Cuenco v. Cuenco Vda. de Manguerra

Where a law partner takes title in his own name to property representing the law firm’s attorney’s fees that equitably belongs to his partner, an implied trust arises in favor of the partner and his heirs; the trustee who later claims the property is estopped and cannot invoke laches against the heir who possessed it, paid taxes, annotated an adverse claim, and sued after ouster.

Respondent Concepcion Cuenco Vda. de Manguerra is a daughter of Don Mariano Jesus Cuenco, who was a law partner of petitioner Miguel Cuenco in the Cuenco and Cuenco Law Offices. The dispute concerns a parcel derived from the Banilad Estate and is governed by the Civil Code provisions on express and implied trusts, including resulting and constructive trusts. The case also involves the Rule 45 limitation that only questions of law may be raised in a petition for review.

Respondent Concepcion Cuenco Vda. de Manguerra is the daughter of Don Mariano Jesus Cuenco, who formed the Cuenco and Cuenco Law Offices with his brother, petitioner Miguel Cuenco. Around August 4, 1931, the law office served as counsel in Valeriano Solon vs. Zoilo Solon (Civil Case No. 9037) and Valeriano Solon vs. Apolonia Solon (Civil Case No. 9040), which involved a dispute among relatives over Lot 903 of the Banilad Estate near the Cebu Provincial Capitol. The records of those cases named Miguel alone as counsel of record, but the lower courts found that the real lawyer behind the success of the cases was the influential Don Mariano. After the cases were won, the awardees subdivided Lot 903 into Lot 903-A, with an area of 5,000 square meters, as Mariano’s attorney’s fees; Lot 903-B, also 5,000 square meters, as Miguel’s attorney’s fees; and Lot 903-C, with 54,000 square meters, as the Solons’ retention. Because Mariano was then actively practicing law in Manila, he entrusted his share, Lot 903-A, to Miguel. On September 10, 1938, Miguel obtained a title to Lot 903-A in his own name, TCT No. RT-6999 (T-21108), and the lower courts found that he was obligated to hold the title in trust for Mariano’s children by his first marriage.

Sometime in 1947, in anticipation of Mariano’s second marriage, the family partitioned Lot 903-A into six sub-lots, Lots 903-A-1 to 903-A-6, corresponding to Mariano’s six children by his first marriage: Teresita, Manuel, Lourdes, Carmen, Consuelo, and Concepcion. Miguel did not object to or oppose the partition plan. On June 4, 1947, he executed four deeds of donation in favor of Teresita, Manuel, Lourdes, and Carmen pursuant to that plan, and on June 24, 1947, he executed a fifth deed of donation in favor of Consuelo. The five deeds left out the sixth child, Concepcion, who later became the respondent. In 1949, Concepcion occupied and fenced a portion of Lot 903-A-6 for taxation purposes and paid the taxes thereon. Mariano died on February 25, 1964, leaving a last will and testament that stated that the lots near the Cebu provincial capitol, which were his attorney’s fees from Victoria Rallos and Zoilo Solon, had already been disposed of and distributed by him, through his brother Miguel, to all his children in the first marriage. Miguel started paying real property taxes on Lot 903-A-6 only on April 4, 1964, after Mariano’s death.

On June 3, 1966, Miguel wrote a letter petitioning the Register of Deeds of Cebu to transfer Lot 903-A-6 to his name on the ground that it was a portion of Lot 903-A. On April 6, 1967, Concepcion requested the Register of Deeds to annotate an affidavit of adverse claim against Miguel’s TCT No. RT-6999, which covered Lot 903-A. At that time, Concepcion had the owner’s duplicate copy of TCT No. RT-6999. On June 3, 1967, the Register of Deeds issued TCT No. 35275 covering Lot 903-A-6 in Miguel’s name, but the earlier annotation of adverse claim remained. In 1969, Miguel tore down the wire fence that Concepcion had constructed on Lot 903-A-6, which compelled her to institute the complaint dated August 20, 1970, filed on September 19, 1970.

