G.R. No.

L-21334 December 10, 1924

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, Petitioner, vs. ANASTASIA

ABADILLA, ET AL., claimants.
THE MUNICIPALITY OF TAYABAS, ET AL., claimants-appellees,
MARIA PALAD, ET AL., claimants-appellants.

Domingo Lopez, Ramon Diokno and Gabriel N. Trinidad for appellants.

Attorney-General Villa-Real for municipality as appellee.
No appearance for the other appellees.

OSTRAND, J.:

This is an appeal from a judgment in cadastral and land registration case No. 3 of the
Court of First Instance of Tayabas (G. L. R. O. Record No. 213) in which case lots Nos.
3464, 3469, and 3470 are claimed by the municipality of Tayabas and the governor of
the province on one side, and by Maria, Eufemio, Eugenia, Felix, Caridad, Segunda, and
Emilia Palad on the other. Lot No. 3470 is also claimed by Dorotea Lopez. The court below
ordered the registration of the three lots in the name of the governor of the Province of
Tayabas in trust for a secondary school to be established in the municipality of Tayabas.
The claimants Palad and Dorotea Lopez appealed. chanroblesvirtualawlibrary chanrobles virtual law library

It appears from the evidence that the lands in question were originally owned by one Luis
Palad, a school teacher, who obtained titled to the land by composicion gratuita in 1894.
On January 25, 1892, Palad executed a holographic will party in Spanish and partly in
Tagalog. Palad died on December 3, 1896, without descendants, but leaving a widow,
the appellant Dorotea Lopez, to whom he had been married since October 4, 1885. On
July 27, 1987, the Court of First Instance of Tayabas ordered the protocolization of the
will over the opposition of Leopoldo and Policarpio Palad, collateral heirs of the deceased
and of whom the appellants Palad are descendants. chanroblesvirtualawlibrary chanrobles virtual law library

The will contained a clause in Tagalog which, translated into English, reads:

That the cocoanut land in Colongcolong, which I have put under cultivation, be used by
my wife after my death during her life or until she marries, which property is referred to
in the inventory under No. 5, but from this cocoanut land shall be taken what is to be
lent to the persons who are to plant cocoanut trees and that which is to be paid to them
as their share of the crop if any should remain; and that she try to earn with the product
of the cocoanut trees of which those bearing fruit are annually increasing; and if the times
aforementioned should arrive, I prepare and donate it to secondary college to be erected
in the capital of Tayabas; so this will be delivered by my wife and the executors to
the Ayuntamiento of this town, should there be any, and if not, to the civil governor of
this province in order to cause the manager thereof to comply with my wishes for the
good of many and the welfare of the town.

After the death of Luis Palad the widow Dorotea Lopez remained in possession of the land
and in the year 1900 married one Calixto Dolendo. On April 20, 1903, the aforesaid
collateral heirs of Luis Palad brought an action against the widow for the partition of the
lands here in question on the ground that she, by reason of her second marriage, had
lost the right to their exclusive use and possession. In the same action the municipality
of Tayabas intervened claiming the land under the clause of the Palad will above quoted.
During the pendency of the action an agreement was arrived at by the parties under
which the land which now constitutes lots Nos. 3464 and 3469 were turned over to the
municipality as its share of the inheritance under the will, and the remaining portion of
the land in controversy and which now forms lot No. 3470 was left in the possession of
Dorotea Lopez. On the strength of the agreement the action was dismissed on November
9, 1904, upon motion by the counsel for the municipality and concurred in by all the
parties, reserving to the collateral heirs the right to bring another action. The municipality
of Tayabas has been in possession of said lots Nos. 3464 and 3469 ever since and Dorotea
Lopez has likewise held uninterrupted possession of lot No. 3470. chanroblesvirtualawlibrary chanrobles virtual law library

In regard to lots Nos. 3464 and 3469, claimed by the appellants Palad and the appellees,
the case presents several problems not directly covered by statutory provisions or by
Spanish or local precedents and, for the solution of which, we must resort to the
underlying principles of the law on the subject. As it is doubtful whether the possession
of the municipality of Tayabas can be considered adverse within the meaning of section
41 of the Code of Civil Procedure, the case as to these lots turns upon the construction
and validity of the clause quoted from the will of Luis Palad, rather than upon the question
of prescription of title.
chanroblesvirtualawlibrary chanrobles virtual law library

The clause is very unskillfully drawn; its language is ungrammatical and at first blush
seems somewhat obscure, but on closer examination it sufficiently reveals the purpose
of the testator. And if its provisions are not in contravention of some established rule of
law or public policy, they must be respected and given effect. It may be observed that
the question as to the sufficiency of the form of the will must be regarded as settled by
the protocolization proceedings had in the year 1897. chanroblesvirtualawlibrary chanrobles virtual law library

It is a well-known rule that testamentary dispositions must be liberally construed so as

to give effect to the intention of the testator as revealed by the will itself. Applying this
rule of construction it seems evident that by the clause in question the testator proposed
to create a trust for the benefit of a secondary school to be established in the town of
Tayabas, naming as trustee the ayuntamiento of the town or if there be no ayuntamiento,
then the civil governor of the Province of Tayabas. chanroblesvirtualawlibrary chanrobles virtual law library

As the law of trusts has been much more frequently applied in England and in the United
Stated than it has in Spain, we may draw freely upon American precedents in determining
the effect of the testamentary trust here under consideration, especially so as the trusts
known to American and English equity jurisprudence are derived from the fidei
commissa of the Roman law and are based entirely upon Civil Law principles. chanroblesvirtualawlibrary chanrobles virtual law library

In order that a trust may become effective there must, of course, be a trustee and
a cestui que trust, and counsel for the appellants Palad argues that we here have neither;
that there is no ayuntamiento, no Gobernador Civil of the province, and no secondary
school in the town of Tayabas. chanroblesvirtualawlibrary chanrobles virtual law library

An ayuntamiento corresponds to what in English is termed a municipal corporation and it

may be conceded that the ordinary municipal government in these Island falls short of
being such a corporation. But we have provincial governors who like their predecessors,
the civil governors, are the chief executives of their respective provinces. It is true that
in a few details the function and power of the two offices may vary somewhat, but it
cannot be successfully disputed that one office is the legal successor of the other. It might
as well be contended that when under the present regime the title of the chief executive
of the Philippine was changed from Civil Governor to that of Governor-General, the latter
was not the legal successor of the former. There can therefore be but very little doubt
that the governor of the Province of Tayabas, as the successor of the civil governor of
the province under the Spanish regime, may acts as trustee in the present case. chanroblesvirtualawlibrary chanrobles virtual law library

In regard to private trust it is not always necessary that the cestui que trust should be
named, or even be in esse at the time the trust is created in his favor. (Flint on Trusts
and Trustees, section 25; citing Frazier vs. Frazier, 2 Hill Ch., 305; Ashurt vs. Given, 5
Watts & S., 329; Carson vs. Carson, 1 Wins. [N. C.] 24.) Thus a devise to a father in
trust for accumulation for his children lawfully begotten at the time of his death has been
held to be good although the father had no children at the time of the vesting of the funds
in him as trustees. In charitable trust such as the one here under discussion, the rule is
still further relaxed. (Perry on Trusts, 5th ed., section 66.) chanrobles virtual law library

This principle is in harmony with article 788 of the Civil Code which reads as follows:

Any disposition which imposes upon an heirs the obligation of periodically investing
specified sums in charitable works, such as dowries for poor maidens or scholarships for
students, or in favor of the poor, or any charitable public educational institution, shall be
valid under the following conditions: chanrobles virtual law library

If the charge is imposed on real property and is temporary, the heir or heirs may dispose
of the encumbered estate, but the lien shall continue until the record thereof is
canceled. chanroblesvirtualawlibrary chanrobles virtual law library

If the charge is perpetual, the heir may capitalize it and invest the capital at interest,
fully secured by first mortgage. chanroblesvirtualawlibrary chanrobles virtual law library

The capitalization and investment of the principal shall be made with the intervention of
the civil governor of the province after hearing the opinion of the prosecuting officer.
virtual law library
chanroblesvirtualawlibrary chanrobles

In any case, if the testator should not have laid down any rules for the management and
application of the charitable legacy, it shall be done by the executive authorities upon
whom this duty devolves by law.

It is true that minor distinctions may possibly be drawn between the case before us and
that presupposed in the article quoted, but the general principle is the same in both
cases. Here the trustee, who holds the legal title, as distinguished from the beneficial title
resting in the cestui que trust, must be considered the heirs. The devise under
consideration does not in terms require periodical investments of specified sums, but it
is difficult to see how this can affect the general principle involved, and unless the devise
contravenes some other provision of the Code it must be upheld. chanroblesvirtualawlibrary chanrobles virtual law library

We have been unable to find any such provision. There is no violation of any rule against
perpetuities: the devise does not prohibit the alienation of the land devised. It does not
violate article 670 of the Code: the making of the will and the continuance or quantity of
the estate of the heir are not left in the discretion of the third party. The devisee is not
uncertain and the devise is therefore are repugnant to article 750 of the Civil Code. The
provincial governor can hardly be regarded as a public establishment within the meaning
of article 748 and may therefore receive the inheritance without the previous approval of
the Government. chanroblesvirtualawlibrary chanrobles virtual law library

But counsel argues that assuming all this to be true the collateral heirs of the deceased
would nevertheless be entitled to the income of the land until the cestui que trust is
actually in esse. We do not think so. If the trustee holds the legal title and the devise is
valid, the natural heirs of the deceased have no remaining interest in the land except
their right to the reversion in the event the devise for some reason should fail, an event
which has not as yet taken place. From a reading of the testamentary clause under
discussion it seems quite evident that the intention of the testator was to have income of
the property accumulate for the benefit of the proposed school until the same should be
established. chanroblesvirtualawlibrary chanrobles virtual law library

From what has been said it follows that the judgment appealed from must be affirmed in
regard to lots Nos. 3464 and 3469. chanroblesvirtualawlibrary chanrobles virtual law library

As to lot No. 3470 little need be said. It may be noted that though the Statute of
Limitation does not run as between trustee and cestui que trust as long as the trust
relations subsist, it may run as between the trust and third persons. Contending that the
Colongcolong land was community property of her marriage with Luis Palad and that lot
No. 3470 represented her share thereof, Dorotea Lopez has held possession of said lot,
adverse to all other claimants, since the year 1904 and has now acquired title by
prescription. chanroblesvirtualawlibrary chanrobles virtual law library

The judgment appealed from is affirmed in regard to lots Nos. 3464 and 3469 and is
reversed as to lot No. 3470, and it is ordered that said lot No. 3470 be registered in the
name of the claimant Dorotea Lopez. No costs will be allowed. So ordered. chanroblesvirtualawlibrary chanrobles virtual law library

Street, Avanceña, Villamor and Romualdez, JJ., concur. chanrobles virtual law library

chanrobles virtual law library

chanrobles virtual law library

Separate Opinions

MALCOLM, J., concurring and dissenting: chanrobles virtual law library

I concur in regard to lots Nos. 3464 and 3469 and dissent in regard to lot No. 3470. As
to the last mentioned lot, it will be recalled that title to it is adjudicated to Dorotea Lopez,
the widow of Luis Palad who, in his will, transmitted the usufructuary rights to the land
to his widow "during her life or until she marries," after which the property was to be
delivered to the ayuntamiento of Tayabas, Tayabas, or if there should not be any, to the
civil governor of the Province of Tayabas, for the benefit of a secondary college. Dorotea
Lopez having remarried, the property should have been turned over to the municipality
of Tayabas. The alleged agreement of 1904 cannot alter there basic and controlling facts.
The possession of Dorotea Lopez has been in contravention of the terms of the trust and
in bad faith. chanroblesvirtualawlibrary chanrobles virtu

G.R. No. 148788 November 23, 2007

SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and VICTORIANO CAÑEZO Petitioners,

vs.
CONCEPCION ROJAS, Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari from the Decision1 of the Court of Appeals, dated September 7,
2000, in CA-G.R. SP No. 53236, and Resolution dated May 9, 2001.

On January 29, 1997, petitioner Soledad Cañezo filed a Complaint2 for the recovery of real property plus
damages with the Municipal Trial Court (MTC) of Naval, Biliran, against her father’s second wife,
respondent Concepcion Rojas. The subject property is an unregistered land with an area of 4,169 square
meters, situated at Higatangan, Naval, Biliran. Cañezo attached to the complaint a Joint
Affidavit3 executed on May 10, 1979 by Isidro Catandijan and Maximina Cañezo attesting to her
acquisition of the property.

In her complaint, the petitioner alleged that she bought the parcel of land in 1939 from Crisogono
Limpiado, although the transaction was not reduced into writing. Thereafter, she immediately took
possession of the property. When she and her husband left for Mindanao in 1948, she entrusted the said
land to her father, Crispulo4 Rojas, who took possession of, and cultivated, the property. In 1980, she
found out that the respondent, her stepmother, was in possession of the property and was cultivating the
same. She also discovered that the tax declaration over the property was already in the name of Crispulo
Rojas.5

In her Answer, the respondent asserted that, contrary to the petitioner’s claim, it was her husband,
Crispulo Rojas, who bought the property from Crisogono Limpiado in 1948, which accounts for the tax
declaration being in Crispulo’s name. From then on, until his death in 1978, Crispulo possessed and
cultivated the property. Upon his death, the property was included in his estate, which was administered
by a special administrator, Bienvenido Ricafort. The petitioner, as heir, even received her share in the
produce of the estate. The respondent further contended that the petitioner ought to have impleaded all of
the heirs as defendants. She also argued that the fact that petitioner filed the complaint only in 1997
means that she had already abandoned her right over the property.6

On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the petitioner, thus:

WHEREFORE, premises considered, the Court finds a preponderance of evidence in favor of plaintiff
Soledad Cañezo and against defendant Concepcion Rojas by declaring plaintiff the true and lawful owner
of the land more particularly described under paragraph 5 of the complaint and hereby orders defendant
Concepcion Rojas:

a) To vacate and surrender possession of the land to plaintiff;

 b) To pay plaintiff the sum of ₱34,000.00 actual damages, ₱10,000.00 for attorney’s fees and
litigation expenses; and

c) To pay the costs.

