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G.R. No. 108121 May 10, 1994 HERMINIA L. RAMOS and HEIRS OF HERMINIO RAMOS,

Petitioners, v. HON. COURT OF APPEALS, SPOUSES HILARIO CELESTINO and LYDIA CELESTINO,

Respondents. DAVIDE, JR., J.:

FACTS: Lydia Celestino, married to Hilario Celestino, was employed in the economic research department of the Central Bank of the Philippines from 1949 to 1983, while the late Herminio Ramos - the deceased spouse of respondent Herminia L. Ramos, was employed during his lifetime in the same department of the Central Bank until his retirement sometime in 1972.chanroblesvirtualawlibrarychanrobles virtual la In 1961, the now defunct People's Homesite & Housing Corporation (PHHC) awarded the rights to buy certain parcels of land to employees of the Central Bank. Herminio was awarded the rights to buy the parcel of land designated as Lot 25, Block 86, with an area of some 400 square meters, and situated in Sikatuna Village in Diliman, Quezon City, Herminio then sold and transferred to Lydia his said rights to buy said property, and Lydia paid the price in several installments, the last installment being paid on May 21, 1962. Having acquired the rights to buy the property, Lydia assumed the obligation of paying to the PHHC the purchase price thereof. When she paid the last monthly amortization, thereby effecting the full payment of the purchase of the subject land, Lydia's friend, Cynthia Camacho, who was then residing at the back of the subject property, acted as the property's caretaker for Lydia, even as Lydia also had the land fenced. A TCT was issued in the name of Herminio Ramos and the copy since then had been in Lydias possession. Then, Hermnio and Herminia executed in Lydia's favor an irrevocable special power of attorney, empowering Lydia to sell, mortgage, or lease the subject property and to dispose of the proceeds thereof in any manner she wants. It serves as a practical means of giving assurance to Lydia that Herminio, together with his spouse Herminia, was in good faith and recognized the existing implied trust relationship between them over the subject land, particularly in view of the restriction annotated on the title certificate in sum to the effect that within one year from said certificate's issuance no transfer or alienation of the property shall be made without the PHHC's written consent. In 1985, upon Herminias petition, the RTC of Quezon City declared Lydias copy to be null and void due to Herminias claim that such copy has been lost. Lydia filed her petition herein praying that said Order obe declared null and void that the new owner's duplicate copy issued and delivered to Herminia be cancelled, on the ground that Herminia secured such new owner's duplicate copy thru fraud and misrepresentation because she well knew that the supposedly "lost" owner's duplicate copy was in Lydia's possession and custody. Sometimes later, after having verified that Herminio had passed away in the early part of 1985 and that Herminia and his successors-in-interest were disputing the ownership of the subject property and building thereon, Lydia together with her spouse Hilario Celestino filed the complaint herein, engaging the services of counsel for the prosecution thereof. RTC: An implied or resulting trust was created by operation of law when the subject property was sold by the PHHC, with the legal title being vested in Herminio as the corresponding TCT was issued in his name, but with the beneficial title, however, being vested in Lydia as she was the one who paid the purchase price of the property out of her funds after Herminio had earlier sold and transferred to her his rights to buy the property and she had fully paid him the purchase price for said rights; accordingly, it appearing that instead of recognizing and abiding by said trust, Herminia and the other respondents have repudiated the trust by claiming the property for

themselves soon after Herminio's death in 1985, Lydia and her spouse Hilario were fully warranted in bringing their said compliant. CA: affirmed the RTCs decision. The cause of action for reconveyance had not yet prescribed for "the trust was a continuing and subsisting one" which the special power of attorney recognized; the rule of prescription of implied or resulting trust does not apply where a fiduciary relation exists and the trustee recognizes the trust; and if at all, there was a repudiation of the trust, it "came about only after the death of Herminio when defendants tried to claim the property for themselves in 1985." Hence, this petition. ISSUE: Whether there no trust was established because there is a restriction expressly imposed by the PHHC in the sale of the land to Herminio Ramos, to wit: Within a period of one year from the issuance of TCT by virtue of this deed no transfer or alienation whatsoever of the property subject thereof whether in whole or in part shall be made or registered w/out the written consent of the vendor and such transfer or alienation may be made only in favor of person qualified to acquire land under the laws of the Philippines. RULING: Lydia Celestino, knowing of her disqualification (she already owns a lot in Quezon City) to acquire a lot from the PHHC at the subdivision reserved for qualified Central Bank employees, tried to get one through the backdoor. Otherwise stated, she wanted to get indirectly that which she could not do so directly. Having acted with evident bad faith, she did not come to court with clean hands when she asked for the reconveyance of the property on the basis of a resulting trust under Article 1448 of the Civil Code. A resulting trust is an "intent-enforcing" trust, based on a finding by the court that in view of the relationship of the parties their acts express an intent to have a trust, even though they did not use language to that effect. The trust is said to result in law from the acts of the parties. However, if the purpose of the payor of the consideration in having title placed in the name of another was to evade some rule of the common or statute law, the courts will not assist the payor in achieving his improper purpose by enforcing a resulting trust for him in accordance with the "clean hands" doctrine. The court generally refuses to give aid to claims from rights arising out of an illegal transaction, such as where the payor could not lawfully take title to land in his own name and he used the grantee as a mere dummy to hold for him and enable him to evade the land laws, e.g., an alien who is ineligible to hold title to land, who pays for it and has the title put in the name of a citizen. As an exception to the law on trusts, "[a] trust or a provision in the terms of a trust is invalid if the enforcement of the trust or provision would be against public policy, even though its performance does not involve the commission of a criminal or tortious act by the trustee." The parties must necessarily be subject to the same limitations on allowable stipulations in ordinary contracts, i.e., their stipulations must not be contrary to law, morals, good customs, public order, or public policy. What the parties then cannot expressly provide in their contracts for being contrary to law and public policy, they cannot impliedly or implicitly do so in the guise of a resulting trust. Although the contract should be voided for being contrary to public policy, we deem it equitable to allow the private respondents to recover what they had paid for the land with legal interest thereon commencing from the date of the filing of the complaint.