In his answer with counterclaim dated December 3, 1970, and filed on December 5, 1970, Miguel alleged that he was the absolute owner of Lot 903-A-6; that the lot was a portion of Lot 903-A, which in turn was part of Lot 903, the subject matter of litigation; that he alone defended the cases involving Lot 903 without Mariano’s participation; that he donated five of the six portions of Lot 903-A to five of Mariano’s children out of gratitude for the love and care they showed him during his long sickness; and that he did not give or donate any portion to Concepcion because she never visited him or took care of him during that sickness. He further alleged that he became critically ill on February 11, 1946, was confined at Singian’s Clinic in Manila, and was then transferred to Cebu where he nearly died in 1946; that his wife Fara Remia Ledesma Cuenco had an operation in January 1951 and was confined at the University of Santo Tomas Hospital and John Hopkins Hospital in the United States; that two of his children died at the University of Santo Tomas Hospital in 1951 and 1952; and that his wife was blind for many months due to malignant hypertension, but Concepcion never remembered her nor commiserated with him and his wife during their long period of sorrow.

Miguel took the witness stand on September 13, 1974, and his self-conducted direct examination lasted until 1985, the last session being on November 22, 1985. He died before he could submit himself for cross-examination, so his testimony was stricken off the record. His surviving daughter, Marietta Cuyegkeng, stood as the substitute petitioner. She testified that she purchased Lot 903-A-6 from her late father sometime in 1990 and constructed a house thereon in the same year; that she became aware of the case because her late father used to commute to Cebu City to attend to it; and that Lot 903-A-6 is in her name under TCT No. 113781 of the Registry of Deeds for Cebu. The trial and appellate courts found that the defendants in Civil Case No. 9040 were represented by the Cuenco and Cuenco Law Office, composed of partners Mariano and Miguel, and that Lot 903-A was part of Mariano’s attorney’s fees.

• Evaluation of Evidence: Petitioner argued that the CA failed to consider facts of substance and significance which, if considered, would show that the preponderance of evidence is in favor of petitioner.
• Implied Trust: Petitioner argued that no constructive or implied trust exists between the parties and that the action is not one for reconveyance based upon a constructive or implied trust.
• Laches and Prescription: Petitioner argued that even where an implied trust is admitted to exist, respondent’s action for relief is barred by laches and prescription.
• Expunged Testimony: Petitioner argued that the trial court and the appellate court erred in expunging from the records the testimony of Miguel Cuenco.

• Expunged Testimony: Respondent countered that the issue of expunging Miguel Cuenco’s direct testimony was not raised before the CA and that petitioner had not asked the trial court to reconsider its Order expunging the testimony, so the issue could not be raised for the first time on appeal.

• Evaluation of Evidence: Whether the CA failed to consider facts of substance and significance which, if considered, would show that the preponderance of evidence is in favor of petitioner.
• Implied Trust: Whether no constructive or implied trust exists between the parties and whether the action is not one for reconveyance based upon a constructive or implied trust.
• Laches and Prescription: Whether, even where an implied trust is admitted to exist, respondent’s action for relief is barred by laches and prescription.
• Expunged Testimony: Whether the trial court and the appellate court erred in expunging from the records the testimony of Miguel Cuenco.

• Evaluation of Evidence: No. Rule 45 limits review to questions of law; the CA’s factual findings affirming the RTC were binding absent a showing of whimsical or capricious exercise of judgment, and the SC declined to reweigh the evidence.
• Implied Trust: No. The contention that no implied trust exists fails; Lot 903-A was Mariano’s share in the law firm’s attorney’s fees, and Miguel’s taking of title in his own name gave rise to an implied trust for Mariano and his heirs, reinforced by estoppel.
• Laches and Prescription: No. Laches did not bar the action; respondent possessed the lot from 1949 to 1969, annotated an adverse claim in 1967, and sued in 1970 after Miguel tore down her fence in 1969, and the CA’s finding that the action had not prescribed was affirmed.
• Expunged Testimony: No. The issue was not raised before the CA and petitioner did not seek reconsideration of the trial court’s expunging Order, so it could not be raised for the first time on appeal.

