Comilang vs. Burcena

A purchase money resulting trust arises when property is bought with funds furnished by one party but legal title is conveyed to another, making the latter a trustee who cannot validly donate the property under Article 736 of the Civil Code. An appellate court may uphold such a trust theory even if not expressly assigned as error, where it is necessary to a just resolution and is closely related to the issues actually raised on appeal.

Francisco and Mariano Burcena are siblings who, while working abroad, sent money to their mother Dominga Reclusado Vda. de Burcena for the purchase of a 918-square meter parcel of land in Manueva, Santa, Ilocos Sur, together with a 32-square meter house built thereon. The property was declared for taxation purposes in Dominga's name as administrator. Salvador Comilang is the petitioner who benefited from a Deed of Donation executed by Dominga over the subject property on or about March 12, 1984, which respondents sought to annul on the ground that Dominga was neither the owner nor authorized to donate.

On April 29, 1985, Francisco Burcena and Mariano Burcena, together with their mother Dominga Reclusado Vda. de Burcena, filed a complaint for annulment of document with damages against Salvador Comilang. The complaint alleged that respondents were the owners of a 918-square meter parcel of land located in Manueva, Santa, Ilocos Sur and a 32-square meter house built thereon, having acquired the property through their earnings while working abroad. The property was declared for taxation purposes in Dominga's name as administrator. On or about March 12, 1984, petitioner caused the execution of a Deed of Donation over the property by taking advantage of Dominga's blindness, old age, and physical infirmity. Respondents contended that the Deed of Donation was null and void because Dominga had no right to donate the property since she was not its owner, Dominga did not give her consent and was misled into executing the document, and even granting Dominga had authority to donate, the donation was void because the property was the only property declared in her name and she could not have reserved for herself in full ownership sufficient property to support herself.

In his Answer dated February 24, 1986, petitioner contended that the Deed of Donation was freely and voluntarily executed by Dominga in consideration of her love and affection for him. Petitioner claimed that the subject property was acquired by Dominga together with her two sisters, Aniceta Reclusado and Juana Reclusado, long before respondents went to Hawaii, and that Dominga erected a house on the land long before the outbreak of World War II, financing the construction and subsequent improvements out of her own money as a merchant. Petitioner further argued that even if respondents had been sending money to Dominga, said money already belonged to her, and if Dominga used that money for improving the house, respondents had no right over the house.

During the pendency of the case and before she could take the witness stand, Dominga died. Trial on the merits ensued, with respondents and their aunt Margarita Burcena testifying for the plaintiffs, and petitioner testifying on his own behalf. The RTC found the donation void because Dominga could not have validly disposed of the subject property, it having been bought with money sent by respondents while working abroad, although declared for taxation purposes in Dominga's name. The RTC declared respondents as owners of the property, annulled the Deed of Donation, and ordered petitioner to vacate and turn over the property, while declaring petitioner's possession to be in good faith and making no pronouncement as to damages, accounting of produce, or attorney's fees.

On appeal, the CA found no cogent reason to disturb the RTC's factual findings or its assessment of witness credibility. The CA held that the case involved an implied trust known as a purchase money resulting trust under Article 1448 of the Civil Code, finding that the evidence convincingly showed the subject property was bought with money belonging to respondents but declared in Dominga's name as administrator. The CA concluded that Dominga's act of donating the property to petitioner was beyond her authority and capacity and done without the consent of the real owners, thereby sustaining the RTC's conclusion that the donation was void.

• Implied Trust Not in Issue: Petitioner assailed the CA's application of the principle of implied trust to nullify the Deed of Donation, asserting that the existence of an implied trust between respondents and Dominga in relation to the subject property was never treated by the RTC nor brought in issue on appeal before the CA.
• Hearsay Testimony: Petitioner argued that Margarita's statement on the witness stand that Dominga told her that respondents sent money to buy the subject property should not have been given weight or credence by the RTC and the CA because it is hearsay and has no probative value.
• Misappreciation of Circumstances: Petitioner assigned as error that the CA misappreciated circumstances of substance and value which greatly affected the outcome of the case or warranted reversal of the RTC decision.

