Denna

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC. v.
RAMOS
VOID v. INEXISTENT CONTRACTS
G.R. No. 127882. 1 December 2004
FACTS: The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1)
Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations
(DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30, 1995, executed by the
government with Western Mining Corporation (Philippines), Inc. (WMCP).
On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and declaring the
unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed
between the government and WMCP, mainly on the finding that FTAAs are service contracts prohibited by the
1987 Constitution.
The Decision struck down the subject FTAA for being similar to service contracts, which, though permitted
under the 1973 Constitution, were subsequently denounced for being antithetical to the principle of
sovereignty over our natural resources, because they allowed foreign control over the exploitation of our
natural resources, to the prejudice of the Filipino nation. The Decision quoted several legal scholars and
authors who had criticized service contracts for, inter alia, vesting in the foreign contractor exclusive
management and control of the enterprise, including operation of the field in the event petroleum was
discovered; control of production, expansion and development; nearly unfettered control over the disposition
and sale of the products discovered/extracted; effective ownership of the natural resource at the point of
extraction; and beneficial ownership of our economic resources. According to the Decision, the 1987
Constitution (Section 2 of Article XII) effectively banned such service contracts.
ISSUE: Whether or not the FTAAs are void.
RULING: To bolster further their claim that the case is not moot, petitioners insist that the FTAA is void and,
hence cannot be transferred; and that its transfer does not operate to cure the constitutional infirmity that is
inherent in it; neither will a change in the circumstances of one of the parties serve to ratify the void contract.
Petitioners are confusing themselves. The present Petition has been filed, precisely because the grantee of the
FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be gainsaid that anyone would have
asserted that the same FTAA was void if it had at the outset been issued to a Filipino corporation. The FTAA,
therefore, is not per se defective or unconstitutional. It was questioned only because it had been issued to an
allegedly non-qualified, foreign-owned corporation. We believe that this case is clearly analogous to Halili, in
which the land acquired by a non-Filipino was re-conveyed to a qualified vendee and the original transaction
was thereby cured. Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the
invalidity of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a Filipino
corporation -- can no longer be assailed; the objective of the constitutional provision -- to keep the
exploration, development and utilization of our natural resources in Filipino hands -- has been served.
More accurately speaking, the present situation is one degree better than that obtaining in Halili, in which the
original sale to a non-Filipino was clearly and indisputably violative of the constitutional prohibition and thus
voidab initio. In the present case, the issuance/grant of the subject FTAA to the then foreign-owned WMCP
was notillegal, void or unconstitutional at the time. The matter had to be brought to court, precisely for
adjudication as to whether the FTAA and the Mining Law had indeed violated the Constitution. Since, up to
this point, the decision of this Court declaring the FTAA void has yet to become final, to all intents and
purposes, the FTAA must be deemed valid and constitutional.
AGAN, JR., ET AL., v. PIATCO
VOID v. INEXISTENT CONTRACTS
G.R. No. 155001. 21 January 2004
FACTS: On October 5, 1994, Asia’s Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the
Philippine Government through the Department of Transportation and Communication (DOTC) and Manila
International Airport Authority (MIAA) for the construction and development of the NAIA IPT III under a
build-operate-and-transfer arrangement pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law).
In accordance with the BOT Law and its Implementing Rules and Regulations (Implementing Rules), the
DOTC/MIAA invited the public for submission of competitive and comparative proposals to the unsolicited
proposal of AEDC. On September 20, 1996 a consortium composed of the People’s Air Cargo and
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp.
(Security Bank) (collectively, Paircargo Consortium), submitted their competitive proposal to the
Prequalification Bids and Awards Committee (PBAC).After finding that the Paircargo Consortium submitted a
bid superior to the unsolicited proposal of AEDC and after failure by AEDC to match the said bid, the DOTC
Issued the notice of award for the NAIA IPT III project to the Paircargo Consortium, which later organized into
herein respondent PIATCO. Hence, on July 12, 1997, the Government, through then DOTC Secretary Arturo T.
Enrile, and PIATCO, through its President, Henry T. Go, signed the “Concession Agreement for the
BuildOperate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III”
(1997 Concession Agreement). On November 26, 1998, the 1997 Concession Agreement was superseded by
the Amended and Restated Concession Agreement (ARCA) containing certain revisions and modifications
from the original contract. A series of supplemental agreements was also entered into by the Government and
PIATCO. The First Supplement was signed on August 27, 1999, the Second Supplement on September 4, 2000,
and the Third Supplement on June 22, 2001 (collectively, Supplements) (the 1997 Concession Agreement,
ARCA and the Supplements collectively referred to as the PIATCO Contracts).On September 17, 2002, various
petitions were filed before this Court to annul the 1997 Concession Agreement, the ARCA and the
Supplements and to prohibit the public respondents DOTC and MIAA from implementing them. In a decision
dated May 5, 2003, this Court granted the said petitions and declared the 1997 Concession Agreement, the
ARCA and the Supplements null and void. Respondent PIATCO, respondent-Congressmen and respondents-
intervenors now seek the reversal of the decision.
ISSUE: Whether or not the Concession Agreement, the ARCA and the Supplements null and voi
RULING: Public bidding is a standard practice for procuring government contracts for public service and for
furnishing supplies and other materials. It aims to secure for the government the lowest possible price under
the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid
suspicion of anomalies and it places all bidders in equal footing. Any government action which permits any
substantial variance between the conditions under which the bids are invited and the contract executed after
the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants
proper judicial action. In view of the above discussion, the fact that the foregoing substantial amendments
were made on the 1997 Concession Agreement renders the same null and void for being contrary to public
policy. These amendments convert the 1997 Concession Agreement to an entirely different agreement from
the contract bidded out or the draft Concession Agreement. It is not difficult to see that the amendments on
(1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and (2)
the assumption by the Government, under certain conditions, of the liabilities of PIATCO directly translates
concrete financial advantages to PIATCO that were previously not available during the bidding process. These
amendments cannot be taken as merely supplements to or implementing provisions of those already existing
in the draft Concession Agreement. The amendments discussed above present new terms and conditions
which provide financial benefit to PIATCO which may have altered the technical and financial parameters of
other bidders had they known that such terms were available.
JAWORSKI, v. PAGCOR
VOID v. INEXISTENT CONTRACT
G.R. No. 144463. January 14, 2004
FACTS: On March 31, 1998, PAGCOR’s board of directors approved an instrument denominated as “Grant of
Authority and Agreement for the Operation of Sports Betting and Internet Gaming”, which granted SAGE the
authority to operate and maintain Sports Betting station in PAGCOR’s casino locations, and Internet Gaming
facilities to service local and international bettors, provided that to the satisfaction of PAGCOR, appropriate
safeguards and procedures are established to ensure the integrity and fairness of the games.
Petitioner filed the instant petition, praying that the grant of authority by PAGCOR in favor of SAGE be
nullified. He maintains that PAGCOR committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it authorized SAGE to operate gambling on the internet. He contends that PAGCOR is not
authorized under its legislative franchise, P.D. 1869, to operate gambling on the internet for the simple reason
that the said decree could not have possibly contemplated internet gambling since at the time of its enactment
on July 11, 1983 the internet was yet inexistent and gambling activities were confined exclusively to real-
space. Further, he argues that the internet, being an international network of computers, necessarily
transcends the territorial jurisdiction of the Philippines, and the grant to SAGE of authority to operate internet
gambling contravenes the limitation in PAGCOR’s franchise, under Section 14 of P.D. No. 1869
ISSUE: Whether or not the agreement granting the authority to PAGCOR to operate internet gambling should
be declared void.
RULING: In the case at bar, PAGCOR executed an agreement with SAGE whereby the former grants the latter
the authority to operate and maintain sports betting stations and Internet gaming operations. In essence, the
grant of authority gives SAGE the privilege to actively participate, partake and share PAGCORs franchise to
operate a gambling activity. The grant of franchise is a special privilege that constitutes a right and a duty to
be performed by the grantee. The grantee must not perform its activities arbitrarily and whimsically but must
abide by the limits set by its franchise and strictly adhere to its terms and conditionalities. A corporation as a
creature of the State is presumed to exist for the common good. Hence, the special privileges and franchises it
receives are subject to the laws of the State and the limitations of its charter. There is therefore a reserved
right of the State to inquire how these privileges had been employed, and whether they have been abused.
While PAGCOR is allowed under its charter to enter into operators and/or management contracts, it is not
allowed under the same charter to relinquish or share its franchise, much less grant a veritable franchise to
another entity such as SAGE. PAGCOR cannot delegate its power in view of the legal principle of delegata
potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly
authorized to do so. In Lim v. Pacquing, the Court clarified that since ADC has no franchise from Congress to
operate the jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate the
jai-alai in the City of Manila. By the same token, SAGE has to obtain a separate legislative franchise and not
ride on PAGCORs franchise if it were to legally operate on-line Internet gambling. WHEREFORE, in view of all
the foregoing, the instant petition is GRANTED. The Grant of Authority and Agreement to Operate Sports
Betting and Internet Gaming executed by PAGCOR in favor of SAGE is declared NULL and VOID.
HEIRS OF BALITE v. LIM
WHO MAY BRING ACTION FOR DECLARATION OF NULLITY
G.R. No. 152168. December 10, 2004
FACTS: Spouses Aurelio and Esperanza Balite were the owners of a parcel of land with an area of 17,551
square meters. When Aurelio died intestate in 1985, his wife, Esperanza Balite, and their children, petitioner
Antonio Balite, Flor Balite-Zamar, Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite,
Cristeta Balite and Aurelio Balite, Jr., inherited the subject property and became co-owners thereof, with
Esperanza inheriting an undivided share of 9,751 square meters.
Esperanza became ill and was in dire need of money for her hospital expenses. She, through her daughter,
Cristeta, offered to sell to Rodrigo Lim, her undivided share. Esperanza and Rodrigo agreed that, under the
“Deed of Absolute Sale”, to be executed by Esperanza over the property, it will be made to appear that the
purchase price of the property would be P150,000.00, although the actual price agreed upon by them for the
property was P1,000,000.00.
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale, they wrote a letter to the Register of Deeds
[RD] of Northern Samar, saying that they were not informed of the sale of a portion of the said property by
their mother nor did they give their consent thereto. On June 27, 1997, petitioners filed a complaint against
Rodrigo with the Regional Trial Court of Northern Samar for “Annulment of Sale, Quieting of Title, Injunction
and Damages.
The trial court dismissed the Complaint. The Court of Appeals held that the sale was valid and binding insofar
as Ezperanza Balite’s undivided share of the property was concerned.
ISSUE: Whether or not the Deed of Absolute Sale is void.
RULING: Article 1345 of the Civil Code provides that the simulation of a contract may either be absolute or
relative. In absolute simulation, there is a colorable contract but without any substance, because the parties
have no intention to be bound by it. An absolutely simulated contract is void, and the parties may recover
from each other what they may have given under the “contract.” On the other hand, if the parties state a false
cause in the contract to conceal their real agreement, such a contract is relatively simulated. Here, the parties’
real agreement binds them.
In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual
purchase price of the property. That the parties intended the agreement to produce legal effect is revealed by
the letter of Esperanza Balite to respondent dated October 23, 1996 and petitioners’ admission that there was
a partial payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to
transfer the ownership of over 10,000 square meters of the property. The Deed of Absolute Sale was merely
relatively simulated, it remains valid and enforceable between the parties and their successors in interest
since all the essential requisites prescribed by law for the validity and perfection of contracts are present.
PINEDA v. CA
376 SCRA 222. February 6, 2002
FACTS: The appellees and the petitioner, Pineda, executed an Agreement to Exchange Real Properties. The
appellees exchanging their property at White Plains with that of the Pinedas located in California. At the time
of the execution of the agreement, the White Plains property was mortgaged with the GSIS, while the
California property also had a mortgaged obligation. As stated in the exchange agreement, Pineda paid the
appellees the total amount of $12, 000. Pineda and the spouses Duque executed an agreement to sell over the
White Plains property, whereby Pineda sold the property in the amount of P1.6M. Pineda paid the mortgage
of the White Plains property and requested the appellees for a written authority for the release of the title
from GSIS. The appellees gave Pineda the authority with the understanding that Pineda will deliver the title to
the appellees. Upon their return to the Philippines, the appellees discovered that the spouses Duque were
occupying the White Plains property and a fictitious deed of sale in the name of Pineda.
In a civil case filed by the appellees, the trial court declared them as the absolute owners of the property
located in White Plains.
ISSUE: Whether or not the Deed of Sale is void.
RULING: The Court denies the petition. It appears that the Banñ ez spouses were the original owners of the
parcel of land and improvements located at White Plains, Quezon City. On January 11, 1983, the Banñ ez
spouses and petitioner Pineda executed an agreement to exchange real properties. However, the exchange did
not materialize. Petitioner Pineda’s "sale" of the property to petitioners Duque was not authorized by the real
owners of the land, respondent Banñ ez. The Civil Code provides that in a sale of a parcel of land or any interest
therein made through an agent, a special power of attorney is essential. This authority must be in writing;
otherwise the sale shall be void. In his testimony, petitioner Adeodato Duque confirmed that at the time he
"purchased" respondents’ property from Pineda, the latter had no Special Power of Authority to sell the
property. A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired for a valuable consideration. Without an authority in writing,
petitioner Pineda could not validly sell the subject property to petitioners Duque. Hence, any "sale" in favor of
petitioners Duque is void.
CRUZ v. BANCOM
G.R. No. 147788. March 19, 2002
FACTS: Plaintiffs Rev. Fr. Edilberto Cruz and his brother Simplicio Cruz, were the registered owners of a
parcel of agricultural land together with improvements.
Defendant Norma Sulit, after being introduced by Candelaria Sanchez to Fr. Cruz, offered to purchase the land.
Plaintiffs’ asking price for the land was P700,000.00, but Norma only had P25,000.00 which Fr. Cruz accepted
as earnest money with the agreement that titles would be transferred to Norma upon payment of the balance
of P675,000.00. Norma succeeded in having the plaintiffs execute a document of sale of the land in favor of
Candelaria who planned to obtain a bank loan in her name using the plaintiffs’ land as collateral.
On account of Norma’s failure to pay the amount stipulated in the Special Agreement and her subsequent
disappearance from her usual address, plaintiffs were prompted to file a complaint to recover the property.
ISSUE: Whether or not the Contracts of Sale and Mortgage are void
RULING: Clearly, the Deeds of Sale were executed merely to facilitate the use of the property as collateral to
secure a loan from a bank. Being merely a subterfuge, these agreements could not have been the source of any
consideration for the supposed sales. Indeed, the execution of the two documents on the same day sustains
the position of petitioners that the Contracts of Sale were absolutely simulated, and that they received no