SO ORDERED.7

Despite the respondent’s objection that the verbal sale cannot be proven without infringing the Statute of
Frauds, the MTC gave credence to the testimony of the petitioners’ two witnesses attesting to the fact that
Crisogono Limpiado sold the property to the petitioner in 1939. The MTC also found no evidence to show
that Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It held that the 1948 tax
declaration in Crispulo’s name had little significance on respondent’s claim, considering that in 1948, the
"country was then rehabilitating itself from the ravages of the Second World War" and "the government
was more interested in the increase in tax collection than the observance of the niceties of law."8

The respondent appealed the case to the Regional Trial Court (RTC) of Naval, Biliran. On October 12,
1998, the RTC reversed the MTC decision on the ground that the action had already prescribed and
acquisitive prescription had set in. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the decision of the Municipal Trial Court of Naval, Biliran awarding
ownership of the disputed land to the plaintiff and further allowing recovery of damages is hereby
REVERSED in toto. There is no award of damages.

The said property remains as the legitime of the defendant Concepcion Rojas and her children.

SO ORDERED.9

However, acting on petitioner’s motion for reconsideration, the RTC amended its original decision on
December 14, 1998.10 This time, it held that the action had not yet prescribed considering that the
petitioner merely entrusted the property to her father. The ten-year prescriptive period for the recovery of
a property held in trust would commence to run only from the time the trustee repudiates the trust. The
RTC found no evidence on record showing that Crispulo Rojas ever ousted the petitioner from the
property. The dispositive portion of the amended decision reads as follows:

WHEREFORE, in view of the foregoing considerations, the decision of this Court dated October 12, 1998
is hereby set aside and another is hereby entered modifying the decision of the Court a quo and declaring
Soledad Rojas Vda. De Cañezo as the true and lawful owner of a parcel of land, more particularly
described and bounded as follows:

A parcel of land situated at Higatangan, Naval, Biliran, bounded on the North by Policarpio Limpiado; on
the South by Fidel Limpiado; on the East by Seashore; and on the West by Crispolo (sic) Limpiado with
an approximate area of 4,169 square meters per Tax Declaration No. 2258, later under Tax Declaration
No. 4073 in the name of Crispolo Rojas and later in the name of the Heirs of Crispolo Rojas.

Further, ordering defendant-appellant Concepcion Rojas and all persons claiming rights or interest under
her to vacate and surrender possession of the land aforecited to the plaintiff or any of her authorized
representatives, Ordering the Provincial and/or Municipal Assessor’s Office to cancel the present existing
Tax Declaration in the name of Heirs of Crispolo Rojas referring to the above-described property in favor
of the name of Soledad Rojas Vda. De Cañezo, Ordering the defendant-appellant Concepcion Rojas to
pay the plaintiff-appellee the sum of ₱34,000.00 in actual damages, and to pay for the loss of her share in
money value of the products of the coconuts of said land from 1979 to 1997 and to pay further until the
case is terminated at the rate of ₱200.00 per quarter based on the regular remittances of the late Crispolo
Rojas to the plaintiff-appellee, and to pay the costs.
SO ORDERED.11

The respondent filed a motion to reconsider the Amended Decision but the RTC denied the same in an
Order dated April 25, 1999.

She then filed a petition for review with the Court of Appeals (CA), which reversed the Amended Decision
of the RTC on September 7, 2000, thus:

WHEREFORE, the amended decision dated December 14, 1998 rendered in Civil Case No. B-1041 is
hereby REVERSED and SET ASIDE. The complaint filed by Soledad Cañezo before the Municipal Trial
Court of Naval, Biliran is hereby DISMISSED on grounds of laches and prescription and for lack of merit.

SO ORDERED.12

The CA held that the petitioner’s inaction for several years casts a serious doubt on her claim of
ownership over the parcel of land. It noted that 17 years lapsed since she discovered that respondent
was in adverse possession of the property before she instituted an action to recover the same. And
during the probate proceedings, the petitioner did not even contest the inclusion of the property in the
estate of Crispulo Rojas. 13

The CA was convinced that Crispulo Rojas owned the property, having bought the same from Crisogono
Limpiado in 1948. Supporting this conclusion, the appellate court cited the following circumstances: (1)
the property was declared for taxation purposes in Crispulo’s name and he had been paying the taxes
thereon from 1948 until his death in 1978; (2) Crispulo adversely possessed the same property from 1948
until his death in 1978; and (3) upon his death in 1978, the property was included in his estate, the
proceeds of which were distributed among his heirs.14

The CA further held that, assuming that there was an implied trust between the petitioner and her father
over the property, her right of action to recover the same would still be barred by prescription since 49
years had already lapsed since Crispulo adversely possessed the contested property in 1948.15

On May 9, 2001, the CA denied the petitioner’s motion for reconsideration for lack of merit.16

In this petition for review, the petitioner, substituted by her heirs, assigns the following errors:

That the Court of Appeals committed grave abuse of discretion in setting aside petitioner’s contention that
the Petition for Review filed by respondent CONCEPCION ROJAS before the Court of Appeals was
FILED OUT OF TIME;

That the Court of Appeals erred and committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it decided that the filing of the case by SOLEDAD CAÑEZO for Recovery of Real
Property was already barred by PRESCRIPTION AND LACHES.17

The petitioner insists that the respondent’s petition for review before the CA was filed out of time. The
petitioner posits that the CA may not grant an additional extension of time to file the petition except for the
most compelling reason. She contends that the fact that respondent’s counsel needed additional time to
secure the certified copy of his annexes cannot be considered as a compelling reason that would justify
an additional period of

extension. She admits, though, that this issue was raised for the first time in their motion for
reconsideration, but insists that it can be raised at any time since it concerns the jurisdiction of the CA
over the petition.
The petitioner further posits that prescription and laches are unavailing because there was an express
trust relationship between the petitioner and Crispulo Rojas and his heirs, and express trusts do not
prescribe. Even assuming that it was not an express trust, there was a resulting trust which generally
does not prescribe unless there is repudiation by the trustee.

For her part, the respondent argues that the petitioners are now estopped from questioning the CA
Resolution granting her second motion for extension to file the petition for review. She notes that the
petitioner did not raise this issue in the comment that she filed in the CA. In any case, the grant of the
second extension of time was warranted considering that the certified true copy of the assailed RTC
orders did not arrive at the office of respondent’s counsel in Cebu City in time for the filing of the petition.

On the merits, the respondent asserts that the complaint is barred by prescription, laches and estoppel.
From 1948 until his death in 1978, Crispulo cultivated the property and was in adverse, peaceful and
continuous possession thereof in the concept of owner. It took the petitioner 49 years from 1948 before
she filed the complaint for recovery of the property in 1997. Granting that it was only in 1980 that she
found out that the respondent adversely possessed the property, still petitioner allowed 17 years to
elapse before she asserted her alleged right over the property.

Finally, the respondent maintains that the other co-owners are indispensable parties to the case; and
because they were not impleaded, the case should be dismissed.

The petition has no merit.

On the procedural issue raised by the petitioner, we find no reversible error in the grant by the CA of the
second motion for extension of time to file the respondent’s petition. The grant or denial of a motion for
extension of time is addressed to the sound discretion of the court.18 The CA obviously considered the
difficulty in securing a certified true copy of the assailed decision because of the distance between the
office of respondent’s counsel and the trial court as a compelling reason for the request. In the absence of
any showing that the CA granted the motion for extension capriciously, such exercise of discretion will not
be disturbed by this Court.

On the second issue, the petitioner insists that her right of action to recover the property cannot be barred
by prescription or laches even with the respondent’s uninterrupted possession of the property for 49 years
because there existed between her and her father an express trust or a resulting trust. Indeed, if no trust
relations existed, the possession of the property by the respondent, through her predecessor, which dates
back to 1948, would already have given rise to acquisitive prescription in accordance with Act No. 190
(Code of Civil Procedure).19 Under Section 40 of Act No. 190, an action for recovery of real property, or of
an interest therein, can be brought only within ten years after the cause of action accrues. This period
coincides with the ten-year period for acquisitive prescription provided under Section 4120 of the same
Act.

Thus, the resolution of the second issue hinges on our determination of the existence of a trust over the
property --- express or implied --- between the petitioner and her father.

A trust is the legal relationship between one person having an equitable ownership of property and
another person owning the legal title to such property, the equitable ownership of the former entitling him
to the performance of certain duties and the exercise of certain powers by the latter.21 Trusts are either
express or implied.22 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.23 Implied
trusts are those which, without being expressed, are deducible from the nature of the transaction as
matters of intent or, independently, of the particular intention of the parties, as being superinduced on the
transaction by operation of law basically by reason of equity.24 An implied trust may either be a resulting
trust or a constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire by prescription a property
entrusted to him unless he repudiates the trust.25 The following discussion is instructive:

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 que trust does not prescribe, 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."

The rule of imprescriptibility of the action to recover property held in trust may possibly apply to resulting
trusts as long as the trustee has not repudiated the trust.

xxxx

Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust for the
recovery of the property held in trust where (a) the trustee has performed unequivocal acts of repudiation
amounting to an ouster of the cestui que trust; (b) such positive acts of repudiation have been made
known to the cestui que trust, and (c) the evidence thereon is clear and conclusive.26

As a rule, however, the burden of proving the existence of a trust is on the party asserting its existence,
and such proof must be clear and satisfactorily show the existence of the trust and its elements.27 The
presence of the following elements must be proved: (1) a trustor or settlor who executes the instrument
creating the trust; (2) a trustee, who is the person expressly designated to carry out the trust; (3) the trust
res, consisting of duly identified and definite real properties; and (4) the cestui que trust, or beneficiaries
whose identity must be clear.28 Accordingly, it was incumbent upon petitioner to prove the existence of
the trust relationship. And petitioner sadly failed to discharge that burden.

The existence of express trusts concerning real property may not be established by parol evidence.29 It
must be proven by some writing or deed. In this case, the only evidence to support the claim that an
express trust existed between the petitioner and her father was the self-serving testimony of the
petitioner. Bare allegations do not constitute evidence adequate to support a conclusion. They are not
equivalent to proof under the Rules of Court.30

In one case, the Court allowed oral testimony to prove the existence of a trust, which had been partially
performed. It was stressed therein that what is important is that there should be an intention to create a
trust, thus:

What is crucial is the intention to create a trust. While oftentimes the intention is manifested by the trustor
in express or explicit language, such intention may be manifested by inference from what the trustor has
said or done, from the nature of the transaction, or from the circumstances surrounding the creation of the
purported trust.

However, an inference of the intention to create a trust, made from language, conduct or circumstances,
must be made with reasonable certainty. It cannot rest on vague, uncertain or indefinite declarations. An
inference of intention to create a trust, predicated only on circumstances, can be made only where they
admit of no other interpretation.31
Although no particular words are required for the creation of an express trust, a clear intention to create a
trust must be shown; and the proof of fiduciary relationship must be clear and convincing. 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.32

In the case at bench, an intention to create a trust cannot be inferred from the petitioner’s testimony and
the attendant facts and circumstances. The petitioner testified only to the effect that her agreement with
her father was that she will be given a share in the produce of the property, thus:

Q: What was your agreement with your father Crispulo Rojas when you left this property to him?

A: Every time that they will make copra, they will give a share.

Q: In what particular part in Mindanao [did] you stay with your husband?

A: Bansalan, Davao del Sur.

Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas comply with his obligation
of giving your share the proceeds of the land?

A: When he was still alive, he gave us every three months sometimes ₱200.00 and sometimes
₱300.00.33

This allegation, standing alone as it does, is inadequate to establish the existence of a trust because
profit-sharing per se, does not necessarily translate to a trust relation. It could also be present in other
relations, such as in deposit.

What distinguishes a trust from other relations is the separation of the legal title and equitable ownership
of the property. In a trust relation, legal title is vested in the fiduciary while equitable ownership is vested
in a cestui que trust. Such is not true in this case. The petitioner alleged in her complaint that the tax
declaration of the land was transferred to the name of Crispulo without her consent. Had it been her
intention to create a trust and make Crispulo her trustee, she would not have made an issue out of this
because in a trust agreement, legal title is vested in the trustee. The trustee would necessarily have the
right to transfer the tax declaration in his name and to pay the taxes on the property. These acts would be
treated as beneficial to the cestui que trust and would not amount to an adverse possession.34

Neither can it be deduced from the circumstances of the case that a resulting trust was
created.1âwphi1 A resulting trust is a species of implied trust that is presumed always to have been
contemplated by the parties, the intention as to which can be found in the nature of their transaction
although not expressed in a deed or instrument of conveyance. A resulting trust is based on the equitable
doctrine that it is the more valuable consideration than the legal title that determines the equitable interest
in property.35

While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by
the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.36 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.37 In the present case, there was no evidence
of any transaction between the petitioner and her father from which it can be inferred that a resulting trust
was intended.
In light of the disquisitions, we hold that there was no express trust or resulting trust established between
the petitioner and her father. Thus, in the absence of a trust relation, we can only conclude that Crispulo’s
uninterrupted possession of the subject property for 49 years, coupled with the performance of acts of
ownership, such as payment of real estate taxes, ripened into ownership. The statutory period of
prescription commences when a person who has neither title nor good faith, secures a tax declaration in
his name and may, therefore, be said to have adversely claimed ownership of the lot.38 While tax
declarations and receipts are not conclusive evidence of ownership and do not prove title to the land,
nevertheless, when coupled with actual possession, they constitute evidence of great weight and can be
the basis of a claim of ownership through prescription.39 Moreover, Section 41 of Act No. 190 allows
adverse possession in any character to ripen into ownership after the lapse of ten years. There could be
prescription under the said section even in the absence of good faith and just title.40

All the foregoing notwithstanding, even if we sustain petitioner’s claim that she was the owner of the
property and that she constituted a trust over the property with her father as the trustee, such a finding
still would not advance her case.