• Evaluation of Evidence: The SC held that petitioner’s first issue asked it to re-evaluate the veracity and probative value of the evidence, which is contrary to Rule 45 because only questions of law may be raised and resolved in a petition for review. It explained that absent a whimsical or capricious exercise of judgment, and unless the lack of basis for the lower courts’ conclusions is amply demonstrated, the SC will not disturb factual findings; findings of fact of the CA affirming those of the trial court are binding and conclusive. The SC reviewed the records and found no reason to disturb the finding that the defendants in Civil Case No. 9040 were represented by the Cuenco and Cuenco Law Office, composed of partners Mariano and Miguel. It held that the one-hectare attorney’s fees from Lot 903 included Lot 903-A and Lot 903-B, each 5,000 square meters, and that the fact only Miguel handled Civil Case No. 9040 did not mean he alone was entitled to the fees. When a client employs a law firm, the client employs the entire firm, not merely the lawyer assigned to handle the case; as a partner, Mariano was entitled to a share in the attorney’s fees. Thus, the lower courts’ finding that Lot 903-A was part of Mariano’s attorney’s fees had ample support.
• Implied Trust: The SC defined a trust as a legal relationship between one having equitable ownership in property and another having legal title. Trusts may be express or implied. Express trusts are created by direct and positive acts of the parties, indicated through some writing, deed, will, or words evidencing an intention to create a trust. Implied trusts, without being express, are deducible from the nature of the transaction as matters of intent or are superinduced by operation of law as a matter of equity, independently of the parties’ particular intention; they may be resulting or constructive. Resulting trusts are presumed contemplated by the parties and based on the equitable doctrine that valuable consideration, not legal title, determines equitable title; they arise from the nature or circumstances of a transaction whereby legal title is vested in one person who is obligated in equity to hold it for another. Constructive trusts are created by equity to satisfy the demands of justice and prevent unjust enrichment; they arise contrary to intention against one who, by fraud, duress, or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. The SC found an implied trust. Although Lot 903-A was titled in Miguel’s name, the circumstances showed the intent that equitable ownership belong to Mariano and his heirs: (a) Lot 903-A was one half of the one-hectare portion of Lot 903 given as attorney’s fees by a client of the law firm of Partners Miguel and Mariano Cuenco and constituted Mariano’s share; (b) from 1938 until February 3, 1947, Lot 903-A remained undivided and untouched by Miguel, when Lourdes Cuenco, upon Mariano’s instruction, had it surveyed and subdivided into six almost equal portions, Lots 903-A-1 to 903-A-6, allocated to Mariano’s six children by his first wife; (c) Miguel surrendered his certificate of title and interposed no objection to the subdivision and allocation to Mariano’s six children, including Concepcion; (d) Mariano’s children, including Concepcion, shouldered the subdivision expenses; (e) after subdivision, Mariano’s children, including Concepcion, took possession of their respective portions; and (f) legal titles to five portions were transferred by gratuitous deed to Mariano’s five children following the subdivision plan prepared for Lourdes Cuenco. The SC held it was of no moment that the implied trust arose from a circumstance not categorically falling under Articles 1448 to 1456 of the Civil Code, because the enumeration of implied trusts in those articles does not exclude others established by the general law of trust. As to Lot 903-A-6, Concepcion’s equitable ownership was bolstered by her fencing the portion allocated to her, planting trees, and paying real property taxes yearly from 1956 until 1969, the year she was dispossessed. The SC held that although tax declarations or realty tax payments are not conclusive evidence of ownership, they are good indicia of possession in the concept of owner, for no one in his right mind would pay taxes on property not in his actual or at least constructive possession; such payments constitute proof that the holder has a claim of title. Miguel began paying real property taxes on Lot 903-A-6 only on April 4, 1964, after Mariano’s death on February 25, 1964, which showed that only then was he emboldened to claim the property as his own and stop recognizing Mariano’s and Concepcion’s ownership rights, when the one who could have refuted his claim had been silenced by death. The SC also held that Miguel was estopped. From the subdivision and the children’s possession as owners, no protest from Miguel was heard until 1963. By his acts and omissions, Miguel led Mariano and his heirs, including Concepcion, to believe that he respected Concepcion’s ownership of Lot 903-A-6. Mariano relied on Miguel’s tacit recognition, as shown by his 1963 will stating that the lots near the Cebu provincial capitol, which were his attorney’s fees from Victoria Rallos and Zoilo Solon, had already been disposed of and distributed by him, through his brother Miguel, to all his six children in the first marriage. Since Lot 903-A had been subdivided and distributed to the six children as early as 1947, Miguel, having induced Mariano and his heirs to believe that Lot 903-A-6 had been distributed to Concepcion as her own, was estopped from asserting the contrary and claiming ownership. The SC defined estoppel in pais as applying 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 exist, and the latter rightfully relies and acts on that belief so as to be prejudiced if the former is permitted to deny those facts.
• Laches and Prescription: The SC defined laches as 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. It held that Concepcion had persistently asserted her right to Lot 903-A-6. She was in possession as owner from 1949 to 1969. When Miguel took steps to have the lot separately titled in his name despite her having the owner’s duplicate copy of TCT No. RT-6999 covering the entire Lot 903-A, she had her adverse claim annotated on the title in 1967. When Miguel ousted her from possession by tearing down her wire fence in 1969, she commenced the present action on September 19, 1970, to protect and assert her rights. The SC found that she could not be held guilty of laches because she did not sleep on her rights. The CA’s holding that her right of action had not prescribed, because she was in possession and the prescriptive period commenced only from her knowledge of the adverse claim over her possession, was affirmed by the denial of the petition.
• Expunged Testimony: The SC held that the issue of expunging Miguel Cuenco’s direct testimony could not be raised for the first time on appeal. Respondent pointed out that the issue was not raised before the CA, and petitioner had not asked the trial court to reconsider its Order expunging the testimony. The SC applied the rule that issues, arguments, and errors not adequately and seriously brought below cannot be raised for the first time on appeal, because basic considerations of due process impel the rule.