consideration therefor.
The failure of Sulit to take possession of the property purportedly sold to her was a clear badge of simulation
that rendered the whole transaction void and without force and effect, pursuant to the Civil Code. The fact
that she was able to secure a Certificate of Title to the subject property in her name did not vest her with
ownership over it. A simulated deed of sale has no legal effect; consequently any transfer certificate of title
Issued in consequence thereof should be cancelled. A simulated contract is not a recognized mode of
acquiring ownership.
CAUTON v. SALUD
G.R. No. 158382. January 27, 2004
FACTS: Respondent Rebecca Salud, joined by her husband Rolando Salud, instituted a suit for foreclosure of
real estate mortgage with damages against petitioner Mansueto Cuaton and his mother, Conchita Cuaton, with
the trial court. The trial court rendered a decision declaring the mortgage void, because it was executed by
Mansueto Cuaton in favor of Rebecca Salud without expressly stating that he was merely acting as a
representative of Conchita Cuaton, in whose name the mortgaged lot was titled. The court ordered petitioner
to pay Rebecca Salud, inter alia, the loan secured by the mortgage in the amount of P1,000,000 plus a total
P610,000.00 representing interests of 10% and 8% per month for the period February 1992 to August 1992.
Both parties filed their respective notices of appeal.
The Court of Appeals affirmed the judgment of the trial court. Petitioner filed a motion for partial
reconsideration of the trial court’s decision with respect to the award of interest in the amount of
P610,000.00, arguing that the same was iniquitous and exorbitant. This was denied by the Court of Appeals.
ISSUE: Whether or not the stipulation of excessive interest rates shall render the contract void
RULING: In the present case, the 10% and 8% interest rates per month on the one-million-peso loan of
petitioner are even higher than those previously invalidated by the Court in the above cases. Accordingly, the
reduction of said rates to 12% per annum is fair and reasonable. Stipulations authorizing iniquitous or
unconscionable interests are contrary to morals (contra bonos mores), if not against the law. Under Article
1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor
the right to set up their illegality as a defense be waived. Moreover, the contention regarding the excessive
interest rates cannot be considered as an Issue presented for the first time on appeal. The records show that
petitioner raised the validity of the 10% monthly interest in his answer filed with the trial court. To deprive
him of his right to assail the imposition of excessive interests would be to sacrifice justice to technicality.
Furthermore, an appellate court is clothed with ample authority to review Rulings even if they are not
assigned as errors. This is especially so if the court finds that their consideration is necessary in arriving at a
just decision of the case before it. We have consistently held that an unassigned error closely related to an
error properly assigned, or upon which a determination of the question raised by the error properly assigned
is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error.
Since respondents pointed out the matter of interest in their Appellants Brief before the Court of Appeals, the
fairness of the imposition thereof was opened to further evaluation. The Court therefore is empowered to
review the same. Wherefore, petition is granted.
MENDEZONA v. OZAMIZ
PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE ONE PARTY IS INNOCENT/DISADVANTAGED
G.R. No. 143370. February 6, 2002
FACTS: A civil case for quieting of title was instituted by petitioner spouses Mendezona as plaintiffs. In their
complaint, the petitioners, as plaintiffs therein, alleged that petitioner spouses own a parcel of land each with
almost similar areas covered and described in Transfer Certificates of Title. The petitioners ultimately traced
their titles of ownership over their respective properties from a notarized Deed of Absolute Sale dated April
28, 1989 executed in their favor by Carmen Ozamiz for and in consideration of the sum of One Million Forty
Thousand Pesos (P1,040,000.00).
The petitioners initiated the suit to remove a cloud on their said respective titles caused by the inscription
thereon of a notice of lis pendens, which came about as a result of an incident in a Special Proceeding of the
RTC. This Special Proceeding is a proceeding for guardianship over the person and properties of Carmen
Ozamiz.
In the course of the guardianship proceeding, the petitioners and the oppositors thereto agreed that Carmen
Ozamiz needed a guardian over her person and her properties, and thus respondent Montalvan was
designated as guardian over the person of Carmen Ozamiz while petitioner Mendezona, respondents Roberto
J. Montalvan and Julio H. Ozamiz were designated as joint guardians over the properties of the said ward.
The respondents opposed the petitioners’ claim of ownership of the Lahug property and alleged that the titles
issued in the petitioners’ names are defective and illegal, and the ownership of the said property was acquired
in bad faith and without value inasmuch as the consideration for the sale is grossly inadequate and
unconscionable. Respondents further alleged that at the time of the sale on April 28, 1989 Carmen Ozamiz
was already ailing and not in full possession of her mental faculties; and that her properties having been
placed in administration, she was in effect incapacitated to contract with petitioners.
The lower court ruled in favor of petitioners. The appellate court reversed the factual findings of the trial
court and ruled that the Deed of Absolute Sale dated April 28, 1989 was a simulated contract since the
petitioners failed to prove that the consideration was actually paid, and, furthermore, that at the time of the
execution of the contract the mental faculties of Carmen Ozamiz were already seriously impaired. Thus, the
appellate court declared that the Deed of Absolute Sale of April 28, 1989 is null and void.
ISSUE: Whether or not the Deed of Absolute Sale was a Simulated Contract.
RULING: Simulation is defined as "the declaration of a fictitious will, deliberately made by agreement of the
parties, in order to produce, for the purposes of deception, the appearances of a juridical act which does not
exist or is different from what that which was really executed." The requisites of simulation are: (a) an
outward declaration of will different from the will of the parties; (b) the false appearance must have been
intended by mutual agreement; and (c) the purpose is to deceive third persons. None of these were clearly
shown to exist in the case at bar.
It has been held that a person is not incapacitated to contract merely because of advanced years or by reason
of physical infirmities. Only when such age or infirmities impair her mental faculties to such extent as to
prevent her from properly, intelligently, and fairly protecting her property rights, is she considered
incapacitated. The respondents utterly failed to show adequate proof that at the time of the sale on April 28,
1989 Carmen Ozamiz had allegedly lost control of her mental faculties.
A person is presumed to be of sound mind at any particular time and the condition is presumed to continue to
exist, in the absence of proof to the contrary. Competency and freedom from undue influence, shown to have
existed in the other acts done or contracts executed, are presumed to continue until the contrary is shown.
WHEREFORE, the instant petition is hereby GRANTED.
FRANCISCO v. HERRERA
G.R. No. 139982. November 21, 2002
FACTS: Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land. On January 3, 1991,
petitioner bought from said landowner the first parcel for the price of P1,000,000, paid in installments from
November 30, 1990 to August 10, 1991. On March 12, 1991, petitioner bought the second parcel for P750,000.
Contending that the contract price for the two parcels of land was grossly inadequate, the children of Eligio,
Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor Herrera, tried to negotiate with
petitioner to increase the purchase price. When petitioner refused, herein respondent then filed a complaint
for annulment of sale, with the RTC of Antipolo City. In his complaint, respondent claimed ownership over the
second parcel, allegedly by virtue of a sale in his favor since 1973. He likewise claimed that the first parcel was
subject to the co-ownership of the surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering
that she died intestate on April 2, 1990, before the alleged sale to petitioner. Finally, respondent also alleged
that the sale of the two lots was null and void on the ground that at the time of sale, Eligio, Sr. was already
incapacitated to give consent to a contract because he was already afflicted with senile dementia,
characterized by deteriorating mental and physical condition including loss of memory.
In his answer, petitioner as defendant below alleged that respondent was estopped from assailing the sale of
the lots. Petitioner contended that respondent had effectively ratified both contracts of sales, by receiving the
consideration offered in each transaction.
The trial court declared the Deeds of Sale null and void. Francisco was ordered to return the lots in question
including all improvements. Concomitantly, Herrera was ordered to return the purchase price of the lots sold.
This was affirmed by the Court of Appeals.
ISSUE: Whether or not the assailed contracts of sale are void or merely voidable and hence capable of being
ratified.
RULING: In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with
petitioner, but that the former’s capacity to consent was vitiated by senile dementia. Hence, we must rule that
the assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and binding
unless annulled through a proper action filed in court seasonably.
An annullable contract may be rendered perfectly valid by ratification, which can be express or implied.
Implied ratification may take the form of accepting and retaining the benefits of a contract. This is what
happened in this case. Respondent’s contention that he merely received payments on behalf of his father
merely to avoid their misuse and that he did not intend to concur with the contracts is unconvincing. If he was
not agreeable with the contracts, he could have prevented petitioner from delivering the payments, or if this
was impossible, he could have immediately instituted the action for reconveyance and have the payments
consigned with the court. None of these happened. As found by the trial court and the Court of Appeals, upon
learning of the sale, respondent negotiated for the increase of the purchase price while receiving the
installment payments. It was only when respondent failed to convince petitioner to increase the price that the
former instituted the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the
contracts, only he wanted to get more. Further, there is no showing that respondent returned the payments or
made an offer to do so. This bolsters the view that indeed there was ratification. One cannot negotiate for an
increase in the price in one breath and in the same breath contend that the contract of sale is void.
Nor can we find for respondent’s argument that the contracts were void as Eligio, Sr., could not sell the lots in
question as one of the properties had already been sold to him, while the other was the subject of a co-
ownership among the heirs of the deceased wife of Eligio, Sr. Note that it was found by both the trial court and
the Court of Appeals that Eligio, Sr., was the "declared owner" of said lots. This finding is conclusive on us. As
declared owner of said parcels of land, it follows that Eligio, Sr., had the right to transfer the ownership
thereof under the principle of jus disponendi.
In sum, the appellate court erred in sustaining the judgment of the trial court that the deeds of sale of the two
lots in question were null and void.
GO CHAN v. YOUNG
G.R. No. 131889. March 12, 2001
FACTS: Gochan Realty was registered with the Security and Exchange Commission with Felix Gochan Sr.,
Maria Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as its incorporators. Later,
Felix Gochan Sr.’s daughter, Alice, mother of herein respondents, inherited 50 shares of stocks in Gochan
Realty from the former. Alice subsequently died leaving the 50 shares to her husband, John Young Sr.
Sometime in 1962, the RTC adjudicated 6/14 of these shares to her children. When her children, herein
respondents, reached the age of majority, their father requested Gochan Realty to partition the shares of his
late wife by canceling the stock certificate in his name and issuing, in lieu thereof, a new stock certificate in
favor of his children. The Realty however, refused.
Meanwhile, fifteen years later, Cecilia Uy and Miguel Uy filed a complaint with the SEC for issuance of shares
of stocks to the rightful owners, nullification of shares of stock, reconveyance of the property impressed with
trust and damages. The petitioners moved to dismiss the complaint. The SEC thereafter held that the Youngs
were not shown to have been stockholders stockholders of Gochan Realty to confer them with the legal
capacity to bring and maintain their action. That is why the case cannot be considered as an intra-corporate
controversy within the jurisdiction of the Commission. The Court of Appeals, on appeal, held that the SEC had
no jurisdiction over the case as far as the heirs of Alice Gochan were concerned; however, it upheld the
capacity of Cecilia Gochan Uy and her spouse, Miguel Uy.
ISSUE: Whether or not the Spouses Uy have the personality to file an action before the SEC against Gochan
Realty Corporation.
RULING: Petitioners contend that the statute of limitations already bars the Uy spouses’ action, be it one for
annulment of a voidable contract or one based upon a written contract. The Complaint, however, contains
respondents’ allegation that the sale of the shares of stock was not merely voidable, but was void ab initio.
Below we quote its relevant portion:
That on November 21, 1979, respondent Felix Gochan & Sons Realty Corporation did not have unrestricted
retained earnings in its books to cover the purchase price of the 208 shares of stock it was then buying from
complainant Cecilia Gochan Uy, thereby rendering said purchase null and void ab initio for being violative of
the trust fund doctrine and contrary to law, morals good customs, public order and public policy;
Necessarily, petitioners’ contention that the action has prescribed cannot be sustained. Prescription cannot be
invoked as a ground if the contract is alleged to be void ab initio. It is axiomatic that the action or defense for
the declaration of nullity of a contract does not prescribe.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.
EPG CONSTRUCTION v. VIGILAR
G.R. No. 131544. March 16, 2001
FACTS: The Ministry of Human Settlement through the BLISS Development Corporation, initiated a housing
project on a government property. For this purpose, the MHS entered into a Memorandum of Agreement
(MOA) with the Ministry of Public Works (MPWH) and Highway where the latter undertook to develop the
housing site and construct therein 145 housing units. By virtue of the MOA, the MPWH forged individual
contracts with petitioners for the construction of the housing units. Under the contracts, the scope of
construction covered only 2/3 of each housing unit. After complying, the MPWH undersecretary made a
verbal request for the additional construction, for the completion of the housing units, which the petitioner
agreed.
Petitioners then received payment for the construction work duly covered by the individual written contracts,
thereby leaving an unpaid balance of P5, 918,315.63, which amount represents the expenses for the
additional constructions for the completion of the existing housing units. On 14 November 1988, petitioners
sent a demand letter to the DPWH Secretary and submitted that their claim for payment was favorably
recommended by DPWH Assistant Secretary for Legal Services Dominador Manama, who recognized the
existence of implied contracts covering the additional constructions. Notwithstanding, DPWH Assistant
Secretary Madamba opined that payment of petitioners money claims should be based on quantum meruit
and should be forwarded to the Commission on Audit (COA) for its due consideration and approval. The
money claims were then referred to COA which returned the same to the DPWH Auditor for auditorial action.
On the basis of the Inspection Report of the Auditors Technical Staff, the DPWH Auditor interposed no
objection to the payment of the money claims subject to whatever action the COA may adopt.
In a Letter of the Undersecretary of Budget and Management dated 20 December 1994, the amount of
P5,819,316.00 was then released for the payment of petitioners money claims.
However, respondent DPWH Secretary Gregorio Vigilar denied the subject money claims prompting herein
petitioners to file before the Regional Trial Court, which was however dismissed.
ISSUE: Whether or not the petitioner has the right to be compensated for the public works housing project by
virtue of the implied contract which was verbally executed
RULING: YES, the petitioner has the right to be compensated for the additional construction applying the
principle of quantum meruit. Notably, the peculiar circumstances present in the instant case buttress
petitioner’s claim for compensation for the additional construction, despite the illegality and void nature of
the “implied contracts” forged between the MPWH and petitioners. In this matter, it is bear stressing that, the
illegality of the subject contracts proceeds from the express declaration or prohibition of the law, and not for
any intrinsic illegality. Stated differently, the subject contracts are not illegal per se.
The Court cannot sanction an injustice so patent on its face and allow itself to be an instrument in the
perpetration thereof. Justice and equity demands that the State’s cloak of invincibility against suit be shred in
this particular case and that the petitioners-contractors be duly compensated, on the basis of quantum
meruit, for the construction done on the public housing project.
Thus, the petition is granted.