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G.R. No. 144516 February 11, 2004

DEVELOPMENT BANK OF THE PHILIPPINES vs. COMMISSION ON AUDIT

These principles are best exemplified in Development Bank of the Philippines v. COA, 422 SCRA 465 (2004), where the DBP contributed funds into a retirement plan for its officers and employees, and constituted a board of trustees vesting it with the control and administration of the fund. Augmentation to the retirement fund were made through loans extended to the qualified officers and employees, which were invested in shares of stocks and other marketable securities, and the earnings from which were directed to be distributed to the beneficiaries even before they have retired.

The COA objected to the distribution of the earnings from the investments made through the retirement fund on the ground that is was contrary to an express provision of law which prohibits the distribution of retirement benefits to government employees prior to their actual retirement. COA also directed that the earnings from the investment be included in DBPs books of account as part of its own earnings, since the retirement and its income were actually owned by DBP having made the contributions thereto. DBP objected to the COA resolution on the ground the express trust created for the benefit of qualified DBP employees under the Trust Agreement . . . gave the Fund a separate legal personality, (at p. 467) and therefore the earnings pertained to the employees and should be credited as income of DBP.

While DBP v. COA characterized an employees trust as a trust maintained by an employer to provide retirement, pension or other benefits to its employees . . . [and ] is a separate taxable entity established for the exclusive benefit of the employees, (at p. 473) still the Court did not consider the such employees trust as a separate juridical person. The Court ruled that The principal and income of the Fund [of employees trust] would be separate and distinct from the funds of DBP, on the ground that DBP as trustor already conveyed legal title thereto to the Board of Trustees of the employees trust, and with DBP officers and employees having beneficial title thereto, thus:

In a trust, one person has an equitable ownership in the property while another person owns the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. . .

In the present case, DBP, as the trustor, vested in the trustees of the Fund legal title over the Fund as well as control over the investment of the money and assets of the Fund. The powers and duties granted to the trustees of the Fund under the Agreement were plainly more than just administrative [but included the power of control, the right to hold legal title, and the power to invest and reinvest] . . . (at p. 474.)

xxx.

Clearly, the trustees received and collected any income and profit derived from the Fund, and they maintained separate books of account for this purpose. The principal and income of the Fund will not revert to DBP even if the trust is subsequently modified or terminated. The Agreement states that the principal and income must be used to satisfy all of the liabilities to the beneficiary officials and employees under the Gratuity Plan . . . (at p. 475.)

On the issue that the DBP officials and employees had no right to the fund nor to the income earned until they actually retire, which

therefore did not qualify them to be considered cestui que trust or beneficiary, and therefore the same should still accrue to DBP, the Court ruled

The beneficiaries or cestui que trust of the Fund are the DBP officials and employees who will retire x x x .

As COA correctly observed, the right of the employees to claim their gratuities from the Fund is still inchoate. [The law], does not allow employees to receive their gratutities until they retire. However, this does not invalidate the trust created by DBP or the concomitant transfer of legal title to the trustees. As far back as in Government v. Abadilla, the Court held that it is not always necessary that the cestui que trust should be named, or even be in esse at the time the trust is created in his favor. It is enough that the beneficiaries are sufficiently certain or identifiable. (at pp. 476-477.)

The Court resolved in DBP v. COA, that The Agreement indisputably transferred legal title over the income and properties of the Fund to the Funds trustees. Thus, COAs directive to recored the income of the Fund in DBPs books of account as the miscellaneous income of DBP constitutes grave abuse of discretion. The income of the Fund does not form part of the revenues or profits of DBP, and DBP may not use such income for its own benefit. The principal and income of the Fund together constitute the res or subject matter of the trust. The Agreement established the Fund precisely so that it would eventually be sufficient to pay for the retirement benefits of DBP employees under [the law] without additional outlay from

DBP. COA itself acknowledged the authority of DBP to set up the Fund. However, COAs subsequent directive would divest the Fund of income, and defeat the purpose for the Funds creation.

G.R. No. 161237 January 14, 2009

PERFECTO MACABABBAD, Jr.,* deceased, substituted by his heirs Sophia Macababbad, Glenn M. Macababbad, Perfecto

Vener M. Macababbad III and Mary Grace Macababbad, and SPS. CHUA SENG LIN AND SAY UN AY, petitioners, vs. FERNANDO G. MASIRAG, FAUSTINA G. MASIRAG,

CORAZON G. MASIRAG, LEONOR G. MASIRAG, and LEONCIO M. GOYAGOY, respondent

FRANCISCA MASIRAG BACCAY, PURA MASIRAG FERRER-MELAD, AND SANTIAGO MASIRAG, Intervenors-

Respondents. BRION, J.:

FACTS: On April 28, 1999, respondents Fernando Masirag (Fernando), Faustina Masirag (Faustina), Corazon Masirag (Corazon), Leonor Masirag (Leonor) and Leoncio Masirag Goyagoy (Leoncio), filed with the RTC a complaint5 against Macababbad, Chua and Say.6 On May 10, 1999, they amended their complaint to allege new matters.7 The respondents alleged that their complaint is an action for quieting of title, nullity of titles, reconveyance, damages and attorneys fees. The deceased spouses Pedro Masirag (Pedro) and Pantaleona Tulauan (Pantaleona) were the original registered owners of Lot No. 4144 of the Cadastral Survey of Tuguegarao, as evidenced by OCT No. 1946.11 Lot No. 4144 contained an area of 6,423 square meters. Pedro and Pantaleona had 8 children, namely, Valeriano, Domingo, Pablo, Victoria, Vicenta, Inicio, Maxima and Maria. Respondents Fernando, Faustina, Corazon and Leonor Masirag are the children of Valeriano and Alfora Goyagoy, while Leoncio is the son of Vicenta and Braulio Goyagoy. The respondents allegedly did not know of the demise of their respective parents; they only learned of the inheritance due from their parents in the first week of March 1999

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when their relative, Pilar Quinto, informed respondent Fernando and his wife Barbara Balisi about it. They immediately hired a lawyer to investigate the matter. The investigation disclosed that the petitioners falsified a document entitled Extra-judicial Settlement with Simultaneous Sale of Portion of Registered Land (Lot 4144) dated December 3, 196712 so that the respondents were deprived of their shares in Lot No. 4144. The document purportedly bore the respondents signatures, making them appear to have participated in the execution of the document when they did not; they did not even know the petitioners. The document ostensibly conveyed the subject property to Macababbad for the sum of P1,800.00.13 Subsequently, OCT No. 1946 was cancelled and Lot No. 4144 was registered in the names of its new owners under TCT No. 13408,14 presumably after the death of Pedro and Pantaleona. However, despite the supposed sale to Macababbad, his name did not appear on the face of TCT No. 13408.15 Despite his exclusion from TCT, his Petition for another owners duplicate copy of TCT No. 13408, filed in the CFI of Cagayan, was granted on July 27, 1982. Subsequently, Macababbad registered portions of Lot No. 4144 in his name and sold other portions to third parties. On May 18, 1972, Chua filed a petition for the cancellation of TCT No. T-13408 and the issuance of a title evidencing his ownership over a subdivided portion of Lot No. 4144 covering 803.50 square meters. On May 23, 1972, TCT No. T-18403 was issued in his name.18 Based on these allegations, the respondents asked: (1) that the extrajudicial settlement of estate and sale be declared null and void ab initio and without force and effect, and that Chua be ordered and directed to execute the necessary deed of reconveyance of the land; if they refuse, that the Clerk of Court be required to do so; (2) the issuance of a new TCT in respondents name and the cancellation of Macababbads and Chuas certificates of title; and (3) that the petitioners be ordered to pay damages and attorneys fees. Macababbad filed a motion to dismiss the amended complaint on July 14, 1999, while Chua and Say filed an Appearance with Motion to Dismiss on September 28, 1999. On December 14, 1999, the RTC granted the motion of Francisca Masirag Baccay, Pura Masirag Ferrer-Melad, and Santiago Masirag for leave to intervene and to admit their complaint-in-intervention. The motion alleged that they have common inheritance rights with the respondents over the disputed property. The RTC, after initially denying the motion to dismiss, reconsidered its ruling and dismissed the complaint in its Order19 dated May 29, 2000 on the grounds that: 1) the action, which was filed 32 years after the property was partitioned and after a portion was sold to Macababbad, had already prescribed; and 2) there was failure to implead indispensable parties, namely, the other heirs of Pedro and Pantaleona and the persons who have already acquired title to portions of the subject property in good faith.20 The CA ignored23 the jurisdictional issue raised by the petitioners in their motion to dismiss, took cognizance of the appeal, and focused on the following issues: 1) whether the complaint stated a cause of action; and 2) whether the cause of action had been waived, abandoned or extinguished. The appellate court reversed and set aside the RTCs dismissal of the complaint. The CA, among others, applied the Civil Code provision on implied trust, i.e., that a person who acquires a piece of property through fraud is considered a trustee of an implied trust for the benefit of the person from whom the property came. Reconciling this legal provision with Article 1409 (which defines void contracts) and Article 1410 (which provides that an action to declare a contract null and void is imprescriptible), the CA ruled

