Pigao vs. Rabanillo

An assignment by a PHHC lot applicant of his personal right to purchase, made without PHHC consent in favor of one who is not a bona fide occupant, is void as contrary to public policy and cannot be enforced through an implied resulting trust.

The disputed 240-square-meter lot at 92 (now 102) K-5th Street, Kamuning, Quezon City was owned by the People's Homesite and Housing Corporation (PHHC), a government corporation, under Transfer Certificate of Title No. 27287. Under PHHC rules and its charter, preference for purchase of its residential lots was accorded to bona fide occupants, consistent with its object of providing decent housing for those otherwise unable to provide themselves therewith. The right to purchase was therefore treated as a personal right to be exercised by the qualified applicant as determined by PHHC.

Sometime in 1947, the late Eusebio Pigao, petitioners' father, together with his family, settled on a 240-square-meter lot at 92 (now 102) K-5th Street, Kamuning, Quezon City. The parcel was government property owned by the People's Homesite and Housing Corporation under Transfer Certificate of Title No. 27287. Eusebio applied for purchase of the lot, and a contract to sell for P1,022.19 was thereafter entered into by Eusebio and PHHC.

In 1959, Eusebio executed a deed of assignment of rights over one-half of the property in favor of respondent Samuel Rabanillo for P1,000, the deed itself stating the property was owned by the PHHC. Respondent proceeded to occupy the front half portion, established a residential building thereon, and paid the amortizations for said portion. In 1970, Eusebio executed a deed of mortgage over the same half-portion in favor of respondent. After amortizations were fully paid in 1973, PHHC issued a deed of sale over the entire lot in favor of Eusebio, and TCT No. 197941 was issued in Eusebio's name. That final deed of sale provided that within one year from issuance of title, no transfer or alienation of the property, in whole or in part, shall be made or registered without written consent of the vendor and only in favor of persons qualified to acquire residential lands.

In 1978, respondent executed an affidavit of adverse claim over the front half portion registered in Eusebio's name, duly annotated on TCT No. 197941. On June 17, 1979, Eusebio died survived by his children, herein petitioners. In 1988, after the Quezon City Register of Deeds was gutted by fire, petitioner Estrella Pigao applied for reconstitution of the burned original of TCT No. 197941. Approved in 1990, reconstituted TCT No. RT-11374 was issued still in Eusebio's name but no longer carried the annotation of respondent's adverse claim.

In 1992, petitioners executed an extrajudicial settlement of Eusebio's estate among themselves including the entire lot, and TCT No. 56210 was issued for the entire lot in petitioners' names. Respondent continued to occupy the front half through his tenant Gil Ymata. On January 29, 1996, petitioners filed Civil Case No. Q-96-26270 to quiet title and recover possession, averring the deed of assignment and deed of mortgage were clouds to be nullified. The trial court found petitioners to be owners of the whole lot and the assignment void, while the Court of Appeals found respondent had paid amortizations for the front half and built his residence there in the secure expectation of ownership upon full payment.

• Prohibition Under Public Land Act: Petitioners argued that the lot was public land granted by PHHC to Eusebio, so Section 118 of Commonwealth Act No. 141 applied and the 1959 deed of assignment was null and void as entered into during the prohibited period from approval of the application up to five years after issuance of the patent in 1973.
• Prohibition Under PHHC Contract and Judicial Notice: Petitioners maintained that Eusebio was prohibited from selling such right without PHHC written consent under the pro-forma conditional contract to sell, and requested judicial notice of that condition although they failed to present Eusebio's contract at trial and instead submitted a conditional contract between Armando Bernabe and PHHC for a different lot to prove the standard clause.
• Implied Trust: Petitioners argued that no implied trust over the one-half portion was created between Eusebio and respondent, the assignment being void.

• Inapplicability of Public Land Act: Respondent countered that Commonwealth Act No. 141 did not apply because it covered only homestead or sales patents.
• Inadmissibility of New Evidence: Respondent objected to petitioners' attempt to seek admission of the alleged pro-forma conditional contract which was presented neither during trial nor on appeal.

• Validity of Assignment Under Public Land Act and Public Policy: Whether the 1959 deed of assignment by Eusebio of his rights to half the PHHC lot in favor of respondent was valid.
• Judicial Notice and Formal Offer of Evidence: Whether the Court could take judicial notice of, or consider, the alleged pro-forma PHHC conditional contract to sell first presented on review to prove a prohibition on assignment.
• Implied Resulting Trust: Whether an implied trust relationship under Article 1448 of the Civil Code was created over the front half portion in favor of respondent who paid amortizations therefor.

