Alejandro B. Ty vs. Sylvia S. Ty

Under Article 1448 of the Civil Code, no purchase money resulting trust is implied when the person to whom title is conveyed is the child of the one paying the purchase price; the law instead disputably presumes a donation in favor of the child, and the property is subject to collation as an advance of the child’s share in the payor’s estate to the extent the payor provided part of the purchase price.

Alejandro B. Ty is the father of Alexander Ty, while Sylvia S. Ty is Alexander’s widow and the administratrix of his intestate estate. The dispute concerns three real properties—the EDSA property, the Meridien Condominium, and the Wack-Wack property—which Alejandro claims he purchased and caused to be registered in Alexander’s name, or in the names of Alexander and Sylvia, with Alexander allegedly holding them in trust for his siblings. The controlling statutory backdrop is Article 1448 of the Civil Code, which creates a purchase money resulting trust but expressly excepts conveyances to a child of the payor, in which case no trust is implied by law and a gift is disputably presumed.

Alejandro B. Ty is the father of Alexander Ty. Alexander died of cancer on May 19, 1988, at the age of 34, survived by his wife Sylvia S. Ty and their daughter Krizia Katrina Ty. A few months after his death, Sylvia filed a petition for settlement of Alexander’s intestate estate in the Regional Trial Court of Quezon City. On July 20, 1989, upon her petition as administratrix in Los Angeles County, the Superior Court of California ordered distribution of the Hollywood condominium unit, the Montebello lot, and a 1986 Toyota pick-up truck to Sylvia and Krizia. On November 23, 1990, Sylvia submitted to the Quezon City intestate court an inventory of Alexander’s estate, listing shares of stocks and several real properties: the EDSA property, registered in Alexander’s name when he was still single; the Meridien Condominium, registered in the names of Alexander and Sylvia; and the Wack-Wack property, also registered in their names. On November 4, 1992, Sylvia asked the intestate court to sell or mortgage estate properties to pay an additional estate tax of P4,714,560.02 assessed by the BIR.

On December 16, 1992, Alejandro filed a complaint for recovery of properties with preliminary injunction/TRO against Sylvia as administratrix, docketed as Civil Case No. 62714 in the RTC of Pasig, Branch 166. He alleged that he purchased the EDSA property on March 17, 1976 from Purificacion Z. Yujuico and registered it in Alexander’s name, with Alexander to hold it in trust for his siblings in the event of Alejandro’s sudden demise. He similarly alleged that he purchased the Meridien Condominium in 1985 and the Wack-Wack property in 1987, and placed their titles in Alexander’s name for the same trust purpose. Alejandro asserted that Alexander and Sylvia had minimal income and were financially incapable of purchasing the properties, presenting Alexander’s income tax returns from 1980-1984 and the profit and loss statement of Sylvia’s Joji San General Merchandising from 1981-1984. He added that Sylvia acted in bad faith in including the properties in Alexander’s estate inventory.

Sylvia denied the trust. She contended that Alexander purchased the EDSA property with his own money and was financially capable, having managed family corporations since age 18 and engaged in importing luxury cars. As to the Meridien Condominium and Wack-Wack property, she argued that she and Alexander had profitable business endeavors and the financial capacity to acquire them. She raised affirmative defenses of Statute of Frauds, Dead Man’s Statute, laches, collateral attack on title, and forum-shopping, and sought attorney’s fees and costs on her counterclaim. On November 9, 1993, Angelina Piguing-Ty, Alejandro’s legal wife, filed a motion for leave to intervene and a complaint-in-intervention, claiming the properties were conjugal; the trial court granted the motion on April 27, 1994.