that the respondents cause of action had not prescribed, because in assailing the extrajudicial partition as void, the [respondents] have the right to bring the action unfettered by a prescriptive period.25 ISSUES: Whether there was an implied trust, hence, the prescriptive period for the action is 10 years. HELD: YES. As the nullity of the extrajudicial settlement of estate and sale has been raised and is the primary issue, the action to secure this result will not prescribe pursuant to Article 1410 of the Civil Code. Article 1458 of the New Civil Code provides: "By the contract of sale one of the contracting parties obligates himself of transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent." It is essential that the vendors be the owners of the property sold otherwise they cannot dispose that which does not belong to them. As the Romans put it: "Nemo dat quod non habet." No one can give more than what he has. The sale of the realty to respondents is null and void insofar as it prejudiced petitioners' interests and participation therein. At best, only the ownership of the shares of Luisa, Maria and Guillerma in the disputed property could have been transferred to respondents. Consequently, respondents could not have acquired ownership over the land to the extent of the shares of petitioners. The issuance of a certificate of title in their favor could not vest upon them ownership of the entire property; neither could it validate the purchase thereof which is null and void. Registration does not vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any better title than what he actually has. Being null and void, the sale to respondents of the petitioners' shares produced no legal effects whatsoever. Stated otherwise, to form a valid and legal agreement it is necessary that there be a party capable of contracting and party capable of being contracted with. Hence, if any one party to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and therefore null and void by reason of its having been made after the death of the party who appears as one of the contracting parties therein. The death of a person terminates contractual capacity. In actions for reconveyance of the property predicated on the fact that the conveyance complained of was null and void ab initio, a claim of prescription of action would be unavailing. "The action or defense for the declaration of the inexistence of a contract does not prescribe." Neither could laches be invoked in the case at bar. Laches is a doctrine in equity and our courts are basically courts of law and not courts of equity. Equity, which has been aptly described as "justice outside legality," should be applied only in the absence of, and never against, statutory law. Aequetas nunguam contravenit legis. The positive mandate of Art. 1410 of the New Civil; Code conferring imprescriptibility to actions for declaration of the inexistence of a contract should preempt and prevail over all abstract arguments based only on equity. Certainly, laches cannot be set up to resist the enforcement of an imprescriptible legal right, and petitioners can validly vindicate their inheritance despite the lapse of time.47 The respondents action is therefore imprescriptible and the CA committed no reversible error in so ruling. The petition was denied for lack of merit.

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G.R. No. 178645 January 30, 2009

LINA PEALBER vs.QUIRINO RAMOS, LETICIA PEALBER, and BARTEX INC.,

CHICO-NAZARIO, J.:

FACTS: Petitioner Lina is the mother of respondent Leticia and the mother-in-law of respondent Quirino, husband of Leticia. Lina claimed that she operated a hardware store in a building she owned along Bonifacio St., Tuguegarao, Cagayan. However, the commercial lot (Bonifacio property) upon which the building stood is owned by and registered in the name of Maria Mendoza (Mendoza), from whom Lina rented the same. She allowed spouses Ramos to manage the hardware store. Mendoza put the Bonifacio property up for sale. As Lina did not have available cash to buy the property, she allegedly entered into a verbal agreement with spouses Ramos wherein the lot would be bought by spouses for and in behalf of Lina using the earnings of the store. It was also agreed that the spouses name shall appear in the Deed of Sale and in the title to secure a loan with which to build a bigger building and expand the business. Upon purchasing the property and the issuance of the title in the spouses name, Lina demanded the reconveyance of said title to her but the former refused.

Lina insisted that the spouses were trustees and thus they were under a moral and legal obligation to reconvey the title to her. Spouses averred that they were entrusted with not only the management but full ownership of the store, on the condition that the stocks and merchandise of the store will be inventoried, and out of the proceeds of the sales thereof, they shall pay Linas outstanding obligations and liabilities. Also, the express trust, from the alleged verbal agreement of the parties, cannot be proven by parol evidence.

ISSUE: WON there exists an express trust.

HELD: NO. Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. However, in accordance with Article 1443 of the Civil Code, when an express trust concerns an immovable property or any interest therein, the same may not be proved by parol or oral evidence.

But the spouses were deemed to have waived their objection to the parol evidence as they failed to timely object when petitioner testified on the said verbal agreement. The requirement in Article 1443 that the express trust concerning an immovable or an interest therein be in writing is merely for purposes of proof, not for the validity of the trust agreement. Therefore, the said article is in the nature of a statute of frauds.

Nevertheless, while admissibility of evidence is an affair of logic and law, determined as it is by its relevance and competence, the weight to be given to such evidence, once admitted, still depends on judicial evaluation. Thus, despite the admissibility of the said testimonies, the Court holds that the same carried little weight in proving the alleged verbal trust agreement between petitioner and respondent spouses.

Salao v. Salao

70 SCRA

Aquino, J.

Facts:

Spouses Manuel Salao and Valentina Ignacio begot four children named Patricio, Alejandra, Juan and Ambrosia. Manuel Salao died in 1885 while his son Patricio died in 1886 survived by his only child, Valentin Salao. When Manuel Salao died there was no documentary evidence as to what properties formed part of his estate. Valentina died and her estate was administered by Ambrosia. The lands left by Valentina are the following: 1.) 2 12 interest in a fishpond; 2.) 4 fishponds; 3.) fishpond with bodega for salt; 4.) 3 riceland. The estate of Valentina was partitioned extrajudicially and signed by her four legal heirs (her grandson and three children). To each of the legal heirs of Valentina was adjudicated a distributive share valued at 8,135.25 pesos. The documentary evidence also shows that prior to the death of Valentina, Juan and Ambrosia secured a Torrens title in their names for a 47 hectare fishpond (Calunuran fishpond). Thereafter, Ambrosia sold under pacto de retro for 800.00 pesos the Calunuran fishpond to Vicente Villongco with a right to redeem for a period of one year. After the fishpond was redeemed from Villongco, Ambrosia and Juan sold it under pacto de retro to Eligio Naval. The fishpond was later redeemed and reconveyed by Juan and Ambrosia. Ambrosia bought a parcel of swampland planted to bakawan and nipa with an area of 96 hectares (Pinaganacan or Lewa fishpond). Juan Salao died in 1931 while Valentin Salao died in 1933 (there was a contention here whether he died at 60 or 63 years old). Before Ambrosia died, she donated to her grandniece (Benita) three lots and to her nepnew (Juani) 12 proindiviso share of the fishpond. After the death of Ambrosia, Benita and Victorina (children of Valentin) while partitioning their fathers estate, filed an action for the reconveyance of the Calunuran fishpond which was allegedly held in trust and had become the sole property of Juani. Juani categorically stated that Valentin did not have any interest in the two fishponds and that the sole owners thereof were his father Juan and his aunt Ambrosia The Trial Court dismissed the complaint. It found that there was no community of property among Juan, Ambrosia and Valenti when the Calunuran and Pinaganacan were acquired. Both parties appealed to the CA. The CA elevated the case to the SC because the amount in controversy exceed 200.00.