Assuming that such a relation existed, it terminated upon Crispulo’s death in 1978. A trust terminates
upon the death of the trustee where the trust is personal to the trustee in the sense that the trustor
intended no other person to administer it.41 If Crispulo was indeed appointed as trustee of the property, it
cannot be said that such appointment was intended to be conveyed to the respondent or any of Crispulo’s
other heirs. Hence, after Crispulo’s death, the respondent had no right to retain possession of the
property. At such point, a constructive trust would be created over the property by operation of law.
Where one mistakenly retains property which rightfully belongs to another, a constructive trust is the
proper remedial device to correct the situation.42

A constructive trust is one created not by any word or phrase, either expressly or impliedly, evincing a
direct intention to create a trust, but one which arises in order to satisfy the demands of justice. It does
not come about by agreement or intention but in the main by operation of law, construed 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.43

As previously stated, the rule that a trustee cannot, by prescription, acquire 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.44 A constructive trust, unlike an express trust, does not emanate from,
or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by
confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary
relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for
the beneficiary.45 The relation of trustee and cestui que trust does not in fact exist, and the holding of a
constructive trust is for the trustee himself, and therefore, at all times adverse.

In addition, a number of other factors militate against the petitioner’s case. First, the petitioner is estopped
from asserting ownership over the subject property by her failure to protest its inclusion in the estate of
Crispulo. The CA, thus, correctly observed that:

Even in the probate proceedings instituted by the heirs of Crispulo Rojas, which included her as a
daughter of the first marriage, Cañezo never contested the inclusion of the contested property in the
estate of her father. She even participated in the project of partition of her father’s estate which was
approved by the probate court in 1984. After personally receiving her share in the proceeds of the estate
for 12 years, she suddenly claims ownership of part of her father’s estate in 1997.

The principle of estoppel in pais applies when -- by one’s acts, representations, admissions, or silence
when there is a need to speak out -- one, intentionally or through culpable negligence, induces another to
believe certain facts to exist; and the latter rightfully relies and acts on such belief, so as to be prejudiced
if the former is permitted to deny the existence of those facts.46 Such a situation obtains in the instant
case.

Second, the action is barred by laches. The petitioner allegedly discovered that the property was being
possessed by the respondent in 1980.47 However, it was only in 1997 that she filed the action to recover
the property. Laches is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to it has either abandoned or declined to assert it.48

Finally, the respondent asserts that the court a quo ought to have dismissed the complaint for failure to
implead the other heirs who are indispensable parties. We agree. We note that the complaint filed by the
petitioner sought to recover ownership, not just possession of the property; thus, the suit is in the nature
of an action for reconveyance. It is axiomatic that owners of property over which reconveyance is
asserted are indispensable parties. Without them being impleaded, no relief is available, for the court
cannot render valid judgment. Being indispensable parties, their absence in the suit renders all
subsequent actions of the trial court null and void for want of authority to act, not only as to the absent
parties but even as to those present. Thus, when indispensable parties are not before the court, the
action should be dismissed.49 At any rate, a resolution of this issue is now purely academic in light of our
finding that the complaint is already barred by prescription, estoppel and laches.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals, dated
September 7, 2000, and Resolution dated May 9, 2001, are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

INOCENCIA DELUAO and FELIPE DELUAO plaintiffs-appellees,

vs.
NICANOR CASTEEL and JUAN DEPRA, defendants,
NICANOR CASTEEL, defendant-appellant.

Aportadera and Palabrica and Pelaez, Jalandoni and Jamir plaintiffs-appellees.

Ruiz Law Offices for defendant-appellant.

CASTRO, J.:

This is an appeal from the order of May 2, 1956, the decision of May 4, 1956 and the order of May 21,
1956, all of the Court of First Instance of Davao, in civil case 629. The basic action is for specific
performance, and damages resulting from an alleged breach of contract.

In 1940 Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of
Malalag (now the Municipality of Malalag), Municipality of Padada, Davao. No action was taken thereon
by the authorities concerned. During the Japanese occupation, he filed another fishpond application for
the same area, but because of the conditions then prevailing, it was not acted upon either. On December
12, 1945 he filed a third fishpond application for the same area, which, after a survey, was found to
contain 178.76 hectares. Upon investigation conducted by a representative of the Bureau of Forestry, it
was discovered that the area applied for was still needed for firewood production. Hence on May 13, 1946
this third application was disapproved.
Despite the said rejection, Casteel did not lose interest. He filed a motion for reconsideration. While this
motion was pending resolution, he was advised by the district forester of Davao City that no further action
would be taken on his motion, unless he filed a new application for the area concerned. So he filed on
May 27, 1947 his fishpond application 1717.

Meanwhile, several applications were submitted by other persons for portions of the area covered by
Casteel's application.

On May 20, 1946 Leoncio Aradillos filed his fishpond application 1202 covering 10 hectares of land found
inside the area applied for by Casteel; he was later granted fishpond permit F-289-C covering 9.3
hectares certified as available for fishpond purposes by the Bureau of Forestry.

Victor D. Carpio filed on August 8, 1946 his fishpond application 762 over a portion of the land applied for
by Casteel. Alejandro Cacam's fishpond application 1276, filed on December 26, 1946, was given due
course on December 9, 1947 with the issuance to him of fishpond permit F-539-C to develop 30 hectares
of land comprising a portion of the area applied for by Casteel, upon certification of the Bureau of Forestry
that the area was likewise available for fishpond purposes. On November 17, 1948 Felipe Deluao filed his
own fishpond application for the area covered by Casteel's application.

Because of the threat poised upon his position by the above applicants who entered upon and spread
themselves within the area, Casteel realized the urgent necessity of expanding his occupation thereof by
constructing dikes and cultivating marketable fishes, in order to prevent old and new squatters from
usurping the land. But lacking financial resources at that time, he sought financial aid from his uncle
Felipe Deluao who then extended loans totalling more or less P27,000 with which to finance the needed
improvements on the fishpond. Hence, a wide productive fishpond was built.

Moreover, upon learning that portions of the area applied for by him were already occupied by rival
applicants, Casteel immediately filed the corresponding protests. Consequently, two administrative cases
ensued involving the area in question, to wit: DANR Case 353, entitled "Fp. Ap. No. 661 (now Fp. A. No.
1717), Nicanor Casteel, applicant-appellant versus Fp. A. No. 763, Victorio D. Carpio, applicant-
appellant"; and DANR Case 353-B, entitled "Fp. A. No. 661 (now Fp. A. No. 1717), Nicanor Casteel,
applicant-protestant versus Fp. Permit No. 289-C, Leoncio Aradillos, Fp. Permit No. 539-C, Alejandro
Cacam, Permittees-Respondents."

However, despite the finding made in the investigation of the above administrative cases that Casteel had
already introduced improvements on portions of the area applied for by him in the form of dikes, fishpond
gates, clearings, etc., the Director of Fisheries nevertheless rejected Casteel's application on October 25,
1949, required him to remove all the improvements which he had introduced on the land, and ordered
that the land be leased through public auction. Failing to secure a favorable resolution of his motion for
reconsideration of the Director's order, Casteel appealed to the Secretary of Agriculture and Natural
Resources.

In the interregnum, some more incidents occurred. To avoid repetition, they will be taken up in our
discussion of the appellant's third assignment of error.

On November 25, 1949 Inocencia Deluao (wife of Felipe Deluao) as party of the first part, and Nicanor
Casteel as party of the second part, executed a contract — denominated a "contract of service" — the
salient provisions of which are as follows:

That the Party of the First Part in consideration of the mutual covenants and agreements made herein to
the Party of the Second Part, hereby enter into a contract of service, whereby the Party of the First Part
hires and employs the Party of the Second Part on the following terms and conditions, to wit:
That the Party of the First Part will finance as she has hereby financed the sum of TWENTY SEVEN
THOUSAND PESOS (P27,000.00), Philippine Currency, to the Party of the Second Part who renders only
his services for the construction and improvements of a fishpond at Barrio Malalag, Municipality of
Padada, Province of Davao, Philippines;

That the Party of the Second Part will be the Manager and sole buyer of all the produce of the fish that
will be produced from said fishpond;

That the Party of the First Part will be the administrator of the same she having financed the construction
and improvement of said fishpond;

That this contract was the result of a verbal agreement entered into between the Parties sometime in the
month of November, 1947, with all the above-mentioned conditions enumerated; ...

On the same date the above contract was entered into, Inocencia Deluao executed a special power of
attorney in favor of Jesus Donesa, extending to the latter the authority "To represent me in the
administration of the fishpond at Malalag, Municipality of Padada, Province of Davao, Philippines, which
has been applied for fishpond permit by Nicanor Casteel, but rejected by the Bureau of Fisheries, and to
supervise, demand, receive, and collect the value of the fish that is being periodically realized from it...."

On November 29, 1949 the Director of Fisheries rejected the application filed by Felipe Deluao on
November 17, 1948. Unfazed by this rejection, Deluao reiterated his claim over the same area in the two
administrative cases (DANR Cases 353 and 353-B) and asked for reinvestigation of the application of
Nicanor Casteel over the subject fishpond. However, by letter dated March 15, 1950 sent to the Secretary
of Commerce and Agriculture and Natural Resources (now Secretary of Agriculture and Natural
Resources), Deluao withdrew his petition for reinvestigation.

On September 15, 1950 the Secretary of Agriculture and Natural Resources issued a decision in DANR
Case 353, the dispositive portion of which reads as follows:

In view of all the foregoing considerations, Fp. A. No. 661 (now Fp. A. No. 1717) of Nicanor Casteel
should be, as hereby it is, reinstated and given due course for the area indicated in the sketch drawn at
the back of the last page hereof; and Fp. A. No. 762 of Victorio D. Carpio shall remain rejected.

On the same date, the same official issued a decision in DANR Case 353-B, the dispositive portion
stating as follows:

WHEREFORE, Fishpond Permit No. F-289-C of Leoncio Aradillos and Fishpond Permit No. F-539-C of
Alejandro Cacam, should be, as they are hereby cancelled and revoked; Nicanor Casteel is required to
pay the improvements introduced thereon by said permittees in accordance with the terms and
dispositions contained elsewhere in this decision....

Sometime in January 1951 Nicanor Casteel forbade Inocencia Deluao from further administering the
fishpond, and ejected the latter's representative (encargado), Jesus Donesa, from the premises.

Alleging violation of the contract of service (exhibit A) entered into between Inocencia Deluao and Nicanor
Casteel, Felipe Deluao and Inocencia Deluao on April 3, 1951 filed an action in the Court of First Instance
of Davao for specific performance and damages against Nicanor Casteel and Juan Depra (who, they
alleged, instigated Casteel to violate his contract), praying inter alia, (a) that Casteel be ordered to
respect and abide by the terms and conditions of said contract and that Inocencia Deluao be allowed to
continue administering the said fishpond and collecting the proceeds from the sale of the fishes caught
from time to time; and (b) that the defendants be ordered to pay jointly and severally to plaintiffs the sum
of P20,000 in damages.
On April 18, 1951 the plaintiffs filed an ex parte motion for the issuance of a preliminary injunction,
praying among other things, that during the pendency of the case and upon their filling the requisite bond
as may be fixed by the court, a preliminary injunction be issued to restrain Casteel from doing the acts
complained of, and that after trial the said injunction be made permanent. The lower court on April 26,
1951 granted the motion, and, two days later, it issued a preliminary mandatory injunction addressed to
Casteel, the dispositive portion of which reads as follows:

POR EL PRESENTE, queda usted ordenado que, hasta nueva orden, usted, el demandado y todos usu
abogados, agentes, mandatarios y demas personas que obren en su ayuda, desista de impedir a la
demandante Inocencia R. Deluao que continue administrando personalmente la pesqueria objeto de esta
causa y que la misma continue recibiendo los productos de la venta de los pescados provenientes de
dicha pesqueria, y que, asimismo, se prohibe a dicho demandado Nicanor Casteel a desahuciar
mediante fuerza al encargado de los demandantes llamado Jesus Donesa de la pesqueria objeto de la
demanda de autos.

On May 10, 1951 Casteel filed a motion to dissolve the injunction, alleging among others, that he was the
owner, lawful applicant and occupant of the fishpond in question. This motion, opposed by the plaintiffs
on June 15, 1951, was denied by the lower court in its order of June 26, 1961.

The defendants on May 14, 1951 filed their answer with counterclaim, amended on January 8, 1952,
denying the material averments of the plaintiffs' complaint. A reply to the defendants' amended answer
was filed by the plaintiffs on January 31, 1952.

The defendant Juan Depra moved on May 22, 1951 to dismiss the complaint as to him. On June 4, 1951
the plaintiffs opposed his motion.

