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September 7, 1998

Romulo, Mabanta, Buenaventura


Sayoc & De Los Santos
30th Floor, Citibank Tower,
Citibank Plaza
8741 Paseo de Roxas, Makati City
Attention : Attys. Reynaldo G. Geronimo
Jose Luis G. De Dios
Gentlemen:
This refers to your letter dated August 21, 1998, requesting confirmation that a "foreign corporation" may enter
into a partnership with "Philippine corporations", the former to act as a "general partner" responsible for
managing the affairs of the partnership and the latter acting as "limited partners".
Please be advised that the above proposal may be allowed, subject to the following conditions:
1. That the authority to enter into a partnership relation as a general partner is expressly conferred by the
charters or articles of incorporation of the foreign partner; the nature of the business venture to be undertaken
by the partnership is in line with the business authorized by the charter or articles of incorporation; and the
investment of the foreign partner is allowable under the Foreign Investments Act.
2. That the foreign partner must obtain a license to transact business in the Philippines in accordance with
the Corporation Code and Foreign Investments Act.
3. The articles of partnership shall stipulate that the foreign partner, being the general partner shall be
liable for all the obligations of the partnership; that its liability shall not be limited to its contribution to the
partnership but extends to the assets of the foreign company; that its liability shall not terminate even after the
dissolution of the partnership so as not to relieve the foreign partner of its obligations incurred by reason of its
entering into the partnership as a general partner; and that the resident agent of the foreign company shall be
jointly and severally liable with the foreign principal.
Very truly yours,
(SGD.) DANILO L. CONCEPCION
Associate Commissioner