Issue: Whether the Calunuran fishpond was held in trust for Valentin by Juan and Ambrosia

Held: The Court held that there was no trust in the instant case because there never was any intention on the part of Juan, Ambrosia and Valentin to create any trust. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. No express trusts concerning an immovable or any interest therein may be proven by parol evidence (Art. 1443). The plaintiffs did not present a scintilla of documentary evidence to prove that there was an express trust over the Calunuran fishpond in favor of Valentin. Purely parol evidence was offered by them, which are not legally indefensible because of the terms of Article 1443. In the same way, plaintiffs evidence cannot be relied upon to prove the existence of an implied trust. Implied trust come into being by operation of law and is ordinarily subdivided into resulting and constructive trusts. There was no constructive trust because the registration of the 2 fishponds in the names of Juan and Ambrosia was not vitiated by fraud or mistake. There was no resulting trust because it was never the intention of Juan, Ambrosia and Valentin to create any trust. Moreover, even assuming that there was an implied trust, plaintiffs action is barred by prescription or laches. Under Act No. 190, the

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longest period od extinctive prescription was only 10 years. The Calunuran fishpond was registered in 1911 and the action was only filed in 1952 or after the lapse of more than 40 years from the date of registration.

[G.R. No. 97995. January 21, 1993.]

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.

FACTS:

Private Respondent B. P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star Kist Foods, Inc., USA (Star Kist). Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through banks for credit to the latter's account.

Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement with PhilippineNational Bank (PNB), transmitted a cable message to PNB to pay the amount of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. Upon receipt of this cabled message, PNB noticed an error and sent a service message to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should only be for US$1,400.

On the basis of the cable message, Cashier's Chec in the amount of US$1,400 was issued by the Star Kist for the account of Mata through the Insular Bank of Asia and America (IBAA). However, fourteen days after, PNB effected another payment in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal. Six years later, PNB requested Mata for refund of US$14,000 (P97,878.60) after it discovered its error in effecting the second payment.

PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a constructive trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to respondent Mata. The Regional Trial Court of Manila rendered judgment dismissing the complaint ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not under Article 1456 on constructive trust. In affirming the lower courts decision, the appellate court added in its opinion that under Art. 2154 on solutio indebiti, the person who makes the payment is the one who commits the mistake vis--vis the recipient who is unaware of such a mistake. Consequently, recipient is duty bound to return the amount paid by mistake. But the appellate court concluded that petitioner's demand for the return of US$14,000 cannot prosper because its cause of action had already prescribed under Article 1145, paragraph 2 of the Civil Code.Hence, the petition for certiorari.

ISSUE: Whether PNB has the right to recover from Mata based on a constructive trust in Art. 1456

HELD: NO. 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. In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely a constructive trust, for the benefit of the person from whom the property comes, in this case PNB, for reasons of justice and equity.

Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it erroneously paid private respondent under a constructive trust, we rule in the negative. Although we are aware that only seven (7) years lapsed after petitioner erroneously credited private respondent with the said amount and that under Article 1144, petitioner is well within the prescriptive period for the enforcement of a constructive or implied trust, we rule that petitioner's claim cannot prosper since it is already barred by laches. It is a well-settled rule now that an action to enforce an implied trust, whether resulting or constructive, may be barred not only by prescription but also by laches. While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable delay. It is unbelievable for a bank, and a government bank at that, which regularly publishes its balanced financial statements annually or more frequently, by the quarter, to notice its error only seven years later. As a universal bank with worldwide operations, PNB cannot afford to commit such costly mistakes. Moreover, as between parties where negligence is imputable to one and not to the other, the former must perforce bear the consequences of its neglect. Hence, petitioner should bear the cost of its own negligence.

G.R. No. L-45645 June 28, 1983

FRANCISCO A. TONGOY, for himself and as Judicial Administrator of the Estate of the Late Luis D. Tongoy and Ma.

Rosario Araneta Vda. de Tongoy, petitioners, vs.

THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA, JUAN T. SONORA, JESUS T. SONORA, TRINIDAD

T. SONORA, RICARDO P. TONGOY, CRESENCIANO P. TONGOY, AMADO P. TONGOY, and NORBERTO P.

TONGOY, respondents.

MAKASIAR, J.:

FACTS: The case is basically an action for reconveyance respecting two (2) parcels of land in Bacolod City. The first is Lot No. 1397 of the Cadastral Survey of Bacolod, otherwise known as Hacienda Pulo, originally registered under Original Certificate of Title No. 2947 in the names of Francisco Tongoy, and Jovita Tongoy (and three others, Jose, Ana, Teresa, who died without issue) in pro-indiviso equal shares. Said co-owners were all children of the late Juan Aniceto

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Tongoy. The second is Lot No. 1395 of the Cadastral Survey of Bacolod, briefly referred to as Cuaycong property, containing formerly covered by Original Certificate of Title No. 2674 in the name of Basilisa Cuaycong.