The defendants filed on October 3, 1951 a joint motion to dismiss on the ground that the plaintiffs'
complaint failed to state a claim upon which relief may be granted. The motion, opposed by the plaintiffs
on October 12, 1951, was denied for lack of merit by the lower court in its order of October 22, 1951. The
defendants' motion for reconsideration filed on October 31, 1951 suffered the same fate when it was
likewise denied by the lower court in its order of November 12, 1951.

After the issues were joined, the case was set for trial. Then came a series of postponements. The lower
court (Branch I, presided by Judge Enrique A. Fernandez) finally issued on March 21, 1956 an order in
open court, reading as follows: .

Upon petition of plaintiffs, without any objection on the part of defendants, the hearing of this case is
hereby transferred to May 2 and 3, 1956 at 8:30 o'clock in the morning.

This case was filed on April 3, 1951 and under any circumstance this Court will not entertain any other
transfer of hearing of this case and if the parties will not be ready on that day set for hearing, the court will
take the necessary steps for the final determination of this case. (emphasis supplied)

On April 25, 1956 the defendants' counsel received a notice of hearing dated April 21, 1956, issued by
the office of the Clerk of Court (thru the special deputy Clerk of Court) of the Court of First Instance of
Davao, setting the hearing of the case for May 2 and 3, 1956 before Judge Amador Gomez of Branch II.
The defendants, thru counsel, on April 26, 1956 filed a motion for postponement. Acting on this motion,
the lower court (Branch II, presided by Judge Gomez) issued an order dated April 27, 1956, quoted as
follows:

This is a motion for postponement of the hearing of this case set for May 2 and 3, 1956. The motion is
filed by the counsel for the defendants and has the conformity of the counsel for the plaintiffs.
An examination of the records of this case shows that this case was initiated as early as April 1951 and
that the same has been under advisement of the Honorable Enrique A. Fernandez, Presiding Judge of
Branch No. I, since September 24, 1953, and that various incidents have already been considered and
resolved by Judge Fernandez on various occasions. The last order issued by Judge Fernandez on this
case was issued on March 21, 1956, wherein he definitely states that the Court will not entertain any
further postponement of the hearing of this case.

CONSIDERING ALL THE FOREGOING, the Court believes that the consideration and termination of any
incident referring to this case should be referred back to Branch I, so that the same may be disposed of
therein. (emphasis supplied)

A copy of the abovequoted order was served on the defendants' counsel on May 4, 1956.

On the scheduled date of hearing, that is, on May 2, 1956, the lower court (Branch I, with Judge
Fernandez presiding), when informed about the defendants' motion for postponement filed on April 26,
1956, issued an order reiterating its previous order handed down in open court on March 21, 1956 and
directing the plaintiffs to introduce their evidence ex parte, there being no appearance on the part of the
defendants or their counsel. On the basis of the plaintiffs' evidence, a decision was rendered on May 4,
1956 the dispositive portion of which reads as follows:

EN SU VIRTUD, el Juzgado dicta de decision a favor de los demandantes y en contra del demandado
Nicanor Casteel:

(a) Declara permanente el interdicto prohibitorio expedido contra el demandado;

(b) Ordena al demandado entregue la demandante la posesion y administracion de la mitad (½) del
"fishpond" en cuestion con todas las mejoras existentes dentro de la misma;

(c) Condena al demandado a pagar a la demandante la suma de P200.00 mensualmente en concepto de

danos a contar de la fecha de la expiracion de los 30 dias de la promulgacion de esta decision hasta que
entregue la posesion y administracion de la porcion del "fishpond" en conflicto;

(d) Condena al demandado a pagar a la demandante la suma de P2,000.00 valor de los pescado
beneficiados, mas los intereses legales de la fecha de la incoacion de la demanda de autos hasta el
completo pago de la obligacion principal;

(e) Condena al demandado a pagar a la demandante la suma de P2,000.00, por gastos incurridos por
aquella durante la pendencia de esta causa;

(f) Condena al demandado a pagar a la demandante, en concepto de honorarios, la suma de P2,000.00;

(g) Ordena el sobreseimiento de esta demanda, por insuficiencia de pruebas, en tanto en cuanto se
refiere al demandado Juan Depra;

(h) Ordena el sobreseimiento de la reconvencion de los demandados por falta de pruebas;

(i) Con las costas contra del demandado, Casteel.

The defendant Casteel filed a petition for relief from the foregoing decision, alleging, inter alia, lack of
knowledge of the order of the court a quo setting the case for trial. The petition, however, was denied by
the lower court in its order of May 21, 1956, the pertinent portion of which reads as follows:
The duty of Atty. Ruiz, was not to inquire from the Clerk of Court whether the trial of this case has been
transferred or not, but to inquire from the presiding Judge, particularly because his motion asking the
transfer of this case was not set for hearing and was not also acted upon.

Atty. Ruiz knows the nature of the order of this Court dated March 21, 1956, which reads as follows:

Upon petition of the plaintiff without any objection on the part of the defendants, the hearing of this case is
hereby transferred to May 2 and 3, 1956, at 8:30 o'clock in the morning.

This case was filed on April 3, 1951, and under any circumstance this Court will not entertain any other
transfer of the hearing of this case, and if the parties will not be ready on the day set for hearing, the
Court will take necessary steps for the final disposition of this case.

In view of the order above-quoted, the Court will not accede to any transfer of this case and the duty of
Atty. Ruiz is no other than to be present in the Sala of this Court and to call the attention of the same to
the existence of his motion for transfer.

Petition for relief from judgment filed by Atty. Ruiz in behalf of the defendant, not well taken, the same is
hereby denied.

Dissatisfied with the said ruling, Casteel appealed to the Court of Appeals which certified the case to us
for final determination on the ground that it involves only questions of law.

Casteel raises the following issues:

(1) Whether the lower court committed gross abuse of discretion when it ordered reception of the
appellees' evidence in the absence of the appellant at the trial on May 2, 1956, thus depriving the
appellant of his day in court and of his property without due process of law;

(2) Whether the lower court committed grave abuse of discretion when it denied the verified petition for
relief from judgment filed by the appellant on May 11, 1956 in accordance with Rule 38, Rules of Court;
and

(3) Whether the lower court erred in ordering the issuance ex parte of a writ of preliminary injunction
against defendant-appellant, and in not dismissing appellees' complaint.

1. The first and second issues must be resolved against the appellant.

The record indisputably shows that in the order given in open court on March 21, 1956, the lower court
set the case for hearing on May 2 and 3, 1956 at 8:30 o'clock in the morning and empathically stated that,
since the case had been pending since April 3, 1951, it would not entertain any further motion for transfer
of the scheduled hearing.

An order given in open court is presumed received by the parties on the very date and time of
promulgation,1 and amounts to a legal notification for all legal purposes.2 The order of March 21, 1956,
given in open court, was a valid notice to the parties, and the notice of hearing dated April 21, 1956 or
one month thereafter, was a superfluity. Moreover, as between the order of March 21, 1956, duly
promulgated by the lower court, thru Judge Fernandez, and the notice of hearing signed by a "special
deputy clerk of court" setting the hearing in another branch of the same court, the former's order was the
one legally binding. This is because the incidents of postponements and adjournments are controlled by
the court and not by the clerk of court, pursuant to section 4, Rule 31 (now sec. 3, Rule 22) of the Rules
of Court.
Much less had the clerk of court the authority to interfere with the order of the court or to transfer the cage
from one sala to another without authority or order from the court where the case originated and was
being tried. He had neither the duty nor prerogative to re-assign the trial of the case to a different branch
of the same court. His duty as such clerk of court, in so far as the incident in question was concerned,
was simply to prepare the trial calendar. And this duty devolved upon the clerk of court and not upon the
"special deputy clerk of court" who purportedly signed the notice of hearing.

It is of no moment that the motion for postponement had the conformity of the appellees' counsel. The
postponement of hearings does not depend upon agreement of the parties, but upon the court's
discretion.3

The record further discloses that Casteel was represented by a total of 12 lawyers, none of whom had
ever withdrawn as counsel. Notice to Atty. Ruiz of the order dated March 21, 1956 intransferably setting
the case for hearing for May 2 and 3, 1956, was sufficient notice to all the appellant's eleven other
counsel of record. This is a well-settled rule in our jurisdiction.4

It was the duty of Atty. Ruiz, or of the other lawyers of record, not excluding the appellant himself, to
appear before Judge Fernandez on the scheduled dates of hearing Parties and their lawyers have no
right to presume that their motions for postponement will be granted.5 For indeed, the appellant and his
12 lawyers cannot pretend ignorance of the recorded fact that since September 24, 1953 until the trial
held on May 2, 1956, the case was under the advisement of Judge Fernandez who presided over Branch
I. There was, therefore, no necessity to "re-assign" the same to Branch II because Judge Fernandez had
exclusive control of said case, unless he was legally inhibited to try the case — and he was not.

There is truth in the appellant's contention that it is the duty of the clerk of court — not of the Court — to
prepare the trial calendar. But the assignment or reassignment of cases already pending in one sala to
another sala, and the setting of the date of trial after the trial calendar has been prepared, fall within the
exclusive control of the presiding judge.

The appellant does not deny the appellees' claim that on May 2 and 3, 1956, the office of the clerk of
court of the Court of First Instance of Davao was located directly below Branch I. If the appellant and his
counsel had exercised due diligence, there was no impediment to their going upstairs to the second
storey of the Court of First Instance building in Davao on May 2, 1956 and checking if the case was
scheduled for hearing in the said sala. The appellant after all admits that on May 2, 1956 his counsel went
to the office of the clerk of court.

The appellant's statement that parties as a matter of right are entitled to notice of trial, is correct. But he
was properly accorded this right. He was notified in open court on March 21, 1956 that the case was
definitely and intransferably set for hearing on May 2 and 3, 1956 before Branch I. He cannot argue that,
pursuant to the doctrine in Siochi vs. Tirona,6 his counsel was entitled to a timely notice of the denial of
his motion for postponement. In the cited case the motion for postponement was the first one filed by the
defendant; in the case at bar, there had already been a series of postponements. Unlike the case at bar,
the Siochi case was not intransferably set for hearing. Finally, whereas the cited case did not spend for a
long time, the case at bar was only finally and intransferably set for hearing on March 21, 1956 — after
almost five years had elapsed from the filing of the complaint on April 3, 1951.

The pretension of the appellant and his 12 counsel of record that they lacked ample time to prepare for
trial is unacceptable because between March 21, 1956 and May 2, 1956, they had one month and ten
days to do so. In effect, the appellant had waived his right to appear at the trial and therefore he cannot
be heard to complain that he has been deprived of his property without due process of law.7 Verily, the
constitutional requirements of due process have been fulfilled in this case: the lower court is a competent
court; it lawfully acquired jurisdiction over the person of the defendant (appellant) and the subject matter
of the action; the defendant (appellant) was given an opportunity to be heard; and judgment was rendered
upon lawful hearing.8
2. Finally, the appellant contends that the lower court incurred an error in ordering the issuance ex
parte of a writ of preliminary injunction against him, and in not dismissing the appellee's complaint. We
find this contention meritorious.

Apparently, the court a quo relied on exhibit A — the so-called "contract of service" — and the appellees'
contention that it created a contract of co-ownership and partnership between Inocencia Deluao and the
appellant over the fishpond in question.

Too well-settled to require any citation of authority is the rule that everyone is conclusively presumed to
know the law. It must be assumed, conformably to such rule, that the parties entered into the so-called
"contract of service" cognizant of the mandatory and prohibitory laws governing the filing of applications
for fishpond permits. And since they were aware of the said laws, it must likewise be assumed — in
fairness to the parties — that they did not intend to violate them. This view must perforce negate the
appellees' allegation that exhibit A created a contract of co-ownership between the parties over the
disputed fishpond. Were we to admit the establishment of a co-ownership violative of the prohibitory laws
which will hereafter be discussed, we shall be compelled to declare altogether the nullity of the contract.
This would certainly not serve the cause of equity and justice, considering that rights and obligations have
already arisen between the parties. We shall therefore construe the contract as one of partnership,
divided into two parts — namely, a contract of partnership to exploit the fishpond pending its award to
either Felipe Deluao or Nicanor Casteel, and a contract of partnership to divide the fishpond between
them after such award. The first is valid, the second illegal.

It is well to note that when the appellee Inocencia Deluao and the appellant entered into the so-called
"contract of service" on November 25, 1949, there were two pending applications over the fishpond. One
was Casteel's which was appealed by him to the Secretary of Agriculture and Natural Resources after it
was disallowed by the Director of Fisheries on October 25, 1949. The other was Felipe Deluao's
application over the same area which was likewise rejected by the Director of Fisheries on November 29,
1949, refiled by Deluao and later on withdrawn by him by letter dated March 15, 1950 to the Secretary of
Agriculture and Natural Resources. Clearly, although the fishpond was then in the possession of Casteel,
neither he nor, Felipe Deluao was the holder of a fishpond permit over the area. But be that as it may,
they were not however precluded from exploiting the fishpond pending resolution of Casteel's appeal or
the approval of Deluao's application over the same area — whichever event happened first. No law, rule
or regulation prohibited them from doing so. Thus, rather than let the fishpond remain idle they cultivated
it.