During trial, Alejandro presented evidence including the petition in the intestate proceeding, Alexander’s income tax returns and confirmation receipts from 1980-1984, the profit and loss statement of Joji San General Merchandising from 1981-1984, the deed of sale of the EDSA property dated March 17, 1976, the titles and condominium certificate of title of the properties, petty cash vouchers, official receipts and checks for security and renovation expenses of the Meridien and Wack-Wack properties, checks issued to Sylvia from June 1988 to November 1991 totaling P51,000.00, and articles of incorporation of various corporations. Sylvia presented the intestate petition, the titles, a deed of sale of stock, transcripts, corporate minutes and articles, a construction agreement with Home Construction for the Wack-Wack renovation, billing letters and receipts, an agreement with Drago Daic Development International, Inc. dated March 1987 for the sale of the Wack-Wack property in favor of Alexander and Sylvia, a photograph of Krizia, Alexander’s business cards, the California court order and decree, an agreement with Gerry L. Contreras dated January 26, 1988 for architectural finishing and interior design, official receipts, obituaries, and a letter to Drago Daic dated February 10, 1987.

The RTC and CA heard testimony from Sylvia, Alejandro, Conchita Sarmiento, Robert Bassig, Tom Adarne, Rosanna Regalado, and Atty. Mario Ongkiko. The CA found that Alexander had been working for at least nine years when he purchased the Meridien and Wack-Wack properties, had a car care business and a beer garden, and was active in several family corporations from which he received emoluments and benefits; that petitioner failed to show by clear preponderance that the money used to purchase those properties came from him; and that at least part of the EDSA property’s purchase price came from Alejandro. The CA also found that the tax declaration receipts for the Wack-Wack property for 2000-2004 and for the Meridien Condominium for 2000-2001 showed the estate of Alexander was paying real estate taxes.

• Article 1448 / Implied Trust over EDSA: Petitioner contended that the EDSA property, though registered in Alexander’s name, was covered by an implied trust under Article 1448 of the Civil Code because he paid the price for the purpose of having the beneficial interest of the property.
• Presumed Donation Not in Issue: Petitioner argued that the Court of Appeals erred in ruling on a “presumed donation” because that matter was never raised as an issue and conflicted with the parties’ respective theories of the case.
• Absence of Donative Intent: Petitioner maintained that Article 1448’s presumption of donation in favor of a child should not apply because he expressly declared that he did not intend to donate the subject properties to Alexander.
• Proof of Implied Trust: Petitioner argued that the Court of Appeals erred in requiring that the implied trust be proven with documentary evidence, contrary to law and jurisprudence.
• Factual Findings on Meridien and Wack-Wack: Petitioner asserted that the Court of Appeals made factual findings grounded on mistaken inferences, speculation, or conjecture, and that he should have been found to have paid for the Meridien Condominium and Wack-Wack property.

• No Implied Trust / Financial Capacity: Respondent, as defendant-appellant before the Court of Appeals, contended that the trial court erred in applying Article 1448 because petitioner presented no evidence that the money used to acquire the properties came from him, and because she and Alexander had the financial capacity to purchase them.
• Express Trust Not Proven: Respondent pointed out that, based on petitioner’s own testimony, he intended an express trust, but no written instrument proved such trust over real property.
• Dead Man’s Statute: Respondent questioned the admission of petitioner’s testimony under the Dead Man’s Statute.
• Income Tax Returns: Respondent questioned the admission of Alexander’s income tax returns under Section 71 of the National Internal Revenue Code and the case of Vera vs. Cusi, Jr.
• Affirmative Defenses: Respondent asserted the affirmative defenses of laches, collateral attack on title, and forum-shopping.
• Counterclaim: Respondent prayed for attorney’s fees and costs of litigation in her counterclaim.

• EDSA Property / Article 1448 Exception: Whether the Court of Appeals erred in holding that no implied trust arose over the EDSA property because Alexander Ty was petitioner’s son, and in applying the disputable presumption of donation under Article 1448 of the Civil Code.
• Meridien Condominium and Wack-Wack Property / Proof of Payment: Whether the Court of Appeals erred in finding that petitioner failed to prove that he paid the purchase price of the Meridien Condominium and Wack-Wack property, and in consequently ruling that no implied trust was created over them.
• Collation of EDSA Property: Whether the EDSA property, presumed donated to Alexander Ty, must be collated into petitioner’s estate as an advance of Alexander’s share to the extent petitioner paid part of its purchase price.