Francisco Tongoy, who died on September 15, 1926, had six children; Patricio D. Tongoy and Luis D. Tongoy by the first marriage; Amado P. Tongoy, Ricardo P. Tongoy; Cresenciano P. Tongoy and Norberto P. Tongoy by his second wife Antonina Pabello whom he subsequently married sometime after the birth of their children. For her part, Jovita Tongoy (Jovita Tongoy de Sonora), who died on May 14, 1915, had four children: Mercedes T. Sonora, Juan T. Sonora, Jesus T. Sonora and Trinidad T. Sonora.

By the time this case was commenced, the late Francisco Tongoy's aforesaid two children by his first marriage, Patricio D. Tongoy and Luis D. Tongoy, have themselves died. On the other hand, there is no question that Luis D. Tongoy left behind a son, Francisco A. Tongoy, and a surviving spouse, Ma. Rosario Araneta Vda. de Tongoy.

On April 17, 1918, Hacienda Pulo was mortgaged by its registered co-owners to the Philippine National Bank (PNB), Bacolod Branch, as security for a loan of P11,000.00 payable in ten (10) years at 8% interest per annum. The mortgagors however were unable to keep up with the yearly amortizations, as a result of which the PNB instituted judicial foreclosure proceedings over Hacienda Pulo on June 18, 1931.

To avoid foreclosure, one of the co-owners and mortgagors, Jose Tongoy, proposed to the PNB an amortization plan that would enable them to liquidate their account. But, on December 23, 1932, the PNB Branch Manager in Bacolod advised Jose Tongoy by letter that the latter's proposal was rejected and that the foreclosure suit had to continue. As a matter of fact, the suit was pursued to finality up to the Supreme Court which affirmed on July 31, 1935 the decision of the CFI giving the PNB the right to foreclose the mortgage on Hacienda Pulo.

In the meantime, Patricio D. Tongoy and Luis Tongoy executed on April 29, 1933 a Declaration of Inheritance wherein they declared themselves as the only heirs of the late Francisco Tongoy and thereby entitled to the latter's share in Hacienda Pulo. On March 13, 1934, Ana Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Sonora, Juan Sonora and Patricio Tongoy executed an "Escritura de Venta", which by its terms transferred for consideration their rights and interests over Hacienda Pulo in favor of Luis D. Tongoy. Thereafter, on October 23, 1935 and November 5, 1935, respectively, Jesus Sonora and Jose Tongoy followed suit by each executing a similar "Escritura de Venta" pertaining to their corresponding rights and interests over Hacienda Pulo in favor also of Luis D. Tongoy. In the case of Jose Tongoy, the execution of the "Escritura de Venta" was preceded by the execution on October 14, 1935 of an Assignment of Rights in favor of Luis D. Tongoy by the Pacific Commercial Company as judgment lien-holder (subordinate to the PNB mortgage) of Jose Tongoy's share in Hacienda Pulo.

On the basis of the foregoing documents, Hacienda Pulo was placed on November 8, 1935 in the name of Luis D. Tongoy, married to Maria Rosario Araneta, under Transfer Certificate of "Title No. 20154. In the following year, the title of the adjacent Cuaycong property also came under the name of Luis D. Tongoy, married to Maria Rosario Araneta, per Transfer Certificate of Title No. 21522, by virtue of an "Escritura de Venta" executed in his favor by the owner Basilisa Cuaycong on June 22, 1936 purportedly for P4,000.00.

On June 26, 1936, Luis D. Tongoy executed a real estate mortgage over the Cuaycong property in favor of the PNB, Bacolod Branch, as security for loan of P4,500.00. Three days thereafter, on June 29, 1936, he also executed a real estate mortgage over Hacienda Pulo in favor of the same bank to secure an indebtedness of P21,000.00, payable for a period of fifteen (15) years at 8% per annum.

After two decades, on April 17, 1956, Luis D. Tongoy paid off all his obligations with the PNB, amounting to a balance of P34,410.00, including the mortgage obligations on the Cuaycong property and Hacienda Pulo. However, it was only on April 22, 1958 that a release of real estate mortgage was executed by the bank in favor of Luis D. Tongoy.

On February 5, 1966, Luis D. Tongoy died, leaving as heirs his wife Maria Rosario Araneta and his son Francisco A. Tongoy. Just before his death, however, Luis D. Tongoy received a letter from Jesus T. Sonora, dated January 26, 1966, demanding the return of the shares in the properties to the co-owners.

Not long after the death of Luis D. Tongoy, the case was instituted in the court below on complaint filed on June 2, 1966 by Mercedes T. Sonora, Juan T. Sonora, Jesus T. Sonora, Trinidad T. Sonora, Ricardo P. Tongoy and Cresenciano P. Tongoy. Named principally as defendants were Francisco A. Tongoy, for himself and as judicial administrator of the estate of the late Luis D. Tongoy, and Maria Rosario Araneta Vda. de Tongoy. Alleging in sum that plaintiffs and/or their predecessors transferred their interests on the two lots in question to Luis D. Tongoy by means of simulated sales, pursuant to a trust arrangement whereby the latter would return such interests after the mortgage obligations thereon had been settled, the complaint prayed that 'judgment be rendered in favor of the plaintiffs and against the defendants-

(a) Declaring that the HACIENDA PULO and the former Cuaycong property, as trust estate belonging to the plaintiffs and the defendants in the proportion set forth in this complaint;