VIGILAR v. AQUINO
G.R. No. 180388. January 18, 2011
FACTS: On 19 June 1992, petitioner Angelito M. Twanñ o, then Officer-in-Charge-District Engineer of the
Department of Public Works and Highways 2nd Engineering District of Pampanga sent an Invitation to Bid to
respondent Arnulfo D. Aquino, the owner of A.D. Aquino Construction and Supplies. The bidding was for the
construction of a dike by bulldozing a part of the Porac River at Pampanga.
Subsequently, the project was awarded to respondent, and a "Contract of Agreement" was thereafter executed
between him and concerned petitioners for the amount of PhP1,873,790.69, to cover the project cost.
By 9 July 1992, the project was duly completed by respondent, who was then Issued a Certificate of Project
Completion dated 16 July 1992. The certificate was signed by Romeo M.
Yumul, the Project Engineer; as well as petitioner Romeo N. Supan, Chief of the Construction Section, and by
petitioner Twanñ o.
Respondent Aquino, however, claimed that PhP1,262,696.20 was still due him, but petitioners refused to pay
the amount. He thus filed a Complaint for the collection of sum of money with damages before the Regional
Trial Court.
Petitioners, for their part, set up the defense that the Complaint was a suit against the state; that respondent
failed to exhaust administrative remedies; and that the "Contract of Agreement" covering the project was void
for violating Presidential Decree No. 1445, absent the proper appropriation and the Certificate of Availability
of Funds.
The lower court ruled in favor of respondent. On appeal, the Court of Appeals reversed and set aside the
Decision of the lower court ordering the Commission on Audit to determine and ascertain with dispatch, on a
quantum meruit basis, the total obligation due to the plaintiff-appellee for his undertaking.
ISSUE: Whether or not Aquino is entitled to the unpaid amount.
RULING: The government project contracted out to respondent was completed almost two decades ago. To
delay the proceedings by remanding the case to the relevant government office or agency will definitely
prejudice respondent. More importantly, the Issues in the present case involve the validity and the
enforceability of the "Contract of Agreement" entered into by the parties.
Neither can petitioners escape the obligation to compensate respondent for services rendered and work done
by invoking the state’s immunity from suit. This Court has long established in Ministerio v. CFI of Cebu, and
recently reiterated in Heirs of Pidacan v. ATO, that the doctrine of governmental immunity from suit cannot
serve as an instrument for perpetrating an injustice to a citizen.
To be sure, this Court — as the staunch guardian of the citizens' rights and welfare — cannot sanction an
injustice so patent on its face, and allow itself to be an instrument in the perpetration thereof. Justice and
equity sternly demand that the State's cloak of invincibility against suit be shred in this particular instance,
and that petitioners-contractors be duly compensated — on the basis of quantum meruit — for construction
done on the public works housing project.
WHEREFORE, in view of the foregoing, the Petition is DENIED for lack of merit.
PHILBANK v. LUI SHE
G.R. No. L-17587. September 12, 1967
FACTS: Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land
in Manila. In it are two residential houses with entrance on Florentino Torres street and the Hen Wah
Restaurant with entrance on Rizal Avenue. The sisters lived in one of the houses, while Wong Heng, a Chinese,
lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the property, paying a
monthly rental of P2,620.
On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with no
other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an invalid,
she was left with no other relative to live with. Her otherwise dreary existence was brightened now and then
by the visits of Wong's four children who had become the joy of her life. Wong himself was the trusted man to
whom she delivered various amounts for safekeeping, including rentals. Wong also took care of the payment;
in her behalf, of taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security guard, and her
household expenses.
Subsequently, she executed a contract of lease in favor of Weng for a period of 50 years. However, the lessee
was given the right to withdraw at any time from the agreement. Subsequently, she again executed another
contract giving Weng the option to buy the premises. The option was conditioned on Weng’s obtaining a
Filipino citizenship, which however, Weng failed to obtain. After which, Justinia again executed two other
contracts, extending the term of the lease to 99 years and another fixing the term of the option to 50 years.
However, a year later, she filed a complaint before the trial court alleging that the various contracts were
executed by her because of machination, and inducement practiced by Weng, thereby she directed her
executor to secure the annulment of the contract.
ISSUE: Whether or not the various contracts were void.
RULING: Article 1308 of the Civil Code creates no impediment to the insertion in a contract of a resolutory
condition permitting the cancellation of the contract by one of the parties. Such a stipulation does not make
either the validity or the fulfillment of the contract dependent upon the will of the party to whom it conceded
the privilege of the cancellation.
In the case, the lease for an alien for a reasonable period is valid. So is the option giving the alien the right to
buy the real property subject to the condition that he must obtain Filipino citizenship. Since alien’s residence
in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not
forbidden. However, if the alien is given not only the lease of, but also the option to buy a piece of land by
virtue of which the Filipino owner cannot sell, or otherwise dispose of his property, this to last for 50 years,
then it becomes clear that the arrangement is a virtual transfer of ownership. As such, the constitutional ban
against alien landholding is in grave peril.
However, it does not follow that because the parties are in pari delicto, they will be left where they are
without relief. Article 1416 of the Civil Code provides an exception when the agreement is not illegal per se
but is merely prohibited, and the prohibition by law is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he had paid on delivery.
ACCORDINGLY, the contracts in question are annulled and set aside.

