Case Summary (G.R. No. 168062)
Case Background and Property Description
Margarita D. Cabacungan owned three unregistered parcels of land in Bauang, La Union, evidenced by tax declarations in her name. In 1968, her son Roberto Laigo, Jr., applying for a non-immigrant U.S. visa, requested that the tax declarations be transferred to his name. Margarita executed an Affidavit of Transfer transferring the properties to Roberto by donation, unbeknownst to her other children, for the express purpose of supporting his visa application.
Subsequent Transactions and Discovery of Sales
After Roberto returned from the U.S., he adopted respondents Pedro and Marilou Laigo, married Estella Balagot, and sold the properties: one to spouses Mario and Julia Campos in 1990, and two others to Marilou and Pedro in 1992. Margarita and her other children were unaware of these sales until Roberto’s wake in 1995, when Pedro disclosed the transactions.
Initiation of Legal Action
In 1996, represented by Luz Laigo-Ali, Margarita filed a complaint for annulment of sales, recovery of ownership and possession, cancellation of tax declarations, and damages. She contended that the transfer to Roberto was for temporary accommodation only—intended to facilitate his visa application—and that she never intended to relinquish ownership. She alleged the sales were simulated, with grossly inadequate prices and fraudulent intent, imputing bad faith to buyers who allegedly knew Roberto was not the true owner.
Defenses of Respondents and Prior Settlements
The spouses Campos claimed to be innocent purchasers for value relying on Roberto’s representations and contested the annulment, asserting prescription and laches due to Margarita’s delay in asserting her rights. Marilou and Pedro also maintained good faith purchase and asserted that the cause of action was barred by prescription expiring ten years after the alleged transfer of property under an implied trust created in 1968. Margarita and the spouses Campos entered into a settlement in 1999, leading to dismissal of the complaint against the Campos, while the case proceeded against Pedro and Marilou.
Trial Court’s Findings and Decision
The Regional Trial Court held that the affidavit of transfer constituted a simple donation transferring ownership to Roberto, rejecting the existence of an express trust for reconveyance due to lack of written evidence. The court inferred the creation of an implied or constructive trust but ruled that Margarita’s failure to recover the properties between 1968 and Roberto’s return constituted laches, barring her claim. It also found that the prescriptive period for recovery based on an implied trust had expired, and that mere inadequacy of the sale price did not vitiate the sales absent defective consent. Consequently, the complaint was dismissed.
Court of Appeals’ Ruling
The Court of Appeals affirmed the trial court’s decision, holding no evidence supported the claim that Roberto was a trustee or that an implied trust existed. It ruled that Margarita’s action was barred by laches, even if an implied trust were assumed. It also held that the prescriptive period under Article 1144 for claims based on implied trust began in 1968. The court applied the rule protecting buyers in good faith, though it found no implied trust.
Issues Presented on Review
Petitioner challenged (a) the finding that the complaint was barred by laches and prescription; (b) the application of the innocent purchaser rule in sales of unregistered land; and (c) the absence of evidence of an implied trust. Petitioner argued the familial relationship invoked a confidential relationship precluding laches, that the transfer was only for accommodation, and that prescription commenced only when Roberto repudiated the trust by selling the properties in 1992. Petitioner further contended that in unregistered land sales, good faith purchasers do not have better rights than the seller.
Legal Principles on Trusts as Applied
The Supreme Court thoroughly discussed trusts under the Civil Code, differentiating between express and implied trusts. Implied trusts arise by operation of law and include resulting trusts (intention-enforcing based on consideration) and constructive trusts (fraud-rectifying, imposed to prevent unjust enrichment and fraud). Articles 1441 and 1457 allow proving implied trusts by parol evidence. Evidence must be trustworthy and not vague.
Evidence Establishing the Implied Trust
Contrary to lower courts’ findings, the Supreme Court recognized credible testimony by Luz Laigo-Ali and Hilaria Costales, witnesses to the affidavit’s execution, explaining that the property was loaned to Roberto solely to support his visa application, with the intention that the properties would return to Margarita upon his return. The absence of written proof was due to trust among family members.
Characterization of Roberto’s Role and the Consequences of Sale
Roberto, as trustee of a resulting trust, held only legal title and had no authority to sell or dispose of the properties. His sales to respondents constituted wrongful conversion and breach of trust. Thus, the respondents who acquired properties from him were subject to reconveyance demands unless protected as bona fide purchasers for value.