(b) Ordering the Register of Deeds of Bacolod to issue new TCTs in the names of the plaintiffs and defendants in the proportions set forth in Par. 26 thereof, based on the original area of HACIENDA PULO;

(c) Ordering the defendants Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy to render an accounting to the plaintiffs of the income of the above two properties from the year 1958 to the present and to deliver to each plaintiff his corresponding share with legal interest thereon from 1958 and until the same shall have been fully paid;

Defendants Francisco A. Tongoy and Ma. Rosario Vda. de Tongoy filed separate answers, denying in effect plaintiffs' causes of action, and maintaining, among others, that the sale to Luis D. Tongoy of the two lots in question was genuine and for a valuable consideration, and that no trust agreement of whatever nature existed between him and the plaintiffs. As affirmative defenses, defendants also raised laches, prescription, estoppel, and the statute of frauds against plaintiffs.

After trial on the merits, the lower court rendered its decision finding the existence of an implied trust in favor of plaintiffs, but at the same time holding their action for reconveyance barred by prescription, except in the case of Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy, and Norberto P. Tongoy, who were adjudged entitled to reconveyance of their corresponding shares in the property left by their father Francisco Tongoy having been excluded therefrom in the partition had during their minority, and not

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having otherwise signed any deed of transfer over such shares. **The proportionate legal share of Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy and the heirs of Norberto P. Tongoy, in Hda. Pulo and Cuaycong property consist of 4/5 of the whole trust estate, leaving 1/5 of the same to the heirs of Luis D. Tongoy.

Both parties appealed the decision of the lower court to respondent appellate court. Respondent court rendered the questioned decision, modifying the judgment and Orders appealed from by ordering, among others, Maria Rosario Araneta Vda. de Tongoy and Francisco A. Tongoy.

1) To reconvey to Mercedes T. Sonora, Juan T. Sonora (as substituted and represented by his heirs), Jesus T. Sonora and Trinidad T. Sonora each a 7/60th portion of both Hacienda Pulo and the Cuaycong property, based on their original shares;

2) To reconvey to Ricardo P. Tongoy, Cresenciano P. Tongoy, Amado P. Tongoy and Norberto P. Tongoy as substituted and represented by his heirs each a 14/135th portion of both Hacienda Pulo and the Cuaycong property, also based on their original shares; provided that the 12 hectares already reconveyed to them by virtue of the Order for execution pending appeal of the judgment shall be duly deducted;

3) To render an accounting to the parties named in pars. 1 and 2 above with respect to the income of Hacienda Pulo and the Cuaycong property from May 5, 1958 up to the time the reconveyances as herein directed are made; and to deliver or pay to each of said parties their proportionate shares of the income, if any, with legal interest thereon from the date of filing of the complaint in this case, January 26, 1966, until the same is paid;

**SC: The Court of Appeals found enough convincing evidence not barred by the aforecited survivorship rule to the effect that the transfers made by the co- owners in favor of Luis D. Tongoy were simulated. The deeds of transfer executed in favor of Luis Tongoy were from the very beginning absolutely simulated or fictitious, since the same were made merely for the purpose of restructuring the mortgage over the subject properties and thus preventing the foreclosure by the PNB.

ISSUES:

1) Whether or not the rights of herein respondents over subject properties, which were the subjects of simulated or fictitious transactions, have already prescribed

2) Whether, assuming arguendo that such an implied trust exists between Luis Tongoy as trustee and the private respondents as cestui que trust, the rights of private respondents to claim reconveyance is barred by prescription or laches (from what time should such period be counted?)

HELD:

I

No. Under Article 1409, contracts which are absolutely simulated or fictitious are inexistent and void from the beginning. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. Under Article 1410, the action or defense for the declaration of the inexistence of a contract does not prescribe.

Considering the law and jurisprudence on simulated or fictitious contracts as aforestated, the within action for reconveyance

instituted by herein respondents which is anchored on the said simulated deeds of transfer cannot and should not be barred by prescription. No amount of time could accord validity or efficacy to such fictitious transactions, the defect of which is permanent.

There is no implied trust that was generated by the simulated transfers; because being fictitious or simulated, the transfers were null and void ab initio-from the very beginning and thus vested no rights whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give life to anything at all.

II

No. Even assuming arguendo that such an implied trust exists between Luis Tongoy as trustee and the private respondents as cestui que trust, still the rights of private respondents to claim reconveyance is not barred by prescription or laches.

Petitioners maintain that, even conceding that respondents have adequately proven an implied trust in their favor, their rights have already prescribed, since actions to enforce an implied trust created under the old Civil Code prescribes in ten years.

On the other hand, private respondents contend that prescription cannot operate against the cestui que trust in favor of the trustee, and that actions against a trustee to recover trust property held by him are imprescriptible.

The facts of the case at bar reveal that the title to Hacienda Pulo was registered in the name of Luis D. Tongoy with the issuance of TCT No. 20154 on November 8, 1935; that the title to the adjacent Cuaycong property was transferred to Luis D. Tongoy with the issuance of TCT No. 21522 on June 22, 1936. The properties were mortgaged in the year 1936 by said Luis D. Tongoy for P4,500.00 and P21,000.00, respectively, for a period of fifteen years; that the mortgage obligations to the PNB were fully paid on April 17, 1956; that the release of mortgage was recorded in the Registry of Deeds on May 5, 1958; and that the case for reconveyance was filed in the trial court on June 2, 1966.

