities for which three conferences were held.xxviii[28] Unfortunately, his efforts proved fruitless. Even the action he brought before the court was filed too late. On the other hand, private respondent should not be unjustly enriched by the improvements introduced by his brother on Lot No. 1700 which he himself had tolerated. He is obliged by law

to indemnify his brother, petitioner Benjamin Esconde, for whatever expenses the latter had incurred. WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned decision AFFIRMED subject to the modification that private respondent shall indemnify petitioner Benjamin Esconde the expenses the latter had incurred for the improvements on Lot No. 1700. No costs. SO ORDERED. Regalado, Puno and Mendoza, JJ., concur.

Penned by Associate Justice Minerva P. Gonzaga-Reyes and concurred in by Associate Justices Arturo B. Buena and Quirino D. Abad Santos, Jr.
i[1] ii[2]

Presided by Judge Romeo G. Maglalang. Andres had two other children namely: Lazara and Ciriaca. Exh. B. Page 3 of Exh. B; Record, p. 11.

iii[3]

iv[4]

v[5]

TCT No. 391 for Lot 1865 was issued to Arturo Dominguez; TCT No. 392 for Lot 1902 to the heirs of Ciriaca, and TCT No. 393 for Lot 1208 to the heirs of Eulogio: Constancia, Pedro, Benjamin and Elenita Esconde.
vi[6]

This lot, which used to be part of Lot No. 1698 and co-owned by Eulogio and his sister Lazara, became the property of the formers heirs after Lot No. 1698 was extrajudicially partitioned on March 3, 1963 (Exh. 1).
vii[7] viii[8]

TSN, March 10, 1988, pp. 23-25; Exh. E.

ix[9]

RTC Decision, p. 29. CA Decision, p. 5.

x[10]

TOLENTINO CIVIL CODE OF THE PHILIPPINES, Vol. IV, 1991 ed., p. 669 citing 54 Am. Jur. 21.
xi[11]

Sotto v. Teves, L-380l8, October 31, 1978,86 SCRA 154, 171 citing Cuaycong, etal. v. Cuaycong, etal., L-21616, December 11, 1967,21 SCRA 1192, 1196.
xii[12]

Art. 1443, Civil Code; Heirs of Maria de Ia Cruz y Gutierrez v. Court of Appeals, G.R. No. 76590, February 26, 1990, 182 SCRA 638, 643 citing Vda. de Mapa v. Court of Appeals, L38972, September 28, 1987, 154 SCRA 294, 300.
xiii[13]

Philippine National Bank v. Court of Appeals, G.R. No. 97995. January 21, 1993, 217 SCRA 347, 353.
xiv[14] xv[15]

OLaco v. Co Cho Chit, G.R. No. 58010, March 31, 1993.220 SCRA 656, 663. 103 Phil. 261, 264 (1958). Supra at pp. 353-3 54.

xvi[16]

xvii[17]

This appears to have a factual basis as Catalina Buan vda. de Esconde joined the other petitioners in filing the action for annulment of title against private respondent.
xviii[18] xix[19]

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

OLaco v. Co Cho Chit, supra at p. 668. See: Huang v. Court of Appeals. G.R. No. 108525, September 13, 1994, 236 SCRA 420, 429-430.
xx[20] xxi[21]

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

xxii[22]

xxiii[23]

xxiv[24]

He was granted by the other petitioners a special power of attorney to appear for them in Civil Case No. 5552 and to enter into any agreement regarding the case (Record, p. 34).
xxv[25]

Art 222. No suit shall be filed or maintained between members of the same family unless it should appear that earnest efforts toward a compromise have been made, but that the same have failed, subject to the limitations in Article 2035.
xxvi[26] xxvii[27]

Exhs. E & F. RTC Decision, p. 7.

xxviii[28]

Express trust; G.R. No. 140528

G.R. No. 140528 "x x x.

There was an express trust between the Torbela siblings and Dr. Rosario. There is no dispute that the Torbela sibling inherited the title to Lot No. 356A from their parents, the Torbela spouses, who, in turn, acquired the same from the first registered owner of Lot No. 356-A, Valeriano. Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12, 1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of P9.00. However, the Torbela siblings explained that they only executed the Deed as an accommodation so that Dr. Rosario could have Lot No. 356-A registered in his name and use said property to secure a loan from DBP, the proceeds of which would be used for building a hospital on Lot No. 356-A a claim supported by testimonial and documentary evidence, and borne out by the sequence of events immediately following the execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued in Dr. Rosarios name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute Quitclaim, in which he expressly acknowledged that he only borrowed Lot No. 356 -A and was transferring and conveying the same back to the Torbela siblings for the consideration of P1.00. On February 21, 1965, Dr. Rosarios loan in the amount of P70,200.00, secured by a mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a hospital building started on Lot No. 356-A. Among the notable evidence presented by the Torbela siblings is the testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent personal interest in the present case. Atty. Alcantara, when she was still a boarder at the house of Eufrosina Torbela Rosario (Dr. Rosarios mother), was consulted by the Torbela siblings as regards the extrajudicial partition of Lot No. 356-A. She also witnessed the execution of the two Deeds of Absolute Quitclaim by the Torbela siblings and Dr. Rosario.
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In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of Appeals,[53] the Court made a clear distinction between title and the certificate of title:
The certificate referred to is that document issued by the Register of Deeds known as the Transfer Certificate of Title (TCT). By title, the law refers to ownership which is represented by that document. Petitioner apparently confuses certificate with title. Placing a parcel of land under the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different from a certificate of title. The TCT is only the best proof of ownership of a piece of land. Besides, the certificate cannot always be considered as conclusive evidence of ownership. Mere issuance of the certificate of title in the name of any person does not foreclose the possibility that the real property may be under co-ownership with persons not named in the certificate or that the registrant may only be a trustee or that other parties may have acquired interest subsequent to the issuance of the certificate of title. To repeat, registration is not the equivalent of title, but is only the best evidence thereof. Title as a concept of ownership should not be confused with the certificate of title as evidence of such ownership although both are interchangeably used. x x x.[54] (Emphases supplied.)

Registration does not vest title; it is merely the evidence of such title. Land registration laws do not give the holder any better title than what he actually has.[55] Consequently, Dr. Rosario must still prove herein his acquisition of title to Lot No. 356-A, apart from his submission of TCT No. 52751 in his name. Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court though observes that Dr. Rosarios testimony on the execution and existence of the verbal agreement with the Torbela siblings lacks significant details (such as the names of the parties present, dates, places, etc.) and is not corroborated by independent evidence. In addition, Dr. Rosario acknowledged the execution of the two Deeds of Absolute Quitclaim datedDecember 12, 1964 and December 28, 1964, even affirming his own signature on the latter Deed. The Parol Evidence Rule provides that when the terms of the agreement have been reduced into writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.[56] Dr. Rosario may not modify, explain, or add to the terms in the two written Deeds of Absolute Quitclaim since he did not put in
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issue in his pleadings (1) an intrinsic ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Deeds to express the true intent and the agreement of the parties thereto; (3) the validity of the Deeds; or (4) the existence of other terms agreed to by the Torbela siblings and Dr. Rosario after the execution of the Deeds.[57] Even if the Court considers Dr. Rosarios testimony on his alleged verbal agreement with the Torbela siblings, the Court finds the same unsatisfactory. Dr. Rosario averred that the two Deeds were executed only because he was planning to secure loan from the Development Bank of the Philippines and Philippine National Bank and the bank needed absolute quitclaim[.][58] While Dr. Rosarios explanation makes sense for the first Deed of Absolute Quitclaim dated December 12, 1964 executed by the Torbela siblings (which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could not be said for the second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr. Rosario. In fact, Dr. Rosarios Deed of Absolute Quitclaim (in which he admitted that he only borrowed Lot No. 356-A and was transferring the same to the Torbela siblings for P1.00.00) would actually work against the approval of Dr. Rosarios loan by the banks. Since Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 is a declaration against his self-interest, it must be taken as favoring the truthfulness of the contents of said Deed.[59] It can also be said that Dr. Rosario is estopped from claiming or asserting ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim dated December 28, 1964. Dr. Rosario's admission in the said Deed that he merely borrowed Lot No. 356-A is deemed conclusive upon him. Under Article 1431 of the Civil Code, [t]hrough estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.[60] That admission cannot now be denied by Dr. Rosario as against the Torbela siblings, the latter having relied upon his representation. Considering the foregoing, the Court agrees with the RTC and the Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela siblings. Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between
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parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties, while an implied trust comes into being by operation of law.[61] Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code, [n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.[62] It is possible to create a trust without using the word trust or trustee. Conversely, the mere fact th at these words are used does not necessarily indicate an intention to create a trust. The question in each case is whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether or not he knows the precise characteristics of the relationship which is called a trust.[63] In Tamayo v. Callejo,[64] the Court recognized that a trust may have a constructive or implied nature in the beginning, but the registered owners subsequent express acknowledgement in a public document of a previous sale of the property to another party, had the effect of imparting to the aforementioned trust the nature of an express trust. The same situation exists in this case. When Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751 on December 16, 1964, an implied trust was initially established between him and the Torbela siblings under Article 1451 of the Civil Code, which provides:
ART. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.

Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28, 1964, containing his express admission that he only borrowed Lot No. 356-A from the Torbela siblings, eventually transformed the nature of the trust to an express one. The express trust continued despite Dr. Rosario stating in his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario kept possession of said property, together with the improvements thereon. x x x."

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[G.R. No. 171805, May 30 : 2011] PHILIPPINE NATIONAL BANK, PETITIONER, VS. MERELO B. AZNAR; MATIAS B. AZNAR III; JOSE L. AZNAR (DECEASED), REPRESENTED BY HIS HEIRS; RAMON A. BARCENILLA; ROSARIO T. BARCENILLA; JOSE B. ENAD (DECEASED), REPRESENTED BY HIS HEIRS; AND RICARDO GABUYA (DECEASED), REPRESENTED BY HIS HEIRS, RESPONDENTS. [G.R. NO. 172021] MERELO B. AZNAR AND MATIAS B. AZNAR III, PETITIONERS, VS. PHILIPPINE NATIONAL BANK, RESPONDENT. DECISION LEONARDO-DE CASTRO, J.: Before the Court are two petitions for review on certiorari under Rule 45 of the Rules of Court both seeking to annul and set aside the Decision[1] dated September 29, 2005 as well as the Resolution[2] dated March 6, 2006 of the Court of Appeals in CA-G.R. CV No. 75744, entitled "Merelo B. Aznar, Matias B. Aznar III, Jose L. Aznar (deceased) represented by his heirs, Ramon A. Barcenilla (deceased) represented by his heirs, Rosario T. Barcenilla, Jose B. Enad (deceased) represented by his heirs, and Ricardo Gabuya (deceased) represented by his heirs v. Philippine National Bank, Jose Garrido and Register of Deeds of Cebu City." The September 29, 2005 Decision of the Court of Appeals set aside the Decision[3] dated November 18, 1998 of the Regional Trial Court (RTC) of Cebu City, Branch 17, in Civil Case No. CEB-21511. Furthermore, it ordered the Philippine National Bank (PNB) to pay Merelo B. Aznar; Matias B. Aznar III; Jose L. Aznar (deceased), represented by his heirs; Ramon A. Barcenilla (deceased), represented by his heirs; Rosario T. Barcenilla; Jose B. Enad (deceased), represented by his heirs; and Ricardo Gabuya (deceased), represented by his heirs (Aznar, et al.), the amount of their lien based on the Minutes of the Special Meeting of the Board of Directors[4] (Minutes) of the defunct Rural Insurance and Surety Company, Inc. (RISCO) duly annotated on the titles of three parcels of land, plus legal interests from the time of PNB's acquisition of the subject properties until the finality of the judgment but dismissing all other claims of Aznar, et al. On the other hand, the March 6, 2006 Resolution of the Court of Appeals denied the Motion for Reconsideration subsequently filed by each party. The facts of this case, as stated in the Decision dated September 29, 2005 of the Court of Appeals, are as follows: In 1958, RISCO ceased operation due to business reverses. In plaintiffs' desire to rehabilitate RISCO, they contributed a total amount of P212,720.00 which was used in the purchase of the three (3) parcels of land described as follows: "A parcel of land (Lot No. 3597 of the Talisay-Minglanilla Estate, G.L.R.O. Record No. 3732) situated in the Municipality of Talisay, Province of Cebu, Island of Cebu. xxx containing an area
12