On Good Faith Purchasers for Unregistered Land
The Court clarified that the doctrine protecting purchasers in good faith is pertinent primarily to registered land, where registration gives constructive notice and protects bona fide purchasers. For unregistered land, buyers acquire no better right than the seller; hence, respondents cannot rely on good faith purchase to defeat Margarita’s claim.
Prescription and Laches Considerations
The Court observed that trust relations terminate upon the trustee’s death, which occurred in this case, modifying the implication of prescription rules. Furthermore, prescription for reconveyance under implied trusts begins to run from the trustee’s unequivocal acts repudiating the trust of which the beneficiary is made aware. Since Margarita only learned of the unauthorized sales in 1995, her 1996 complaint was t
Case Syllabus (G.R. No. 168062)
Background and Procedural History
- The case involves a Rule 45 Petition for Review contesting the October 13, 2006 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 72371, affirming the Regional Trial Court (RTC) of La Union Branch 33’s July 2, 2001 judgment that dismissed the complaint in Civil Case No. 1031-BG.
- Petitioner Margarita D. Cabacungan, represented by her daughter Luz Laigo-Ali, filed a complaint for annulment of sale, recovery of ownership and possession, cancellation of tax declarations, and damages against respondents Marilou Laigo, Pedro Roy Laigo, Stella Balagot, and spouses Mario and Julia Campos.
- Estella Balagot was later dropped from the case. Petitioner died during proceedings and her estate took over.
Facts of the Case
- Margarita owned three parcels of unregistered lands in Paringao and Baccuit, Bauang, La Union, with tax declarations in her name.
- In 1968, Margarita's son Roberto Laigo, Jr., applied for a U.S. non-immigrant visa and requested Margarita to transfer the tax declarations of these properties to his name to support his visa application.
- Margarita executed an Affidavit of Transfer transferring the properties to Roberto by donation without informing her other children.
- Roberto successfully obtained the visa, traveled to the U.S., and returned afterwards.
- Roberto adopted respondents Pedro and Marilou in 1979 and married Estella Balagot.
- In 1990 and 1992, Roberto sold the properties to the respondents and the spouses Campos, without Margarita’s knowledge.
- Margarita learned of the sales only in 1995 during Roberto's wake, reportedly from Pedro.
- In 1996, Margarita instituted the complaint for annulment of the sales and recovery of the properties, arguing Roberto merely held legal title in trust, not absolute ownership.
Claims and Defenses
- Petitioner contended the 1968 transfer was solely for facilitating Roberto's U.S. visa application, with no intention to divest ownership; thus sales were invalid, fictitious, and fraudulent, with imputed bad faith on buyers.
- Spouses Campos and respondents Marilou and Pedro claimed they were innocent purchasers for value and in good faith, relying on Roberto's representations.
- Respondents argued insufficiency of grounds to annul sale based on alleged inadequacy of price absent defect in consent.
- They raised prescription and laches, citing Margarita’s long inaction from 1968 to 1996 and Roberto's death, suggesting claims should be against his estate.
- Margarita and spouses Campos entered into an amicable settlement, dismissing claims between each other, but trial continued as to Pedro and Marilou.
Trial Court’s Findings and Judgment
- The RTC ruled that the 1968 Affidavit of Transfer was a simple transfer and no express trust had been created due to lack of evidence of Roberto's obligation to reconvey.
- The court found instead an implied or constructive trust existed between Margarita and Roberto.
- The court held Margarita guilty of laches for her failure to recover the properties earlier and barred her claim, finding respondents as buyers in good faith.
- It further ruled that prescription had run on Margarita's claim based on the ten-year bar for actions related to ownership recovery or implied trust enforcement.
- The court found inadequacy of price insufficient to annul sales absent defect of consent.
- Consequently, it dismissed the complaint.
Court of Appeals’ Ruling
- The CA affirmed the RTC’s dismissal, rejecting petitioner’s claim that Roberto was a mere trustee with no evidence of an agreement to return properties.
- Though questioning the existence of an implied trust, CA held that even assuming it existed, Margarita’s claim was barred by laches due to unreasonable delay.
- It held that prescription regarding an implied trust under Article 1144 had also run from 1968 when the transfer was executed.
- CA maintained the applicability of the innocent purchaser rule, noting Pedro and Marilou were buyers in good faith.
- The appeal was denied and dismissal was affirmed.
Issues on Appeal
- Whether the 1968 Affidavit of Transfer created