Salao vs Salao L-26699, March 16, 1976

Facts:
The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot four children
named Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio,
died in 1886 survived by his only child. Valentin Salao.
After Valentinas death, her estate was administered by her daughter Ambrosia.
The documentary evidence proves that in 1911 or prior to the death of Valentina Ignacio her two children, Juan
Y. Salao, Sr. and Ambrosia Salao, secured a Torrens title, OCT No. 185 of the Registry of Deeds of
Pampanga, in their names
The property in question is the forty-seven-hectare fishpond located at Sitio Calunuran, Lubao, Pampanga,
wherein Benita Salao-Marcelo daughter of Valentin Salao claimed 1/3 interest on the said fishpond.
The defendant Juan Y. Salao Jr. inherited from his father Juan Y. Salao, Sr. of the fishpond and the other
half from the donation of his auntie Ambrosia Salao.
It was alleged in the said case that Juan Y. Salao, Sr and Ambrosia Salao had engaged in the fishpond
business. Where they obtained the capital and that Valentin Salao and Alejandra Salao were included in that
joint venture, that the funds used were the earnings of the properties supposedly inherited from Manuel Salao,
and that those earnings were used in the acquisition of the Calunuran fishpond. There is no documentary
evidence to support that theory.
The lawyer of Benita Salao and the Children of Victorina Salao in a letter dated January 26, 1951 informed
Juan S. Salao, Jr. that his clients had a one-third share in the two fishponds and that when Juani took
possession thereof in 1945, in which he refused to give Benita and Victorinas children their one-third share of
the net fruits which allegedly amounted to P200,000. However, there was no mention on the deeds as to the
share of Valentin and Alejandra.
Juan S. Salao, Jr. in his answer dated February 6, 1951 categorically stated that Valentin Salao did not have
any interest in the two fishponds and that the sole owners thereof his father Banli and his aunt Ambrosia, as
shown in the Torrens titles issued in 1911 and 1917, and that he Juani was the donee of Ambrosias one-half
share.
Benita Salao and her nephews and niece asked for the annulment of the donation to Juan S. Salao, Jr. and for
the reconveyance to them of the Calunuran fishpond as Valentin Salaos supposed one-third share in the 145
hectares of fishpond registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao.
Issue :
1 Whether or not the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and
Ambrosia Salao.
2 Whether or not plaintiffs action for reconveyance had already prescribed.
Held:
1. There was no resulting trust in this case because there never was any intention on the part of Juan
Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was no constructive trust
because the registration of the two fishponds in the names of Juan and Ambrosia was not vitiated by
fraud or mistake. This is not a case where to satisfy the demands of justice it is necessary to consider
the Calunuran fishpond being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin
Salao.
Ratio:
A Torrens Title is generally a conclusive evidence of the ownership of the land referred to therein. (Sec. 47, Act
496). A strong presumption exists that Torrens titles were regularly issued and that they are valid. In order to
maintain an action for reconveyance, proof as to the fiduciary relation of the parties must be clear and
convincing.
The plaintiffs utterly failed to prove by clear, satisfactory and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations.
Trust and trustee; establishment of trust by parol evidence; certainty of proof. Where a trust is to be
established by oral proof, the testimony supporting it must be sufficiently strong to prove the right of the alleged
beneficiary with as much certainty as if a document proving the trust were shown. A trust cannot be
established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof.
Trusts; evidence needed to establish trust on parol testimony. In order to establish a trust in real property by
parol evidence, the proof should be as fully convincing as if the act giving rise to the trust obligation were
proven by an authentic document. Such a trust cannot be established upon testimony consisting in large part
of insecure surmises based on ancient hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).
The foregoing rulings are good under article 1457 of the Civil Code which, as already noted, allows an implied
trust to be proven by oral evidence. Trustworthy oral evidence is required to prove an implied trust because,
oral evidence can be easily fabricated.
On the other hand, a Torrens title is generally a conclusive of the ownership of the land referred to therein
(Sec. 47, Act 496). A strong presumption exists. that Torrens titles were regularly issued and that they are
valid. In order to maintain an action for reconveyance, proof as to the fiduciary relation of the parties must be
clear and convincing.
The real purpose of the Torrens system is, to quiet title to land. Once a title is registered, the owner may rest
secure, without the necessity of waiting in the portals of the court, or sitting in the mirador de su casa, to avoid
the possibility of losing his land.
2. Reconveyance had already prescribed. Plaintiffs action is clearly barred by prescription or laches.
Ratio:
Under Act No. 190, whose statute of limitation would apply if there were an implied trust in this case, the
longest period of extinctive prescription was only ten year.
The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its reconveyance was
made by the plaintiffs in 1951. Their action was filed in 1952 or after the lapse of more than forty years from the
date of registration. The plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if they
had any rights at all. Vigilanti prospiciunt jura or the law protects him who is watchful of his rights (92 C.J.S.
1011, citing Esguerra vs. Tecson, 21 Phil. 518, 521).
Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim, since it is
human nature for a person to assert his rights most strongly when they are threatened or invaded. Laches or
unreasonable delay on the part of a plaintiff in seeking to enforce a right is not only persuasive of a want of
merit but may, according to the circumstances, be destructive of the right itself.
Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of the Calunuran
fishpond, it is no longer to Pass upon the validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr.
of her one-half share in the two fishponds The plaintiffs have no right and personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not have any successional rights to Ambrosias
share. The sole legal heir of Ambrosia was her nephew, Juan, Jr., her nearest relative within the third degree.
Valentin Salao, if living in 1945 when Ambrosia died, would have been also her legal heir, together with his first
cousin, Juan, Jr. (Juani). Benita Salao, the daughter of Valentin, could not represent him in the succession to
the estate of Ambrosia since in the collateral line, representation takes place only in favor of the children of
brothers or sisters whether they be of the full or half blood is (Art 972, Civil Code). The nephew excludes a
grandniece like Benita Salao or great-gandnephews like the plaintiffs Alcuriza (Pavia vs. Iturralde 5 Phil. 176).

FABIAN vs. FABIAN
G.R. No. L-20449
January 29, 1968

FACTS: Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate in Muntinlupa,
Rizal. By virtue of this purchase, he was issued sale certificate 547. He died on August 2, 1928, survived by
four children, namely, Esperanza, Benita I, Benita II,

and Silbina.

On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the deceased, executed an affidavit. On the
strength of this affidavit, sale certificate 547 was assigned to them.