• Implied Trust — A trust is a legal relationship between one having equitable ownership in property and another having legal title. Implied trusts, without being express, are deducible from the nature of the transaction as matters of intent or are superinduced by operation of law as a matter of equity, independently of the parties’ particular intention. They may be resulting or constructive. In this case, Miguel’s taking title to Lot 903-A in his own name, although it represented Mariano’s share in the law firm’s attorney’s fees, gave rise to an implied trust in favor of Mariano and his heirs.
• Resulting Trust — Presumed contemplated by the parties and based on the equitable doctrine that valuable consideration, not legal title, determines equitable title; it arises from the nature or circumstances of a transaction whereby legal title is vested in one person who is obligated in equity to hold it for another. The SC used this framework to explain why Lot 903-A, though titled in Miguel’s name, equitably belonged to Mariano.
• Constructive Trust — Created by equity to satisfy the demands of justice and prevent unjust enrichment; it arises contrary to intention against one who, by fraud, duress, or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. The SC cited this definition in its trust analysis.
• Implied Trusts Outside Articles 1448 to 1456 — The enumeration of implied trusts in Articles 1448 to 1456 of the Civil Code does not exclude others established by the general law of trust. The SC held that the implied trust in this case was valid even if it arose from a circumstance not categorically listed in those articles.
• 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 exist, and the latter rightfully relies and acts on that belief so as to be prejudiced if the former is permitted to deny those facts. Miguel’s long silence and recognition of the subdivision and distribution estopped him from later claiming Lot 903-A-6.
• Laches — 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. Concepcion was not guilty of laches because she possessed the lot, annotated an adverse claim, and sued soon after ouster.
• Employment of a Law Firm — When a client employs a law firm, the client does not employ only the lawyer assigned to personally handle the case; the client employs the entire law firm. Thus, Mariano, as a partner, was entitled to a share in the attorney’s fees even if Miguel alone handled Civil Case No. 9040.
• Tax Declarations and Realty Tax Payments — Although not conclusive evidence of ownership, they are good indicia of possession in the concept of owner, for no one in his right mind would pay taxes on property not in his actual or at least constructive possession; they constitute proof that the holder has a claim of title. Concepcion’s payments from 1956 to 1969 supported her equitable ownership.
• Questions of Law Under Rule 45 — A petition for review under Rule 45 may raise only questions of law; factual findings of the CA affirming the trial court are binding and conclusive absent a whimsical or capricious exercise of judgment. The SC declined to reweigh the evidence.
• Issues Not Raised Below — Issues, arguments, and errors not adequately and seriously brought below cannot be raised for the first time on appeal; basic considerations of due process impel the rule. The SC applied this to the expunged-testimony issue.