LIGUEZ v. CA
G.R. No. L-11240. December 18, 1957
FACTS: The case began upon complaint filed by petitioner-appellant against the widow and heirs of the late
Salvador P. Lopez to recover a parcel of 51.84 hectares of land. Plaintiff averred to be its legal owner, pursuant
to a deed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez, on 18 May 1943.
The defense interposed was that the donation was null and void for having an illicit causa or consideration,
which was the plaintiff's entering into marital relations with Salvador P. Lopez, a married man; and that the
property had been adjudicated to the appellees as heirs of Lopez by the court of First Instance, since 1949.
The Court of Appeals found that the deed of donation was prepared by the Justice of the Peace of Mati, Davao,
before whom it was signed and ratified on the date aforesaid. At the time, the appellant Liguez was a minor,
only 16 years of age.
The Court of Appeals found that when the donation was made, Lopez had been living with the parents of
appellant for barely a month; that the donation was made in view of the desire of Salvador P. Lopez, a man of
mature years, to have sexual relations with appellant Conchita Liguez; that Lopez had confessed to his love for
appellant to the instrumental witnesses, with the remark that her parents would not allow Lopez to live with
her unless he first donated the land in question; that after the donation, Conchita Liguez and Salvador P. Lopez
lived together in the house that was built upon the latter's orders, until Lopez was killed on July 1st, 1943, by
some guerrillas who believed him to be pro-Japanese.
It was also ascertained by the Court of Appeals that the donated land originally belonged to the conjugal
partnership of Salvador P. Lopez and his wife, Maria Ngo; that the latter had met and berated Conchita for
living maritally with her husband, sometime during June of 1943; that the widow and children of Lopez were
in possession of the land and made improvements thereon; that the land was assessed in the tax rolls first in
the name of Lopez and later in that of his widow.; and that the deed of donation was never recorded.
Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and null and void (1)
because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant; and (2)
because the donation was tainted with illegal cause or consideration, of which donor and donee were
participants.
ISSUE: Whether or not the Deed of Donation is void for having illicit cause or consideration
RULING: Under Article 1279 of the Civil Code of 1989, which was the governing law during the execution of
the Deed of Donation, the liberality of the donor is deemed cover only in those contracts that are pure
beneficence. In these contracts, the idea of self-interest is totally absent in the part of the transferee. Here, the
facts as found demonstrated that in making the donation, Salvador Lopez was not moved exclusively by the
desire to benefit the petitioner but also to secure her cohabiting with him. Petitioner seeks to differentiate
between the liberality of Lopez as cause and his desire as a motive. However, motive may be regarded as cause
when it predetermined the purpose of the contract. The Court of Appeals rejected the claim of petitioner on
the ground on the rule on pari delicto embodied in Article 1912 of the Civil Code. However, this rule cannot
be applied in the case because it cannot be said that both parties had equal guilt where petitioner was a mere
minor when the donation was made and that it was not shown that she was fully aware of the terms of the
said donation.
PABUGAIS v. SAHIJWANI
G.R. No. 156846. February 23, 2004
FACTS: Pursuant to an “Agreement and Undertaking”, petitioner Teddy G. Pabugais, agreed to sell to
respondent Dave P. Sahijwani a lot containing 1,239 square meters. Respondent paid petitioner the amount of
P600,000.00 as option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the
execution of the contract, simultaneous with delivery of the owner’s duplicate Transfer Certificate of Title in
respondent’s name the Deed of Absolute Sale; the Certificate of Non-Tax Delinquency on real estate taxes and
Clearance on Payment of Association Dues. The parties further agreed that failure on the part of respondent
to pay the balance of the purchase price entitles petitioner to forfeit the P600, 000.00 option/reservation fees;
while nondelivery by the latter of the necessary documents obliges him to return to respondent the said
option/reservation fee with interest at 18% per annum. Petitioner failed to deliver the required documents.
In compliance with their agreement, he returned to respondent the latter’s P600, 000.00 option/reservation
fee by way of Far East Bank & Trust Company Check, which was, however, dishonored.
Petitioner claimed that he twice tendered to respondent, through his counsel, the amount of P672,900.00, but
said counsel refused to accept the same. On August 15, 1994, petitioner filed a complaint for consignation.
Respondent’s counsel, on the other hand, admitted that his office received petitioner’s letter dated August 5,
1994, but claimed that no check was appended thereto. He averred that there was no valid tender of payment
because no check was tendered and the computation of the amount to be tendered was insufficient.
On November 29, 1996, the trial court rendered a decision declaring the consignation invalid for failure to
prove that petitioner tendered payment to respondent and that the latter refused to receive the same.
Petitioner appealed the decision to the Court of Appeals but was denied.
On a motion for reconsideration, the Court of Appeals declared the consignation as valid. It held that the
validity of the consignation had the effect of extinguishing petitioner’s obligation to return the
option/reservation fee to respondent. Hence, petitioner can no longer withdraw the same.
ISSUE: Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.
RULING: The amount consigned with the trial court can no longer be withdrawn by petitioner because
respondent’s prayer in his answer that the amount consigned be awarded to him is equivalent to an
acceptance of the consignation, which has the effect of extinguishing petitioner’s obligation.
Petitioner also failed to manifest his intention to comply with the “Agreement and Undertaking” by delivering
the necessary documents and the lot subject of the sale to respondent in exchange for the amount deposited.
Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorney’s fees to petitioner’s counsel, Atty. De
Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from acquiring by assignment,
property and rights which are the object of any litigation in which they may take part by virtue of their
profession. Furthermore, Rule 10 of the Canons of Professional Ethics provides that “the lawyer should not
purchase any interest in the subject matter of the litigation which he is conducting.” The assailed transaction
falls within the prohibition because the Deed assigning the amount of P672, 900.00 to Atty. De Guzman, Jr., as
part of his attorney’s fees was executed during the pendency of this case with the Court of Appeals. In his
Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise prayed
that the same be released to him. That petitioner knowingly and voluntarily assigned the subject amount to
his counsel did not remove their agreement within the ambit of the prohibitory provisions. To grant the
withdrawal would be to sanction a void contract. Thus, the petition is denied.
INFOTECH v. COMELEC
G.R. No. 159139. January 13, 2004
FACTS: Congress passed Republic Act 8046, which authorized COMELEC to conduct a nationwide
demonstration of a computerized election system. On December 22, 1997, Congress enacted Republic Act
8436 authorizing COMELEC to use an automated election system (AES) for the process of voting, counting
votes and canvassing/consolidating the results of the national and local elections.
Initially intending to implement the automation during the May 11, 1998 presidential elections, COMELEC
eventually decided against full national implementation and limited the automation to the Autonomous
Region in Muslim Mindanao (ARMM). However, due to the failure of the machines to read correctly some
automated ballots in one town, the poll body later ordered their manual count for the entire Province of Sulu.
On January 28, 2003, the Commission Issued an “Invitation to Apply for Eligibility and to Bid.
Out of the 57 bidders, the BAC found MPC and the Total Information Management Corporation (TIMC) eligible.
For technical evaluation, they were referred to the BAC’s Technical Working Group (TWG) and the Department
of Science and Technology (DOST).
In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both MPC and TIMC had
obtained a number of failed marks in the technical evaluation. Notwithstanding these failures, COMELEC en
banc, promulgated Resolution No. 6074 awarding the project to MPC.
On May 29, 2003, five individuals and entities (including the herein Petitioners Information Technology
Foundation of the Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a
letter to COMELEC Chairman Benjamin Abalos Sr. They protested the award of the Contract to Respondent
MPC “due to glaring irregularities in the manner in which the bidding process had been conducted.” Citing
therein the noncompliance with eligibility as well as technical and procedural requirements, they sought a re-
bidding. However, the COMELEC chairman -- speaking through Atty. Jaime Paz, his head executive assistant --
rejected the protest and declared that the award “would stand up to the strictest scrutiny.
ISSUE: Whether or not the COMELEC can recover or demand the performance of the other.
RULING: For the automation of the counting and canvassing of the ballots in the 2004 elections, COMELEC
awarded the Contract to “Mega Pacific Consortium” an entity that had not participated in the bidding. Despite
this grant, the poll body signed the actual automation Contract with “Mega Pacific eSolutions, Inc.,” a company
that joined the bidding but had not met the eligibility requirements.
Because of the foregoing violations of law and the glaring grave abuse of discretion committed by COMELEC,
the Court declared null and void the assailed Resolution and the subject Contract. The illegal, imprudent and
hasty actions of the Commission have not only desecrated legal and jurisprudential norms, but have also cast
serious doubts upon the poll body’s ability and capacity to conduct automated elections. Truly, the pith and
soul of democracy -- credible, orderly, and peaceful elections -- has been put in jeopardy by the illegal and
gravely abusive acts of COMELEC.
As a necessary consequence of such nullity and illegality, the purchase of the machines and all appurtenances
thereto including the still-to-be-produced (or in COMELEC words, to be reprogrammed) software, as well as
all the payments made therefor, have no basis whatsoever in law. The public funds expended pursuant to the
void Resolution and Contract must therefore be recovered from the payees and/or from the persons who
made possible the illegal disbursements, without prejudice to possible criminal prosecutions against them.
HADJA FATIMA v. HADJI ABUBACAR
PROHIBITED CONTRACTS: EFFECTS AND REMEDIES IN CASE OF IN PARI DELICTO
G.R. No. 179743. August 2, 2010
FACTS: Respondent Hadji Abubacar Maruhom was awarded a market stall at the Reclamation Area by the
Islamic City of Marawi. On December 1, 1985, respondent orally sold his stall to petitioner for P20,000.00.
Later, respondent executed a Deed of Assignment, confirming the oral sale; assigning, selling, transferring, and
conveying his market stall to petitioners for a consideration of P20,000.00. In the same Deed of Assignment,
petitioners leased the subject stall to respondent for a monthly rental of P250.00, beginning December 1,
1985, renewable every year at the option of petitioners.
Respondent religiously paid the monthly rentals. However, on June 1, 1993, respondent simply stopped
paying the rentals. Respondent promised to settle his unpaid account, but he failed to make good his promise.
Petitioner then demanded that respondent vacate the property, but the demand just fell on deaf ears.
Accordingly, on August 22, 1994, petitioners filed a complaint for recovery of possession and damages, with
prayer for issuance of a temporary restraining order (TRO), with the Regional Trial Court.
Respondent averred that he signed the Deed of Assignment on petitioner’s assurance that the conditions they
earlier agreed upon were contained in the deed. Being illiterate, he just relied on petitioners assurances.
Respondent denied that he refused to pay the agreed monthly rentals; alleging that petitioners were the ones
who refused to receive the rental payments and instead demanded payment of P150,000.00. The Deed of
Assignment, he added, failed to express the true intent and agreement of the parties; and his signature
thereon was procured by fraud, deceit, and misrepresentation; hence, void ab initio.
The respondent appealed to the CA urging it to apply the civil law rule on pari delicto after the RTC rendered a
decision in favor of the petitioner.
ISSUE: Whether or not the rule on pari delicto is applicable in the case.
RULING: We sustain the CA in declaring the Deed of Assignment null and void, but we cannot abide by the CAs
final disposition.
A void contract is equivalent to nothing; it produces no civil effect. It does not create, modify, or extinguish a
juridical relation. Parties to a void agreement cannot expect the aid of the law; the courts leave them as they
are, because they are deemed in pari delicto or in equal fault. To this rule, however, there are exceptions that
permit the return of that which may have been given under a void contract. One of the exceptions is found in
Article 1412 of the Civil Code, which states:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense,
the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand
the return of what he has given without any obligation to comply with his promise.
Respondent was well aware that as mere grantee of the subject stall, he cannot sell it without the consent of
the City Government of Marawi. Yet, he sold the same to petitioners. The records, however, are bereft of any
allegation and proof that petitioners had actual knowledge of the status of respondent’s ownership of the
subject stall. Petitioners can, therefore, recover the amount they had given under the contract.
MANZANILLA v. CA
KINDS OF NATURAL OBLIGATIONS
G.R. No. L-75342. March 15, 1990
FACTS: In 1963, spouses Celedonio and Dolores Manzanilla (spouses Manzanilla) sold on installment an
undivided one-half portion of their residential house and lot. At the time of the sale, the said property was
mortgaged to the Government Service Insurance System (GSIS), which fact was known to the vendees,
spouses Magdaleno and Justina Campo. The Campo spouses took possession of the premises upon payment of
the first installment on April 17, 1963 and up to the present. Some payments were made to petitioners while
some were made directly to GSIS.
On May 17, 1965, the GSIS filed its application to foreclose the mortgage on the property for failure of the
Manzanilla spouses to pay their monthly amortizations. The property was sold at public auction where GSIS
was the highest bidder.
Two months before the expiration of the period to redeem or on August 31, 1966, the Manzanilla spouses
executed a Deed of Absolute Sale of the undivided one half portion of their property in favor of the Campo
spouses. Upon the expiration of the period to redeem without the Manzanilla spouses exercising their right of
redemption, title to the property was consolidated in favor of the GSIS and a new title Issued in its name.
The Manzanilla spouses made representations and succeeded in re-acquiring the property from the GSIS then
they mortgaged the property to the Binñ an Rural Bank. Petitioner Ines Carpio purchased the property from the
Manzanilla spouses and agreed to assume the mortgage in favor of Binñ an Rural Bank.
On November 12, 1973, private respondent Justina Campo registered her adverse claim over the said lot.On
October 3, 1977, petitioner Carpio filed an ejectment case against private respondent Justina Campo. On July
31, 1979, private respondent Justina Campo (already a widow) filed a complaint for quieting of title against
the Manzanilla spouses and Ines Carpio praying among others, for the issuance to her of a certificate of title
over the undivided onehalf portion of the property. The trial court rendered its decision in favor of Campo.
The decision was appealed by petitioners to the Court of Appeals; however it only affirmed the decision of the
trial court. Petitioners’ Motion for reconsideration was denied.
ISSUE: Whether or not petitioners are under any legal duty to reconvey the undivided one-half portion of the
property to private respondent Justina Campo.
RULING: In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem the property
from GSIS, title to the property was consolidated in the name of GSIS. The new title cancelled the old title in
the name of the Manzanilla spouses. GSIS at this point had a clean title free from any lien in favor of any
person including that of the Campo spouses.
If it were true that petitioners deliberately allowed the loan to lapse and the mortgage to be foreclosed, we do
not see how these circumstances can be utilized by them to their advantage. There was no guarantee that
petitioners would be able to redeem the property in the event the mortgage thereon was foreclosed as in fact
they failed to redeem because they had no money. On the other hand, had they opted to eventually exercise
their right of redemption after foreclosure, they would be under a legal duty to convey one-half portion
thereof sold to the Campo spouses because by then, title to the property would still be in their name. Either
way, petitioners were bound to lose either the entire property in case of failure to redeem or the one-half
portion thereof sold to private respondent in the case of redemption. Further, should not petitioners let the
period of redemption lapse without exercising the right of redemption, as what happened in this case, there
was no guarantee that the same could be re-acquired by them from GSIS nor would GSIS be under any legal
duty to resell the property to them.
There may be a moral duty on the part of petitioners to convey the one-half portion of the property previously
sold to private respondents. However, they are under no legal obligation to do so. Hence, the action to quiet
title filed by private respondent must fail.
RURAL BANK OF PARANAQUE v. REMOLADO
KINDS OF NATURAL OBLIGATIONS
G.R. No. L-62051. March 18, 1985
FACTS: This case is about the repurchase of mortgaged property after the period of redemption had expired.
Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an area of 308 square meters,
with a bungalow thereon, which was leased to Beatriz Cabagnot. In 1966 she mortgaged it to the Rural Bank
of Paranñ aque, Inc. as security for a loan of P15,000. She paid the loan. On April 17, 1971 she mortgaged it
again to the bank. She eventually secured loans totalling P18,000. The loans become overdue. The bank
foreclosed the mortgage on July 21, 1972 and bought the property at the foreclosure sale for P22,192.70. The
one-year, period of redemption was to expire on August 21, 1973. On August 8, 1973 the bank advised
Remolado that she had until August 23 to redeem the property. On August 9, 1973 or 14 days before the
expiration of the one-year redemption period, the bank gave her a statement showing that she should pay
P25,491.96 for the redemption of the property on August 23. No redemption was made on that date. On
September 3, 1973 the bank consolidated its ownership over the property. Remolado's title was cancelled. A
new title, TCT No. 418737, was Issued to the bank on September 5. On September 24, 1973, the bank gave
Remolado up to ten o'clock in the morning of October 31, 1973, or 37 days, within which to repurchase (not
redeem since the period of redemption had expired) the property. The bank did not specify the price.
On October 26, 1973 Remolado and her daughter, Patrocinio Gomez, promised to pay the bank P33,000 on
October 31 for the repurchase of the property. Contrary to her promise, Remolado did not repurchase the
property on October 31. Five days later, or on November 5, Remolado and her daughter delivered P33,000
cash to the bank's assistant manager as repurchase price. The amount was returned to them the next day,
November 6, 1973. At that time, the bank was no longer willing to allow the repurchase. Remolado filed an
action to compel the bank to reconvey the property to her for P25,491.96 plus interest and other charges and
to pay P35,000 as damages. The repurchase price was not consigned. A notice of lis pendens was registered.
On November 15, the bank sold the property to Pilar Aysip for P50,000. A new title was Issued to Aysip with
an annotation of lis pendens
The trial court ordered the bank to return the property to Remolado upon payment of the redemption price of
P25,491.96 plus interest and other bank charges and to pay her P15,000 as damages. The Appellate Court
affirmed the judgment.
ISSUE: Whether or not the appellate court erred in reconveying the disputed property to Remolado
RULING: Yes. We hold that the trial court and the Appellate Court erred in ordering the reconveyance of the
property. There was no binding agreement for its repurchase. Even on the assumption that the bank should
be bound by its commitment to allow repurchase on or before October 31, 1973, still Remolado had no cause
of action because she did not repurchase the property on that date.
Justice is done according to law. As a rule, equity follows the law. There may be a moral obligation, often
regarded as an equitable consideration (meaning compassion), but if there is no enforceable legal duty, the
action must fail although the disadvantaged party deserves commiseration or sympathy. The choice between
what is legally just and what is morally just, when these two options do not coincide, is explained by Justice
Moreland in Vales vs. Villa, 35 Phil. 769, 788 where he said: "Courts operate not because one person has been
defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish
things, make ridiculous contracts, use miserable judgment, and lose money by them - indeed, all they have in