The acting Director of Lands, on behalf of the Government, sold lot 164 to Silbina Fabian Teodora Fabian.
The vendees spouses forthwith took physical possession thereof, cultivated it, and appropriated the produce.
In that same year, they declared the lot in their names for taxation purposes. In 1937 the RD of Rizal issued a
TCT over lot 164 in their names. They later subdivided the lot into 2 equal parts.

The plaintiffs filed the present action for reconveyance against the defendants spouses, averring that Silbina
and Teodora, through fraud perpetrated in their affidavit aforesaid. That by virtue of this affidavit, the said
defendants succeeded in having the sale certificate assigned to them and thereafter in having lot 164 covered
by said certificate transferred in their names; and that by virtue also of these assignment and transfer, the
defendants succeeded fraudulently in having lot 164 registered in their names. They further allege that the land
has not been transferred to an innocent purchaser for value. A reconveyance thereof is prayed for.

In their answer, the defendants spouses claim that Pablo Fabian was not the owner of lot 164 at the time of his
death on August 2, 1928 because he had not paid in full the amortizations on the lot; that they are the absolute
owners thereof, having purchased it from the Government, and from that year having exercised all the
attributes of ownership thereof up to the present; and that the present action for reconveyance has already
prescribed. The dismissal of the complaint is prayed for.

The lower court rendered judgment declaring that the defendants spouses had acquired a valid and complete
title to the property by acquisitive prescription, and accordingly dismissed the complaint. The latters motion for
reconsideration was thereafter denied. Hence, the present recourse.

ISSUE:

(1) Was Pablo Fabian the owner of lot 164 at the time of his death, in the face of the fact, admitted by the
defendants-appellees, that he had not then paid the entire purchase price thereof?
(2) May laches constitute a bar to an action to enforce a constructive trust?
(3) Has title to the land vested in the appellees through the mode of acquisitive prescription?

HELD: The judgment a quo, dismissing the complaint, is affirmed

1. YES. Lot 164 was a part of the Friar Lands Estate of Muntinlupa, Rizal; its sale to Pablo Fabian was
therefore governed by Act 1120, otherwise known as the Friar Lands Act. While under section 15 of the said
Act, title to the land sold is reserved to the Government until the purchaser makes full payment of all the
required installments and the interest thereon, this legal reservation refers to the bare, naked title. The
equitable and beneficial title really went to the purchaser the moment he paid the first installment and
was given a certificate of sale. The reservation of the title in favor of the Government is made merely to
protect the interest of the Government so as to preclude or prevent the purchaser from encumbering or
disposing of the lot purchased before the payment in full of the purchase price. Outside of this protection the
Government retains no right as an owner. For instance, after issuance of the sales certificate and pending
payment in full of the purchase price, the Government may not sell the lot to another. It may not even
encumber it. It may not occupy the land to use or cultivate; neither may it lease it or even participate or share in
its fruits. In other words, the Government does not and cannot exercise the rights and prerogatives of owner.
And when said purchaser finally pays the final installment on the purchase price and is given a deed of
conveyance and a certificate of title, the title at least in equity, retroacts to the time he first occupied the land,
paid the first installment and was issued the corresponding certificate of sale. In other words, pending the
completion of the payment of the purchase price, the purchaser is entitled to all the benefits and
advantages which may accrue to the land as well as suffer the losses that may befall it.

That Pablo Fabian had paid five annual installments to the Government, and in fact been issued a sale
certificatein his name, are conceded. He was therefore the owner of lot 164 at the time of his death. He left four
daughters, namely, Esperanza, Benita I, Benita II and Silbina to whom all his rights and interest over lot 164
passed upon his demise.

In case a holder of a certificate dies before the giving of the deed and does not leave a widow, then the interest
of the holder of the certificate shall descend and deed shall issue to the person who under the laws of the
Philippine Islands would have taken had the title been perfected before the death of the holder of the
certificate, upon proof of the holders thus entitled of compliance with all the requirements of the certificate.

2.
The assignment and sale of the lot to the defendants Silbina and Teodora were therefore null and void. To
the extent of the participation of the appellants, application must be made of the principle that if property is
acquired through fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the
person from whom the property comes.