The evidence preponderates in favor of the view that the initial intention of the parties was not to form a
co-ownership but to establish a partnership — Inocencia Deluao as capitalist partner and Casteel as
industrial partner — the ultimate undertaking of which was to divide into two equal parts such portion of
the fishpond as might have been developed by the amount extended by the plaintiffs-appellees, with the
further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of
the fishpond that would pertain to him. This can be gleaned, among others, from the letter of Casteel to
Felipe Deluao on November 15, 1949, which states, inter alia:

... [W]ith respect to your allowing me to use your money, same will redound to your benefit because you
are the ones interested in half of the work we have done so far, besides I did not insist on our being
partners in my fishpond permit, but it was you "Tatay" Eping the one who wanted that we be partners and
it so happened that we became partners because I am poor, but in the midst of my poverty it never
occurred to me to be unfair to you. Therefore so that each of us may be secured, let us have a document
prepared to the effect that we are partners in the fishpond that we caused to be made here in Balasinon,
but it does not mean that you will treat me as one of your "Bantay" (caretaker) on wage basis but not
earning wages at all, while the truth is that we are partners. In the event that you are not amenable to my
proposition and consider me as "Bantay" (caretaker) instead, do not blame me if I withdraw all my cases
and be left without even a little and you likewise.
(emphasis supplied)9
Pursuant to the foregoing suggestion of the appellant that a document be drawn evidencing their
partnership, the appellee Inocencia Deluao and the appellant executed exhibit A which, although
denominated a "contract of service," was actually the memorandum of their partnership agreement. That
it was not a contract of the services of the appellant, was admitted by the appellees themselves in their
letter10 to Casteel dated December 19, 1949 wherein they stated that they did not employ him in his
(Casteel's) claim but because he used their money in developing and improving the fishpond, his right
must be divided between them. Of course, although exhibit A did not specify any wage or share
appertaining to the appellant as industrial partner, he was so entitled — this being one of the conditions
he specified for the execution of the document of partnership.11

Further exchanges of letters between the parties reveal the continuing intent to divide the fishpond. In a
letter,12 dated March 24, 1950, the appellant suggested that they divide the fishpond and the remaining
capital, and offered to pay the Deluaos a yearly installment of P3,000 — presumably as reimbursement
for the expenses of the appellees for the development and improvement of the one-half that would pertain
to the appellant. Two days later, the appellee Felipe Deluao replied,13expressing his concurrence in the
appellant's suggestion and advising the latter to ask for a reconsideration of the order of the Director of
Fisheries disapproving his (appellant's) application, so that if a favorable decision was secured, then they
would divide the area.

Apparently relying on the partnership agreement, the appellee Felipe Deluao saw no further need to
maintain his petition for the reinvestigation of Casteel's application. Thus by letter14 dated March 15, 1950
addressed to the Secretary of Agriculture and Natural Resources, he withdrew his petition on the alleged
ground that he was no longer interested in the area, but stated however that he wanted his interest to be
protected and his capital to be reimbursed by the highest bidder.

The arrangement under the so-called "contract of service" continued until the decisions both dated
September 15, 1950 were issued by the Secretary of Agriculture and Natural Resources in DANR Cases
353 and 353-B. This development, by itself, brought about the dissolution of the partnership. Moreover,
subsequent events likewise reveal the intent of both parties to terminate the partnership because each
refused to share the fishpond with the other.

Art. 1830(3) of the Civil Code enumerates, as one of the causes for the dissolution of a partnership, "...
any event which makes it unlawful for the business of the partnership to be carried on or for the members
to carry it on in partnership." The approval of the appellant's fishpond application by the decisions in
DANR Cases 353 and 353-B brought to the fore several provisions of law which made the continuation of
the partnership unlawful and therefore caused its ipso facto dissolution.

Act 4003, known as the Fisheries Act, prohibits the holder of a fishpond permit (the permittee) from
transferring or subletting the fishpond granted to him, without the previous consent or approval of the
Secretary of Agriculture and Natural Resources.15 To the same effect is Condition No. 3 of the fishpond
permit which states that "The permittee shall not transfer or sublet all or any area herein granted or any
rights acquired therein without the previous consent and approval of this Office." Parenthetically, we must
observe that in DANR Case 353-B, the permit granted to one of the parties therein, Leoncio Aradillos,
was cancelled not solely for the reason that his permit covered a portion of the area included in the
appellant's prior fishpond application, but also because, upon investigation, it was ascertained thru the
admission of Aradillos himself that due to lack of capital, he allowed one Lino Estepa to develop with the
latter's capital the area covered by his fishpond permit F-289-C with the understanding that he (Aradillos)
would be given a share in the produce thereof.16

Sec. 40 of Commonwealth Act 141, otherwise known as the Public Land Act, likewise provides that

The lessee shall not assign, encumber, or sublet his rights without the consent of the Secretary of
Agriculture and Commerce, and the violation of this condition shall avoid the contract; Provided, That
assignment, encumbrance, or subletting for purposes of speculation shall not be permitted in any
case: Provided, further, That nothing contained in this section shall be understood or construed to permit
the assignment, encumbrance, or subletting of lands leased under this Act, or under any previous Act, to
persons, corporations, or associations which under this Act, are not authorized to lease public lands.

Finally, section 37 of Administrative Order No. 14 of the Secretary of Agriculture and Natural Resources
issued in August 1937, prohibits a transfer or sublease unless first approved by the Director of Lands and
under such terms and conditions as he may prescribe. Thus, it states:

When a transfer or sub-lease of area and improvement may be allowed. — If the permittee or lessee had,
unless otherwise specifically provided, held the permit or lease and actually operated and made
improvements on the area for at least one year, he/she may request permission to sub-lease or transfer
the area and improvements under certain conditions.

(a) Transfer subject to approval. — A sub-lease or transfer shall only be valid when first approved by the
Director under such terms and conditions as may be prescribed, otherwise it shall be null and void. A
transfer not previously approved or reported shall be considered sufficient cause for the cancellation of
the permit or lease and forfeiture of the bond and for granting the area to a qualified applicant or bidder,
as provided in subsection (r) of Sec. 33 of this Order.

Since the partnership had for its object the division into two equal parts of the fishpond between the
appellees and the appellant after it shall have been awarded to the latter, and therefore it envisaged the
unauthorized transfer of one-half thereof to parties other than the applicant Casteel, it was dissolved by
the approval of his application and the award to him of the fishpond. The approval was an event which
made it unlawful for the business of the partnership to be carried on or for the members to carry it on in
partnership.

The appellees, however, argue that in approving the appellant's application, the Secretary of Agriculture
and Natural Resources likewise recognized and/or confirmed their property right to one-half of the
fishpond by virtue of the contract of service, exhibit A. But the untenability of this argument would readily
surface if one were to consider that the Secretary of Agriculture and Natural Resources did not do so for
the simple reason that he does not possess the authority to violate the aforementioned prohibitory laws
nor to exempt anyone from their operation.

However, assuming in gratia argumenti that the approval of Casteel's application, coupled with the
foregoing prohibitory laws, was not enough to cause the dissolution ipso facto of their partnership,
succeeding events reveal the intent of both parties to terminate the partnership by refusing to share the
fishpond with the other.

On December 27, 1950 Casteel wrote17 the appellee Inocencia Deluao, expressing his desire to divide
the fishpond so that he could administer his own share, such division to be subject to the approval of the
Secretary of Agriculture and Natural Resources. By letter dated December 29, 1950,18 the appellee Felipe
Deluao demurred to Casteel's proposition because there were allegedly no appropriate grounds to
support the same and, moreover, the conflict over the fishpond had not been finally resolved.

The appellant wrote on January 4, 1951 a last letter19 to the appellee Felipe Deluao wherein the former
expressed his determination to administer the fishpond himself because the decision of the Government
was in his favor and the only reason why administration had been granted to the Deluaos was because
he was indebted to them. In the same letter, the appellant forbade Felipe Deluao from sending the
couple's encargado, Jesus Donesa, to the fishpond. In reply thereto, Felipe Deluao wrote a letter20 dated
January 5, 1951 in which he reiterated his refusal to grant the administration of the fishpond to the
appellant, stating as a ground his belief "that only the competent agencies of the government are in a
better position to render any equitable arrangement relative to the present case; hence, any action we
may privately take may not meet the procedure of legal order."
Inasmuch as the erstwhile partners articulated in the aforecited letters their respective resolutions not to
share the fishpond with each other — in direct violation of the undertaking for which they have
established their partnership — each must be deemed to have expressly withdrawn from the partnership,
thereby causing its dissolution pursuant to art. 1830(2) of the Civil Code which provides, inter alia, that
dissolution is caused "by the express will of any partner at any time."

In this jurisdiction, the Secretary of Agriculture and Natural Resources possesses executive and
administrative powers with regard to the survey, classification, lease, sale or any other form of concession
or disposition and management of the lands of the public domain, and, more specifically, with regard to
the grant or withholding of licenses, permits, leases and contracts over portions of the public domain to be
utilized as fishponds.21, Thus, we held in Pajo, et al. vs. Ago, et al. (L-15414, June 30, 1960), and
reiterated in Ganitano vs. Secretary of Agriculture and Natural Resources, et al.
(L-21167, March 31, 1966), that

... [T]he powers granted to the Secretary of Agriculture and Commerce (Natural Resources) by law
regarding the disposition of public lands such as granting of licenses, permits, leases, and contracts, or
approving, rejecting, reinstating, or cancelling applications, or deciding conflicting applications, are all
executive and administrative in nature. It is a well-recognized principle that purely administrative and
discretionary functions may not be interfered with by the courts (Coloso v. Board of Accountancy, G.R.
No. L-5750, April 20, 1953). In general, courts have no supervising power over the proceedings and
action of the administrative departments of the government. This is generally true with respect to acts
involving the exercise of judgment or discretion, and findings of fact. (54 Am. Jur. 558-559) Findings of
fact by an administrative board or official, following a hearing, are binding upon the courts and will not be
disturbed except where the board or official has gone beyond his statutory authority, exercised
unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of
discretion... (emphasis supplied)

In the case at bar, the Secretary of Agriculture and Natural Resources gave due course to the appellant's
fishpond application 1717 and awarded to him the possession of the area in question. In view of the
finality of the Secretary's decision in DANR Cases 353 and 353-B, and considering the absence of any
proof that the said official exceeded his statutory authority, exercised unconstitutional powers, or acted
with arbitrariness and in disregard of his duty, or with grave abuse of discretion, we can do no less than
respect and maintain unfettered his official acts in the premises. It is a salutary rule that the judicial
department should not dictate to the executive department what to do with regard to the administration
and disposition of the public domain which the law has entrusted to its care and administration. Indeed,
courts cannot superimpose their discretion on that of the land department and compel the latter to do an
act which involves the exercise of judgment and discretion.22

Therefore, with the view that we take of this case, and even assuming that the injunction was properly
issued because present all the requisite grounds for its issuance, its continuation, and, worse, its
declaration as permanent, was improper in the face of the knowledge later acquired by the lower court
that it was the appellant's application over the fishpond which was given due course. After the Secretary
of Agriculture and Natural Resources approved the appellant's application, he became to all intents and
purposes the legal permittee of the area with the corresponding right to possess, occupy and enjoy the
same. Consequently, the lower court erred in issuing the preliminary mandatory injunction. We cannot
overemphasize that an injunction should not be granted to take property out of the possession and control
of one party and place it in the hands of another whose title has not been clearly established by law.23

However, pursuant to our holding that there was a partnership between the parties for the exploitation of
the fishpond before it was awarded to Casteel, this case should be remanded to the lower court for the
reception of evidence relative to an accounting from November 25, 1949 to September 15, 1950, in order
for the court to determine (a) the profits realized by the partnership, (b) the share (in the profits) of
Casteel as industrial partner, (e) the share (in the profits) of Deluao as capitalist partner, and (d) whether
the amounts totalling about P27,000 advanced by Deluao to Casteel for the development and
improvement of the fishpond have already been liquidated. Besides, since the appellee Inocencia Deluao
continued in possession and enjoyment of the fishpond even after it was awarded to Casteel, she did so
no longer in the concept of a capitalist partner but merely as creditor of the appellant, and therefore, she
must likewise submit in the lower court an accounting of the proceeds of the sales of all the fishes
harvested from the fishpond from September 16, 1950 until Casteel shall have been finally given the
possession and enjoyment of the same. In the event that the appellee Deluao has received more than her
lawful credit of P27,000 (or whatever amounts have been advanced to Casteel), plus 6% interest thereon
per annum, then she should reimburse the excess to the appellant.

ACCORDINGLY, the judgment of the lower court is set aside. Another judgment is hereby rendered: (1)
dissolving the injunction issued against the appellant, (2) placing the latter back in possession of the
fishpond in litigation, and (3) remanding this case to the court of origin for the reception of evidence
relative to the accounting that the parties must perforce render in the premises, at the termination of
which the court shall render judgment accordingly. The appellant's counterclaim is dismissed. No
pronouncement as to costs.

G.R. No. 107508 April 25, 1996

PHILIPPINE NATIONAL BANK, petitioner,

vs.
COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF
COMMUNICATIONS, and F. ABANTE MARKETING, respondents.

KAPUNAN, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision
dated April 29, 1992 of respondent Court of Appeals in CA-G.R. CV No. 24776 and its resolution dated
September 16, 1992, denying petitioner Philippine National Bank's motion for reconsideration of said
decision.

The facts of the case are as follows.

A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 was
issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports
[DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank
(herein petitioner).

On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol),
deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the
same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the
check to petitioner for clearing.

Petitioner cleared the check as good and, thereafter, PBCom credited Capitol's account for the
amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom
and debited PBCom's account for the amount covered by the check, the reason being that there was
a "material alteration" of the check number.
 PBCom, as collecting agent of Capitol, then proceeded to debit the latter's account for the same
amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the check
to PBCom.

On the other hand, Capitol could not, in turn, debit F. Abante Marketing's account since the latter
had already withdrawn the amount of the check as of October 15, 1981. Capitol sought clarification
from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an
explanation and re-crediting from petitioner.

Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of
Manila against PBCom which, in turn, filed a third-party complaint against petitioner for
reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourth-
party complaint against F. Abante Marketing.