• "A trust is a legal relationship between one having an equitable ownership in a property and another having legal title to it." — The SC uses this definition to frame the trust relationship between Miguel, who held legal title, and Mariano and his heirs, who held equitable ownership.
• "Implied trusts may either be resulting or constructive trusts, both coming into being by operation of law." — The SC classifies implied trusts before applying them to the arrangement over Lot 903-A.
• "When a client employs the services of a law firm, he does not employ the services of the lawyer who is assigned to personally handle the case. Rather, he employs the entire law firm." — The SC relies on this to hold that Mariano, as a partner, was entitled to a share in the attorney’s fees even if Miguel alone handled Civil Case No. 9040.
• "Although tax declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless, they are good indicia of possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not in his actual or at least constructive possession." — The SC uses this to give weight to Concepcion’s realty tax payments from 1956 to 1969 as evidence of her equitable ownership and possession.

• Almora vs. CA, 309 SCRA 586, July 2, 1999 — Relied on for the rule that factual findings of the lower courts will not be disturbed absent a whimsical or capricious exercise of judgment.
• Rilloraza, Africa, De Ocampo and Africa vs. Eastern Telecommunications Phils., Inc., 309 SCRA 566, July 2, 1999 — Relied on for the rule that employing a law firm employs the entire firm, not merely the lawyer assigned to handle the case.
• Rosario vs. CA, 310 SCRA 464, July 19, 1999 — Relied on for the definitions of express, implied, resulting, and constructive trusts.
• Vda. de Esconde vs. CA, 253 SCRA 66, February 1, 1996 — Relied on for the definition of trust and constructive trust.
• Development Bank of the Philippines vs. CA, 331 SCRA 267, April 28, 2000 — Relied on for the rule that tax declarations and realty tax payments are good indicia of possession in the concept of owner.
• Hanopol vs. Shoemart, Incorporated, 390 SCRA 439, October 4, 2002 — Relied on for the principle of estoppel in pais.
• Westmont Bank vs. Ong, 375 SCRA 212, January 30, 2002 — Relied on for the definition of laches.
• City of Cebu vs. Heirs of Candido Rubi, 306 SCRA 408, April 29, 1999 — Relied on for the rule that issues not raised below cannot be raised for the first time on appeal, as due process requires.

• Rule 45, Section 1, 1997 Rules of Civil Procedure — Limits a petition for review to questions of law; the SC used it to refuse re-evaluation of the evidence.
• Article 1441, Civil Code — Provides that trust relations between parties may be express or implied; the SC used it to frame the trust analysis.
• Articles 1448 to 1456, Civil Code — Enumerate implied trusts; the SC noted that the implied trust here did not categorically fall under them but was still valid.
• Article 1447, Civil Code — States that the enumeration of implied trusts does not exclude others established by the general law of trust; the SC relied on it to uphold the implied trust.
• Article 1799, Civil Code — A stipulation excluding one or more partners from any share in profits or losses is void; the SC cited it in holding that Mariano, as partner, was entitled to a share in the attorney’s fees.