of SEVENTY[-]EIGHT THOUSAND ONE HUNDRED EIGHTY[-]FIVE SQUARE METERS (78,185) more or less. x x x" covered by Transfer Certificate of Title No. 8921 in the name of Rural Insurance & Surety Co., Inc."; "A parcel of land (Lot 7380 of the Talisay Minglanilla Estate, G.L.R.O. Record No. 3732), situated in the Municipality of Talisay, Province of Cebu, Island of Cebu. xxx containing an area of THREE HUNDRED TWENTY[-]NINE THOUSAND FIVE HUNDRED FORTY[-]SEVEN SQUARE METERS (329,547), more or less. xxx" covered by Transfer Certificate of Title No. 8922 in the name of Rural Insurance & Surety Co., Inc." and "A parcel of land (Lot 1323 of the subdivision plan Psd-No. 5988), situated in the District of Lahug, City of Cebu, Island of Cebu. xxx containing an area of FIFTY[-]FIVE THOUSAND SIX HUNDRED FIFTY[-]THREE (55,653) SQUARE METERS, more or less." covered by Transfer Certificate of Title No. 24576 in the name of Rural Insurance & Surety Co., Inc." After the purchase of the above lots, titles were issued in the name of RISCO. The amount contributed by plaintiffs constituted as liens and encumbrances on the aforementioned properties as annotated in the titles of said lots. Such annotation was made pursuant to the Minutes of the Special Meeting of the Board of Directors of RISCO (hereinafter referred to as the "Minutes") on March 14, 1961, pertinent portion of which states: xxxx 3. The President then explained that in a special meeting of the stockholders previously called for the purpose of putting up certain amount of P212,720.00 for the rehabilitation of the Company, the following stockholders contributed the amounts indicated opposite their names: CONTRIBUTED SURPLUS MERELO B. AZNAR MATIAS B. AZNAR JOSE L. AZNAR RAMON A. BARCENILLA ROSARIO T. BARCENILLA JOSE B. ENAD RICARDO GABUYA P50,000.00 50,000.00 27,720.00 25,000.00 25,000.00 17,500.00 17,500.00 212,720.00 xxxx And that the respective contributions above-mentioned shall constitute as their lien or interest on the property described above, if and when said property are titled in the name of RURAL INSURANCE & SURETY CO., INC., subject to registration as their adverse claim in pursuance of the Provisions of Land Registration Act, (Act No. 496, as amended) until such time their respective contributions are refunded to them completely.
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x x x x" Thereafter, various subsequent annotations were made on the same titles, including the Notice of Attachment and Writ of Execution both dated August 3, 1962 in favor of herein defendant PNB, to wit: On TCT No. 8921 for Lot 3597: Entry No. 7416-V-4-D.B. - Notice of Attachment - By the Provincial Sheriff of Cebu, Civil Case No. 47725, Court of First Instance of Manila, entitled "Philippine National Bank, Plaintiff, versus Iluminada Gonzales, et al., Defendants", attaching all rights, interest and participation of the defendant Iluminada Gonzales and Rural Insurance & Surety Co., Inc. of the two parcels of land covered by T.C.T. Nos. 8921, Attachment No. 330 and 185. Date of Instrument - August 3, 1962. Date of Inscription - August 3, 1962, 3:00 P.M. Entry No. 7417-V-4-D.B. - Writ of Execution - By the Court of First Instance of Manila, commanding the Provincial Sheriff of Cebu, of the lands and buildings of the defendants, to make the sum of Seventy[-]One Thousand Three Hundred Pesos (P71,300.00) plus interest etc., in connection with Civil Case No. 47725, File No. T-8021. Date of Instrument - July 21, 1962. Date of Inscription - August 3, 1962, 3:00 P.M. Entry No. 7512-V-4-D.B. - Notice of Attachment - By the Provincial Sheriff of Cebu, Civil Case Nos. IV-74065, 73929, 74129, 72818, in the Municipal Court of the City of Manila, entitled "Jose Garrido, Plaintiff, versus Rural Insurance & Surety Co., Inc., et als., Defendants", attaching all rights, interests and participation of the defendants, to the parcels of land covered by T.C.T. Nos. 8921 & 8922 Attachment No. 186, File No. T-8921. Date of the Instrument - August 16, 1962. Date of Inscription - August 16, 1962, 2:50 P.M. Entry No. 7513-V-4-D.B. - Writ of Execution - By the Municipal Court of the City of Manila, commanding the Provincial Sheriff of Cebu, of the lands and buildings of the defendants, to make the sum of Three Thousand Pesos (P3,000.00), with interest at 12% per annum from July 20, 1959, in connection with Civil Case Nos. IV-74065, 73929, 74613 annotated above. File No. T-8921 Date of the Instrument - August 11, 1962. Date of the Inscription - August 16, 1962, 2:50 P.M. On TCT No. 8922 for Lot 7380: (Same as the annotations on TCT 8921) On TCT No. 24576 for Lot 1328 (Corrected to Lot 1323-c per court order):
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Entry No. 1660-V-7-D.B. - Notice of Attachment - by the Provincial Sheriff of Cebu, Civil Case No. 47725, Court of First Instance of Manila, entitled "Philippine National Bank, Plaintiff, versus, Iluminada Gonzales, et al., Defendants", attaching all rights, interest, and participation of the defendants Iluminada Gonzales and Rural Insurance & Surety Co., Inc. of the parcel of land herein described. Attachment No. 330 & 185. Date of Instrument - August 3, 1962. Date of Inscription - August 3, 1962, 3:00 P.M. Entry No. 1661-V-7-D.B. - Writ of Execution by the Court of First Instance of Manila commanding the Provincial Sheriff of Cebu, of the lands and buildings of the defendants to make the sum of Seventy[-]One Thousand Three Hundred Pesos (P71,300.00), plus interest, etc., in connection with Civil Case No. 47725. File No. T-8921. Date of the Instrument - July 21, 1962. Date of the Inscription - August 3, 1962 3:00 P.M. Entry No. 1861-V-7-D.B. - Notice of Attachment - By the Provincial Sheriff of Cebu, Civil Case Nos. IV-74065, 73929, 74129, 72613 & 72871, in the Municipal Court of the City of Manila, entitled "Jose Garrido, Plaintiff, versus Rural Insurance & Surety Co., Inc., et als., Defendants", attaching all rights, interest and participation of the defendants, to the parcel of land herein described. Attachment No. 186. File No. T-8921. Date of the Instrument - August 16, 1962. Date of the Instription - August 16, 1962 2:50 P.M. Entry No. 1862-V-7-D.B. - Writ of Execution - by the Municipal Court of Manila, commanding the Provincial Sheriff of Cebu, of the lands and buildings of the Defendants, to make the sum of Three Thousand Pesos (P3,000.00), with interest at 12% per annum from July 20, 1959, in connection with Civil Case Nos. IV-74065, 73929, 74129, 72613 & 72871 annotated above. File No. T-8921. Date of the Instrument - August 11, 1962. Date of the Inscription - August 16, 1962 at 2:50 P.M. As a result, a Certificate of Sale was issued in favor of Philippine National Bank, being the lone and highest bidder of the three (3) parcels of land known as Lot Nos. 3597 and 7380, covered by T.C.T. Nos. 8921 and 8922, respectively, both situated at Talisay, Cebu, and Lot No. 1328-C
15

covered by T.C.T. No. 24576 situated at Cebu City, for the amount of Thirty-One Thousand Four Hundred Thirty Pesos (P31,430.00). Thereafter, a Final Deed of Sale dated May 27, 1991 in favor of the Philippine National Bank was also issued and Transfer Certificate of Title No. 24576 for Lot 1328-C (corrected to 1323-C) was cancelled and a new certificate of title, TCT 119848 was issued in the name of PNB on August 26, 1991. This prompted plaintiffs-appellees to file the instant complaint seeking the quieting of their supposed title to the subject properties, declaratory relief, cancellation of TCT and reconveyance with temporary restraining order and preliminary injunction. Plaintiffs alleged that the subsequent annotations on the titles are subject to the prior annotation of their liens and encumbrances. Plaintiffs further contended that the subsequent writs and processes annotated on the titles are all null and void for want of valid service upon RISCO and on them, as stockholders. They argued that the Final Deed of Sale and TCT No. 119848 are null and void as these were issued only after 28 years and that any right which PNB may have over the properties had long become stale. Defendant PNB on the other hand countered that plaintiffs have no right of action for quieting of title since the order of the court directing the issuance of titles to PNB had already become final and executory and their validity cannot be attacked except in a direct proceeding for their annulment. Defendant further asserted that plaintiffs, as mere stockholders of RISCO do not have any legal or equitable right over the properties of the corporation. PNB posited that even if plaintiff's monetary lien had not expired, their only recourse was to require the reimbursement or refund of their contribution.[5] Aznar, et al., filed a Manifestation and Motion for Judgment on the Pleadings[6] on October 5, 1998. Thus, the trial court rendered the November 18, 1998 Decision, which ruled against PNB on the basis that there was an express trust created over the subject properties whereby RISCO was the trustee and the stockholders, Aznar, et al., were the beneficiaries or the cestui que trust. The dispositive portion of the said ruling reads: WHEREFORE, judgment is hereby rendered as follows: <TABLE WIDTH="100%" BORDER="0" ALIGN="CENTER" CELLPADDING="0" CELLSPACING="0"> <TR VALIGN="TOP"> <TD WIDTH="5%"><DIV ALIGN="JUSTIFY">a) </DIV></TD> <TD WIDTH="95%"><DIV ALIGN="JUSTIFY">Declaring the Minutes of the Special Meeting of the Board of Directors of RISCO approved on March 14, 1961 (Annex "E," Complaint) annotated on the titles to subject properties on May 15, 1962 as an express trust whereby RISCO was a mere trustee and the above-mentioned stockholders as beneficiaries being the true and lawful owners of Lots 3597, 7380 and 1323;</DIV></TD> </TR> <TR VALIGN="TOP"> <TD><DIV ALIGN="JUSTIFY">b) </DIV></TD> <TD><DIV ALIGN="JUSTIFY">Declaring all the subsequent annotations of court writs and processes, to wit: Entry No. 7416-V-4-D.B., 7417-V4-D.B., 7512-V-4-D.B., and 7513-V-4-D.B. in TCT No. 8921 for Lot 3597 and TCT No. 8922 for Lot 7380; Entry No. 1660-V-7-D.B., Entry No. 1661-V-7-D.B., Entry No. 1861-V-7-D.B., Entry No. 1862-V-7-D.B., Entry No. 4329-V-7-D.B., Entry No. 3761-V-7-D.B. and Entry No. 26522 v. 34, D.B. on TCT No. 24576 for Lot 1323-C, and all other subsequent annotations
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thereon in favor of third persons, as null and void;</DIV></TD> </TR> <TR VALIGN="TOP"> <TD><DIV ALIGN="JUSTIFY">c) </DIV></TD> <TD><DIV ALIGN="JUSTIFY">Directing the Register of Deeds of the Province of Cebu and/or the Register of Deeds of Cebu City, as the case may be, to cancel all these annotations mentioned in paragraph b) above the titles;</DIV></TD> </TR> <TR VALIGN="TOP"> <TD><DIV ALIGN="JUSTIFY">d) </DIV></TD> <TD><DIV ALIGN="JUSTIFY">Directing the Register of Deeds of the Province of Cebu to cancel and/or annul TCTs Nos. 8921 and 8922 in the name of RISCO, and to issue another titles in the names of the plaintiffs; and</DIV></TD> </TR> <TR VALIGN="TOP"> <TD><DIV ALIGN="JUSTIFY">e)</DIV></TD> <TD> <DIV ALIGN="JUSTIFY">Directing Philippine National Bank to reconvey TCT No. 119848 in favor of the plaintiffs.<SUP STYLE="color: rgb(255, 0, 0);">[7]</SUP></DIV></TD> </TR> </TABLE> PNB appealed the adverse ruling to the Court of Appeals which, in its September 29, 2005 Decision, set aside the judgment of the trial court. Although the Court of Appeals agreed with the trial court that a judgment on the pleadings was proper, the appellate court opined that the monetary contributions made by Aznar, et al., to RISCO can only be characterized as a loan secured by a lien on the subject lots, rather than an express trust. Thus, it directed PNB to pay Aznar, et al., the amount of their contributions plus legal interest from the time of acquisition of the property until finality of judgment. The dispositive portion of the decision reads: WHEREFORE, premises considered, the assailed Judgment is hereby SET ASIDE. A new judgment is rendered ordering Philippine National Bank to pay plaintiffs-appellees the amount of their lien based on the Minutes of the Special Meeting of the Board of Directors duly annotated on the titles, plus legal interests from the time of appellants' acquisition of the subject properties until the finality of this judgment. All other claims of the plaintiffs-appellees are hereby DISMISSED.[8] Both parties moved for reconsideration but these were denied by the Court of Appeals. Hence, each party filed with this Court their respective petitions for review on certiorari under Rule 45 of the Rules of Court, which were consolidated in a Resolution[9] dated October 2, 2006. In PNB's petition, docketed as G.R. No. 171805, the following assignment of errors were raised: I THE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE TRIAL COURT THAT A JUDGMENT ON THE PLEADINGS WAS WARRANTED DESPITE THE EXISTENCE OF GENUINE ISSUES OF FACTS ALLEGED IN PETITIONER PNB'S ANSWER. II THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RIGHT OF
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RESPONDENTS TO REFUND OR REPAYMENT OF THEIR CONTRIBUTIONS HAD NOT PRESCRIBED AND/OR THAT THE MINUTES OF THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF RISCO CONSTITUTED AS AN EFFECTIVE ADVERSE CLAIM. III THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE DISMISSAL OF THE COMPLAINT ON GROUNDS OF RES JUDICATA AND LACK OF CAUSE OF ACTION ALLEGED BY PETITIONER IN ITS ANSWER.[10] On the other hand, Aznar, et al.'s petition, docketed as G.R. No. 172021, raised the following issue: THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE CONTRIBUTIONS MADE BY THE STOCKHOLDERS OF RISCO WERE MERELY A LOAN SECURED BY THEIR LIEN OVER THE PROPERTIES, SUBJECT TO REIMBURSEMENT OR REFUND, RATHER THAN AN EXPRESS TRUST.[11] Anent the first issue raised in G.R. No. 171805, PNB argues that a judgment on the pleadings was not proper because its Answer,[12] which it filed during the trial court proceedings of this case, tendered genuine issues of fact since it did not only deny material allegations in Aznar, et al.'s Complaint[13] but also set up special and affirmative defenses. Furthermore, PNB maintains that, by virtue of the trial court's judgment on the pleadings, it was denied its right to present evidence and, therefore, it was denied due process. The contention is meritorious. The legal basis for rendering a judgment on the pleadings can be found in Section 1, Rule 34 of the Rules of Court which states that "[w]here an answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading, the court may, on motion of that party, direct judgment on such pleading. x x x." Judgment on the pleadings is, therefore, based exclusively upon the allegations appearing in the pleadings of the parties and the annexes, if any, without consideration of any evidence aliunde.[14] However, when it appears that not all the material allegations of the complaint were admitted in the answer for some of them were either denied or disputed, and the defendant has set up certain special defenses which, if proven, would have the effect of nullifying plaintiff's main cause of action, judgment on the pleadings cannot be rendered.[15] In the case at bar, the Court of Appeals justified the trial court's resort to a judgment on the pleadings in the following manner: Perusal of the complaint, particularly, Paragraph 7 thereof reveals:

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"7. That in their desire to rehabilitate RISCO, the above-named stockholders contributed a total amount of PhP212,720.00 which was used in the purchase of the above-described parcels of land, which amount constituted liens and encumbrances on subject properties in favor of the above-named stockholders as annotated in the titles adverted to above, pursuant to the Minutes of the Special Meeting of the Board of Directors of RISCO approved on March 14, 1961, a copy of which is hereto attached as Annex "E". On the other hand, defendant in its Answer, admitted the aforequoted allegation with the qualification that the amount put up by the stockholders was "used as part payment" for the properties. Defendant further averred that plaintiff's liens and encumbrances annotated on the titles issued to RISCO constituted as "loan from the stockholders to pay part of the purchase price of the properties" and "was a personal obligation of RISCO and was thus not a claim adverse to the ownership rights of the corporation." With these averments, We do not find error on the part of the trial court in rendering a judgment on the pleadings. For one, the qualification made by defendant in its answer is not sufficient to controvert the allegations raised in the complaint. As to defendants' contention that the money contributed by plaintiffs was in fact a "loan" from the stockholders, reference can be made to the Minutes of the Special Meeting of the Board of Directors, from which plaintiffs-appellees anchored their complaint, in order to ascertain the true nature of their claim over the properties. Thus, the issues raised by the parties can be resolved on the basis of their respective pleadings and the annexes attached thereto and do not require further presentation of evidence aliunde.[16] However, a careful reading of Aznar, et al.'s Complaint and of PNB's Answer would reveal that both parties raised several claims and defenses, respectively, other than what was cited by the Court of Appeals, which requires the presentation of evidence for resolution, to wit: Complaint (Aznar, et al.) 11. That these subsequent annotations on the titles of the properties in question are subject to the prior annotation of liens and encumbrances of the abovenamed stockholders per Entry No. 458-V-7-D.B. inscribed on TCT No. 24576 on May 15, 1962 and per Entry No. 6966-V-4-D.B. on TCT No. 8921 and TCT No. 8922 on May 15, 1962; 12. That these writs and processes annotated on the titles are all null and void for total want of valid service upon RISCO and the above-named stockholders considering that as early as sometime in 1958, RISCO ceased operations as earlier stated, and as early as May 15, 1962, the liens and encumbrances of the above-named stockholders were annotated in the titles of subject properties; Answer (PNB) 10) Par. 11 is denied as the loan from the stockholders to pay part of the purchase price of the properties was a personal obligation of RISCO and was thus not a claim adverse to the ownership rights of the corporation; 11) Par. 12 is denied as in fact notice to RISCO had been sent to its last known address at Plaza Goite, Manila;

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13. That more particularly, the Final Deed of Sale (Annex "G") and TCT No. 119848 are null and void as these were issued only after 28 years and 5 months (in the case of the Final Deed of Sale) and 28 years, 6 months and 29 days (in the case of TCT 119848) from the invalid auction sale on December 27, 1962, hence, any right, if any, which PNB had over subject properties had long become stale; 14. That plaintiffs continue to have possession of subject properties and of their corresponding titles, but they never received any process concerning the petition filed by PNB to have TCT 24576 over Lot 1323-C surrendered and/or cancelled; 15. That there is a cloud created on the aforementioned titles of RISCO by reason of the annotate writs, processes and proceedings caused by Jose Garrido and PNB which were apparently valid or effective, but which are in truth and in fact invalid and ineffective, and prejudicial to said titles and to the rights of the plaintiffs, which should be removed and the titles quieted.[17]

12) Par. 13 is denied for no law requires the final deed of sale to be executed immediately after the end of the redemption period. Moreover, another court of competent jurisdiction has already ruled that PNB was entitled to a final deed of sale; 13) Par. 14 is denied as plaintiffs are not in actual possession of the land and if they were, their possession was as trustee for the creditors of RISCO like PNB; 14) Par. 15 is denied as the court orders directing the issuance of titles to PNB in lieu of TCT 24576 and TCT 8922 are valid judgments which cannot be set aside in a collateral proceeding like the instant case.[18]

Furthermore, apart from refuting the aforecited material allegations made by Aznar, et al., PNB also indicated in its Answer the special and affirmative defenses of (a) prescription; (b) res judicata; (c) Aznar, et al., having no right of action for quieting of title; (d) Aznar, et al.'s lien being ineffective and not binding to PNB; and (e) Aznar, et al.'s having no personality to file the suit.[19] From the foregoing, it is indubitably clear that it was error for the trial court to render a judgment on the pleadings and, in effect, resulted in a denial of due process on the part of PNB because it was denied its right to present evidence. A remand of this case would ordinarily be the appropriate course of action. However, in the interest of justice and in order to expedite the resolution of this case which was filed with the trial court way back in 1998, the Court finds it proper to already resolve the present controversy in light of the existence of legal grounds that would dispose of the case at bar without necessity of presentation of further evidence on the other disputed factual claims and defenses of the parties. A thorough and comprehensive scrutiny of the records would reveal that this case should be dismissed because Aznar, et al., have no title to quiet over the subject properties and their true cause of action is already barred by prescription. At the outset, the Court agrees with the Court of Appeals that the agreement contained in the Minutes of the Special Meeting of the RISCO Board of Directors held on March 14, 1961 was a
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loan by the therein named stockholders to RISCO. We quote with approval the following discussion from the Court of Appeals Decision dated September 29, 2005: Careful perusal of the Minutes relied upon by plaintiffs-appellees in their claim, showed that their contributions shall constitute as "lien or interest on the property" if and when said properties are titled in the name of RISCO, subject to registration of their adverse claim under the Land Registration Act, until such time their respective contributions are refunded to them completely. It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. When the language of the contract is explicit leaving no doubt as to the intention of the drafters thereof, the courts may not read into it any other intention that would contradict its plain import. The term lien as used in the Minutes is defined as "a discharge on property usually for the payment of some debt or obligation. A lien is a qualified right or a proprietary interest which may be exercised over the property of another. It is a right which the law gives to have a debt satisfied out of a particular thing. It signifies a legal claim or charge on property; whether real or personal, as a collateral or security for the payment of some debt or obligation." Hence, from the use of the word "lien" in the Minutes, We find that the money contributed by plaintiffsappellees was in the nature of a loan, secured by their liens and interests duly annotated on the titles. The annotation of their lien serves only as collateral and does not in any way vest ownership of property to plaintiffs.[20] (Emphases supplied.) We are not persuaded by the contention of Aznar, et al., that the language of the subject Minutes created an express trust. Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties. An implied trust comes into being by operation of law.[21] Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and positive acts of the settlor or the trustor - by some writing, deed, or will or oral declaration. It is created not necessarily by some written words, but by the direct and positive acts of the parties.[22] This is in consonance with Article 1444 of the Civil Code, which states that "[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended." In other words, the creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations.[23] No such reasonable certitude in the creation of an express trust obtains in the case at bar. In fact,
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a careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not offer any indication that the parties thereto intended that Aznar, et al., become beneficiaries under an express trust and that RISCO serve as trustor. Indeed, we find that Aznar, et al., have no right to ask for the quieting of title of the properties at issue because they have no legal and/or equitable rights over the properties that are derived from the previous registered owner which is RISCO, the pertinent provision of the law is Section 2 of the Corporation Code (Batas Pambansa Blg. 68), which states that "[a] corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence." As a consequence thereof, a corporation has a personality separate and distinct from those of its stockholders and other corporations to which it may be connected.[24] Thus, we had previously ruled in Magsaysay-Labrador v. Court of Appeals[25] that the interest of the stockholders over the properties of the corporation is merely inchoate and therefore does not entitle them to intervene in litigation involving corporate property, to wit: Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations. While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person.[26] In the case at bar, there is no allegation, much less any proof, that the corporate existence of RISCO has ceased and the corporate property has been liquidated and distributed to the stockholders. The records only indicate that, as per Securities and Exchange Commission (SEC) Certification[27] dated June 18, 1997, the SEC merely suspended RISCO's Certificate of Registration beginning on September 5, 1988 due to its non-submission of SEC required reports and its failure to operate for a continuous period of at least five years. Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the properties at issue in this case on the strength of the Minutes which, at most, is merely evidence of a loan agreement between them and the company. There is no indication or even a suggestion that the ownership of said properties were transferred to them which would require no less that the said properties be registered under their names. For this reason, the complaint should be dismissed since Aznar, et al., have no cause to seek a quieting of title over the subject properties. At most, what Aznar, et al., had was merely a right to be repaid the amount loaned to RISCO. Unfortunately, the right to seek repayment or reimbursement of their contributions used to purchase the subject properties is already barred by prescription.
22