On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered as follows:

1.) On plaintiffs complaint, defendant Philippine Bank of Communications is

ordered to re-credit or reimburse plaintiff Capitol City Development Bank the amount
of P97,650.00, plus interest of 12 percent thereto from October 19, 1981 until the
amount is fully paid;

2.) On Philippine Bank of Communications third-party complaint third-party

defendant PNB is ordered to reimburse and indemnify Philippine Bank of
Communications for whatever amount PBCom pays to plaintiff;

3.) On Philippine National Bank's fourth-party complaint, F. Abante Marketing is

ordered to reimburse and indemnify PNB for whatever amount PNB pays to PBCom;

4.) On attorney's fees, Philippine Bank of Communications is ordered to pay

Capitol City Development Bank attorney's fees in the amount of Ten Thousand
(P10,000.00) Pesos; but PBCom is entitled to reimbursement/indemnity from PNB;
and Philippine National Bank to be, in turn reimbursed or indemnified by F. Abante
Marketing for the same amount;

5.) The Counterclaims of PBCom and PNB are hereby dismissed;

6.) No pronouncement as to costs.

SO ORDERED.1

An appeal was interposed before the respondent Court of Appeals which rendered its decision on
April 29, 1992, the decretal portion of which reads:

WHEREFORE, the judgment appealed from is modified by exempting PBCom from

liability to plaintiff-appellee for attorney's fees and ordering PNB to honor the check for
P97,650.00, with interest as declared by the trial court, and pay plaintiff-appellee attorney's
fees of P10,000.00. After the check shall have been honored by PNB, PBCom shall re-credit
plaintiff-appellee's account with it with the amount. No pronouncement as to costs.
 SO ORDERED.2

A motion for reconsideration of the decision was denied by the respondent Court in its resolution
dated September 16, 1992 for lack of merit.3

Hence, petitioner filed the instant petition which raises the following issues:

WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A

MATERIAL ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.

II

WHETHER OR NOT A CERTIFICATION HEREIN ISSUED BY THE MINISTRY OF

EDUCATION CAN BE GIVEN WEIGHT IN EVIDENCE.

III

WHETHER OR NOT A DRAWEE BANK WHO FAILED TO RETURN A. CHECK WITHIN

THE TWENTY FOUR (24) HOUR CLEARING PERIOD MAY RECOVER THE VALUE OF THE
CHECK FROM THE COLLECTING BANK.

IV

WHETHER OR NOT IN THE ABSENCE OF MALICE OR ILL WILL PETITIONER PNB

MAY BE HELD LIABLE FOR ATTORNEY'S FEES.4

We find no merit in the petition.

We shall first deal with the effect of the alteration of the serial number on the negotiability of the
check in question.

Petitioner anchors its position on Section 125 of the Negotiable Instruments Law (ACT No.
2031)5 which provides:

Sec. 225. What constitutes a material alteration. Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;

(c) The time or place of payment;

(d) The number or the relations of the parties;

(e) The medium or currency in which payment is to be made;

 (f) Or which adds a place of payment where no place of payment is specified, or any other
change or addition which alters the effect of the instrument in any respect, is a material
alteration.

Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted
provision of the Negotiable Instruments Law. It maintains that under Section 125(f), any change that
alters the effect of the instrument is a material alteration.6

We do not agree.

An alteration is said to be material if it alters the effect of the

instrument.7 It means an unauthorized change in an instrument that purports to modify in any respect
the obligation of a party or an unauthorized addition of words or numbers or other change to an
incomplete instrument relating to the obligation of a party.8 In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of the Negotiable Instruments
Law.

Section 1 of the Negotiable Instruments Law provides:

Sec. 1. — Form of negotiable instruments. An instrument to be negotiable must conform

to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or

otherwise indicated therein with reasonable certainty.

In his book entitled "Pandect of Commercial Law and Jurisprudence," Justice Jose C. Vitug opines
that "an innocent alteration (generally, changes on items other than those required to be stated under
Sec. 1, N.I.L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the
holder may enforce it only according to its original tenor."9

Reproduced hereunder are some examples of material and immaterial alterations:

A. Material Alterations:

(1) Substituting the words "or bearer" for "order."

(2) Writing "protest waived" above blank indorsements.

(3) A change in the date from which interest is to run.

 (4) A check was originally drawn as follows: "Iron County Bank, Crystal Falls, Mich.
Aug. 5, 1901. Pay to G.L. or order $9 fifty cents CTR" The insertion of the figure 5
before the figure 9, the instrument being otherwise unchanged.

(5) Adding the words "with interest" with or without a fixed rate.

(6) An alteration in the maturity of a note, whether the time for payment is thereby
curtailed or extended.

(7) An instrument was payable "First Nat'l Bank" the plaintiff added the word
"Marion."

(8) Plaintiff, without consent of the defendant, struck out the name of the defendant
as payee and inserted the name of the maker of the original note.

(9) Striking out the name of the payee and substituting that of the person who
actually discounted the note.

(10) Substituting the address of the maker for the name of a co-maker.10

B. Immaterial Alterations:

(1) Changing "I promise to pay" to "We promise to pay", where there are two
makers.

(2) Adding the word "annual" after the interest clause.

(3) Adding the date of maturity as a marginal notation.

(4) Filling in the date of actual delivery where the makers of a note gave it with the
date in blank, "July ____."

(5) An alteration of the marginal figures of a note where the sum stated in words
in the body remained unchanged.

(6) The insertion of the legal rate of interest where the note had a provision for
"interest at _______ per cent."

(7) A printed form of promissory note had on the margin the printed words,
"Extended to ________." The holder on or after maturity wrote in the blank space the
words "May 1, 1913," as a reference memorandum of a promise made by him to the
principal maker at the time the words were written to extend the time of payment.

(8) Where there was a blank for the place of payment, filling in the blank with the
place desired.

(9) Adding to an indorsee's name the abbreviation "Cash" when it had been agreed
that the draft should be discounted by the trust company of which the indorsee was
cashier.
 (10) The indorsement of a note by a stranger after its delivery to the payee at the
time the note was negotiated to the plaintiff.

(11) An extension of time given by the holder of a note to the principal maker,
without the consent of a surety co-maker.11

The case at bench is unique in the sense that what was altered is the serial number of the check
in question, an item which, it can readily be observed, is not an essential requisite for negotiability
under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the
relations between the parties. The name of the drawer and the drawee were not altered. The intended
payee was the same. The sum of money due to the payee remained the same. Despite these findings,
however, petitioner insists, that:

xxx xxx xxx

It is an accepted concept, besides being a negotiable instrument itself, that a TCAA check
by its very nature is the medium of exchange of governments (sic) instrumentalities of
agencies. And as (a) safety measure, every government office o(r) agency (is) assigned TCAA
checks bearing different number series.

A concrete example is that of the disbursements of the Ministry of Education and Culture.
It is issued by the Bureau of Treasury sizeable bundles of checks in booklet form with serial
numbers different from other government office or agency. Now, for fictitious payee to succeed
in its malicious intentions to defraud the government, all it need do is to get hold of a TCAA
Check and have the serial numbers of portion (sic) thereof changed or altered to make it
appear that the same was issued by the MEG.

Otherwise, stated, it is through the serial numbers that (a) TCAA Check is determined to
have been issued by a particular office or agency of the government.12

xxx xxx xxx

Petitioner's arguments fail to convince. The check's serial number is not the sole indication of its
origin.. As succinctly found by the Court of Appeals, the name of the government agency which issued
the subject check was prominently printed therein. The check's issuer was therefore sufficiently
identified, rendering the referral to the serial number redundant and inconsequential. Thus, we quote
with favor the findings of the respondent court:

xxx xxx xxx

If the purpose of the serial number is merely to identify the issuing government office or
agency, its alteration in this case had no material effect whatsoever on the integrity of the
check. The identity of the issuing government office or agency was not changed thereby and
the amount of the check was not charged against the account of another government office or
agency which had no liability under the check. The owner and issuer of the check is boldly and
clearly printed on its face, second line from the top: "MINISTRY OF EDUCATION AND
CULTURE," and below the name of the payee are the rubber-stamped words: "Ministry of
Educ. & Culture." These words are not alleged to have been falsely or fraudulently intercalated
into the check. The ownership of the check is established without the necessity of recourse to
the serial number. Neither there any proof that the amount of the check was erroneously
charged against the account of a government office or agency other than the Ministry of
Education and Culture. Hence, the alteration in the number of the check did not affect or
 change the liability of the Ministry of Education and Culture under the check and, therefore, is
immaterial. The genuineness of the amount and the signatures therein of then Deputy Minister
of Education Hermenegildo C. Dumlao and of the resident Auditor, Penomio C. Alvarez are
not challenged. Neither is the authenticity of the different codes appearing therein questioned
. . .13 (Emphasis ours.)

Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number
was altered, the same being an immaterial or innocent one.

We now go to the second issue. It is petitioner's submission that the certification issued by Minrado
C. Batonghinog, Cashier III of the MEC clearly shows that the check was altered. Said certification
reads:

July 22, 1985

TO WHOM IT MAY CONCERN:

This is to certify that according to the records of this Office, TCAA PNB Check Mo. SN7-3666223-
3 dated August 7, 1981 drawn in favor of F. Abante Marketing in the amount of NINETY (S)EVEN
THOUSAND SIX HUNDRED FIFTY PESOS ONLY (P97,650.00) was not issued by this Office nor
released to the payee concerned. The series number of said check was not included among those
requisition by this Office from the Bureau of Treasury.

Very truly yours,

(SGD.) MINRADO C. BATONGHINOG

Cashier III14

Petitioner claims that even if the author of the certification issued by the Ministry of Education and
Culture (MEG) was not presented, still the best evidence of the material alteration would be the
disputed check itself and the serial number thereon. Petitioner thus assails the refusal of respondent
court to give weight to the certification because the author thereof was not presented to identify it and
to be cross-examined thereon.15

We agree with the respondent court.

The one who signed the certification was not presented before the trial court to prove that the said
document was really the document he prepared and that the signature below the said document is his
own signature. Neither did petitioner present an eyewitness to the execution of the questioned
ℒαwρhi৷

document who could possibly identify it. 16 Absent this proof, we cannot rule on the authenticity of the
contents of the certification. Moreover, as we previously emphasized, there was no material alteration
on the check, the change of its serial number not being substantial to its negotiability.

Anent the third issue — whether or not the drawee bank may still recover the value of the check
from the collecting bank even if it failed to return the check within the twenty-four (24) hour clearing
period because the check was tampered — suffice it to state that since there is no material alteration
in the check, petitioner has no right to dishonor it and return it to PBCom, the same being in all respects
negotiable.
 However, the amount of P10,000.00 as attorney's fees is hereby deleted. In their respective
decisions, the trial court and the Court of Appeals failed to explicitly state the rationale for the said
award. The trial court merely ruled as follows:

With respect to Capitol's claim for damages consisting of alleged loss of opportunity, this
Court finds that Capitol failed to adequately substantiate its claim. What Capitol had presented
was a self-serving, unsubstantiated and speculative computation of what it allegedly could
have earned or realized were it not for the debit made by PBCom which was triggered by the
return and debit made by PNB. However, this Court finds that it would be fair and reasonable
to impose interest at 12% per annum on the principal amount of the check computed from
October 19, 1981 (the date PBCom debited Capitol's account) until the amount is fully paid and
reasonable attorney's fees.17 (Emphasis ours.)

And contrary to the Court of Appeal's resolution, petitioner unambiguously questioned before it
the award of attorney's fees, assigning the latter as one of the errors committed by the trial court.18

The foregoing is in conformity with the guiding principles laid down in a long line of cases and
reiterated recently in Consolidated Bank & Trust Corporation (Solidbank) v. Court of Appeals:19

The award of attorney's fees lies within the discretion of the court and depends upon the
circumstances of each case. However, the discretion of the court to award attorney's fees
under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable
justification, without which the award is a conclusion without a premise and improperly left to
speculation and conjecture. It becomes a violation of the proscription against the imposition of
a penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court,
188 SCRA 170 [1990]). The reason for the award must be stated in the text of the court's
decision. If it is stated only in the dispositive portion of the decision, the same shall be
disallowed. As to the award of attorney's fees being an exception rather than the rule, it is
necessary for the court to make findings of fact and law that would bring the case within the
exception and justify the grant of the award (Refractories Corporation of the Philippines v.
Intermediate Appellate Court, 176 SCRA 539 [176 SCRA 539]).

WHEREFORE, premises considered, except for the deletion of the award of attorney's fees, the
decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.
G.R. No. L-20274 October 30, 1969

ELOY MIGUEL and DEMETRIO MIGUEL, petitioners,

vs.
THE COURT OF APPEALS and ANACLETA M. VDA. DE REYES, respondents.

Silvestre Br. Bello for petitioners.

Teofilo A. Leonin for respondent.

CASTRO, J.:

Petition for review on certiorari of the decision and the two resolutions of the Court of Appeals
promulgated on May 10, July 23, and September 5, all in the year 1962, in CA-G.R.-16497-R,
entitled "Eloy Miguel and Demetrio Miguel, plaintiffs-appellees vs. Anacleta M. Vda. de Reyes,
defendant-appellant."

During the Spanish regime and prior to July 26, 1894, Eloy Miguel, then single and resident of
Laoag, Ilocos Norte, went to Isabela and for some appreciable period of time stayed with his
kinsman Juan Felipe in Barrio Ingud Norte, Municipality of Angadanan. There he spotted an
uncultivated parcel of land, one hectare of which he forthwith occupied, and then cleared and
planted to corn. After the Philippine Revolution, he returned to Laoag, Ilocos Norte and took a wife.
In the early years of the ensuing American regime, Eloy Miguel returned to Ingud Norte with his
family, resettled on the same land, cultivated and planted it to rice, declared it for taxation purposes,
and paid the annual realty taxes thereon.