• EDSA Property / Article 1448 Exception: No. The Court of Appeals correctly applied Article 1448’s exception. Because Alexander was petitioner’s son, no trust is implied by law; a donation is disputably presumed. The EDSA property must be collated into petitioner’s estate upon his death as an advance of Alexander’s share to the extent petitioner paid part of its purchase price.
• Meridien Condominium and Wack-Wack Property / Proof of Payment: No. The Court of Appeals’ finding that petitioner failed to prove he paid the purchase price is factual and supported by the record. No implied trust arose over these properties.
• Collation of EDSA Property: Yes. The EDSA property is presumed donated to Alexander and must be collated into petitioner’s estate in the event of his death as an advance of Alexander’s share to the extent petitioner provided part of its purchase price.

• EDSA Property / Article 1448 Exception: Article 1448 provides that when property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest, an implied trust arises; the former is the trustee and the latter is the beneficiary. The same article, however, contains a proviso: if the person to whom title is conveyed is a child, legitimate or illegitimate, of the one paying the price, no trust is implied by law, and a gift in favor of the child is disputably presumed. Petitioner invoked Article 1448 to claim an implied trust over the EDSA property. The Court of Appeals conceded that at least part of the purchase price came from petitioner, but ruled out an implied trust because Alexander was petitioner’s son. The Supreme Court held that the Court of Appeals did not err: the outcome was the necessary consequence of petitioner’s own theory and was inextricably linked to it by the law. Since Alexander was undisputedly petitioner’s child, no trust is implied; the law presumes a donation. Petitioner failed to prove the contrary. The net effect is that respondent must collate the EDSA property into the mass of petitioner’s estate in the event of his death as an advance of Alexander’s share to the extent petitioner provided part of its purchase price.
• Meridien Condominium and Wack-Wack Property / Proof of Payment: The Court of Appeals found that petitioner failed to show that the money used to purchase the Meridien Condominium and Wack-Wack property came from him. The Supreme Court treated this as a factual finding and found no convincing argument to alter it. The Court of Appeals had thoroughly reviewed the records and supported its conclusions point by point. Among the facts cited were Alexander’s sources of income: he had been working for nine years when he purchased the properties, had a car care business, and was actively engaged in family corporations from which he received emoluments and other benefits. Because there was no showing that petitioner paid part of the purchase price, no implied trust was created over these properties; the evidence instead showed Alexander had the means to pay for them.
• Collation of EDSA Property: The EDSA property, being presumed donated to Alexander under Article 1448, is subject to collation. The Court cited Article 1061 and subsequent articles of the Civil Code. The property must be collated into the mass of petitioner’s estate in the event of his death as an advance of Alexander’s share in his father’s estate, to the extent petitioner provided part of its purchase price.

• Purchase Money Resulting Trust under Article 1448 — When property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest, an implied trust arises: the former is the trustee, while the latter is the beneficiary. However, if the person to whom title is conveyed is a child, legitimate or illegitimate, of the one paying the price, no trust is implied by law; it is disputably presumed that there is a gift in favor of the child. In this case, because Alexander Ty was petitioner’s son, the exception applied to the EDSA property; no implied trust arose despite petitioner’s claim that he paid part of the price.
• Disputable Presumption of Donation to a Child — Under the exception in Article 1448, a conveyance to a child of the payor is presumed to be a donation. The presumption is disputable, but petitioner failed to prove the contrary. The property is thus treated as an advance of the child’s share in the parent’s estate and is subject to collation.
• Collation — Property gratuitously received by a compulsory heir from the decedent during the latter’s lifetime is collated into the mass of the estate as an advance of the heir’s share, to the extent of the value provided by the decedent. The Court required respondent to collate the EDSA property into petitioner’s estate upon his death as an advance of Alexander Ty’s share, to the extent petitioner provided part of its purchase price.
• Clear and Satisfactory Proof for Implied Trust — A party asserting an implied trust bears the burden of proving its existence by evidence that is sufficiently strong, clear and satisfactory, or trustworthy. Implied trusts may be proved by oral evidence, but such evidence must be received with extreme caution and cannot rest on loose, equivocal, or indefinite declarations. The Court affirmed the Court of Appeals’ finding that petitioner failed to discharge this burden as to the Meridien Condominium and Wack-Wack property.
• Factual Findings of the Court of Appeals — Findings of fact of the Court of Appeals, especially when supported by the record, are not disturbed absent a convincing showing of error. The Court declined to overturn the Court of Appeals’ findings that petitioner failed to prove payment for the Meridien and Wack-Wack properties and that Alexander had the financial means to acquire them.