Section 1, Rule 9 of the Rules of Court provides that when it appears from the pleadings or the evidence on record that the action is already barred by the statute of limitations, the court shall dismiss the claim, to wit: 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. (Emphasis supplied.) In Feliciano v. Canoza,[28] we held: We have ruled that trial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or other facts on record show it to be indeed timebarred x x x; and it may do so on the basis of a motion to dismiss, or an answer which sets up such ground as an affirmative defense; or even if the ground is alleged after judgment on the merits, as in a motion for reconsideration; or even if the defense has not been asserted at all, as where no statement thereof is found in the pleadings, or where a defendant has been declared in default. What is essential only, to repeat, is that the facts demonstrating the lapse of the prescriptive period, be otherwise sufficiently and satisfactorily apparent on the record; either in the averments of the plaintiffs complaint, or otherwise established by the evidence.[29] (Emphasis supplied.) The pertinent Civil Code provision on prescription which is applicable to the issue at hand is Article 1144(1), to wit: 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. (Emphasis supplied.) Moreover, in Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.,[30] we held that the term "written contract" includes the minutes of the meeting of the board of directors of a corporation, which minutes were adopted by the parties although not signed by them, to wit: Coming now to the question of prescription raised by defendant Lepanto, it is contended by the latter that the period to be considered for the prescription of the claim regarding participation in the profits is only four years, because the modification of the sharing embodied in the management contract is merely verbal, no written document to that effect having been presented. This contention is untenable. The modification appears in the minutes of the special meeting of the Board of Directors of Lepanto held on August 21, 1940, it having been made upon the authority of its President, and in said minutes the terms of modification had been specified. This is sufficient to have the agreement considered, for the purpose of applying the statute of limitations, as a written contract even if the minutes were not signed by the parties (3 A.L.R., 2d,
23

p. 831). It has been held that a writing containing the terms of a contract if adopted by two persons may constitute a contract in writing even if the same is not signed by either of the parties (3 A.L.R., 2d, pp. 812-813). Another authority says that an unsigned agreement the terms of which are embodied in a document unconditionally accepted by both parties is a written contract (Corbin on Contracts, Vol. I, p. 85).[31] Applied to the case at bar, the Minutes which was approved on March 14, 1961 is considered as a written contract between Aznar, et al., and RISCO for the reimbursement of the contributions of the former. As such, the former had a period of ten (10) years from 1961 within which to enforce the said written contract. However, it does not appear that Aznar, et al., filed any action for reimbursement or refund of their contributions against RISCO or even against PNB. Instead the suit that Aznar, et al., brought before the trial court only on January 28, 1998 was one to quiet title over the properties purchased by RISCO with their contributions. It is unmistakable that their right of action to claim for refund or payment of their contributions had long prescribed. Thus, it was reversible error for the Court of Appeals to order PNB to pay Aznar, et al., the amount of their liens based on the Minutes with legal interests from the time of PNB's acquisition of the subject properties. In view of the foregoing, it is unnecessary for the Court to pass upon the other issues raised by the parties. WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack of merit. The petition of PNB in G.R. No. 171805 is GRANTED. The Complaint, docketed as Civil Case No. CEB-21511, filed by Aznar, et al., is hereby DISMISSED. No costs. SO ORDERED. Corona, C.J., (Chairperson), Velasco, Jr., Peralta,* and Perez, JJ., concur. Endnotes:
*

Per Special Order No. 994 dated May 27, 2011.

[1]

Rollo (G.R. No. 171805), pp. 75-88; penned by Associate Justice Arsenio J. Magpale with Associate Justices Vicente L. Yap and Apolinario D. Bruselas, Jr., concurring.
[2]

Id. at 90-91. Id. at 157-166. Id. at 128-130. Id. at 76-80. Id. at 131-134.
24

[3]

[4]

[5]

[6]

[7]

Id. at 165-166. Id. at 87. Id. at 299. Id. at 49-50. Rollo (G.R. No. 172021), p. 19. Rollo (G.R. No. 171805), pp. 120-127. Id. at 92-119. Pacific Rehouse Corporation v. EIB Securities, Inc., G.R. No. 184036, October 13, 2010. Municipality of Tiwi v. Betito, G.R. No. 171873, July 9, 2010, 624 SCRA 623, 638. Rollo (G.R. No. 171805), pp. 82-83. Id. at 100-102. Id. at 122. Id. at 123-126. Id. at 84-85.

[8]

[9]

[10]

[11]

[12]

[13]

[14]

[15]

[16]

[17]

[18]

[19]

[20]

[21]

Heirs of Tranquilino Labiste v. Heirs of Jose Labiste, G.R. No. 162033, May 8, 2009, 587 SCRA 417, 425.
[22]

Ringor v. Ringor, 480 Phil. 141, 158 (2004). Heirs of Pedro Medina v. Court of Appeals, 196 Phil. 205, 213-214 (1981).

[23]

[24]

Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations Commission, G.R. Nos. 170689 & 170705, March 17, 2009, 581 SCRA 598, 612.
[25]

259 Phil. 748 (1989).

25

[26]

Id. at 754. Rollo (G.R. No. 171805), p. 113.

[27]

[28]

G.R. No. 161746, September 1, 2010, 629 SCRA 550, citing Gicano v. Gegato, 241 Phil. 139, 145 (1988).
[29]

Id. at 558-559. 125 Phil. 204 (1966). Id. at 223-224. Republic of the Philippines SUPREME COURT Manila EN BANC DECISION

[30]

[31]

February 16, 1950 G.R. No. L-48090 DOLORES PACHECO, in her capacity as guardian of the minors Concepcion, Alicia, and Herminia Yulo, petitioner, vs. SANTIAGO ARRO ET AL., respondents. DEMETRIA FIRMEZA, accompanied by her husband, Basilio Rivera, respondent-movant. Vicente Hilado for petitioner. Padilla, J.: On 13 October 1947, this Court declared the record of this case reconstituted. As reconstituted it shows that on 31 January 1941, a petition for a writ of certiorari was filed by Dolores Pacheco, as guardian of the minors Concepcion, Alicia and Herminia surnamed Yulo, daughters of the late Jose Yulo y Regalado, for the review of a judgment rendered by the Court of Appeals which affirmed the one rendered on 21 March 1939 by the Court of First Instance of Occidental Negros, ordering Jose Yulo y Regalado to execute deeds of assignment in favor of the plaintiffs for each and every lot claimed by them, the numbers of which appear opposite their names in the complaint filed by them. The decision of the Court of Appeals reads as follows:

26

Los demandantes interpusieron la demanda de autos para que el demandado otorgue una escritura de donacion a su favor de los lotes que aparecen a continuacion de sus respectivos numbres y que son como siguien: Santiago Arro</TD> Lot No. 237</TD> </TR> Juan Balidio</TD> Lot No. 150</TD> </TR> Ruperto Caballero</TD> Lot No. 208</TD> </TR> Domingo Ciriaco</TD> Lot No. 147</TD> </TR> Filomeno Echanova</TD> Lot No. 121</TD> </TR> Florentino Granada</TD> Lot No. 148</TD> </TR> Dorotea Firmesa</TD> Lot No. 224</TD> </TR>
27

Agustin Sarap</TD> Lot No. 207</TD> </TR> Atanacio Jordan</TD> Lot No. 230</TD> </TR> Fortunato Lambatin</TD> Lot No. 213</TD> </TR> Fausto Leal</TD> Lot No. 118</TD> </TR> Dionisia Crelo</TD> Lot No. 235</TD> </TR> Martin Quinanola</TD> Lot No. 238</TD> </TR> Florencia Rosales</TD> Lot No. 124</TD> </TR> Basilio Salino</TD> Lot No. 153</TD>
28

</TR> Magdaleno Salvo</TD> Lot No. 155</TD> </TR> Pascual Sibug</TD> Lot No. 215</TD> </TR> Pedro Tan</TD> Lot No. 122</TD> </TR> Teodora Caalaman</TD> Lot No. 112</TD> </TR> Maria Torillo</TD> Lot No. 135</TD> </TR> Pedro Tajanlangit</TD> Lot No. 209</TD> </TR> Silverio Toala</TD> Lot No. 149</TD> </TR> Pablo Tayson</TD>
29

Lot No. 212</TD> </TR> Maria Villanueva</TD> Lot No. 236</TD> </TR> and</TD> Lot No. 228</TD> </TR> Inocencio Viva</TD> Lot No. 120</TD> </TR> Fortunato Siasat</TD> Lot No. 151</TD> </TR> and</TD> Lot No. 152</TD> </TR> El demandado alego, como defensa especial, que las alegaciones de la demanda no constituyen motivo de accion y que el plazo para entablarla ha trascurrido; y, por via de contrademanda, pide que los demandantes sean condenados a desalojar sus respectivos lotes. Habiendo fallecido el demandado, se enmendo la demanda para la sustitucion del mismo por sus hijos, los cuales eran todos menores de edad, representados por su tutora Dolores Pacheco, la cual tambien presento contestaciones enmendadas. El Juzgado decidio el asunto a favor de los demandantes y contra la parte demandada, y en su citada decision hizo el siguiente relato de hechos:

30

Los demandates eran los reclamantes de los lotes mencionados en la demanda situados todos en las Calles Zamora y Quennon del municipio de Isabela de esta provincia, con la oposicion del demandado Jose Yulo y Regalado que tambien los reclamaba para si; pero habiendo llegado este y los primeros a una inteligencia en el sentido de que si los nombres de dichas calles se cambiaban de Zamora y Quennon a T. Yulo y G. Regalado, respectivamente, que eran los nombres de los padres del demandado, a saber: Teodoro Yulo y Gregoria Regalado; dicho demandado estaria dispuesto a ceder dichos lotes a sus respectivos reclamantes, convenio que se hizo en Corte abierta, presidida por el Honorable Juez Norberto Romualdez, habiendo tomado nota de ello el taguigrafo Sr. Tanjuequiao, segun consta en el Exhibit B, los demandantes, que estaban asistidos entonces de su abogado Don Agustin P. Seva, retiraron sus respectivas reclamaciones asi como las pruebas que ya habian practicado ante el Juez Arbitro en apoyo de sus citadas reclamaciones, dando asi lugar a que los citados lotes se adjudicaran a nombre del citado demandado, librandose despues a su favor los correspondientes decretos y titulos y estos ultimos estuvieron largo tiempo en poder del tesorero municipal de Isabela sin que los recogiera el citado demandado. Despues de hechas muchas gestiones, pues hubo necesidad de que se dictara una ley autorizando a los municipios para cambiar los nombres de las calles que se hallan dentro de sus respectivos terminos jurisdiccionales, se dicto por el Concejo Municipal de Isabela una resolucion ordenando el cambio de los nombres de las calles ya citadas y una vez aprobada dicha resolucion por la Honorable Junta Provincial de Negros Occidental, se procedio al cambio mediante orden ejecutiva del Presidente de dicho municpio en febrero de 1934. El demandado por primera vez cumplio en parte con el convenio arriba mencionado, otorgando en los meses de mayo y junio de 1928 los Exhibits D, E, F, G, H e I a favor de los reclamantes mencionados en los mismos, donandoles los lotes que les correspondian, y por virtud de dichas escrituras los reclamantes favorecidos consiguieron el traspaso del titulo de dichos lotes a su favor en el Registro de la Propiedad de esta provincia. Los otros reclamantes siguieron el ejemplo y fueron a verse con el citado demandado para pedir que se les cediera tambien los lotes que cada uno de ellos reclamaba, y este les indico que mandaran preparar la escritura correspondiente al abogado Don Hugo P. Rodriguez que habia estado representado al citado demandado Jose Yulo y Regalado en vida en esta causa, y a su muerte lo ha sido tambien y hasta ahora lo es de sus herederos, pero dicho demandado no quiso firmar las tales escrituras hasta que paso a mejor vida, alegando que los demandantes se habian portado ingratos para con el, ingratitud que segun estos ultimos declararon consistio en que ellos no favorecieron a un candidato del demandado en una de las elecciones pasadas. Los demandantes entablaron la presente accion para obligar al demandado o a sus herederos a respectar el convenio habido entre ellos y el citado demandado y a otorgar las escrituras correspondientes de donacion de sus respectivos lotes. La representacion del citado demandado o sus herederos invoca como primera defensa la prescripcion que no ha sido interrumpida, segun dicha representacion, por el otorgamiento de los Exhibits D al I, ademas de otras defensas basadas en tecnicismos que seria prolijo enumerar,