Considering that the implied trust resulted from the simulated sales which were made for the purpose of enabling the transferee, Luis D. Tongoy, to save the properties from foreclosure for the benefit of the co-owners, it would not do to apply the theory of constructive notice resulting from the registration in the trustee's name. Hence, the ten-year prescriptive period should not be counted from the date of registration in the name of the trustee. Rather, it should be counted from the date of recording of the release of mortgage in the Registry of Deeds, on which date May 5, 1958 the cestui que trust were charged with the knowledge of the settlement of the mortgage obligation, the attainment of the purpose for which the trust was constituted.

Indeed, as respondent Court of Appeals had correctly held: as already indicated, the ten-year prescriptive period for bringing the action to enforce the trust or for reconveyance of plaintiffs-appellants shares should be toned from the registration of the release of the mortgage obligation, since only by that time could plaintiffs-appellants be charged with constructive knowledge of the liquidation of the mortgage obligations, when it became incumbent upon them to expect and demand the return of their shares, there being no proof that plaintiffs-appellants otherwise learned of the payment of the obligation earlier. More precisely then the prescriptive period should be reckoned from May 5, 1958 when the release of the mortgage was recorded in the Registry of

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Deeds, which is to say that the present complaint was still filed within the period on June 4, 1966.

Consequently, petitioner Francisco A. Tongoy as successor-in-interest and/or administrator of the estate of the late Luis D. Tongoy, is under obligation to return the shares of his co-heirs and co-owners in the subject properties and, until it is done, to render an accounting of the fruits thereof from the time that the obligation to make a return arose, which in this case should be May 5, 1958, the date of registration of the document of release of mortgage.

CARAGAY-LAYNO VS. COURT OF APPEALS G.R. No. L-52064

Melencio-Herrera, J. Facts As Administratrix, DE VERAs widow filed in Special Proceedings of the Court of First Instance of Pangasinan, an Inventory of all properties of the deceased, which included a parcel of land in the poblacion of Calasiao, Pangasinan, containing an area of 5,417 square meters, more or less, and covered by Tax Declaration No. 12664. Because of the discrepancy in area mentioned in the Inventory as 5,147 square metersand that in the title as 8,752 square meters, respondent ESTRADA repaired to the Disputed Property and found that the northwestern portion, subsequently surveyed to be 3,732 square meters, was occupied by petitioner-spouses Juliana Caragay Layno and Benito Layno. ESTRADA demanded that they vacate the Disputed Portion since it was titled in the name of the deceased DE VERA, but petitioners refused claiming that the land belonged to them and, before them, to JULIANAS father Juan Caragay. ESTRADA then instituted suit against JULIANA for the recovery of the Disputed Portion which she resisted, mainly on the ground that the Disputed Portion had been fraudulently or mistakenly included in OCT No. 63, so that an implied or constructive trust existed in her favor. She then counterclaimed for reconveyance of property in the sense that title be issued in her favor. After hearing, the Trial Court rendered judgment ordering JULIANA to vacate the Disputed Portion. On appeal, respondent Appellate Court affirmed the Decision in toto. Issue Whether or not petitioners claim for reconveyance based on implied or constructive trust has prescribed after 10 years Held No. The evidence discloses that the Disputed Portion was originally possessed openly, continuously and uninterruptedly in the concept of an owner by Juan Caragay, the deceased father of JULIANA, and had been declared in his name under Tax Declaration No. 28694 beginning with the year 1921. Prescription cannot be invoked against JULIANA for the reason that as lawful possessor and owner of the Disputed Portion, her cause of action for reconveyance which, in effect, seeks to quiet title to the property, falls within settled jurisprudence that an action to quiet title to property in ones possession is imprescriptible. Her undisturbed possession over a period of fifty two (52) years gave her a continuing right to seek the aid of a Court of equity to determine the nature of the adverse claim of a third party and the effect on her own title. Besides, under the circumstances, JULIANAS right to quiet title, to seek reconveyance, and to annul OCT. No. 63 accrued only in 1966 when she was made aware of a claim adverse to her own. It was only then that the statutory period of prescription may be said to have commenced to run against her.

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner, vs.

THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA

ASEJO and SANTIAGO ASEJO, respondents.

SARMIENTO, J.:

FACTS: The land in question originally belonged to Felisa Alzul, who married twice in her lifetime. In her first marriage, she had as an only child petitioner Rustico Adille; and in her second marriage, her children were private respondents. Felisa sold the property in pacto de retro to certain third persons, with a period of repurchase for 3 years. She died without being able to redeem the property. After her death but during the period of redemption, petitioner repurchased the property. Petitioner executed a deed of extrajudicial partition, representing himself to be the only heir and child of his mother, with the consequence that he was able to secure title in his name alone. Hence, private respondents filed an action for partition against petitioner.

ISSUE: Whether the petitioner is a trustee of the property on behalf of the private respondents?

HELD: YES. Art. 1456 of the Civil Code provides that if property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The Supreme Court agree with the respondent Court of Appeals that fraud attended the registration of the property. The petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he executed preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole dominion over the property. The aforequoted provision therefore applies.

It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf of his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144 of the Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the private respondents being the beneficiaries, under the Article 1456. The evidence, of course, points to the second alternative the petitioner having asserted claims of exclusive ownership over the property and having acted in fraud of his co-heirs. He cannot therefore be said to have assume the mere management of the property abandoned by his co-heirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms, the result would be the same whether it is one or the other. The petitioner would remain liable to the Private respondents, his co-heirs.

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