• "Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child." — This is the controlling provision. It defines the purchase money resulting trust and its exception for a child of the payor, which the Court applied to the EDSA property.
• "Stated otherwise, the outcome is the necessary consequence of petitioner’s theory and argument and is inextricably linked to it by the law itself." — This states the ratio for rejecting petitioner’s objection to the presumed-donation ruling: having invoked Article 1448, petitioner was bound by the exception contained in the same article.
• "The net effect of all the foregoing is that respondent is obliged to collate into the mass of the estate of petitioner, in the event of his death, the EDSA property as an advance of Alexander’s share in the estate of his father, to the extent that petitioner provided a part of its purchase price." — This is the Court’s dispositive modification, applying the law on collation to the presumed donation of the EDSA property.
• "The CA, therefore, ruled that with respect to the Meridien Condominium and the Wack-Wack property, no implied trust was created because there was no showing that part of the purchase price was paid by petitioner and, on the contrary, the evidence showed that Alexander Ty had the means to pay for the same." — This summarizes the Court’s affirmance of the finding that no implied trust arose over the two other properties.

• Alegre vs. Reyes, 161 SCRA 226 (1961) — Cited by the Court of Appeals on reopening a civil case for reception of additional evidence; the Court of Appeals applied the principle that reopening before judgment rests on sound judicial discretion and the paramount interest of justice, but still excluded forgotten evidence.
• Marella vs. Reyes, 12 Phil. 1; Abrenica vs. Gonda and De Gracia, 34 Phil. 739; Tongco vs. Vianzon, 50 Phil. 698 — Cited by the Court of Appeals in rejecting the Dead Man’s Statute objection, because counsel for defendant did not object to plaintiff’s testimony and cross-examined him.
• Vera vs. Cusi, Jr. — Cited by defendant-appellant on the inadmissibility of income tax returns under Section 71 of the National Internal Revenue Code; the Court of Appeals distinguished it, holding the returns admissible because they were produced from plaintiff’s own files and not obtained from the BIR or by court order.

• Article 1448, Civil Code — Provides the purchase money resulting trust and its exception for a child of the payor. Applied to the EDSA property: because Alexander was petitioner’s son, no implied trust arose; a donation was disputably presumed.
• Article 1061 and subsequent articles, Civil Code — Cited in the footnote for collation. Applied to require respondent to collate the EDSA property into the mass of petitioner’s estate upon his death as an advance of Alexander’s share, to the extent petitioner provided part of its purchase price.
• Rule 130, Section 20, Rules of Court (Dead Man’s Statute) — Invoked by respondent against petitioner’s testimony. The Court of Appeals held it inapplicable because no objection was made and petitioner was cross-examined.
• Section 71, National Internal Revenue Code — Invoked by respondent against the admission of Alexander’s income tax returns. The Court of Appeals held it inapplicable because the returns were produced from petitioner’s own files, not obtained from the BIR or by court order.
• Rule 45, Rules of Court — The procedural basis for the petition for review on certiorari filed before the Supreme Court.

The “WE CONCUR” portion lists Chief Justice Reynato S. Puno (Chairperson) and Associate Justices Antonio T. Carpio (marked with an asterisk; footnote states “On Leave”), Renato C. Corona, and Teresita J. Leonardo-De Castro. No separate concurring opinions are summarized in the text.