Laches may bar an action brought to enforce a constructive trust such as the one in the case at bar.
Illuminating are the following excerpts from a decision penned by Mr. Justice Reyes:

But in constructive trusts, . . . the rule is that laches constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is a concealment of the facts giving rise to the trust

The assignment of sale certificate was effected in October 1928; and the actual transfer of lot 164 was made
on the following November 14. It was only on July 8, 1960, 32 big years later, that the appellants for the first
time came forward with their claim to the land. The record does not reveal, and it is not seriously asserted, that
the appellees concealed the facts giving rise to the trust. Upon the contrary, paragraph 13 of the stipulation of
facts of the parties states with striking clarity that defendants herein have been in possession of the land in
question since 1928 up to the present publicly and continuously under claim of ownership; they have cultivated
it, harvested and appropriated the fruits for themselves.

3. it is already settled in this jurisdiction that an action for reconveyance of real property based upon a
constructive or implied trusts, resulting from fraud, may be barred by the statute of limitations. the discovery in
that case being deemed to have taken place when new certificates of title were issued exclusively in the
names of the respondents therein.

[A]lthough, as a general rule, an action for partition among co-heirs does not prescribe, this is true only as long
as the defendants do not hold the property in question under an adverse title. The statute of limitations
operates, as in other cases, from the moment such adverse title is asserted by the possessor of the property

Inasmuch as petitioners seek to annul the aforementioned deed of extra-judicial settlement upon the ground
of fraud in the execution thereof, the action therefor may be filed within four (4) years from the discovery of the
fraud. Upon the undisputed facts in the case at bar, not only had laches set in when the appellants instituted
their action for, reconveyance in 1960, but as well their right to enforce the constructive trust had already
prescribed.

It logically follows from the above disquisition that acquisitive prescription has likewise operated to vest
absolute title in the appellees, pursuant to the provisions of section 41 of Act 190 that:

Ten years actual adverse possession by any person claiming to be the owner for that time of any land or
interest in land, uninterruptedly continued for ten years by occupancy, descent, grants, or otherwise, in
whatever way such occupancy may have commenced or continued,

shall vest in every actual occupant or
possessor of such land a full and complete title

Upon the foregoing disquisition, we hold not only that the appellants action to enforce the constructive trust
created in their favor has prescribed, but as well that a valid, full and complete title has vested in the appellees
by acquisitive prescription.

NOTES:

1. Article 1456 of the new Civil Code, while not retroactive in character, merely expresses a rule already
recognized by our courts prior to the Codes promulgation (see Gayondato vs. Insular Treasurer, 49
Phil. 244). Appellants are, however, in error in believing that like express trust, such constructive trusts
may not be barred by lapse of time. The American law on trusts has always maintained a distinction
between express trusts created by the intention of the parties, and the implied or constructive trusts
that are exclusively created by law, the latter not being trusts in their technical sense. The express
trusts disable the trustee from acquiring for his own benefit the property committed to his management
or custody, at least while he does not openly repudiate the trust, and makes such repudiation known to
the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared
that the rules on adverse possession does not apply to continuing and subsisting (i.e., unrepudiated)
trusts.

RUFINO BUENO, FILOMENA B. GUERRO, LUIS B. GUERRERO, BENJAMIN B. GUERRERO, VIOLETA B.
REYES-SAMONTE, FELICIDAD B. REYES-FONACIER, MERCEDES B. REYES, HONESTA B. REYES-
SARMIENTO, TEODORA B. REYES-DALUMPINES, MAMERTA B. REYES-MERCADO, ROSARIO B.
REYES-CONCEPCION, FEDERICO B. REYES and CONCEPCION B. REYES,

plaintiffs-appellants, vs. MATEO H. REYES, and JUAN H. REYES defendants-appellees.