the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of
law, the commission of what the law knows as an actionable wrong before the courts are authorized to lay
hold of the situation and remedy it."
In the instant case, the bank acted within its legal rights when it refused to give Remolado any extension to
repurchase after October 31, 1973. It had given her about two years to liquidate her obligation. She failed to
do so. Thus, the Appellate Court's judgment is reversed and set aside.
COJUANGCO v. REPUBLIC
MEANING OF TRUST; NATURE OF LEGAL RELATIONSHIP
G.R. No. 166859, G.R. No. 169203, G.R. No. 180702 April 12, 2011
FACTS: For over two decades, the Issue of whether the sequestered sizable block of shares representing 20%
of the outstanding capital stock of San Miguel Corporation (SMC) at the time of acquisition belonged to their
registered owners or to the coconut farmers has remained unresolved. The Republic commenced Civil Case
No. 0033 in the Sandiganbayan by complaint, impleading as defendants respondent Eduardo M. Cojuangco, Jr.
(Cojuangco) and 59 individual defendants. Cojuangco allegedly purchased a block of 33,000,000 shares of
SMC stock through the 14 holding companies owned by the CIIF Oil Mills. For this reason, the block of
33,133,266 shares of SMC stock shall be referred to as the CIIF block of shares. The Sandiganbayan ruled that
the amended Complaint in Civil Case No. 0033-F was dismissed for failure of plaintiff to prove by
preponderance of evidence its causes of action against defendants with respect to the twenty percent (20%)
outstanding shares of stock of San Miguel Corporation registered in defendants’ names. Republic of the
Philippines appealed the case to the Supreme Court invoking that coconut levy funds are public funds. The
SMC shares, which were acquired by respondents Cojuangco, Jr. and the Cojuangco companies with the use of
coconut levy funds – in violation of respondent Cojuangco, Jr.’s fiduciary obligation – are, necessarily, public in
character and should be reconveyed to the government.
ISSUE: Whether Respondent Cojuangco Jr. used the coconut levy funds to acquire SMC shares in violation of
his fiduciary obligation as a public officer.
RULING: It does not suffice, as in this case, that the respondent is or was a government official or employee
during the administration of former Pres. Marcos. There must be a prima facie showing that the respondent
unlawfully accumulated wealth by virtue of his close association or relation with former Pres. Marcos and/or
his wife. Republic’s burden to establish by preponderance of evidence that respondents’ SMC shares had been
illegally acquired with coconut-levy funds was not discharged. The conditions for the application of Articles
1455 and 1456 of the Civil Code (like the trustee using trust funds to purchase, or a person acquiring property
through mistake or fraud), and Section 31 of the Corporation Code (like a director or trustee willfully and
knowingly voting for or assenting to patently unlawful acts of the corporation, among others) require factual
foundations to be first laid out in appropriate judicial proceedings. Hence, concluding that Cojuangco
breached fiduciary duties as an officer and member of the Board of Directors of the UCPB without competent
evidence thereon would be unwarranted and unreasonable. Thus, the Sandiganbayan could not fairly find
that Cojuangco had committed breach of any fiduciary duties as an officer and member of the Board of
Directors of the UCPB. For one, the Amended Complaint contained no clear factual allegation on which to
predicate the application of Articles 1455 and 1456 of the Civil Code, and Section 31 of the Corporation Code.
Although the trust relationship supposedly arose from Cojuangco’s being an officer and member of the Board
of Directors of the UCPB, the link between this alleged fact and the borrowings or advances was not
established. Nor was there evidence on the loans or borrowings, their amounts, the approving authority, etc.
As trial court, the Sandiganbayan could not presume his breach of fiduciary duties without evidence showing
so, for fraud or breach of trust is never presumed, but must be alleged and proved. The thrust of the Republic
that the funds were borrowed or lent might even preclude any consequent trust implication but is more
inclined to be a contract of loan. To say that a relationship is fiduciary when existing laws do not provide for
such requires evidence that confidence is reposed by one party in another who exercises dominion and
influence. Absent any special Facts and circumstances proving a higher degree of responsibility, any dealings
between a lender and borrower are not fiduciary in nature. Thus, the petition is denied.
RINGOR v. RINGOR
G.R. No. 147863. August 13, 2004
FACTS: The controversy involves lands in San Fabian, Pangasinan, owned by the late Jacobo Ringor. By his first
wife, Gavina Laranang, he had two children, Juan and Catalina. He did not have offsprings by his second and
third wives. Catalina predeceased her father Jacobo who died sometime in 1935, leaving Juan his lone heir of
3 lots owned by Jacobo. Juan married Gavina and had 7 children with her. One of the children was Jose (the
father and predecessors-in-interest of herein petitioners). Jacobo applied for the registration of his lands
under the Torrens system. He filed three land registration cases alone, with his son Juan, or his grandson Jose,
applying jointly with him. Subsequently, in a Compraventa dated November 3, 1928, Jacobo allegedly sold and
transferred to Jose his one-half undivided interest in Parcel 1 covered by OCT No. 25885. Jacobo's thumbmark
appeared on the Compraventa. During trial, witnesses attested that even after the decisions in the three land
registration cases and the Compraventas, Jacobo remained in possession of the lands and continued
administering them as he did prior to their registration. According to witness Julio Monsis, Jacobo did not
partition the lands since the latter said that he still needed them. When Jacobo died on June 7, 1935, the lands
under the three land registration applications, including those which petitioners sought to partition in their
counterclaim before the trial court, remained undivided. Jose continued to function as administrator over said
land and promised to divide it equally/ When he died sometime on 1971, Respondents demanded from Jose's
children, herein petitioners, the partition and delivery of their share in the estate left by Jacobo and under
Jose's administration. The petitioners refused and attempts at amicable settlement failed. On March 27, 1973,
respondents filed a Complaint for partition and reconveyance.
RTC decided in favor of respondents, concluding that Jacobo created an express trust over his entire property
in favor of his grandchildren. CA affirmed the lower court’s decision.
ISSUE: Whether or not Jacobo only created an express trust.
RULING: 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. Contrary to the
claim of petitioners, oral testimony is allowed to prove that a trust exists. It is not error for the court to rely on
parol evidence, - - i.e., the oral testimonies of witnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - -
which the appellate court also relied on to arrive at the conclusion that an express trust exists.
Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is not error for the
court to rely on parol evidence, - - i.e., the oral testimonies of witnesses Emeteria Ringor, Julio Monsis and
Teofilo Abalos - - which the appellate court also relied on to arrive at the conclusion that an express trust
exists.
A trustee who obtains a Torrens title over a property held in trust for him by another cannot repudiate the
trust by relying on the registration. A Torrens Certificate of Title in Jose's name did not vest ownership of the
land upon him. The Torrens system does not create or vest title. It only confirms and records title already
existing and vested. The SC upheld the decision of the lower courts in favoring the respondents’ claims.
SALVADOR v. CA
G.R. No. 109910. April 5, 1995
FACTS: Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180 containing an area of 1,267 and 3,816
square meters, respectively. Title thereto devolved upon his nine children, namely, Victoriano, Procopio, Lope,
Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death sometime before or during the Second
World War.
Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's children, filed with the then Court of First
Instance a complaint against the spouses Alberto and Elpia Yabo for "Quieting of Title, Annulment of
Documents, and Damages." In the complaint, he alleged that he owned a total of eight shares of the subject
lots, having purchased the shares of seven of Alipio's children and inherited the share of his wife, Maria, and
that except for the portion corresponding to Gaudencia's share which he did not buy, he occupied, cultivated,
and possessed continuously, openly, peacefully, and exclusively the two parcels of land. He then prayed that he
be declared the absolute owner of 8/9 of the lots in question.
On 8 October 1976, the grandchildren and great-grandchildren of the late Alipio Yabo lodged with the same
court a complaint for partition and quieting of title with damages against Pastor Makibalo, Enecia Cristal, and
the spouses Eulogio and Remedies Salvador. They alleged that Lot No. 6080 and Lot No. 6180 are the common
property of the heirs of Alipio Yabo; that after Alipio's death, the spouses Pastor and Maria Makibalo, Enecia
Cristal and Jose Yabo became the de facto administrators of the said properties; and that much to their
surprise, they discovered that the Salvador spouses, who were strangers to the family, have been harvesting
coconuts from the lots, which act as a cloud on the plaintiffs' title over the lots.
ISSUE: Whether or not Pastor Makibalo has acquired by prescription the shares of his other co-heirs or co-
owners
RULING: This Court has held that the possession of a co-owner is like that of a trustee and shall not be
regarded as adverse to the other co-owners but in fact as beneficial to all of them. Acts which may be
considered adverse to strangers may not be considered adverse insofar as co-owners are concerned. A mere
silent possession by a co-owner, his receipt of rents, fruits or profits from the property, the erection of
buildings and fences and the planting of trees thereon, and the payment of land taxes, cannot serve as proof of
exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised acts of
possession which unequivocably constituted an ouster or deprivation of the rights of the other co-owners.
Thus, in order that a co-owner's possession may be deemed adverse to the cestui que trust or the other co-
owners, the following elements must concur: (1) that he has performed unequivocal acts of repudiation
amounting to an ouster of the cestui que trust or the other coowners; (2) that such positive acts of
repudiation have been made known to the cestui que trust or the other co-owners; and (3) that the evidence
thereon must be clear and convincing.
In Pangan vs. Court of Appeals, this Court had occasion to lay down specific acts which are considered as acts
of repudiation:
There is clear repudiation of a trust when one who is an apparent administrator of property causes the
cancellation of the title thereto in the name of the apparent beneficiaries and gets a new certificate of title in
his own name.
It is only when the defendants, alleged co-owners of the property in question, executed a deed of partition and
on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance
of a new one wherein they appear as the new owners of a definite area each, thereby in effect denying or
repudiating the ownership of one of the plaintiffs over his alleged share in the entire lot, that the statute of
limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the
existence of the co-ownership and of their rights thereunder.
The records do not show that Pastor Makibalo adjudicated to himself the whole estate of his wife by means of
an affidavit filed with the Office of the Register of Deeds as allowed under Section 1 Rule 74 of the Rules of
Court, or that he caused the issuance of a certificate of title in his name or the cancellation of the tax
declaration in Alipio's name and the issuance of a new one in his own name.
HUANG v. CA
EXPRESS TRUST v. IMPLIED TRUST
G.R. No. 108525. September 13, 1994
FACTS: Private respondents Dolores and Aniceto Sandoval wanted to buy two lots in Makati but were allowed
to buy only one lot per policy of the subdivision owner. Private respondents bought Lot 21 and registered it in
their name. Respondents also bought Lot 20 but the deed of sale was in the name of petitioner Ricardo Huang
and registered in his name. Respondents constructed a house on Lot 21 while petitioners were allowed by
respondents to build a house on Lot 20. Petitioners were also allowed to mortgage the Lot 20 to the SSS to
secure a loan. Respondents actually financed the construction of the house, the swimming pool, and the fence
surrounding the properties on the understanding that the petitioners would merely hold title in trust for the
respondents’ beneficial interest.
Petitioner Huangs leased the property to Deltron Corporation for its official quarters without the permission
of the respondents. But later, the lessees prohibited the use of the swimming pool by the respondents, and the
Huangs began challenging the respondents’ ownership of the property. Thus, respondents filed a complaint
before the trial court for the nullification of the deed of sale to the petitioners and the quieting of title of Lot
20.
The trial court found that the respondents were the real owners of the Lot 20 and therefore ordered the
petitioners to vacate the property and to remit to the respondents the rentals earned from Lot 20. The Court
of Appeals affirmed the lower court’s decision. Hence, this petition.
ISSUE: Whether or not petitioners can claim ownership of the property registered in their name but for which
was paid by the respondents.
RULING: Respondent Sandoval provided the money for the purchase of Lot 20 but the corresponding deed of
sale and transfer certificate of title were placed in the name of petitioner Huang. Through this transaction, a
resulting trust was created. Petitioner became the trustee of Lot 20 and its improvements for the benefit of
respondent as owner. Article 1448 of the New Civil Code provides that there is an implied trust when
property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of
having the beneficial interest for the property. A resulting trust arises because of the presumption the he who
pays for a thing intends a beneficial therein for himself.
Given these provisions of law, petitioner was only a trustee of the property in question for the benefit of the
respondent who is the real owner. Therefore, petitioner cannot claim ownership of the property even when it
was registered in his name. Thus, petition is denied.
VDA. DE ESCONDE v. CA
G.R. No. 103635. February 01, 1996
FACTS: Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the children of the
late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde was one of the children 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.
Eulogio died in April, 1944 survived by petitioners and private respondent. At that time, Lazara and Ciriaca,
Eulogio's sisters, had already died without having partitioned the estate of the late Estanislao Esconde.
On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed a deed of extrajudicial partition, 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. Pursuant to the same deed, transfer certificates of title were
issued to the new owners of the properties.
Meanwhile, Benjamin constructed the family home on Lot No. 1698-B 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. 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.
Petitioners herein filed a complaint before the Regional Trial Court of Bataan against private respondent for
the annulment of TCT No. 394. In its decision of July 31, 1989, the lower court dismissed the complaint and
the counterclaims. Petitioners elevated the case to the Court of Appeals which affirmed the lower court's
decision.
ISSUE: Whether or not the action was already barred with laches and prescription.
RULING: 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. 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. No particular words are required for the creation of
an express trust, it being sufficient that a trust is clearly intended. 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 super induced on the transaction by operation of law as matters of equity, independently of the particular
intention of the parties. 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.
The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and
unless he repudiates the trust, applies to express trusts and resulting implied trusts. However, in constructive
implied trusts, prescription may supervene even if the trustee does not repudiate the relationship.
Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive
period.
Since the action for the annulment of private respondent's title to Lot No. 1700 accrued during the effectivity
of Act No. 190, Section 40 of Chapter III thereof applies. It provides: Sec. 40. Period of prescription as to real
estate. An action for recovery of title to, or possession of, real property, or an interest therein, can only be
brought within ten years after the cause of such action accrues.
It is tragic that a land dispute has once again driven a wedge between brothers. However, credit must be given
to petitioner Benjamin Esconde for resorting to all means possible in arriving at a settlement between him
and his. Unfortunately, his efforts drove 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.
TALA REALTY v. BANCO FILIPINO
G.R. No. 143263. January 29 2004
FACTS: In 1979, Banco Filipino, respondent, had to unload some of its branch sites since it has reached its
allowable limit under Section 25(a) and 34 of Republic Act 337, as amended, otherwise known as the General
Banking Act.
The major stockholders of Banco Filipino formed a corporation known as TALA Realty Services Corporation,
herein petitioner. On August 25, 1981, respondent bank executed in favor of petitioner TALA eleven deeds of
sale transferring to the latter its branch sites. In turn, petitioner leased these branch sites to respondent
through separate contracts of lease for a period of twenty years, renewable for another twenty years, at the
option of respondent, with a monthly rental of P12,000.00 and require respondent bank to pay petitioner
P602,500.00 as advance rentals.
That day, another lease contract was executed by the parties covering each branch site providing for a period
of eleven years, renewable for another nine years at the option of respondent. And respondent bank was
required to pay P602,500.00 as security deposit for the performance of the terms and conditions of the
contract. In August 1992, petitioner wrote respondent informing it of the expiration of the 11-year lease
contract. They failed to reach an agreement. Thus, on April 14, 1994, petitioner notified respondent that the
lease shall no longer be renewed and demanded that it vacate the premises and pay the rents in arrears
amounting to P2,057,600.00. Respondent did not heed such demand, prompting petitioner to file civil case
for illegal detainer.
RTC rendered its Decision dismissing petitioner’s complaint for ejectment for lack of merit. The Court of
Appeals had dismissed the petition and upholding the 20-year lease contract between the parties.
ISSUE: Whether respondent may be ejected from the leased premises for non-payment of rent.
RULING: No, the Supreme Court ruled that the parties deliberately circumvented the real estate investment
limit under Sections 25(a) and 34 of the General Banking Act. Being in pari delicto, they should suffer the
consequences of their deception by denying them any affirmative relief. Equity dictates that Tala should not
be allowed to collect rent from the Bank. Both the Bank and Tala participated in the deceptive creation of a
trust to circumvent the real estate investment limit under Sections 25(a) and 34 of the General Banking Act.
Upholding Tala’s right to collect rent from the period during which the Bank was arbitrarily closed would
allow Tala to benefit from the illegal ‘warehousing agreement.’ This would result in the application of the
Bank’s advance rentals covering the eleventh to the twentieth years of the lease, to the rentals due for the
period during which the Bank was arbitrarily closed. With the advance rentals already used up, and the Bank
having stopped payment of the rent on the thirteenth year of the lease or in April 1994, rentals would be due
Tala from the time the Bank stopped paying rent in April 1994 up to the expiration of the lease period. The
Bank should not be allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect
rent from the Bank. The clean hands doctrine will not allow the creation or the use of a juridical relation such
as a trust to subvert, directly or indirectly, the law. Neither the Bank nor Tala came to court with clean hands;
neither will obtain relief from the court as one who seeks equity and justice must come to court with clean
hands. Thus, the petition is DENIED.
MEDINA v. CA
HOW EXPRESS TRUST IS ESTABLISHED
G.R. No. L-26107. November 27, 1981
FACTS: The late Francisco Medina had eight children, all of whom are deceased. Petitioner Margarita Medina,
who filed the complaint on behalf of the heirs of Pedro Medina in the Court of First Instance of Masbate, is the
daughter of Pedro Medina who predeceased his father Francisco Medina. Restituta Zurbito Vda. de Medina,
herein private respondent, and defendant in the trial court, is the widow of Sotero Medina (brother of Pedro
Medina); and Andres Navarro, Jr., her herein co-respondent and co-defendant in the trial court, is her
grandson.
On March 6, 1957, herein petitioners filed the complaint in the trial court seeking to recover from herein
respondents a parcel of land situated in the sitio of Oac, municipality of Milagros, province of Masbate,
containing an area of 321.1156 hectares and praying that respondents be ordered to deliver to them
possession and ownership thereof with accounting, damages and costs and litigation expenses.
Among others, the complaint alleged that petitioner Margarita Medina as plaintiff inherited with her sister