31

precisamente porque, a juicio del Juzgado, es innecesario hacer pronunciamientos sobre las cuestiones asi suscitadas por la defensa para los fines de esta decision. A continuacion hizo las siguientes consideraciones: Sin tener en cuenta para nada los meritos de las alegaciones y pruebas aportadas por los demandantes de que con anterioridad a la medicion catastral y a la vista de los lotes mencionados en la demanda ellos eran los dueos y poseedores de los mismos, pues de hecho continuan poseyendolos, habiendo pagado desde el comienzo las contribuciones territoriales correspondientes; y sin tener tampoco en cuenta el valor de los decretos y certificados de titulo expedidos a favor del demandado que logro adquerirlos en virtud de la retirada de las reclamaciones de los demandantes, asi como de las pruebas por ellos practicadas en virtud de la promesa del demandado de cederles o donarles dichos lotes tan pronto se cumpliese la condicion de que ya se ha hecho merito arriba, el juzgado es de opinion que el demandado se ha constituido en un mero depositario de dichos titulos adjudicados a el con la obligacion expresa de cederlos a sus respectivos dueos tan pronto se consiguiese la realizacion de la condicion impuesta por el y aceptada por estos, y cuando existe un deposito con caracter fiduciario, no cabe la prescripcion, pues tenemos varias decisiones de la Honorable Corte Suprema de Filipinas en que se ha sentado la doctrina que el derecho de los beneficiarios que por confianza permitieron a uno a modo de depositario, que adquiriese el titulo de un terreno con la obligacion de traspasarlo a ellos nunca prescribe a favor del que de este modo llega a adquirir el titulo en virtud del deposito con caracter fiduciario. Pues seria altamente injusto, ilegal y constituiria un despojo inaudito que unos pobres labriegos fueran desposeidos de terrenos heredados de sus causantes que los adquirieron por desmonte, roturacion en o con el producto de su trabajo y del sudor de su frente, solamente porque tuvieron confianza en la persona del demandado que, a juicio de ellos, era digno de ella, confianza respaldada por el convenio habido entre ellos y el citado demandado en presencia del Juzgado, y en virtud del cual retiraron sus reclamaciones, en la inteligencia de que se les cederia los terrenos qued reclamaban sin necesidad de un pleito si se cumplia la condicion que el demandado les impuso, si se permite ahora al demandado, por medio de tecnicismos quedarse con los terrenos adjudicados a su favor y de que serian privados sus actuales poseedores, cuando al juzgado le consta que a dichos proseedores no se les dio oportunidad de probar sus reclamaciones mediante la promesa de una cesion o donacion a su favor. Es verdad que aparentemente toda accion que tuviesen los demandantes de reclamar la propiedad de los citados lotes que hasta ahora continuan ocupando en concepto de dueos en virtud de las disposiciones claras de la ley del Registro de Propiedad ha prescrito si se diera valor a la defensa fundada exclusivamente en tecnicismos que el demandado interpone en su informe, pero el Juzgado cree que esas defensas no tienen aplicacion alguna al presente caso que cae perfectamente dentro de lo que en derecho americano se llama Trust. Aun suponiendo que los reclamantes no tenian derecho a ser declarados dueos de los lotes en controversia, el demandado no puede ahora alegar esa falta de derecho para dejar de cumplir el compromiso contraido por el que se ha constituido en una mero depositario del titulo que
32

adquiriera sobre dichos lotes. An agreement entered into upon a supposition of a right or of a doubtful right though it afterwards comes out that the right was on the other side, shall be binding, and the right shall not prevail against the agreement of the parties; for the right must always be on one side or the other, and therefore the compromise or a doubtful right is a sufficient foundation for an agreement. Stapleton vs. Stapleton, 1 Atl., 2; Bishop, Cont., S., 27; Ronayman vs. Jarves, 79 Ill., s 19; Parker vs. Runslow, 102 Ill., 272; 40 Am. Rep., 558; McKinley vs. Watkins, 13 Ill., 140; Pool vs. Becker, 92 Ill., 601; Wray vs. Chandler, 64 Ind., 154; United States Mortg. Co. vs. Henderson, 111 Ind., 24; Jones vs. Hittenhouse, 87 Ind., 348. En su consecuencia, el Juzgado dicta sentencia ordenando al demandado o a los herederos de este a otorgar a favor de todos y cada uno de los demandantes una escritura de cesion de los lotes que cada uno de ellos reclama, con las costas al demandado. Se arguye, en primer termino, en esta apelacion que el Exhibit B, es una prueba incompetente por no estar certificado ni por el Escribano ni por el Juez. Dicho Exhibito es como sigue: Exhibit B</TD> </TR> ESTADOA UNIDOS DE AMERICA ISLA FILIPINAS EN EL JUZGADO DE PRIMERA INSTANCIA DE NEGROS OCCIDENTAL VIGESIMO SEGUNDO DISTRITO JUDICIAL [Expediente No. 11, G. L. R. O. Record No. 100, Catastro de Isabela, Lote No. 109] El Director de Terrenos, contra Tomas Abaniel y Otros. En una sesion del Juzgado de Primera Instancia de Bacolod, Negros Occ. celebrada el dia 3 de diciembre de 1917, a las 8:00 a.m. Presentes .</TD> El Hon. Norberto Romualdez, Juez del Vigesimo Segundo Distrito Judicial</TD> </TR> Comparecencias</TD> El Escribano Sr. Mariano Cuadra de dicho Juzgado El Taquigrafo Oficial Lorenzo Tanjuaquiao El abogado Sr. Agustin P. Seva, por los opositores y; El abogado Sr. Serafin P. Hilado, por los reclamantes.</TD> </TR> Llamada a vista el lote arriba numerado, tuvieron lugar las siguientes actuaciones: El Sr. Pablo Garcia de Isabela, manifesto que el ha hablado con todos y cada uno de los concejales de Isabela, y que ellos se han comprometido a aprobar yna resolucion de poner el
33

nombre del Sr. Teodoro Yulo a la calle Zamora y el de Gregoria Regalado a la calle Quennon, ambas calles del casco de la poblacion de Isabela. En vista de estas manifestaciones del abogado de los reclamantes de los cuarenta y tantos lotes, poco mas o manos, situados en dichas calles y controvertidos entre el Sr. Yulo y los ocupantes de dichos lotes, el Sr. Jose Yulo, representado por el Dr. Mariano Yulo, se compromete a donar estas parcelas de terreno a los reclamantes tan pronto como se apruebe una resolucion por la Junta Municipal de Isabela y aprobada debidamente por la Junta Provincial, a poner los nombres de Teodoro Yulo y Gregoria Regalado a las calles arriba mencionadas; Entendiendose, Que si algun Concejo Municipal posterior resolviese cambiar de nuevo los nombres de dichas calles y que esta ultima resolucion llegase a ponerse en practica, entonces la propiedad que rige a cada uno de los lotes a que aqui se hacen referencia, revertira al donante. Teniendo en cuenta todas estas manifestaciones, el abogado de los reclamantes renuncia presentar sus pruebas. El abogado de los opositores, en vista de este arreglo, hace constar que retira todas las pruebas practicadas por sus representados ante el Juez arbitro de Isabela sobre los lotes a que dicha transaccion se refiere. Conviene hacer la aclaracion de que el compromiso del Sr. Yulo es el de hacer una donacion de todos y cada uno de estos lotes a sus actuales ocupantes, no necesariamente por toda la extension del lote, sino de aquella parte que el determinara ulteriormente, y que al hacerlo asi, se obliga a no destruir edificios ni siembras de los ocupantes de esos lotes. Entendiendose, Que en caso de disminucion, esta tendra lugar no precisamente al frente de los lotes que miran a la calle Zamora sino al lado contrario al Sur. Certifico: Que lo que precede es transcripcion fiel y exacta de las notas taquigraficas tomadas por mi durante la sesion arriba mencionada. Bacolod, Negros Occidental, enero 4 de 1918. LORENZO TANJUAQUIAO Taquigrafo Oficial</TD> </TR> Habiendose presentado dicha prueba ante el mismo Juzgado que vio el Catastro de Isabela, y ante quien tuvo lugar lo que consta en el Exhibit B, somos de opinion que dicha certificacion era innecesaria, puesto que el Juzgado podia tomar conocimiento judicial del contenido del citado documento. Tambien se alega que no constituyendo dicho Exhibit B un contrato firmado por la parte demandada no puede presentarse como prueba en virtud de la ley de fraudes y no puede probarse su contenido mediante prueba oral. Entendemos que la ley de Fraudes solamente es aplicable a los contratos ratos y no a los consumados, como son parcialmente los celebrados en Corte abierta y en virtud de los cuales Jose Yulo y Regalado obtuvo el titulo de los lotes correspondientes a los demandantes, pues estos son los que los poseen y siempre los han poseido. Cuando se trata de probar un fraude, la prueba oral es admisible. (Yacapin versus Neri, 40 Phil. 61.) Habiendo los demandantes retirado su oposicion en el expediente catastral en virtud de la promesa hecha por el demandado en Corte abierta, este esta ahora en estoppel para negar la existencia de dicho convenio. En cuanto a la prescripcion de la accion de los demandantes, creemos que el Juzgado inferior
34