During the year 1932, Leonor Reyes, an ambulatory notary public and husband of the private
respondent Anacleta M. Reyes, used to visit Barrio Ingud Norte, looking for documents to notarize.
He and Eloy Miguel became acquaintances. Later, Leonor Reyes asked Miguel if he wanted to
secure expeditiously a title to his landholding. Having received an affirmative answer and after Eloy
Miguel had handed to him the tax declaration and tax receipts covering the land, Leonor Reyes
prepared and filed a homestead application in the name of Eloy Miguel and, furthermore, promised
to work for the early approval of the said application. Reyes handed to Miguel the receipt for the
filing fee (exh. A) corresponding to the homestead application, advising the latter to keep it, but he
(Reyes) withheld other papers including the tax declaration and tax receipts, assuring Miguel that he
would return them as soon as the homestead patent was issued in Miguel's name. Reyes likewise
advised Miguel to cease paying the land taxes until the patent shall have been issued by the Bureau
of Lands.

After a long wait and becoming impatient about the issuance of the promised title, Eloy Miguel
inquired from Leonor Reyes about the status of his application. Reyes promised to send a letter-
tracer to the Bureau of Lands, and, in fact, asked Eloy Miguel to affix his thumbmark to a blank
paper upon which was supposed to be written a letter-tracer. However, World War II broke out in the
Pacific, and Miguel did not hear of and about his homestead application; after the war he had no way
of ascertaining the outcome of his application because Leonor Reyes had died meanwhile during the
Japanese occupation of the Philippines.

For the services rendered and still to be rendered by Leonor Reyes in preparing the homestead
application and in securing the issuance of the correspondent patent, Miguel gave the former 1/5 of
his yearly harvest from the land. After the death of Leonor Reyes Miguel continued to deliver an
equal number of cavanes of palay to the former's widow, Anacleta M. Vda. de Reyes, who likewise
promised to help him secure the necessary homestead patent.
Meanwhile, Demetrio Miguel helped his father, Eloy Miguel, clear and cultivate the land. Sometime
in 1932, on the occasion of the marriage of Demetrio, Eloy Miguel ceded to Demetrio 14 hectares of
the southern portion of the land as a gift propter nuptias. Demetrio forthwith declared the said portion
for taxation purposes in his name, as evidenced by tax declaration 7408 (exh. G).

However, unknown to Eloy and Demetrio Miguel, Leonor Reyes on June 25, 1935 filed sales
application 20240 in the name of his wife, Anacleta M. Vda. de Reyes (hereinafter referred to as the
private respondent), covering the same parcel of land occupied and cultivated by the Miguels and
the subject of Eloy Miguel's homestead-application. The sales application was duly acknowledged by
the Bureau of Lands on June 29, 1935, and a sale at public auction took place on August 3, 1939
whereat the private respondent was the sole bidder. The Director of lands awarded the land to her
on March 7, 1940, the value of which was to be paid on installments.

Sometime in 1950, the private respondent had the land surveyed by Maximo Lorenzo who, in the
course of the survey, assured Eloy Miguel that the land was being surveyed in the latter's name. The
private respondent, who was present during the survey, made the same assurance to Eloy Miguel.
However, because his suspicions were aroused by the act of the private respondent of having the
land surveyed, Eloy Miguel directed his son, Demetrio, to inquire from the office of the district land
officer of Ilagan, Isabela, about the status of his (Eloy's) homestead application. Demetrio discovered
that their land was covered by the sales application of the private respondent. Eloy Miguel forthwith
filed on February 16, 1950 a protest with the Bureau of Lands against sales application 20240 of the
private respondent. Consequently, on February 21, 1950, the Director of Lands ordered an
investigation. Hearing of the protest was scheduled for May 26, 1950 by deputy public lands
inspector Alejandro Ramos of Land District 4, Bureau of Lands, Ilagan, Isabela, but was postponed
at the instance of the private respondent. The hearing was then reset for February 10, 1951, by
assistant public lands inspector Hilarion Briones. However, the Miguels had in the interim discovered
that notwithstanding their protest and the investigation ostensibly being conducted by the
administrative branch of the Government, sales patent V-522 and original certificate of title P-1433,
covering the parcel of land in question, were granted and issued to the private respondent on
January 10, 1951 and January 22, 1951, respectively.

Consequently, on February 17, 1951 Eloy and Demetrio Miguel lodged a complaint with the Court of
First Instance of Isabela against the private respondent, Anacleta M. Vda. de Reyes, the Director of
Lands, and the Register of Deeds of Isabela, for the annulment of sales patent V-522 and the
cancellation of original certificate of title P-1433. That case, docketed as civil case 315 of the Court
of First Instance of Isabela, was dismissed by that court on grounds that the plaintiffs did not have
personality to institute the action, and that it was prematurely filed — the Miguels not having
exhausted all administrative remedies, more specifically not appealing to the Secretary of Agriculture
and Natural Resources from the grant by the Director of Land of the patent to the private
respondent. On appeal to this Court, the dismissal was affirmed on the second ground (G.R. No. L-
4851, promulgated July 31, 1953).

On September 7, 1953, Eloy and Demetrio Miguel commenced the action (civil case 616) in the
Court of First Instance of Isabela against the private respondent to compel her to reconvey to them
the land covered by the abovementioned patent and title. After due hearing, the trial court found that
Eloy Miguel "has always been, and up to this time, in physical possession of the whole tract of land
in question under claim of ownership thru occupancy, he having occupied and cultivated the land
since the Spanish regime;" that he was a homestead applicant way back in 1932 for the land
possessed by him; that there exists a trust relationship Eloy Miguel would himself have personally
attented to his own application; and that, through fraud and misrepresentations, Leonor Reyes
caused the filing and approval of an application and the issuance by the Bureau of Lands of a sales
patent covering the property in the name of his wife, the private respondent, without the consent and
knowledge of the Miguels. The lower court, however, held that reconveyance is not proper because
the land in question is not the private property of the Miguels since time immemorial but remains a
part of the public domain, and instead declared that Eloy Miguel "should be given priority to acquire
the land under the foregoing premises, the court a quo rendered judgment ordering (1) the Director
of Land to cancel patent V-522 issued in the name of Anacleta M. Vda. de Reyes, (2) the Registrar
of Deeds of Isabela to cancel original certificate of title P-1433 in the name of Anacleta M. Vda. de
Reyes and to return Patent V-522 to the Bureau of Lands, and (3) the Director of Lands to give due
course to the homestead application of Eloy Miguel over the land.

The private respondent appealed to the Court of Appeals (hereafter referred to as the respondent
Court) which dismissed the complaint upon the ground that the judgment appealed from could not
and did not bind the Director of Lands and the Registrar of Deeds of Isabela who were not parties
thereto. Eloy and, Demetrio Miguel (hereafter referred to as the petitioners) filed a motion for
reconsideration, wherein they argued that while the trial court might have incurred error in the legal
conclusions drawn from its own findings of fact, the respondent Court was not legally precluded by
the Rules of Court and applicable jurisprudence to modify the judgment of the trial court, so as to
make it conform to the evidence, and to grant the relief of reconveyance sought in the action, in
which action the Director of Land and the Register of Deeds of Isabela are not proper or necessary
parties. The motion for reconsideration wag denied in an extended resolution of the respondent
Court Promulgated on July 23, 1962, which ruled that the petitioners should have appealed from the
decision of the trial court. A second motion for reconsideration was denied in a minute resolution
dated September 5, 1962.

The petitioners are now before us on appeal by certiorari, assigning as errors (1) the Court of
Appeals' holding that they should have appealed from the decision of the trial court, and (2) its
finding that, assuming that reconveyance in favor of the petitioners as mere appellees is still proper,
the cases cited in the latter's first motion for reconsideration are not in point.

It has been postulated — and, we think, correctly — that the Supreme Court is vested with ample
authority to review matters not assigned as errors in an appeal, if it finds that their consideration and
resolution are indispensable or necessary in arriving at a just decision in a given case.1 Thus, before
passing upon the foregoing assigned errors, we shall first resolve in seriatim the matters raised in
both the appealed decision and resolutions of the respondent Court because to do so is imperative
in arriving at a fair and equitable adjudication of this case.

1. The respondent Court points up the failure of the petitioners to present a petition for judicial
confirmation of imperfect title, if they indeed had been in possession of the land since July 26, 1894,
in accordance with the Public Land Act. Eloy Miguel should not, however, be expected to file such a
petition because all along he was relying on the solemn assurances of Leonor Reyes and later his
wife, the private respondent, that they were in the process of securing a homestead patent for him.

2. The respondent Court observed in its decision that the evidence on the allegation that Leonor
Reyes acted fraudulently in applying for the purchase of the land and later transferring his right to his
wife, is sharply conflicting, and that even granting that there was fraud in the obtention of the
issuance of the patent, any objection based on that ground should have been interposed within one
year from the date of its issuance.

We cannot give our approval to this view. As found by the court below, the petitioners have proven
by preponderance of evidence the fraud perpetrated by the private respondent and her husband on
Eloy Miguel. The weight of evidence leans heavily in favor of the fact of occupation by Eloy Miguel of
the land from prior to July 26, 1894. This was the finding of the lower court — which belies the
private respondent's allegation that Eloy Miguel entered as her tenant only in 1935. There is also the
receipt, exh. A, evidencing the payment of a filing fee for a homestead application, which receipt, in
the session of Eloy Miguel, raises at least the presumption that he had filed a homestead
application. That the records of the Bureau of Lands or of any of its units, particularly the district land
office at Ilagan, Isabela, do not show that such application was ever filed, supports the petitioners'
thesis, concurred in by the trial court, that the blank paper which Eloy Miguel thumbmarked at the
behest of Leonor Reyes was used by the latter to withdraw the formers application instead of to
trace the application. Finally, there is the private respondent's and her husband's act of misleading
the Bureau of Lands by falsely stating in their application for a sales patent that there was no
improvement on the land, when, as found by the lower court, the land had already been cultivated
and improved by Eloy Miguel since 1932, by the latest. (This misleading statement, noted by the
court a quo on exh. 15 dated March 28, 1939 of the private respondent, significantly, is not
impugned by the latter.) In fact, the lower court observed that the private respondent herself affirmed
on the witness stand that Eloy Miguel was in 1935 already working on the land, although supposedly
as her tenant. Therefore, at the time the private respondent's sales patent application was filed in
1935, Leonor Reyes and she led the Bureau of Lands to believe that the land was uncultivated and
unoccupied by other claimants. The very relevant question arises: Why did the Reyes spouses
conceal from the Bureau of Lands the fact that the land was occupied and being cultivated by the
Miguels, when there existed no prohibition against having the land cultivated for them by tenants?
There are only two logical reasons for the mysterious conduct of the Reyes spouses. First, had they
stated in their sales application that the whole parcel of land was under cultivation by the petitioners,
the Director of Lands would have in all probability discovered that the land applied for was covered
by the prior homestead application of Eloy Miguel and most likely would have disapproved the sales
application of the private respondent. Second, had a survey of the land been conducted earlier, this
would have aroused the suspicions of Eloy Miguel earlier and enabled him to discover much sooner
the fraud perpetrated by Leonor Reyes before the sales application of the private respondent was
given due course. Indeed, the private respondent waited until she had just about paid all the
installments on the land before ordering a final survey thereof. It was this survey which aroused Eloy
Miguel's suspicions and enabled him and his son to discover the fraud perpetrated upon them.

The respondent Court's holding that any objection based on fraud should have been interposed
within one year from the date the issuance of the sales patent has no relevance to the case at bar.
This is an action for the enforcement of a constructive trust — the ultimate object of which is the
reconveyance of property lost through breach of fiduciary relations and/or fraud. Therefore, it can be
filed within four years from the discovery of the fraud.2 And since the petitioners discovered the fraud
committed against them by the Reyes spouses in 1950, they had until 1954 within which to bring this
action. This action was seasonably instituted because the complaint was filed on September 7,
1953.

3. The respondent Court also held that the only remedy available at the time the action below was
instituted was for the Government (through the Solicitor General) to file an action for the reversion of
the land to the public domain based on the illegality of the grant — a suit which a private person is
not authorized to file. The foregoing rule is correct but inapplicable in this case, which, as earlier
mentioned, is an action for reconveyance of a piece of land through enforcement of a constructive
trust. For this same reason, the provision of Land Administrative Order 6 of the Secretary of
Agriculture and Natural Resources, cited in the respondent court's decision, is likewise inapt.

4. The respondent Court attributes error to the lower court's finding that Eloy Miguel filed a
homestead application for the land in question, stating that no other evidence was presented to
show that such application was filed except the testimony of Eloy Miguel and the receipt for the filing
fee of a homestead application; and that if such application was really filed, some trace or tell-tale
evidence of it would be extant, and the application could have been easily reconstituted after the
liberation in 1945 when the Government adopted a policy to enable all public land applicants to
reconstitute their applications. It is too well-settled to require any citation of authority that the lower
Court's findings of fact are entitled to considerable weight, especially with respect to the appreciation
of the testimony of witnesses on the stand, since it was in the best position to observe the demeanor
of the witnesses. The testimony of Eloy Miguel regarding his filing of a homestead application over
the parcel of land — as found by the lower court — should not therefore lightly be brushed aside.
The receipt, exh. A, for the filing of the homestead application raises a presumption in favor of Eloy
Miguel's having filed such an application. As earlier explained, if no trace of the said application
could be found among the records of the Bureau of Lands or of any of its units particularly the district
land office at Ilagan, Isabela, it is because through fraud — i.e., by asking Eloy Miguel to thumbmark
a blank piece of paper — Leonor Reyes succeeded in withdrawing the application of Miguel. And he
did this to pave the way for his wife, the private respondent herein, herself to apply for the land under
a sales application. Of course, having relied on the assurances of the Reyes spouses that they
would help him secure a homestead patent, Eloy Miguel found no need to reconstitute his
homestead application. It is not even farfetched to suppose that Miguel, being illiterate, never even
came to learn of the Government's policy of enabling public land applicants to reconstitute their
applications.