Ana Medina the said parcel of land from their father Pedro Medina; that upon their father's death, she and her
sister Ana Medina being then minors were placed under the care and custody of the spouses Sotero Medina
and Restituta Zurbito, as guardians of their persons and property; that the land in dispute was placed under
the management of Sotero Medina as administrator thereof, and upon Sotero's death under the management
of his widow, Restituta Zurbito; that she later discovered that the land in question was surreptitiously
declared for taxation purposes in the name of Andres Navarro, Jr., grandson of Restituta Zurbito; that said
respondents as defendants had without color of title denied petitioners' ownership and instead had claimed
ownership thereof since the year 1948 and exercised acts of possession and ownership thereon to the
exclusion of petitioners; that petitioners had demanded that respondents vacate the premises and deliver
possession and ownership thereof, but the latter failed and refused to do so; that respondent Andres Navarro,
Jr. had excavated soil from the land in question and sold the same to the Provincial Government of Masbate
without the knowledge and consent of petitioners and appropriated the proceeds thereof to his personal
benefit to the damage and prejudice of the plaintiff; and that respondent Restituta Zurbito Vda. de Medina
never rendered an accounting of the income of the property in question in spite of their repeated demands
and instead appropriated all the income therefrom to her personal use and benefit.
After trial, judgment was rendered declaring petitioner Margarita Medina with her coheirs as the lawful
owners of the land in question. Upon appeal, respondent Court of Appeals reversed the trial court's decision
and sustaining respondents' defenses of prescription of action and acquisitive prescription, ordered the
dismissal of the complaint.
ISSUE: Whether or not express trust was created in the case.
RULING: The appellate court correctly held that the Facts and evidence of record do not support petitioners'
claim of the creation of an express trust and imprescriptibility of their claim, Ruling squarely that "the Facts
do not warrant the conclusion that an express trust was created over the land in dispute. Although no
particular words are required for the creation of an express trust, a clear intention to create a trust must be
shown (Article 1444, Civil Code of the Philippines); and the proof of fiduciary relationship must be clear and
convincing g (Quiogue vs. Arambulo, 45 O. G. 305; Espinosa vs. Tumulak, CA-G. R. No. 30075-R, June 26, 1964).
Express trusts are those intentionally created by the direct and positive act of the trustor, by some writing,
deed or win, or oral declaration (54 Am. Jur. 33-34). 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 (54 Am. Jur. 48-49). Nowhere in the record is there any
evidence, and the plaintiffs do not even raise the pretention, that the original owner of the property Pedro
Medina, father of plaintiff Margarita Medina, appointed, designated or constituted Sotero Medina (the
husband of defendant Restituta Zurbito Medina) as the trustee of the land in dispute. Plaintiffs' contention
that there was an express trust must, therefore, fail."
Concretely, petitioners anchor their claim of an express trust on the following circumstances: (1) respondents'
possession of the titulo real covering the land; (2) the deed of partition of the estate of the common
predecessor Francisco Medina dated February 3, 1924, adjudicating the land solely to his son Narciso Medina;
(3) the deed of sale of the land dated June 29, 1924, executed by Narciso Medina in favor of his brother Sotero
Medina; and (4) the testimony of respondent Restituta Zurbito Vda. de Medina (Sotero's wife) to the effect
that her husband used to "administer" and then later on, she herself "administered" the land.
These circumstances do not make out the creation of an express trust. Respondents' possession of the Spanish
title issued in the late Pedro Medina's name may just be the consequence of the sale of the land by Narciso (to
whom it had been adjudicated in the partition) to the spouses Sotero Medina and Restituta Zurbito on June
29, 1924 and is by no means an evidence of an express trust created for the benefit of petitioners. Spanish
titles are defeasible, and "although evidences of ownership. ... May be lost through prescription." Neither is
the deed of partition (which apparently excluded Pedro Medina) entered into earlier any indication of an
express creation of a trust. In fact, these documents are adverse to petitioners' cause, and are evidences of
transfer of ownership of the land from one owner/owners to another or others and they in fact negate the
creation or existence of an express trust.
FILIPINAS PORT v. GO
HOW IS EXPRESS TRUST PROVEN
G.R. No. 161886. March 16, 2007
FACTS: On 4 September 1992, petitioner Eliodoro C. Cruz, Filport’s president from 1968 until he lost his bid
for reelection as Filport’s president during the general stockholders’ meeting in 1991, wrote a letter to the
corporation’s Board of Directors questioning the board’s creation of the following positions with a monthly
remuneration of P13, 050.00 each, and the election thereto of certain members of the board. In his aforesaid
letter, Cruz requested the board to take necessary action/actions to recover from those elected to the
aforementioned positions the salaries they have received. The board met and took up Cruz’s letter. The
records do not show what specific action/actions the board had taken on the letter. Evidently, whatever
action/actions the board took did not sit well with Cruz.
On 14 June 1993, Cruz, purportedly in representation of Filport and its stockholders, among which is herein
co-petitioner Mindanao Terminal and Brokerage Services, Inc. (Minterbro), filed with the SEC a petition which
he describes as a derivative suit against the herein respondents who were then the incumbent members of
Filport’s Board of Directors, for alleged acts of mismanagement detrimental to the interest of the corporation
and its shareholders at large. In the same petition, Cruz alleged that despite demands made upon the
respondent members of the board of directors to desist from creating the positions in question and to account
for the amounts incurred in creating the same, the demands were unheeded. Cruz thus prayed that the
respondent members of the board of directors be made to pay Filport, jointly and severally, the sums of
money variedly representing the damages incurred as a result of the creation of the offices/positions
complained of and the aggregate amount of the questioned increased salaries.
The derivative suit hibernated with the SEC for a long period of time. This petition was filed to set aside the
decision of Court of Appeals reversing the RTC’s decision dismissing the derivative suit instituted by
petitioner Eliodoro Cruz for and in behalf of the stockholders of copetitioner Filipinas Port Services, Inc.
ISSUE: Whether the CA erred in holding that Filport’s Board of Directors acted within its powers in creating
the executive committee and the positions of AVPs for Corporate Planning, Operations, Finance and
Administration, and those of the Special Assistants to the President and the Board Chairman, each with
corresponding remuneration, and in increasing the salaries of the positions of Board Chairman, Vice-
President, Treasurer and Assistant General Manager
RULING: The petition is bereft of merit.
The governing body of a corporation is its board of directors. Section 23 of the Corporation Code explicitly
provides that unless otherwise provided therein, the corporate powers of all corporations formed under the
Code shall be exercised, all business conducted and all property of the corporation shall be controlled and
held by a board of directors. Thus, with the exception only of some powers expressly granted by law to
stockholders (or members, in case of non-stock corporations), the board of directors (or trustees, in case of
non-stock corporations) has the sole authority to determine policies, enter into contracts, and conduct the
ordinary business of the corporation within the scope of its charter, i.e., its articles of incorporation, bylaws
and relevant provisions of law. Verily, the authority of the board of directors is restricted to the management
of the regular business affairs of the corporation, unless more extensive power is expressly conferred.
In the present case, the board’s creation of the positions of Assistant Vice Presidents for Corporate Planning,
Operations, Finance and Administration, and those of the Special Assistants to the President and the Board
Chairman, was in accordance with the regular business operations of Filport as it is authorized to do so by the
corporation’s by-laws, pursuant to the Corporation Code.
The election of officers of a corporation is provided for under Section 25 of the Code which reads:
Sec. 25. Corporate officers, quorum. – Immediately after their election, the directors of a corporation must
formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a
director, a secretary who shall be a resident and citizen of the Philippines and such other officers as may be
provided for in the by-laws.
MENDIZABEL v. APAO
RESULTING TRUST v. CONSTRUCTIVE TRUST
G.R. No. 143185. February 20, 2006
FACTS: Fernando Apao purchased from spouses Alejandro and Teofila Magbanua a parcel of land with an area
of 61,616 square meters. Fernando bought the property for P400. The vendors executed a deed of sale which
stated inter alia that they could purchase back the property within six months for P400, failing which, the sale
would become absolute. The vendors failed to repurchase the property. Fernando thus took possession of the
same. The Bureau of Lands approved the survey resulting in the issuance of Survey Plan covering both lots.
Upon receipt of the approved survey plan, Fernando immediately filed an application with the Bureau of
Lands for a free patent over the entirety.
A latter survey resulted in a subdivision of the land into two separate and distinct lots identified as Lot Nos.
407 and 1080. Fernando learned that Ignacio Mendizabel had filed prior to the Bureau of Lands survey a
homestead application over Lot No. 1080. Fernando became the claimant-protestant in Ignacios application.
On 11 May 1962, the Bureau of Lands Regional Office in Zamboanga City rendered a decision awarding Lot
No. 1080 to Ignacio. Fernando and his wife Teopista Paridela-Apao filed before the trial court a complaint for
Annulment of Titles, Reconveyance and Damages against petitioner. The RTC rendered a decision in favor of
the spouses Apao which was affirmed by the CA.
ISSUE: Whether implied trust exists in this case
RULING: Petitioners claim that while respondents complaint alleged fraud or mistake, it did not state with
particularity the circumstances constituting fraud or mistake, pursuant to Section 5, Rule 8 of the Rules of
Court. Petitioners claim that on this score alone, both the trial court and the Court of Appeals should have
decided the case in their favor. Petitioner’s argument is untenable. In an action for reconveyance, all that must
be alleged in the complaint are two Facts which, admitting them to be true, would entitle the plaintiff to
recover title to the disputed land, namely, (1) that the plaintiff was the owner of the land or possessed the
land in the concept of owner, and (2) that the defendant had illegally dispossessed him of the land. In their
complaint, respondents clearly asserted that: (1) they were the true and actual possessors of the property; (2)
they purchased the property from spouses Alejandro and Teofila Magbanua on 21 March 1955 as evidenced
by a deed of sale pacto de retro which spouses Magbanua executed in their favor; (3) their ownership of the
property became absolute when the vendors failed to repurchase it within the period stipulated in their
contract; and (4) they were fraudulently deprived of ownership of the property when petitioners obtained
homestead patents and certificates of title in their names. These allegations certainly measure up to the
requisite statement of Facts to constitute an action for reconveyance based on an implied trust. Indubitably,
the act of petitioners in misrepresenting that they were in actual possession and occupation of the property,
obtaining patents and original certificates of title in their names, created an implied trust in favor of the actual
possessors of the property. The Civil Code provides: ART. 1456. If property is acquired through mistake or
fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
In other words, if the registration of the land is fraudulent, the person in whose name the land is registered
holds it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property.
VDA. DE GUALBERTO v. GO
G.R. No. 139843. July 21, 2005
FACTS: Petitioners are the heirs of the late Generoso Gualberto, former registered owner of a parcel of land
containing an area of 169.59 square meters, more or less, and declared for taxation purpose. Sometime in
1965, the subject parcel of land was sold by Generoso Gualberto and his wife, herein petitioner Consuelo
Natividad Vda. De Gualberto, to respondents’ father Go S. Kiang for P9, 000.00, as evidenced by a deed entitled
“Kasulatan ng Bilihang Tuluyan” dated January 15, 1965 (“Kasulatan”, for brevity), which deed appears to
have been duly notarized by then Municipal Judge Pascual L. Serrano of the Municipal Court of Siniloan,
Laguna and recorded in his registry as Doc. No. 9, Page No. 12, Book No.12, Series of 1965. On April 1, 1973,
petitioner Consuelo executed an Affidavit attesting to the fact that the aforementioned parcel of land had truly
been sold by her and her husband Generoso to the spouses Go S. Kiang and Rosa Javier Go, as borne by the
said “Kasulatan”. Evidently, the affidavit was executed for purposes of securing a new tax declaration in the
name of the spouses Go.
In December, 1973, in a case for Unlawful Detainer filed by a certain Demetria Garcia against herein
petitioners, the latter alleged that therein plaintiff Garcia “is not a real party in interest and therefore has no
legal capacity and cause of action to sue the defendants; that the real parties in interest of the parcel of
commercial land and the residential apartment in question are Generoso Gualberto and Go S. Kiang
respectively as shown by TCT No. 9203 Issued by the Register of Deeds of Laguna. In a Forcible Entry case
filed by respondents against petitioners before the Municipal Circuit Trial Court of Siniloan-Famy, Siniloan,
Laguna docketed as Civil Case No. 336, a decision was rendered in favor of respondents, which decision was
affirmed in toto by the RTC of Siniloan, Laguna. When elevated to the Court of Appeals, that same decision
was affirmed by the latter court, saying that “the Court finds that the judgment of the court a quo affirming the
previous judgment of the municipal court is supported by sufficient and satisfactory evidence and there is no
reason for the Court to hold otherwise.
ISSUE: Whether an action for reconveyance of property based on nullity of title prescribes.
HELD: Petitioners insist that their action for reconveyance is imprescriptible.
An action for reconveyance of real property based on implied or constructive trust is not barred by the
aforementioned 10-year prescriptive period only if the plaintiff is in actual, continuous and peaceful
possession of the property involved. Generally, an action for reconveyance based on an implied or constructive
trust, such as the instant case, prescribes in 10 years from the date of issuance of decree of registration.
However, this rule does not apply when the plaintiff is in actual possession of the land. Thus, it has been held:
An action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years,
the point of reference being the date of registration of the deed or the date of the issuance of the certificate of
title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in
possession of the property, since if a person claiming to be the owner thereof is in actual possession of the
property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to
quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a
piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed
possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the
nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by
one who is in possession.”
Here, it was never established that petitioners remained in actual possession of the property after their
father’s sale thereof to Go S. Kiang in 1965 and up to the filing of their complaint in this case on August 10,
1995. On the contrary, the trial court’s factual conclusion is that respondents had actual possession of the
subject property ever since. The action for reconveyance in the instant case is, therefore, not in the nature of
an action for quieting of title, and is not imprescriptible.
HEIRS OF YAP v. CA
G.R. No. 133047. August 17, 1999
FACTS: Ramon Yap purchased a parcel of land from the spouses Carlos and Josefina Nery. The lot was
thereupon registered in the name of Ramon Yap under Transfer Certificate of Title No. 102132; forthwith, he
also declared the property in his name for tax purposes and paid the real estate taxes due thereon from 1966
to 1992. In 1967, Ramon Yap constructed a two storey 3-door apartment building for the use of the Yap
family. One-fifth (1/5) of the cost of the construction was defrayed by Ramon Yap while the rest was
shouldered by Chua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon its completion, the
improvement was declared for real estate tax purposes in the name of Lorenzo Yap in deference to the wishes
of the old woman.
The controversy started when herein petitioners, by a letter of 08 June 1992, advised respondents of the
former’s claim of ownership over the property and demanded that respondents execute the proper deed
necessary to transfer the title to them. At about the same time, petitioners filed a case for ejectment against
one of the bonafide tenants of the property.
ISSUE: Whether or not there was implied trust in the instant case.
RULING: The court found there was none. The Court of Appeals, sustaining the court a quo, has found the
evidence submitted by petitioners to be utterly wanting, consisting mainly of the selfserving testimony of
Sally Yap. She herself admitted that the business establishment of her husband Lorenzo was razed by fire in
1964 that would somehow place to doubt the claim that he indeed had the means to purchase the subject land
about two years later from the Nery spouses. Upon the other hand, Ramon Yap was by then an accountant
with apparent means to buy the property himself. At all events, findings of fact by the Court of Appeals,
particularly when consistent with those made by the trial court, should deserve utmost regard when not
devoid of evidentiary support. No cogent reason had been shown by petitioners for the Court to now hold
otherwise.
One basic distinction between an implied trust and an express trust is that while the former may be
established by parol evidence, the latter cannot. Even then, in order to establish an implied trust in real
property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust
obligation are proven by an authentic document. An implied trust, in fine, cannot be established upon vague
and inconclusive proof.
HEIRS OF KIONISALA v. HEIRS OF DACUT
PRESCRIPTIVE PERIODS OF ACTION TO ENFORCE IMPLIED TRUSTS
G.R. No. 147379. February 27, 2002
FACTS: On 19 December 1995 private respondents filed a complaint for declaration of nullity of titles,
reconveyance and damages against petitioners in the Regional Trial Court. This complaint involved 2 parcels
of land known as Lot No. 1017 and Lot No. 1015. Lot No. 1017 was granted a free patent to petitioners Heirs
of Ambrocio Kionisala and Lot 1015 was bestowed upon Isabel Kionisala, one of the impleaded heirs of
Ambrocio Kionisala. Thereafter, Lot 1017 was registered under the Torrens system and was Issued Original
Certificate of Title in petitioners’ name, while Lot No. 1015 was registered in the name of Isabel Kionisala
under Original Certificate of Title No. P-20229.
In support of their causes of action for declaration of nullity of titles and reconveyance, private respondents
claimed absolute ownership of Lot 1015 and 1017 even prior to the issuance of the corresponding free
patents and certificates of title.
The trial court dismissed the complaint on the ground that the cause of action of private respondents was
truly for reversion so that only the Director of Lands could have filed the complaint. The private respondents
moved for reconsideration of the order of dismissal but the motion was denied. The appellate court
promulgated its assailed Decision reversing the order of dismissal.
ISSUE: Whether or not the action for nullity of free patents and certificates of title of Lot 1015 and Lot 1017
or the action for reconveyance based on implied trust of the same lots has prescribed.
RULING: The Supreme Court ruled that neither the action for declaration of nullity of free patents and
certificates of title of Lot 1015 and Lot 1017 nor the action for reconveyance based on an implied trust of the
same lots has prescribed. It ruled that “a free patent Issued over private land is null and void, and produces no
legal effects whatsoever. Moreover, private respondents’ claim of open, public, peaceful, continuous and
adverse possession of the 2 parcels of land and its illegal inclusion in the free patents of petitioners and in
their original certificates of title also amounts to an action for quieting of title which is imprescriptible.
The action for reconveyance based on implied trust, on the other hand, prescribes only after 10 years from
1990 and 1991 when the free patents and the certificates of title over Lot 1017 and Lot 1015, respectively,
were registered.
Obviously the action had not prescribed when private respondents filed their complaint against petitioners on
19 December 1995. At any rate, the action for reconveyance in the case at bar is also significantly deemed to
be an action to quiet title for purposes of determining the prescriptive period on account of private
respondents’ allegations of actual possession of the disputed lots. In such a case, the cause of action is truly
imprescriptible.
Wherefore, the instant petition for review is denied.