estuvo acertado al concluir que el titulo de los referidos lotes habia sido expedido a nombre del demandado en su concepto de fideicomisario y, por lo tanto, que el esta obligado a traspasar los mismos a favor de aquellos, en cualquier tiempo. Este caso es parecido al asunto de Bantigui versus Platon, R. G. No. 31317. Alli los opositores retiraron su oposicion en vista, segun el Juzgado, de las pruebas de la parte solicitante. Mas tarde, sin embargo, presentaron una demanda para obligar al solicitante a que traspase ciertas porciones del terreno decretado a su favor, habiendo declarado en la vista el abogado de los opositores de que la oposicion fue retirada por la promesa del solicitante de traspasar despues las porciones reclamadas por los opositores. El Juzgado accedio a lo pedido en la demanda, y dicha decision fue confirmada por la Corte Suprema. En meritos de todo lo expuesto, y no hallando ningun error de hecho ni de derecho en la decision apelada, la confirmamos en todas sus partes con las costas a la apelante. The foregoing discloses that the respondents, the plaintiffs in civil case No. 6088 of the Court of First Instance of Occidental Negros and the appellees in CA-G.R. No. 5700 of the Court of Appeals, filed answers in the cadastral case No. 11, G.L.R.O. cadastral record No. 100, claiming lots as their property and began to present evidence before a referee appointed by the court in support of their respective claims. Upon the assurance and promise made in open court by Dr. Mariano Yulo, who represented the late predecessor-in-interest of the petitioners in the cadastral case, the defendant in civil case No. 6088 and the appellant in CA-G.R. No. 5700, that after the change of Zamora and Quennon Streets of the municipality of Isabela, province of Occidental Negros, into T. Yulo and G. Regalado Streets, respectively, the names of the deceased parents of the defendant Jose Yulo y Regalado, the latter would convey and assign the lots to the claimants, the herein respondents withdrew their claims, and the cadastral court confirmed the title to the lots and decreed their registration in the name of the defendant Jose Yulo y Regalado. In other words, the plaintiffs and appellees in the courts below and now respondents asserted title to each lot claimed by them and began to present evidence to prove title thereto in the cadastral case, but because of the promise referred to made in open court by the representative of the defendantappellant, the predecessor-in-interest of the petitioners, the respondents withdrew their claims relying upon such promise. That finding is of fact and cannot be reviewed by this Court.1 It does not appear it is not even hinted that the admission as evidence of the copy of the transcript of the stenographic notes taken by the official stenographer, upon which that finding is predicated, was objected to by the predecessor-in-interest of the petitioners. The original transcript was part of the record of the cadastral case and the trial court admitted it as evidence and based the judgment rendered in the case upon it. The fact that the copy of the transcript (Exhibit B) attached to the record of this case is not certified or authenticated by the clerk of court who is the legal keeper thereof is no reason for disregarding it as evidence, for the original transcript attached to the record of the cadastral case must have been read and taken into consideration by the judge of the trial court. At any rate, there having been no objection to the admission of the unauthenticate copy of the transcript, the question of its admissibility cannot now be raised. The uncontroverted and undisputed finding of the trial court, confirmed by the Court of Appeals, that the predecessor-in-interest of the petitioners had complied with the promise by executing deeds of donation or assignment to some of the claimants, as shown in or by Exhibits D, E, F, G, H, and I, is a strong proof or corroboration of the truth or authenticity of the contents of the unauthenticated copy of the transcript of the stenographic notes referred to marked Exhibit B. In these circumstances, its probative value cannot be disregarded much less assailed.
35

Counsel asserts that a trustee does not have title to the property which is the subject of the trust, because title to such property is vested in the cestui que trust. Hence he argues if the predecessor-in-interest of the petitioners was a trustee, he or his successors-in-interest could not and cannot be compelled in an action for specific performance to convey or assign the property the subject of the trust because in an action for specific performance counsel contends the party to be compelled to perform is the owner or has the title to the property sought to be conveyed or assigned. The juridical concept of a trust, which in a broad sense involves, arises from, or is the result of, a fiduciary relation between the trustee and the cestui que trust as regards certain property real, personal, funds or money, or choses in action must not be confused with an action for specific performance. When the claim to the lots in the cadastral case was withdrawn by the respondents relying upon the assurance and promise made in open court by Dr. Mariano Yulo in behalf of Jose Yulo y Regalado, the predecessor-in-interest of the petitioners, a trust or a fiduciary relation between them arose, or resulted therefrom, or was created thereby. The trustee cannot invoke the statute of limitations to bar the action and defeat the right of the cestui que trust. If the pretense of counsel for the petitioners that the promise above adverted to cannot prevail over the final decree of the cadastral court holding the predecessor-in-interest of the petitioners to be the owner of the lots claimed by the respondents were to be sustained and upheld, then actions to compel a party to assign or convey the undivided share in a parcel of land registered in his name to his coowner or co-heir could no longer be brought and could no longer succeed and prosper. It is contended that lot 224 was claimed in the cadastral case by the predecessor-in-interest of the petitioners alone, and not as adjudged in this case by the trial court and confirmed by the Court of Appeals that it was also claimed by one of the respondents, one of the plaintiffs in the court below. This also is a question of fact which cannot be reviewed in these proceedings. The judgment under review is affirmed, with costs against the petitioners. Moran, C.J., Ozaeta, Pablo, Bengzon, Tuason, Montemayor, Reyes, and Torres, JJ., concur. Footnotes 1 Filipinas Compaia de Seguros vs. Tan Chuaco, G. R. No. L-1559, 31 January 1950, and cases cited therein.

G.R. No. 175073

August 15, 2011

ESTATE OF MARGARITA D. CABACUNGAN, represented by LUZ LAIGO-ALI, Petitioner,

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vs. MARILOU LAIGO, PEDRO ROY LAIGO, STELLA BALAGOT and SPOUSES MARIO B. CAMPOS AND JULIA S. CAMPOS, Respondents.

CARPIO,* J.,

BRION,**

SERENO,***JJ.

DECISION

PERALTA, J.:

This Petition for Review under Rule 45 of the Rules of Court assails the October 13, 2006 Decision1 of the Court of Appeals in CA-G.R. CV No. 72371. The assailed decision affirmed the July 2, 2001 judgment2 rendered by the Regional Trial Court of La Union, Branch 33 in Civil Case No. 1031-BG a complaint for annulment of sale of real property, recovery of ownership and possession, cancellation of tax declarations and damages filed by Margarita Cabacungan,3 represented by her daughter, Luz Laigo-Ali against Marilou Laigo and Pedro Roy Laigo, respondents herein, and against Estella Balagot,4 and the spouses Mario and Julia Campos.

The facts follow.

Margarita Cabacungan (Margarita) owned three parcels of unregistered land in Paringao and in Baccuit, Bauang, La Union, each measuring 4,512 square meters, 1,986 square meters and 3,454 square meters. The properties were individually covered by tax declaration all in her name.5 Sometime in 1968, Margaritas son, Roberto Laigo, Jr. (Roberto), applied for a non-immigrant
37

visa to the United States, and to support his application, he allegedly asked Margarita to transfer the tax declarations of the properties in his name.6 For said purpose, Margarita, unknown to her other children, executed an Affidavit of Transfer of Real Property whereby the subject properties were transferred by donation to Roberto.7 Not long after, Robertos visa was issued and he was able to travel to the U.S. as a tourist and returned in due time. In 1979, he adopted respondents Pedro Laigo (Pedro) and Marilou Laigo (Marilou),8 and then he married respondent Estella Balagot.

In July 1990, Roberto sold the 4,512 sq m property in Baccuit to the spouses Mario and Julia Campos for P23,000.00.9 Then in August 1992, he sold the 1,986 sq m and 3,454 sq m lots in Paringao, respectively, to Marilou for P100,000.00 and to Pedro for P40,000.00.10 Allegedly, these sales were not known to Margarita and her other children.11

It was only in August 1995, at Robertos wake, that Margarita came to know of the sales as told by Pedro himself.12 In February 1996, Margarita, represented by her daughter, Luz, instituted the instant complaint for the annulment of said sales and for the recovery of ownership and possession of the subject properties as well as for the cancellation of Ricardos tax declarations. Margarita admitted having accommodated Robertos request for the transfer of the properties to his name, but pointed out that the arrangement was only for the specific purpose of supporting his U.S. visa application. She emphasized that she never intended to divest herself of ownership over the subject lands and, hence, Roberto had no right to sell them to respondents and the Spouses Campos. She likewise alleged that the sales, which were fictitious and simulated considering the gross inadequacy of the stipulated price, were fraudulently entered into by Roberto. She imputed bad faith to Pedro, Marilou and the Spouses Campos as buyers of the lots, as they supposedly knew all along that Roberto was not the rightful owner of the properties.13 Hence, she principally prayed that the sales be annulled; that Robertos tax declarations be cancelled; and that the subject properties be reconveyed to her.14

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

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

On February 3, 1999, prior to pre-trial, Margarita and the Spouses Campos amicably entered into a settlement whereby they waived their respective claims against each other.18 Margarita died two days later and was forthwith substituted by her estate.19 On February 8, 1999, the trial court rendered a Partial Decision20 approving the compromise agreement and dismissing the complaint against the Spouses Campos. Forthwith, trial on the merits ensued with respect to Pedro and Marilou.

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

WHEREFORE, in view of the foregoing considerations, the complaint is DISMISSED.21

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

Moreover, the trial court surmised how Margarita could have failed to recover the subject properties from Roberto at any time between 1968, following the execution of the Affidavit of Transfer, and Robertos return from the United States shortly thereafter. Finding Margarita guilty of laches by such inaction, the trial court barred recovery from respondents who were found to have acquired the properties supposedly in good faith and for value.23 It also pointed out that recovery could no longer be pursued in this case because Margarita had likewise exhausted the ten-year prescriptive period for reconveyance based on an implied trust which had commenced
39

to run in 1968 upon the execution of the Affidavit of Transfer.24 Finally, it emphasized that mere inadequacy of the price as alleged would not be a sufficient ground to annul the sales in favor of Pedro and Marilou absent any defect in consent.25

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

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

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

SO ORDERED.28

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

Petitioner posits that the Court of Appeals should not have haphazardly applied the doctrine of laches and failed to see that the parties in this case are bound by familial ties. They assert that laches must not be applied when an injustice would result from it. Petitioner believes that the
40

existence of such confidential relationship precludes a finding of unreasonable delay on Margaritas part in enforcing her claim, especially in the face of Luzs testimony that she and Margarita had placed trust and confidence in Roberto. Petitioner also refutes the Court of Appeals finding that there was a donation of the properties to Roberto when the truth is that the subject properties were all that Margarita possessed and that she could not have failed to provide for her other children nor for means by which to support herself. It reiterates that the transfer to Roberto was only an accommodation so that he could submit proof to support his U.S. visa application.

On the issue of prescription, petitioner advances that it runs from the time Roberto, as trustee, has repudiated the trust by selling the properties to respondents in August 15, 1992; that hence, the filing of the instant complaint in 1996 was well within the prescriptive period. Finally, petitioner states that whether a buyer is in good or bad faith is a matter that attains relevance in sales of registered land, as corollary to the rule that a purchaser of unregistered land uninformed of the sellers defective title acquires no better right than such seller.

Respondents stand by the ruling of the Court of Appeals. In their Comment, they theorize that if indeed Margarita and Roberto had agreed to have the subject properties returned following the execution of the Affidavit of Transfer, then there should have been a written agreement evincing such intention of the parties. They note that petitioners reliance on the Affidavit of Transfer as well as on the alleged unwritten agreement for the return of the properties must fail, simply because they are not even parties to it. Be that as it may, the said document had effectively transferred the properties to Roberto who, in turn, had acquired the full capacity to sell them, especially since these properties could well be considered as Robertos inheritance from Margarita who, on the contrary, did have other existing properties in her name. Moreover, they believe that the liberal application of the rule on laches between family members does not apply in the instant case because there is no fiduciary relationship and privity between them and Margarita.

There is merit in the petition.

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

41

reviewing the records and in appraising the evidence, especially since an opposite conclusion is warranted and, as will be shown, justified.