5. Coming now to the assigned errors, the respondent Court's view is not correct that it cannot grant
the relief of reconveyance because the petitioners did not appeal from the decision of the lower
court. There exist sufficient bases, hereinafter to be discussed, for the respondent Court to award
said relief in the exercise of its broad appellate powers to affirm, reverse or modify the judgment or
order appealed from.

To start with, the petitioners cannot entirely be blamed if they thought it the better part of prudence
not to appeal. For although it did not incorporate a decree of reconveyance, still the decision of the
court below was favorable to them because it vindicated their actual possession of the land under
a bona fide claim of ownership since the Spanish regime, and adjudged them as having a better
right to the land and the priority to own it under the Public Land Act. Besides, it was their legitimate
desire to avoid incurring additional expenses incident to the bringing of an appeal.

However, as appellees in the Court of Appeals, the petitioners pointedly called the attention of the
respondent Court in their brief to several questions decided against them in the court below. Thus,
working on the theory that it was plain error for the trial court to order the Director of Lands and the
Register of Deeds of Isabela to implement its decision, the petitioners called the attention of the
respondent Court to the precise nature of the action below in which the Director of Lands and the
Register of Deeds of Isabela need not be impleaded.

... The action in this case is reconveyance, the purpose of which is to compel the defendant
to return to the plaintiffs-appellees the land in question which she has acquired through
fraudulent means. Such being the case, it would have been utterly improper for the plaintiffs
to have impleaded the Director of Lands or the Register of Deeds of Isabela inasmuch as the
action is personal in nature directed against the person of the defendant." .

The petitioners likewise called the attention of the respondent Court to the trust relationship existing
between them, on one hand, and the Reyes spouses, on the other, which was breached by the
latter. Thus, to justify the reconveyance to them of the property, they stated that:

Moreover, a situation of trust has been created in the instant case between the plaintiff and
the defendant-appellant deceased husband upon whom the plaintiff Eloy Miguel relied
through his (Reyes') representations that the corresponding title to said land would be
secured in favor of the plaintiff Eloy Miguel. The evidence likewise shows that the defendant
Vda. de Reyes promised the plaintiff to continue the work begun by her late husband with the
ultimate result of securing the said homestead patent and title in favor of the plaintiff Eloy
Miguel. Inasmuch as the said promise was violated by the defendant who secretly worked
 toward the acquisition of the said land for her own self, fraudulently and stealthily, no
prescription can run as against plaintiffs' right to claim ownership of the said property.

We held in one case that appellants need not make specific assignment of errors provided they
discuss at length and assail in their brief the correctness of the trial court's findings regarding the
matter. Said discussion warrants the appellate court to rule upon the point because it substantially
complies with sec. 7, Rule 51 of the Revised Rules of Court, intended merely to compel the
appellant to specify the questions which he wants to raise and be disposed of in his appeal. A clear
discussion regarding an error allegedly committed by the trial court accomplishes the purpose of a
particular assignment of error.3

Reasoning a fortiori from the above-cited authority, an appellee who occupies a purely defensive
position and is not required to make assignments of errors, need only discuss or call the attention of
the appellate court in his brief to the issues erroneously decided against him by the trial court.4 Here
the petitioners (appellees in the Court of Appeals) stated quite explicitly in their brief that since the
action was for reconveyance, it was utterly improper to implead the Director of Lands and the
Register of Deeds — in effect calling the attention of the respondent Court to a plain error committed
by the trial court in ordering the Director of Lands and the Register of Deeds to nullify the sales
patent and original certificate of title issued to the private respondent. And, in discussing the trust
relationship between the Miguels and the Reyes spouses which was breached by the latter, the
petitioners (as appellees) also clearly brought to the attention of the respondent Court a valid ground
disregarded by the lower court as a basis for granting the relief of reconveyance.

Moreover, the Rules of Court5 and jurisprudence authorize a tribunal to consider errors, although
unassigned, if they involve (1) errors affecting the lower court's jurisdiction over the subject matter,
(2) plain errors 6 not specified, and (3) clerical errors. Certainly, the mandate contained in the
dispositive portion of the lower court's decision and addressed to the Director of Lands and the
Register of Deeds, who were not parties to the case, is a plain error which the respondent Court
properly corrected. As aforenarrated, the petitioners (as appellees) brought this error to the attention
of the respondent Court. Another plain error which the respondent Court should have considered
was the court a quo's conclusion that the land in litigation was still part of the public domain, in the
face of the parties' mutual allegations to the contrary and despite the admitted fact that a sales
patent and an original certificate of title over the land had already been issued, thus segregating the
land from the public domain and making it private land.

It is noteworthy that the complaint for reconveyance was not dismissed by the trial court. What it
denied was merely the relief or remedy of reconveyance. However, in its decision, the trial court
made certain findings of fact which justified the relief of reconveyance — e.g., that Eloy Miguel "has
always been, and up to this time, in physical possession of the whole tract of land in question under
claim of ownership thru occupancy, he having occupied and cultivated the land since the Spanish
regime;" that there was a trust relationship between Eloy Miguel and the Reyes spouses; and that
the Reyes spouses have fraudulently and in bad faith breached that trust. Hence, in reiterating their
positions before the respondent Court on the private nature of the land, on the impropriety of
impleading the Director of Lands and the Register of Deeds of Isabela, and on the existence of a
trust relationship between the petitioners and the Reyes spouses, the petitioners were in point of fact
inviting the respondent Court's attention to questions erroneously decided against them by the trial
court, in the hope that the respondent Court would render judgment in accordance with the facts
adjudged by the trial court as proven.

If the complaint states a claim upon which any relief can be given, it is immaterial what the
plaintiff has asked for in his prayer or whether he has asked for the proper relief; the court
will grant him the relief to which he is entitled under the facts proven (Kansas City St. L. and
 C. R. Co. v. Alton R. Co., 5 Fed. Rules Service, p. 638; U.S. Circuit Court of Appeals,
Seventh Circuit, Dec. 18, 1941).

On appeal to the respondent Court by the private respondent, the suit was, as it has always been in
the court of origin, one for reconveyance. And of course, the petitioners did not ask the respondent
Court for an affirmative relief different from what was logically justified by the facts found by and
proven in the court a quo.

6. The respondent Court opined that the cases cited by the petitioners in their motion for
reconsideration (i.e., Republic of the Philippines v. Carle Heirs, L-12485, July 21, 1959, and Roco, et
al. v. Gimeda L-11651, Dec. 27, 1958) are not applicable because they involved properties which
admittedly belonged to the parties entitled to reconveyance, unlike the herein petitioners who are
mere public land applicants and have not acquired title under the Public Land Act. Assuming the
respondent Court to be correct, a legion of cases there are which can be cited in favor of the
petitioners' position. Since the law of trust has been more frequently applied in England and in the
United States than it has been in Spain, we may draw freely upon American precedents in
determining the effects of trusts, especially so because the trusts known to American and English
equity jurisprudence are derived from the fidei commissa of the Roman Law and are based entirely
upon civil law principles.7 Furthermore, because the case presents problems not directly covered by
statutory provisions or by Spanish or local precedents, resort for their solution must be had to the
underlying principles of the law on the subject. Besides, our Civil Code itself directs the adoption of
the principles of the general law of trusts, insofar as they are not in conflict with said Code, the Code
of Commerce, the Rules of Court and special laws.8

In holding that the cases cited by the petitioners in their motion for reconsideration (i,e., Republic of
the Philippines v. Carle Heirs, supra, and Roco, et al. v. Gimeda, supra) are inapplicable, the
respondent Court advances the theory that an action for reconveyance based on constructive trust
will prosper only if the properties involved belong to the parties suing for and entitled to
reconveyance. This is not entirely accurate. In Fox v. Simons9 the plaintiff employed the defendant to
assist him in obtaining oil leases in a certain locality in Illinois, the former paying the latter a salary
and his expenses. The defendant acquired some leases for the plaintiff and others for himself.
Whereupon, the plaintiff brought suit to compel the defendant to assign the leases which he had
acquired for himself. The court found for the plaintiff, holding that it was a breach of the defendant's
fiduciary duty to purchase for himself the kind of property which he was employed to purchase for
the plaintiff. 10

It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil
leases. He merely employed the defendant to obtain them for him, but the latter obtained some for
the plaintiff and some for himself. Yet, despite the absence of this former-ownership circumstance,
the court there did not hesitate to order the defendant to assign or convey the leases he obtained for
himself to the plaintiff because of the breach of fiduciary duty committed by said defendant. Indeed,
there need only be a fiduciary relation and a breach of fiduciary duty before reconveyance may be
adjudged. In fact, a fiduciary may even be chargeable as a constructive trustee of property which he
purchases for himself, even though he has not undertaken to purchase it for the beneficiary if in
purchasing it he was improperly competing with the beneficiary.11

Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another and
the other reposes confidence in him, although there is no written contract or no contract at all. If the
agent violates his duty as fiduciary, a constructive trust arises. It is immaterial that there was no
antecedent fiduciary relation and that it arose contemporaneously with the particular transaction. 12
In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel file
a homestead application over the land and offered his services in assisting the latter to secure a
homestead patent. Eloy Miguel accepted Leonor Reyes' offer of services, thereby relying, on his
word and reposing confidence in him. And in payment for the services rendered by Leonor Reyes in
preparing and filing the homestead application and those still to be rendered by him in securing the
homestead patent, Eloy Miguel delivered to Reyes 1/5 of his yearly harvest from the said land. When
Leonor Reyes died, the petitioners continued to deliver the same percentage of their annual harvest
to the private respondent who undertook to continue assisting the former to secure a homestead
patent over said land. However, in breach of their fiduciary duty and through fraud, Leonor Reyes
and the private respondent filed a sales application and obtained a sales patent and ultimately an
original certificate of title over the same parcel of land. Therefore, following the ruling in Fox v.
Simons, supra, the private respondent can be compelled to reconvey or assign to the petitioners the
parcel of land in the proportion of nine hectares in favor of Eloy Miguel and 14 hectares in favor of
Demetrio Miguel, respectively.

The private respondent argues that there is no violation of trust relationship because the petitioners
could have participated in the public bidding. She avers that the alleged fraud supposedly committed
upon the petitioners, and on which the claim for reconveyance is founded, is clearly of no moment
because the sales patent in question was not the necessary consequence thereof, but rather, it was
granted in consideration of her being the highest bidder and the purchaser of the land. In refutation
of the foregoing argument, it must be observed, firstly, that the petitioners — because of the fraud
practised on them by the Reyes spouses — never came to know about the public bidding in which
the land was offered for sale and therefore could not have participated therein. Had not the Reyes
spouses misrepresented in their sales application that the land was uncultivated and unoccupied,
the Director of Lands would in all probability have found out about the occupancy and cultivation of
the said land by the petitioners and about Eloy Miguel's homestead application over the same, and
consequently would have denied the sales application of the Reyes spouses. Secondly, it may
justifiably be postulated that equity will convert one who, for any reason recognized by courts of
equity as a ground for interference, has received legal title from the Government to lands, which in
equity and by the laws of Congress ought to have gone to another, into a trustee for such other and
compel him to convey the legal title accordingly.13 Thirdly, Eloy Miguel could have very easily
obtained title to the said parcel of land in either of two ways, had he not been inveigled by Leonor
Reyes to file a homestead application. Thus, since he is a natural-born Filipino citizen, who is not an
owner of more than twenty-four hectares of land, and who since prior to July 4, 1926 (under R.A.
782, approved June 21, 1952, occupation and cultivation since July 4, 1945, or prior thereto, is
deemed sufficient) has continuously occupied and cultivated a parcel of land not more than twenty-
four hectares in area, he was entitled to apply for a free patent for, or gratuitous grant, of said land.
This is known as confirmation of imperfect or incomplete titles by administrative legalization.14 Or,
since Eloy Miguel has possessed the land prior to July 26, 1894 and said possession has been
continuous, uninterrupted, open, adverse and in the concept of an owner, there is a
presumption juris et de jure that all necessary conditions for a grant by the State have been
complied with, and he would have been by force of law entitled — pursuant to the provisions of sec.
48(b) of the Public Land Act — to the registration of his title to the land. 15

ACCORDINGLY, the decision of the Court of Appeals of May 10, 1962 and its resolutions of July 23
and September 5, 1962, are set aside. Another judgment is hereby entered, ordering the private
respondent Anacleta M. Vda. de Reyes to convey the land subject matter of the complaint, in fee
simple, to the petitioners, in the proportion of nine (9) hectares in favor of Eloy Miguel and fourteen
(14) hectares in favor of Demetrio Miguel. In the event of failure of the said private respondent, for
any reason whatsoever, to convey within thirty (30) days from the date this judgment becomes final,
it is hereby decreed that at the end of that period she will be automatically divested of her title to the
property in dispute, and this decision shall be authority for the Register of Deeds to forthwith cancel
the original of the original certificate of title P1433 in his office and the owner's copy thereof in the
name of Anacleta M. Vda. de Reyes, and to issue in favor of Eloy Miguel and Demetrio Miguel new
Torrens titles over the land in the proportion above indicated. Costs against the private respondent
Reyes.