• Appellate Prerogative on Unassigned Errors: Respondents maintained that the CA had the judicial prerogative to rule on matters not assigned as errors in an appeal if indispensable or necessary to the just resolution of the case.
• Admissibility of Margarita's Testimony: Respondents submitted that Margarita's testimony was not hearsay since Margarita merely stated what Dominga said, and the testimony was offered to establish the fact that the statement was made, not to prove the truth of the matters asserted.

• Appellate Authority to Apply Implied Trust: Whether the CA erred in declaring that an implied trust arises over the subject property when the existence of an implied trust was never treated by the RTC nor raised as an issue on appeal.
• Admissibility of Testimony: Whether Margarita's testimony recounting Dominga's statements about the source of funds used to purchase the property is hearsay and devoid of probative value.

• Appellate Authority to Apply Implied Trust: No. The CA did not err in applying the doctrine of implied trust, as appellate courts are clothed with ample authority to review rulings not assigned as errors when consideration thereof is necessary to arrive at a just decision and is closely related to an assigned error.
• Admissibility of Testimony: No. Margarita's testimony was admissible as an independently relevant statement, offered to establish the fact that Dominga made the statement and the tenor thereof, not to prove the truth of the matters asserted, and thus did not fall within the hearsay rule.

• Appellate Authority to Apply Implied Trust: Section 8, Rule 51 of the 1997 Rules of Civil Procedure recognizes the broad discretionary power of an appellate court to consider errors not assigned, including matters not assigned as errors but consideration of which is necessary in arriving at a just decision, matters closely related to an assigned error, and matters upon which the determination of a properly assigned question is dependent. Since petitioner directly brought in issue on appeal in his Appellant's Brief the RTC's declaration that Dominga could not have validly disposed of the subject property because respondents were the real owners, it was within the CA's authority to review and evaluate the propriety of that ruling. In holding that an implied trust exists between respondents and Dominga, the CA merely clarified the RTC's findings. Under Article 1448 of the Civil Code, a purchase money resulting trust arises when property is sold and legal title is granted to one party but the price is paid by another for the purpose of having the beneficial interest. The two elements — actual payment of valuable consideration and such consideration furnished by the alleged beneficiary — were both present, as respondents showed the property was bought with their money but titled in Dominga's name. As trustee, Dominga could not validly donate the property under Article 736, which provides that guardians and trustees cannot donate property entrusted to them. Nobody can dispose of that which does not belong to him.

• Admissibility of Testimony: Margarita's testimony that Dominga told her respondents sent money to buy the subject property cannot be categorized as hearsay. The testimony was not presented to prove the truth of Dominga's statement but only to establish the fact that Dominga narrated to Margarita the source of the funds used in the purchase. The utterance is in the nature of an independently relevant statement, admissible to show that the statement was made and its tenor, regardless of the truth or falsity of the matters asserted. When the fact that a statement has been made is relevant, the hearsay rule does not apply. Moreover, Margarita's testimony was not the main basis for the RTC's decision and was not indispensable; it merely corroborated the testimonies of respondents on the source of funds. The testimonies of all three witnesses for the plaintiffs were found convincing and credible by the RTC, whose findings on witness credibility will not be disturbed on appeal, trial courts having superior advantages in observing the manner and demeanor of witnesses.

• Purchase Money Resulting Trust — A trust implied by law under Article 1448 of the Civil Code, arising when property is sold and legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest. The former is the trustee and the latter is the beneficiary. The elements are: (a) actual payment of money, property, or services, or an equivalent, constituting valuable consideration; and (b) such consideration must be furnished by the alleged beneficiary. An exception exists where the person to whom title is conveyed is a child of the one paying the price, in which case no trust is implied, it being disputably presumed that there is a gift in favor of the child. In this case, both elements were present: respondents furnished the purchase price while title was held by Dominga, making Dominga a trustee who could not donate the property under Article 736.