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

Implied trusts are further classified into constructive trusts and resulting trusts. Constructive trusts, on the one hand, come about in the main by operation of law and not by agreement or intention. They arise not by any word or phrase, either expressly or impliedly, evincing a direct intention to create a trust, but one which arises in order to satisfy the demands of justice.35 Also known as trusts ex maleficio, trusts ex delicto and trusts de son tort, they are construed against one who by actual or constructive fraud, duress, abuse of confidence, commission of a wrong or any form of unconscionable conduct, artifice, concealment of questionable means, or who in any way against equity and good conscience has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy.36 They are aptly characterized as "fraud-rectifying trust,"37 imposed by equity to satisfy the demands of justice38 and to defeat or prevent the wrongful act of one of the parties.39 Constructive trusts are illustrated in Articles 1450, 1454, 1455 and 1456.40

On the other hand, resulting trusts arise from the nature or circumstances of the consideration involved in a transaction whereby one person becomes invested with legal title but is obligated in equity to hold his title for the benefit of another. This is based on the equitable doctrine that valuable consideration and not legal title is determinative of equitable title or interest and is always presumed to have been contemplated by the parties.41 Such intent is presumed as it is not expressed in the instrument or deed of conveyance and is to be found in the nature of their transaction.42 Implied trusts of this nature are hence describable as "intention-enforcing trusts."43 Specific examples of resulting trusts may be found in the Civil Code, particularly Articles 1448, 1449, 1451, 1452 and 1453.44

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Articles 1448 to 1456 of the Civil Code enumerate cases of implied trust, but the list according to Article 1447 is not exclusive of others which may be established by the general law on trusts so long as the limitations laid down in Article 1442 are observed,45 that is, that they be not in conflict with the New Civil Code, the Code of Commerce, the Rules of Court and special laws.46

While resulting trusts generally arise on failure of an express trust or of the purpose thereof, or on a conveyance to one person upon a consideration from another (sometimes referred to as a "purchase-money resulting trust"), they may also be imposed in other circumstances such that the court, shaping judgment in its most efficient form and preventing a failure of justice, must decree the existence of such a trust.47 A resulting trust, for instance, arises where, there being no fraud or violation of the trust, the circumstances indicate intent of the parties that legal title in one be held for the benefit of another.48 It also arises in some instances where the underlying transaction is without consideration, such as that contemplated in Article 144949 of the Civil Code. Where property, for example, is gratuitously conveyed for a particular purpose and that purpose is either fulfilled or frustrated, the court may affirm the resulting trust in favor of the grantor or transferor,50 where the beneficial interest in property was not intended to vest in the grantee.51

Intention although only presumed, implied or supposed by law from the nature of the transaction or from the facts and circumstances accompanying the transaction, particularly the source of the consideration is always an element of a resulting trust52 and may be inferred from the acts or conduct of the parties rather than from direct expression of conduct.53 Certainly, intent as an indispensable element, is a matter that necessarily lies in the evidence, that is, by evidence, even circumstantial, of statements made by the parties at or before the time title passes.54 Because an implied trust is neither dependent upon an express agreement nor required to be evidenced by writing,55 Article 145756 of our Civil Code authorizes the admission of parole evidence to prove their existence. Parole evidence that is required to establish the existence of an implied trust necessarily has to be trustworthy and it cannot rest on loose, equivocal or indefinite declarations.57

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

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

In her testimony, Luz, who affirmed under oath her own presence at the execution of the Affidavit of Transfer, described the circumstances under which Margarita and Roberto entered into the agreement. She narrated that Roberto had wanted to travel to the U.S and to show the embassy proof of his financial capacity, he asked to "borrow" from Margarita the properties involved but upon the condition that he would give them back to her upon his arrival from the United States. She admitted that Robertos commitment to return the properties was not put in writing because they placed trust and confidence in him, and that while she had spent most of her time in Mindanao since she married in 1956, she would sometimes come to La Union to see her mother but she never really knew whether at one point or another her mother had demanded the return of the properties from Roberto.60 She further asserted that even after Robertos arrival from the United States, it was Margarita who paid off the taxes on the subject properties and that it was only when her health started to deteriorate that Roberto had taken up those obligations.61 Hilarias testimony ran along the same line. Like Luz, she was admittedly present at the execution of the Affidavit of Transfer which took place at the house she shared with Jacinto Costales, the notarizing officer who was her own brother. She told that Roberto at the time had wanted to travel to the U.S. but did not have properties in the Philippines which he could use to back up his visa application; as accommodation, Margarita "lent" him the tax declarations covering the properties but with the understanding that upon his return he would give them back to Margarita. She professed familiarity with the properties involved because one of them was actually sitting close to her own property.62

While indeed at one point at the stand both of Luzs and Hilarias presence at the execution of the affidavit had been put to test in subtle interjections by respondents counsel to the effect that their names and signatures did not appear in the Affidavit of Transfer as witnesses, this, to our mind, is of no moment inasmuch as they had not been called to testify on the fact of, or on the contents of, the Affidavit of Transfer or its due execution. Rather, their testimony was offered to prove the circumstances surrounding its execution the circumstances from which could be derived the unwritten understanding between Roberto and Margarita that by their act, no absolute transfer of ownership would be effected. Besides, it would be highly unlikely for Margarita to institute the instant complaint if it were indeed her intention to vest in Roberto, by virtue of the Affidavit of Transfer, absolute ownership over the covered properties.
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It is deducible from the foregoing that the inscription of Robertos name in the Affidavit of Transfer as Margaritas transferee is not for the purpose of transferring ownership to him but only to enable him to hold the property in trust for Margarita. Indeed, in the face of the credible and straightforward testimony of the two witnesses, Luz and Hilaria, the probative value of the ownership record forms in the names of respondents, together with the testimony of their witness from the municipal assessors office who authenticated said forms, are utterly minimal to show Robertos ownership. It suffices to say that respondents did not bother to offer evidence that would directly refute the statements made by Luz and Hilaria in open court on the circumstances underlying the 1968 Affidavit of Transfer.

As a trustee of a resulting trust, therefore, Roberto, like the trustee of an express passive trust, is merely a depositary of legal title having no duties as to the management, control or disposition of the property except to make a conveyance when called upon by the cestui que trust.63 Hence, the sales he entered into with respondents are a wrongful conversion of the trust property and a breach of the trust. The question is: May respondents now be compelled to reconvey the subject properties to petitioner? We rule in the affirmative.

Respondents posit that petitioners claim may never be enforced against them as they had purchased the properties from Roberto for value and in good faith. They also claim that, at any rate, petitioners cause of action has accrued way back in 1968 upon the execution of the Affidavit of Transfer and, hence, with the 28 long years that since passed, petitioners claim had long become stale not only on account of laches, but also under the rules on extinctive prescription governing a resulting trust. We do not agree.

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

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Second, the invocation of the rules on limitation of actions relative to a resulting trust is not on point because the resulting trust relation between Margarita and Roberto had been extinguished by the latters death. A trust, it is said, terminates upon the death of the trustee, particularly where the trust is personal to him.65 Besides, prescription and laches, in respect of this resulting trust relation, hardly can impair petitioners cause of action. On the one hand, in accordance with Article 114466 of the Civil Code, an action for reconveyance to enforce an implied trust in ones favor prescribes in ten (10) years from the time the right of action accrues, as it is based upon an obligation created by law.67 It sets in from the time the trustee performs unequivocal acts of repudiation amounting to an ouster of the cestui que trust which are made known to the latter.68 In this case, it was the 1992 sale of the properties to respondents that comprised the act of repudiation which, however, was made known to Margarita only in 1995 but nevertheless impelled her to institute the action in 1996 still well within the prescriptive period. Hardly can be considered as act of repudiation Robertos open court declaration which he made in the 1979 adoption proceedings involving respondents to the effect that he owned the subject properties,69 nor even the fact that he in 1977 had entered into a lease contract on one of the disputed properties which contract had been subject of a 1996 decision of the Court of Appeals.70 These do not suffice to constitute unequivocal acts in repudiation of the trust.

On the other hand, laches, being rooted in equity, is not always to be applied strictly in a way that would obliterate an otherwise valid claim especially between blood relatives. The existence of a confidential relationship based upon consanguinity is an important circumstance for consideration; hence, the doctrine is not to be applied mechanically as between near relatives.71 Adaza v. Court of Appeals72 held that the relationship between the parties therein, who were siblings, was sufficient to explain and excuse what would otherwise have been a long delay in enforcing the claim and the delay in such situation should not be as strictly construed as where the parties are complete strangers vis-a-vis each other; thus, reliance by one party upon his blood relationship with the other and the trust and confidence normally connoted in our culture by that relationship should not be taken against him. Too, Sotto v. Teves73 ruled that the doctrine of laches is not strictly applied between near relatives, and the fact that the parties are connected by ties of blood or marriage tends to excuse an otherwise unreasonable delay.

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

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

This scenario is characteristic of a constructive trust imposed by Article 145677 of the Civil Code, which impresses upon a person obtaining property through mistake or fraud the status of an implied trustee for the benefit of the person from whom the property comes. Petitioner, in laying claim against respondents who are concededly transferees who professed having validly derived their ownership from Roberto, is in effect enforcing against respondents a constructive trust relation that arose by virtue of the wrongful and fraudulent transfer to them of the subject properties by Roberto.

Aznar Brother Realty Co. v. Aying,78 citing Buan Vda. de Esconde v. Court of Appeals,79 explained this form of implied trust as follows:

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary.

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xxxx

x x x [C]onstructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold.80

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

As to when the prescriptive period commences to run, Crisostomo v. Garcia82 elucidated as follows:

When property is registered in another's name, an implied or constructive trust is created by law in favor of the true owner. The action for reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the title. An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of title over the property.1avvphi1

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

From the foregoing, it is clear that an action for reconveyance under a constructive implied trust in accordance with Article 1456 does not prescribe unless and until the land is registered or the instrument affecting the same is inscribed in accordance with law, inasmuch as it is what binds the land and operates constructive notice to the world.84 In the present case, however, the lands involved are concededly unregistered lands; hence, there is no way by which Margarita, during
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her lifetime, could be notified of the furtive and fraudulent sales made in 1992 by Roberto in favor of respondents, except by actual notice from Pedro himself in August 1995. Hence, it is from that date that prescription began to toll. The filing of the complaint in February 1996 is well within the prescriptive period. Finally, such delay of only six (6) months in instituting the present action hardly suffices to justify a finding of inexcusable delay or to create an inference that Margarita has allowed her claim to stale by laches.

WHEREFORE, the Petition is GRANTED. The October 13, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 72371, affirming the July 2, 2001 judgment of the Regional Trial Court of La Union, Branch 33 in Civil Case No. 1031-BG, is REVERSED and SET ASIDE, and a new one is entered (a) directing the cancellation of the tax declarations covering the subject properties in the name of Roberto D. Laigo and his transferees; (b) nullifying the deeds of sale executed by Roberto D. Laigo in favor of respondents Pedro Roy Laigo and Marilou Laigo; and (c) directing said respondents to execute reconveyance in favor of petitioner.

SO ORDERED.

DIOSDADO M. PERALTA Associate Justice

WE CONCUR:

ANTONIO T. CARPIO* Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice Associate Justice ARTURO D. BRION**

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MARIA LOURDES P. A. SERENO*** Associate Justice

ATTESTATION

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

PRESBITERO J. VELASCO, JR. Associate Justice Third Division, Chairperson

CERTIFICATION

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

RENATO C. CORONA Chief Justice

Footnotes

* Designated as an additional member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1059 dated August 1, 2011.
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** Designated as an additional member in lieu of Associate Justice Jose Catral Mendoza, per Special Order No. 1056 dated July 27, 2011.

*** Designated as an additional member, per Special Order No. 1028 dated June 21, 2011.

1 Penned by Associate Justice Japar B. Dimaampao, with Associate Justices Marina L. Buzon and Regalado E. Maambong, concurring; rollo, pp. 43-54.

2 Signed by Judge Rose Mary R. Molina Alim; id. at 173-181.

3 Petitioner was later on substituted by the Estate of Margarita D. Cabacungan, represented by Luz Laigo-Ali.

4 Estella Balagots name was dropped from the subsequent pleadings filed with the trial court.

5 Tax Declaration Nos. 12234 series of 1953, 34668 series of 1967 and 15052 series of 1953, records, pp. 216-218.

6 Records, p. 2.

7 Id. at 2-3, 8 and 215.

8 Id. at 219-221.

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9 See Deed of Absolute Sale, id. at 9.

10 See Deed of Sale of a Residential Land, and Deed of Sale of Portions of Land, id. at 10-11.

11 Records, pp. 3-4.

12 Id. at 5; TSN, February 9, 2000, pp. 8-9.

13 See Compliant, records, pp. 2-5.

14 Records, p. 6.

15 Records, p. 33.

16 These respondents initially submitted a Motion to Dismiss, but the trial court denied the same in its March 10, 1998 Order. See records, pp. 91-98, 116-119.

17 See Answer, records, pp. 122-127.

18 Records, p. 173.

19 Id. at 179-182.

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20 Id. at 177-178.

21 Id. at 288.

22 Rollo, p. 178.

23 Id. at 178.

24 Id. at 179.

25 Id. at 181.

26 CA rollo, p. 223.

27 Id. at 224-225.

28 Id. at 226.

29 Id. at 28.

30 Caezo v. Rojas, G.R. No. 148788, November 23, 2007, 538 SCRA 242, 251; Tigno v. Court of Appeals, G.R. No. 110115, October 8, 1997, 280 SCRA 262, 271-272, citing Morales v. Court of Appeals, 274 SCRA 282 (1997).