Facts:
On January 7, 1936 Francisco H. Reyes filed an answer in Cadastral Case No. 47 of Ilocos Norte, claiming lot
No. 2857 of the Laoag Cadastre as property belonging to himself and to his two brothers, Juan and Mateo. The
case was heard without opposition, and the lot was adjudicated in favor of the claimants on March 27, 1939, in
whose names Original Certificate of Title No. 19074 was issued on the following July 7.Twenty-three years
thereafter, or on December 12, 1962 to be exact, the plaintiffs filed the action below for reconveyance of lot No.
2357. They allege in their complaint that the said lot originally belonged to Jorge Bueno, who died leaving three
children, namely, Brigida Bueno, Eugenia Bueno and Rufino Bueno, to whom the property descended by
intestate succession; that subsequently Brigida and Eugenia died, leaving their respective children, who are
now the plaintiffs-appellants together with Rufino Bueno; that Francisco H. Reyes was Eugenias husband and
the father of the plaintiffs surnamed Reyes, who agreement among the heirs of Jorge Bueno was entrusted in
filing the answer in the cadastral proceedings and in obtaining the title thereto for and in behalf of all the heirs
of Jorge Bueno, including his wife Eugenia Bueno.
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Issue:
Whether by mistake or fraud, the real owner being another person, impresses upon the title so acquired the
character of a constructive trust for the real owner, which would justify an action for reconveyance.
Held:
Under Article 1456 of the Civil Code, if property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes. An action upon a trust is imprescriptible, without distinguishing between express and implied trusts,
the better rule, as laid down by this Court in other decisions, is that prescription does supervene where the
trust is merely an implied one. The constructive trust arose by reason of the bad faith or mistake of the
deceased Francisco H. Reyes, compounded by the connivance of the appellees Juan and Mateo Reyes

Tamayo v Callejo:
**an implied trust that became an express trust.
Before 19112, the Tamayos sold a piece of land to Fernando Domantay, who took possession of the land.
When Vicente died after the sale and his widow waived her rights to the remaining portion of the property to
their children Mariano and Marcos, the two brothers applied to register the land in their name, saying they
inherited it from their father, including the part that was sold to Domantay. In 1918 Domantay sold the land to
Callejo.
In 1940 Mariano Tamayo sold the land to Estacio, whose surveyor went to the land in 1952 to segregate it; that
same year Callejo registered his adverse claim to the land. Tamayo pleaded the statute of limitations as
defense, but the court found that in 1918, when they had the land registered in their name, Mariano Tamayo,
on his behalf and that of his brother, executed a public document acknowledging that his deceased parents
had sold a parcel of the land to Domantay.
Though there was no clear evidence to create a trust, ruling out an express trust, the admission of the sale in a
public document turned the implied trust into an express one. An express trust, the court held, was a
continuing and subsisting trust until repudiated, in which case the period of prescription begins to run only
from the time of repudiation.
2. implied trust:
those which, without being expressed, are deducible from the nature of the transaction as matters of intent,
or superinduced on the transaction by operation of law as a matter of equity, independently of the intent of the
parties
1448. when property is sold, and titled to one, but the price is paid by another person, for the purpose of having
the beneficial interest of the property. Resulting trust.
1449. when a donation is made to a person, who either has no beneficial interest or only a part thereon.
Resulting trust.
1450. when property is paid by one for the benefit of another, and the title is given to the one who paid for it,
but only to secure the payment of the debt. In this case the one who borrowed the money may, after paying his
debt, compel a conveyance of the property. Constructive trust , meant to prevent unjust enrichment.
1451. when one inherits land but he has it titled to another. Resulting trust, because there is intent.
1452. when two or more people agree to buy property and, with their consent, have it titled only to one of them.
Resulting trust.
1453. when property is given to a person in reliance upon his declared intention to hold it or transfer it to
another. Resulting trust.
1454. when property is conveyed to another to secure the performance of an obligation. When the obligation
becomes due, and the grantor offers to fulfill it, he may demand the reconveyance of the property. Constructive
trust.
1455. when any trustee, guardian or other person holding a fiduciary relationship uses trust funds to buy
property and has it titled to him or to a third person. Constructive trust.
1456. if property is acquired through mistake or fraud.
Two kinds of implied trust:
1. resulting trust presumed to have been contemplated by the parties, the intent found in the nature of the
transaction, though not expressed in the deed or instrument of conveyance; found in articles 1448-1455
2. constructive trust raised by construction of law, or by operation of law
created not by intent, but by the construction of equity in order to satisfy the demands of justice (Art. 1456)

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