RAMOS v. RAMOS
G.R. No. L-19872. December 3, 1974
FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880,
respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7 natural children.
In December 1906, a special proceeding for the settlement of the intestate estate of said spouses was
conducted. Rafael Ramos, a brother of Martin, administered the estate for more than 6 years. Eventually, a
partition project was submitted which was signed by the 3 legitimate children and 2 of the 7 natural children.
A certain Timoteo Zayco signed in representation of the other 5 natural children who were minors. The
partition was sworn to before a justice of peace.
The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head of
cattle and the advances to the legitimate children. ½ thereof represented the estate of Martin. 1/3 thereof was
the free portion or P12,497.98. The shares of the 7 natural children were to be taken from that 1/3 free
portion. Indeed, the partition was made in accordance with the Old Civil code. Thereafter, Judge Richard
Campbell approved the partition project. The court declared that the proceeding will be considered closed
and the record should be archived as soon as proof was submitted that each heir had received the portion
adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the administrator to submit a report showing that the shares
of the heirs had been delivered to them as required by the previous decision. Nevertheless, the manifestation
was not in strict conformity with the terms of the judge’s order and with the partition project itself. 8 lots of
the Himamaylan Cadastre were registered in equal shares in the names of Gregoria (widow of Jose Ramos)
and her daughter, when in fact the administrator was supposed to pay the cash adjudications to each of them
as enshrined in the partition project. Plaintiffs were then constrained to bring the suit before the court
seeking for the reconveyance in their favor their corresponding participations in said parcels of land in
accordance with Article 840 of the old Civil Code. Note that 1/6 of the subject lots represents the 1/3 free
portion of martin’s shares which will eventually redound to the shares of his 7 legally acknowledged natural
children. The petitioners’ action was predicated on the theory that their shares were merely held in trust by
defendants. Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the lower court dismissed the
complaint on the grounds of res judicata, prescription and laches.
ISSUE: Whether or not the plaintiffs’ action was barred by prescription, laches and res judicata to the effect
that they were denied of their right to share in their father’s estate.
RULING: There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to
him, or that an action to compel a trustee to convey property registered in his name in trust for the benefit of
the cestui qui trust does not prescribed or that the defense of prescription cannot be set up in an action to
recover property held by a person in trust for the benefit of another, or that property held in trust can be
recovered by the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee is not
adverse. Not being adverse, he does not acquire by prescription the property held in trust. Thus, section 38 of
Act 190 provides that the law of prescription does not apply in the case of a continuing and subsisting trust.
INTESTATE ESTATE OF TY v. CA
G.R. No. 112872. April 19, 2001
FACTS: Petitioner Sylvia S. Ty was married to Alexander T. Ty, son of private respondent Alejandro B. Ty.
Alexander died of leukemia on May 19, 1988 and was survived by his wife, petitioner Silvia, and only child,
Krizia Katrina. In the settlement of his estate, petitioner was appointed administratrix of her late husband’s
intestate estate.
On November 4, 1992, petitioner filed a motion for leave to sell or mortgage estate property in order to
generate funds for the payment of deficiency estate taxes in the sum of P4,714,560.00.
Privite respondent Alejandro Ty then filed two complaints for the recovery of the abovementioned property,
praying for the declaration of nullity of the deed of absolute sale of the shares of stock executed by private
respondent in favor of the deceased Alexander, praying for the recovery of the pieces of property that were
placed in the name of deceased Alexander, they were acquired through private-respondent’s money, without
any cause or consideration from deceased Alexander.
The motions to dismiss were denied. Petitioner then filed petitions for certiorari in the Courts of Appeals,
which were also dismissed for lack of merit. Thus, the present petitions now before the Court.
ISSUE: Whether or not an express trust was created by private respondent when he transferred the property
to his son.
RULING: Private respondent contends that the pieces of property were transferred in the name of the
deceased Alexander for the purpose of taking care of the property for him and his siblings. Such transfer
having been effected without cause of consideration, a resulting trust was created. Petitioner is in error when
she contends that an express trust was created by private respondent when he transferred the property to his
son. Express trust is those that are created by the direct and positive acts of the parties, by some writing or
deed or will or by words evidencing an intention to create a trust. On the other hand, implied trusts are those
which, without being expressed, are deducible from the nature of the transaction by operation of law as
matters of equity, independently of the particular intention of the parties. Thus, if the intention to establish a
trust is clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other
matters indicative of such intent, then the trust is implied. In the cases at hand, private respondent contends
that the pieces of property were transferred in the name of the deceased Alexander for the purpose of taking
care of the property for him and his siblings. Such transfer having been effected without cause of
consideration, a resulting trust was created. A resulting trust arises in favor of one who pays the purchase
money of an estate and places the title in the name of another, because of the presumption that he who pays
for a thing intends a beneficial interest therein for himself. The trust is said to result in law from the acts of
the parties. Such a trust is implied in fact. Petitioner’s assertion that private respondent’s action is barred by
the statute of limitations is erroneous. The statute of limitations cannot apply in this case. Resulting trusts
generally do not prescribe except when the trustee repudiates the trust.
VDA. DE RETERTO v. BARZ
G.R. No. 148180. December 19, 2001
FACTS: Petitioners are the heirs of Panfilo Retuerto, while respondents are the heirs of Pedro Barz who is the
sole heir of Juana Perez Barz. Juana Perez Barz was the original owner of Lot No. 896 having an area of
13,160 square meters. Before her death, Juana Perez executed a Deed of Absolute Sale in favor of Panfilo
Retuerto over a parcel of land, identified as Lot No. 896-A, a subdivision of Lot No. 896, with an approximate
area of 2,505 square meters. On July 22, 1940, the Court Issued an Order directing the Land Registration
Commission for the issuance of the appropriate Decree in favor of Panfilo Retuerto over the said parcel of
land. However, no such Decree was issued as directed by the Court because, by December 8, 1941, the Second
World War ensued in the Pacific. However, Panfilo failed to secure the appropriate decree after the war.
Sometime in 1966, Pedro Barz, as the sole heir of Juana Perez, filed and application, with the then CFI of Cebu
for the confirmation of his title over Lot 896 which included the Lot sold to Panfilo Retuerto. The Court ruled
in his favor declaring him the lawful owner of the said property, and thus Original Certificate of Title No. 521
was issued. Lot No. 896-A however was continuously occupied by the petitioners. Thus, a confrontation
arose and as a result respondents filed an action on September 5, 1989 for “Quieting of Title, Damages and
Attorney’s Fees.” In their answer, petitioners claimed that they were the owners of a portion of the lot which
was registered under the name of Pedro Barz and therefore the issuance of the Original Certificate of Title in
Pedro Barz’s name did not vest ownership but rather it merely constituted him as a trustee under a
constructive trust. Petitioners further contend that Pedro Barz misrepresented with the land registration
court that he inherited the whole lot thereby constituting fraud on his part.
ISSUE: Whether or not petitioners are the rightful owner of the lot.
RULING: The contention is bereft of merit. Constructive trusts are created in equity to prevent unjust
enrichment, arising against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right
to property which he ought not, in equity and good conscience, to hold. Petitioners failed to substantiate their
allegation that their predecessor-in-interest had acquired any legal right to the property subject of the
present controversy. Nor had they adduced evidence to show that the certificate of title of Pedro Barz was
obtained through fraud.
Even assuming arguendo that Pedro Barz acquired title to the property through mistake or fraud, petitioners
are nonetheless barred from filing their claim of ownership. An action for reconveyance based on an implied
or constructive trust prescribes within ten years from the time of its creation or upon the alleged fraudulent
registration of the property. Since registration of real property is considered a constructive notice to all
persons, then the ten-year prescriptive period is reckoned from the time of such registering, filing or entering.
Thus, petitioners should have filed an action for reconveyance within ten years from the issuance of OCT No.
521 in November 16, 1968. This, they failed to do so.
CHIA LIONG TAN v. CA
G.R. No. 106251. November 11, 1993
FACTS: Petitioner Chiao Liong Tan claims to be the owner of a motor vehicle, particularly described as Isuzu
Elf van, 1976 Model that he purchased. As owner thereof, petitioner says he has been in possession,
enjoyment and utilization of the said motor vehicle until his older brother, Tan Ban Yong, the private
respondent, took it from him.
Petitioner relies principally on the fact that the van is registered in his name under Certificate of Registration.
He claims in his testimony before the trial court that the said motor vehicle was purchased from Balintawak
Isuzu Motor Center for a price of over P100, 000. 00; that he sent his brother to pay for the van and the receipt
for payment was placed in his name because it was his money that was used to pay for the vehicle; that he
allowed his brother to use the van because the latter was working for his company, the CLT Industries; and
that his brother later refused to return the van to him and appropriated the same for himself.
On the other hand, private respondent testified that CLT Industries is a family business that was placed in
petitioner’s name because at that time he was then leaving for the United Stated and petitioner remaining
Filipino in the family residing in the Philippines. When the family business needed a vehicle in 1987 for use in
the delivery of machinery to its customers, he asked petitioner to look for a vehicle and gave him the amount
of P5, 000.00 to be deposited as down payment for the van, which would be available in about a month. After
a month, he himself paid the whole price out of a loan of P140, 000.00 from his friend Tan Pit Sin.
Nevertheless, respondent allowed the registration of the vehicle in petitioner’s name. It was also their
understanding that he would keep the van for himself because CLT Industries was not in a position to pay him.
Hence, from the time of the purchase, he had been in possession of the vehicle including the original
registration papers thereof, but allowing petitioner from time to time to use the van for deliveries of
machinery.
After hearing, the trial court ruled in favor of the private respondent. Finding no merit in the appeal, the
Court of Appeals affirmed the decision of the trail court.
ISSUE: Whether or not the petitioner-appellant established proof of ownership over the subject motor
vehicle.
RULING: Petitioner did not have in his possession the Certificate of Registration of the motor vehicle and the
official receipt of payment for the same, thereby lending credence to the claim of private respondent who has
possession thereof, that he owns the subject motor vehicle. A certificate of registration of a motor vehicle in
one’s name indeed creates a strong presumption of ownership. For all practical purposes, the person in
whose favor it has been Issued is virtually the owner thereof unless proved otherwise. In other words, such
presumption is rebuttable by competent proof.
The New Civil Code recognizes cases of implied trusts other than those enumerated therein. Thus, although no
specific provision could be cited to apply to the parties herein, it is undeniable that an implied trust was
created when the certificate of registration of the motor vehicle was placed in the name of the petitioner
although the price thereof was not paid by him but by private respondent. The principle that a trustee who
puts a certificate of registration in his name cannot repudiate the trust relying on the registration is one of the
well-known limitations upon a title. A trust, which derives its strength from the confidence one reposes on
another especially between brothers, does not lose that character simply because of what appears in a legal
document.
WHEREFORE, the instant petition for review is hereby DENIED for lack of merit.
O’LACO v. CO CHO CHIT
G.R. No. 58010. March 31, 1993
FACTS: This Case involves half-sisters each claiming ownership over a parcel of land. While petitioner Emilia
O'Laco asserts that she merely left the certificate of title covering the property with private respondent O Lay
Kia for safekeeping, the latter who is the former's older sister insists that the title was in her possession
because she and her husband bought the property from their conjugal funds.
The trial court declared that there was no trust relation of any sort between the sisters. The Court of Appeals
ruled otherwise. Hence, the instant petition for review on certiorari of the decision of the appellate court
together with its resolution denying reconsideration.
ISSUE: Whether a resulting trust was intended by them in the acquisition of the property; Whether
Prescription has set in.
RULING: Trust relations between parties may either be express or implied. Express trusts are those which are
created by the direct and positive acts of the parties, by some writing or deed, or will, or by words evincing an
intention to create a trust. Implied trusts are those which, without being express, are deducible from the
nature of the transaction as matters of intent, or which are superinduced on the transaction by operation of
law as matters of equity, independently of the particular intention of the parties. Implied trusts may either be
resulting or constructive trusts, both coming into being by operation of law.
A resulting trust was indeed intended by the parties under Art. 1448 of the New Civil Code which states ----
"Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but
the price is paid by another for the purpose of having the beneficial interest of the property. The former is the
trustee, while the latter is the beneficiary . . ."
As differentiated from constructive trusts, where the settled rule is that prescription may supervene, in
resulting trust, the rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust.
Once the resulting trust is repudiated, however, it is converted into a constructive trust and is subject to
prescription. A resulting trust is repudiated if the following requisites concur: (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of
repudiation have been made known to the cestui qui trust; and, (c) the evidence thereon is clear and
convincing.
In Tale v. Court of Appeals, the Court categorically ruled that an action for reconveyance based on an implied
or constructive trust must perforce prescribe in ten (10) years, and not otherwise, thereby modifying
previous decisions holding that the prescriptive period was four (4) years.
Neither the registration of the Oroquieta property in the name of petitioner Emilia O'Laco nor the issuance of
a new Torrens title in 1944 in her name in lieu of the alleged loss of the original may be made the basis for the
commencement of the prescriptive period. For, the issuance of the Torrens title in the name of Emilia O'Laco
could not be considered adverse, much less fraudulent. Precisely, although the property was bought by
respondent-spouses, the legal title was placed in the name of Emilia O'Laco. The transfer of the Torrens title
in her name was only in consonance with the deed of sale in her favor. Consequently, there was no cause for
any alarm on the part of respondent-spouses. As late as 1959, or just before she got married, Emilia continued
to recognize the ownership of respondent-spouses over the Oroquieta property.
Thus, until that point, respondent-spouses were not aware of any act of Emilia which would convey to them
the idea that she was repudiating the resulting trust. The second requisite is therefore absent. Hence,
prescription did not begin to run until the sale of the Oroquieta property, which was clearly an act of
repudiation. But immediately after Emilia sold the Oroquieta property which is obviously a disavowal of the
resulting trust, respondent-spouses instituted the present suit for breach of trust. Correspondingly, laches
cannot lie against them.
After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the recognition, and
ordinarily will not be in fault for omitting to bring an action to enforce his rights.
There is no running of the prescriptive period if the trustee expressly recognizes the resulting trust. Since the
complaint for breach of trust was filed by respondent-spouses two (2) months after acquiring knowledge of
the sale, the action therefore has not yet prescribed.
WHEREFORE, the Petition for Review on Certiorari is DENIED.