53

31 Article 1441, Civil Code of the Philippines states:

ART. 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law.

32 Caezo v. Rojas, supra note 30, at 251-252, citing Buan Vda. de Esconde v. Court of Appeals, 323 Phil. 81, 89 (1996); Ringor v. Ringor, G.R. No. 147863, August 13, 2004, 436 SCRA 484, 497.

33 Tigno v. Court of Appeals, supra note 30, at 271; 76 Am Jur 2d, 159, p. 191, citing Gifford v. Dennis, 335 SE2d 371; Sorrels v. McNally, 105 So 106; and Emberry Community Church v. Bloomington Dist. Missionary & Church Extension Soc., 482 NE2d 288.

34 See Buan Vda. de Esconde, supra note 32, at 89, citing Philippine National Bank v. Court of Appeals, 217 SCRA 347 (1993); Caezo v. Rojas, supra note 30, at 252;

35 Caezo v. Roxas, supra note 30, at 258; citing Heirs of Yap v. Court of Appeals, 371 Phil. 523, 531 (1999).

36 Roa, Jr. v. Court of Appeals, G.R. No. L-27294, June 23, 1983, 123 SCRA 3, 15-16.

37 76 Am Jur 2d, 163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.

38 Roa, Jr. v. Court of Appeals, supra note 36, at 16.

39 76 Am Jur 2d, 163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.

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40 Lopez v. Court of Appeals, G.R. No. 157784, December 16, 2008, 574 SCRA 26.

41 Buan Vda. de Esconde, supra note 32, at 89-90.

42 Salao v. Salao, G.R. No. L-26699, March 16, 1976, 70 SCRA 65, 81.

43 76 Am Jur 2d, 163, citing Martin v. Kehl (2nd Dist.), 145 Cal App 3d 228.

44 Lopez v. Court of Appeals, supra note 40.

45 Roa, Jr. v. Court of Appeals, supra note 36, at 15.

46 Article 1442 incorporates and adopts a large part of the American law on trusts and thereby the Philippine legal system will be amplified and will be rendered more suited to a just and equitable solution of many questions. See The Report of the Code Commission, p. 60.

47 76 Am Jur 2d, 166, citing McClure v. Moore, 565 So 2d 8; Western Union Te. Co. v. Shepard, 169 NY 170.

48 See 76 Am Jur 2d, 166, note 50 which cites Jones v. Jones, 459 P2d 603 and Re Wilder, 42 BR 6.

49 Art. 1449. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.
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50 Rebillard v. Hagedorn, 6 Conn App 355, 505 A2d 731.

51 Frame v. Wright, 9 NW2d 364, 147 ALR 1154.

52 76 Am Jur 2d, 169, p. 201, citing Smith v. Smith, 196 So 409 and Swon v. Huddleston, 282 SW2d 18.

53 American Hotel Management Associates, Inc. v. Jones, 768 F2d 562.

54 See 76 Am Jur 2d, 170, p. 203.

55 See 76 Am Jur 2d, 166, p. 197.

56 Art. 1457. An implied trust may be proved by oral evidence.

57 Tigno v. Court of Appeals, supra note 30, at 274; Morales v. Court of Appeals, 274 SCRA 282 (1997); Ong Ching Po v. Court of Appeals, 239 SCRA 341 (1994); Salao v. Salao, supra note 42, at 83, citing De Leon v. Molo-Peckson, 116 Phil. 1267 (1962).

58 Records, pp. 2-3.

59 Id. at 179-180.

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60 TSN, February 9, 2000, pp. 7, 8, 16, 17.

ATTY. LIBATIQUE:

Q: Madam witness, why do you know this transferors affidavit?

WITNESS:

A: I was present when they signed, sir.

Q: Who signed this?

A: My mother, sir.

Q: And whom?

A: And Roberto Laigo, Jr., sir.

Q: You said you were present, whose signature appears under the name, Roberto Laigo?

A: Roberto Laigo, sir.

Q: Your brother?
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A: My brother.

Q: x x x and the signature Margarita Laigo, whose signature is that?

A: My mother.

xxxx

Q: Madam witness, tell the court under what circumstances was that transferors affidavit executed.

A: What do you mean?

Q: Under what circumstances?

A: He just borrowed it because he was going to the United States, he is going to show and he wants to use that as evidence that he owns land in the Philippines.

Q: What was the condition of that transfer, since you said you were present?

A: He will return it as soon as he will arrive (sic), and that was agreed upon, sir.

Q: Was Roberto able to go to America?

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A: Yes, sir.

Q: And one of the evidence that was used x x x to secure a visa were these 3 tax declarations of properties?

A: Yes, sir.

Q: You said that (Roberto Laigo) promised to return these properties in the name of Margarita Laigo. How long did Roberto Laigo stay in America?

A: He did not stay long, sir.

Q: How long?

A: Maybe (3) to (4) months.

Q: And after he has returned from America, did he return the titles of these properties in the name of your mother?

A: We did not know about it because when we came to know (of) it, it was already sold and my mother was surprised to know that it was already sold.

Q: When did you come to know (of) it?

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A: In 1995 when my brother died.

xxxx

Q: Earlier you said that you were aware of this transferees affidavit x x x

A: Yes, sir.

Q: Did you act as witness in the transferees affidavit?

A: No, I was there only, sir.

Q: So that is the reason why you have no signature x x x as witness?

A: Yes, sir.

xxxx

Q: Also, you said that the reason why this transferees affidavit and the transferors affidavit were executed was because your brother was going to the United States and he will return this transferees affidavit when he comes back.

A: Yes, sir.

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Q; Was that agreement put in writing?

A: No, sir.

Q: Why was it not put in writing?

A: He was my brother and we trusted him so much.

Q: Why did you not ask that your brother put it in writing so that he will not forget it?

A: Because of the trust we had with (sic) him, he was my brother and we trusted him.

Q: So you admit that there is no document in writing to show that that agreement was the actual agreement?

A: None, sir. (Emphasis supplied.)

61 TSN, February 9, 2000, pp. 12-17.

62 TSN, March 23, 2000, pp. 3-7.

Q: Do you know Margarita Laigo Cabacungan?

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A: Yes, sir. I know her. She is the sister of my mother, Clara.

Q: Do you know how many children does she have (sic)?

A: There are three children namely: Luz Laigo, Roberto Laigo, and Paulina Laigo.

Q: Do you know the properties that are subjects of this case?

A: Yes, I know.

Q: Where are these properties located?

A: At Paringao and Baccuit.

Q: These properties in Paringao, where are these properties in relation to the Cresta Ola and the Mark Theresa Apartments? Are these properties near those sites?

A: Yes sir, they are very near each other.

Q: Now, do you know the subject properties, one of which is west of the national road and corner part of Cresta Del Mar?

A: Yes, I know it.

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Q: Why do you know it?

A: Because the Cresta Del Mar and ours is the Cresta Ola, they are very near each other.

Q: What about the property east of the national road near the Mark Theresa Apartment, x x x where is this property?

A: It is east of the road x x x South of the Mark Theresa Apartment.

xxxx

Q: You said that these properties were owned by Margarita Laigo Cabacungan. Do you know how these properties were transferred to Roberto Laigo, Jr.?

A: I know it.

Q: Why do you know?

A: Because the papers were made by my brother, Jacinto Costales, in our house.

Q: When you say Jacinto Costales, is this the same person who was once a judge of Bagulin Trial Court?

A: Oh, yes!

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Q: Where is he now?

A: He is already dead.

xxxx

Q: Now, will you tell the court why was this document (sic) executed by Margarita Laigo and Roberto Laigo.

A: When Roberto Laigo wanted to go to America, he has no properties in his name. That is why his mother lent him that document to show that he has properties in the Philippines, but after he goes to America those properties will go back to his mother.

xxxx

Q: How far is your house to that of Margarita Cabacungan?

Atty. Libatique: Your Honor, for the record, that is about from the town hall to that place four (4) kilometers x x x I think that would be the approximate distance.

xxxx

Q: At the time (Jacinto Costales) was a judge and he executed this affidavit sometime in 1968, where were you if you still remember?

64

A: I was in the house of my brother (Jacinto).

Q: You [were] staying in just one house?

A: Yes, sir.

Q: And you said you were a witness to the execution of this transferees affidavit?

A: Yes, sir.

Q: If you were a witness, do you remember if you signed a document which will show that you were a witness?

A: No, sir.

Q:You did not sign?

A: No. sir.

xxxx

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Q: Earlier you said that you know for a fact that there was an agreement that Margarita Laigo signed this in favor of Roberto Laigo because Roberto Laigo at that time (was) going to the United States, and Roberto Laigo will be using this Transferees Affidavit?

A: Yes, sir.

Q: Do you know, madam witness, if that was reduced into writing?

xxxx

A: That is a verbal agreement.

Q: How did you come to know that?

A: I was in the house.

Q: In the house of Margarita Laigo?

A: Yes, sir, because she is my auntie

Q: Are you still staying there full time in the house of Margarita Laigo?

A: Sometimes only.

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xxxx

Q: So that means that sometimes, you were not there. It could be that Mrs. Laigo told Roberto Laigo that that was (his) property already.

A: No, it cannot be because Margarita Laigo has two daughters, Luz Laigo and Paulina Laigo.

Q: So that is your opinion?

A: Yes, sir. (Emphasis supplied.)

63 76 Am Jur 2d, 162, citing Hocking v. Hocking, 484 NE2d 406.

64 Spouses Rayos v. Reyes, 446 Phil 32, 50 (2003), citing Sales v. Court of Appeals, 211 SCRA 858 (1992); David v. Bandin, G.R. Nos. L-48322, L-49712, L-49716 and 49687, April 8, 1987, 149 SCRA 140, 150.

65 Canezo v. Rojas, supra note 30, at 257.

66 Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

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(3) Upon a judgment.

67 Heirs of Maria Vda. de Vega v. Court of Appeals, G.R. No. 93507, July 12, 1991, 199 SCRA 168, 177; Tale v. Court of Appeals, G.R. No. 101028, April 23, 1992, 208 SCRA 266.

68 Pilapil v. Briones, G.R. No. 150175 (Resolution on the Motion for Reconsideration), February 5, 2007, 514 SCRA 197; Canezo v. Rojas, supra note 30, at 252-253; Ramos v. Ramos, 158 Phil. 935 (1974).

69 Decision of the Municipal Trial Court of San Fernando, La Union, Branch I in SP. PROC. No. 193, CA rollo, pp. 363-365.

70 Decision of the Court of Appeals in CA-G.R. SP No. 36220, id. at 371-378.

71 See Adaza v. Court of Appeals, 253 Phil. 364, 376 (1989).

72 Id.

73 175 Phil. 343 (1978).

74 See 76 Am Jur 292, p. 306

75 See 76 Am Jur 292, pp. 306-307

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76 See 76 Am Jur 297, pp. 311-312.

77 Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

78 497 Phil. 788, 799 (2005).

79 Supra note 32.

80 Aznar Brothers Realty Co. v. Aying, supra note 78, at 799-800.

81 Buan Vda. de Esconde v. Court of Appeals, supra note 32; Aznar Brothers Realty Co. v. Aying, id.

82 516 Phil. 743 (2006) .

83 Id. at 753, citing Austria-Magat v. Court of Appeals, 426 Phil. 263, 278 (2002) (Emphasis supplied.); Pascual v. Court of Appeals, G.R. No. 115925, August 15, 2003, 409 SCRA 105, 113; Spouses Alfredo v. Spouses Borras, 452 Phil. 178, 204 (2003) ; Vda. de Delgado v. Court of Appeals, 416 Phil. 263, 274 (2001); Villanueva-Mijares v. Court of Appeals, 386 Phil. 555, 566 (2000).

84 Spouses Abrigo v. De Vera, 476 Phil. 641, 653 (2004).

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