• Independently Relevant Statements — Statements made by a person, when testified to by a witness, are admissible not to prove the truth of the matters asserted but to establish the fact that the statement was made and its tenor. Such statements are not hearsay because the hearsay rule applies only when the testimony is offered to prove the truth of the fact asserted in the statement. Regardless of the truth or falsity of a statement, when the fact that it has been made is relevant, the hearsay rule does not apply. In this case, Margarita's testimony about Dominga's statements on the source of funds was admissible as an independently relevant statement corroborating respondents' testimonies.

• Appellate Court's Authority to Consider Unassigned Errors — Under Section 8, Rule 51 of the 1997 Rules of Civil Procedure, an appellate court may pass upon errors not assigned where: (a) the grounds affect jurisdiction over the subject matter; (b) the matters constitute plain or clerical errors; (c) consideration is necessary for a just decision and complete resolution; (d) the matters were raised in the trial court and are matters of record bearing on the issues; (e) the matters are closely related to an assigned error; or (f) the determination of a properly assigned question is dependent upon them. In this case, the CA properly applied the implied trust doctrine as a clarification of the RTC's ruling on ownership, which petitioner had directly challenged on appeal.

• "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." — This is the Court's quotation of Article 1448 of the Civil Code, the statutory basis for the purchase money resulting trust applied to nullify the donation.

• "What was sought to be admitted in evidence, and what was actually admitted in evidence, was the fact that the statement was made by Dominga to Margarita, not necessarily that the matters stated by her were true. The said utterance is in the nature of an independently relevant statement which may be admitted in evidence as such, but not necessarily to prove the truth thereof." — This passage articulates the ratio decidendi on the hearsay issue, distinguishing independently relevant statements from hearsay evidence.

• "Regardless of the truth or falsity of a statement, when the fact that it has been made is relevant, the hearsay rule does not apply and the statement may be shown." — This is the canonical formulation of the independently relevant statement doctrine as applied in this case, frequently cited in subsequent evidence jurisprudence.

• Mendoza vs. Bautista, G.R. No. 143666, March 18, 2005, 453 SCRA 691 — Cited for the proposition that appellate courts have broad authority to review rulings not assigned as errors, enumerating the instances where such review is proper. Followed.
• Tigno vs. Court of Appeals, 345 Phil. 486 (1997) — Cited for the elements of a purchase money resulting trust under Article 1448. Followed.
• Bon vs. People, G.R. No. 152160, January 13, 2004, 419 SCRA 101 — Cited for the doctrine on independently relevant statements as an exception to the hearsay rule. Followed.
• Republic vs. Heirs of Felipe Alejaga, Sr., 441 Phil. 656 (2002) — Cited for the principle that when the fact that a statement has been made is relevant, the hearsay rule does not apply. Followed.
• People vs. Dalag, 450 Phil. 304 (2003) — Cited for the doctrine that trial courts' findings on witness credibility will not be disturbed on appeal due to their superior advantage in observing witnesses' demeanor. Followed.
• Marquez vs. Court of Appeals, 360 Phil. 843 (1998) — Cited for the principle that nobody can dispose of that which does not belong to him. Followed.

• Article 1448, Civil Code — Establishes the doctrine of implied trust, specifically the purchase money resulting trust, where property is sold and legal title is granted to one party but the price is paid by another. Applied to hold that Dominga was a trustee of respondents, having no authority to donate the property.
• Article 736, Civil Code — Provides that guardians and trustees cannot donate the property entrusted to them. Applied to invalidate Dominga's donation to petitioner, she being a trustee of the property.
• Section 8, Rule 51, 1997 Rules of Civil Procedure — Governs the questions that may be decided on appeal, allowing appellate courts to pass upon errors not assigned when necessary for a just resolution. Applied to sustain the CA's authority to rule on the implied trust theory despite its not having been expressly raised as an error.

Chief Justice Artemio V. Panganiban (Chairperson) and Associate Justice Consuelo Ynares-Santiago concurred. Associate Justice Romeo J. Callejo, Sr. took no part. Associate Justice Minita V. Chico-Nazario concurred.