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LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC. v.

VOID v. INEXISTENT CONTRACTS

G.R. No. 127882. 1 December 2004

ISSUE: Whether or not the FTAAs are void.

G.R. No. 155001. 21 January 2004

G.R. No. 144463. January 14, 2004

G.R. No. 152168. December 10, 2004

ISSUE: Whether or not the Deed of Absolute Sale is void.

376 SCRA 222. February 6, 2002

ISSUE: Whether or not the Deed of Sale is void.

G.R. No. 147788. March 19, 2002

WHO MAY BRING ACTION FOR DECLARATION OF NULLITY

G.R. No. 158382. January 27, 2004

G.R. No. 143370. February 6, 2002

G.R. No. 139982. November 21, 2002

G.R. No. 131889. March 12, 2001

G.R. No. 131544. March 16, 2001

Thus, the petition is granted.

G.R. No. 180388. January 18, 2011

ISSUE: Whether or not Aquino is entitled to the unpaid amount.

G.R. No. L-17587. September 12, 1967

ISSUE: Whether or not the various contracts were void.

ACCORDINGLY, the contracts in question are annulled and set aside.

G.R. No. L-11240. December 18, 1957

G.R. No. 156846. February 23, 2004

G.R. No. 159139. January 13, 2004

G.R. No. 179743. August 2, 2010

G.R. No. L-75342. March 15, 1990

G.R. No. L-62051. March 18, 1985

G.R. No. 147863. August 13, 2004

ISSUE: Whether or not Jacobo only created an express trust.

G.R. No. 109910. April 5, 1995

G.R. No. 108525. September 13, 1994

G.R. No. 103635. February 01, 1996

G.R. No. 143263. January 29 2004

G.R. No. L-26107. November 27, 1981

ISSUE: Whether or not express trust was created in the case.

G.R. No. 161886. March 16, 2007

RULING: The petition is bereft of merit.

G.R. No. 143185. February 20, 2006

ISSUE: Whether implied trust exists in this case

G.R. No. 139843. July 21, 2005

HELD: Petitioners insist that their action for reconveyance is imprescriptible.

G.R. No. 133047. August 17, 1999

G.R. No. 147379. February 27, 2002

Wherefore, the instant petition for review is denied.

G.R. No. L-19872. December 3, 1974

G.R. No. 112872. April 19, 2001

G.R. No. 148180. December 19, 2001

G.R. No. 106251. November 11, 1993

G.R. No. 58010. March 31, 1993

WHEREFORE, the Petition for Review on Certiorari is DENIED.

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