• Validity of Assignment Under Public Land Act and Public Policy: No. Commonwealth Act No. 141 was inapplicable since the lot was PHHC-owned, not homestead or patent land, but the assignment was void as contrary to public policy for transferring a personal purchase right without PHHC consent to a non-occupant.
• Judicial Notice and Formal Offer of Evidence: No. The Bernabe contract was not subject to mandatory or discretionary judicial notice and was never formally offered, so it could not be considered without denying due process.
• Implied Resulting Trust: No. No enforceable purchase-money resulting trust arose because enforcement would contravene public policy where the underlying transfer was void ab initio.

• Validity of Assignment Under Public Land Act and Public Policy: Commonwealth Act No. 141 was inapplicable because its five-year prohibition on resale referred only to free patents and homestead lands, whereas the lot was owned by PHHC, a government corporation, under TCT No. 27287 and conveyed only by final deed of sale in 1973 while title remained in PHHC in 1959. Nevertheless, the assignment was void for being contrary to public policy. Preference for PHHC residential lots belonged to bona fide occupants to effectuate decent housing for those unable otherwise to provide it, making the qualified applicant's right to purchase personal and transferable only with PHHC consent in line with that policy, as also reflected in the 1973 deed's restriction. No PHHC approval was shown and no proof existed that respondent, not a bona fide occupant, was qualified to avail of the preferential right, so the transfer frustrated government policy.
• Judicial Notice and Formal Offer of Evidence: The document first presented on review — a conditional contract between Bernabe and PHHC for a different lot — was not among matters mandatorily noticed under Section 1, Rule 129, nor of common general knowledge, authoritatively settled, or within judicial knowledge under Section 2. Judicial notice required common and general knowledge, settled character, and notoriety, to be exercised with caution with doubts resolved negatively. Moreover, only evidence formally offered may be considered, with opportunity to object and cross-examine, and judges must base findings strictly on evidence offered at trial. The document did not even pertain to the lot and parties involved and was therefore neither relevant nor material, and its late presentation deprived respondent of scrutiny and objection.
• Implied Resulting Trust: Article 1448 creates a purchase-money resulting trust where property is sold, legal estate is granted to one party but price is paid by another for beneficial interest, requiring actual valuable consideration furnished by the alleged beneficiary. Although respondent shouldered half the amortizations received by Eusebio's wife and paid to PHHC plus realty taxes, enforcement was barred by the recognized exception where enforcement would be against public policy. Because the transfer of rights was void ab initio for frustrating PHHC policy, implying a trust to achieve what could not be expressly stipulated was impermissible, even though performance involved no criminal or tortious act by the trustee.

• Transfer of PHHC purchase rights contrary to public policy — A bona fide occupant-applicant's right to buy a PHHC residential lot is a personal right exercisable only by the qualified applicant as determined by PHHC, in line with the policy of providing decent housing for those unable otherwise to provide it. Any transfer of that right without PHHC consent, especially to one who is not a bona fide occupant and not shown qualified, frustrates public policy and is null and void. Applied to void Eusebio's 1959 assignment to respondent despite inapplicability of Commonwealth Act No. 141.
• Purchase-money resulting trust under Article 1448 — There is an implied trust when property is sold and legal estate is granted to one party but the price is paid by another for beneficial interest, the former being trustee and latter beneficiary. To give rise to such trust there must be (1) actual payment of money, property or services, or an equivalent constituting valuable consideration, and (2) such consideration furnished by the alleged beneficiary. Applied to acknowledge respondent's payments but deny trust status because of the public-policy exception.
• Exception to resulting trust for illegality and public policy — No trust results where purchase is made in violation of an existing statute and in evasion of its express provision in favor of the guilty party, where actual contrary intention is proved, where conveyance is to a child or one in loco parentis importing a gift, and where enforcement would be against public policy even without criminal or tortious performance. Applied through Ramos vs. Court of Appeals to hold that what parties cannot expressly stipulate as contrary to law and public policy they cannot impliedly do by resulting trust.
• Judicial notice — Matters of judicial notice require (1) common and general knowledge, (2) well and authoritatively settled character, not doubtful or uncertain, and (3) knowledge within the court's jurisdiction, with power exercised cautiously and doubts resolved negatively. Applied to refuse notice of an alleged pro-forma PHHC contract proved only by a contract for a different lot and party.
• Formal offer of evidence and due process — Courts consider only evidence formally offered, with opposing counsel given opportunity to object or cross-examine, and findings must rest strictly on evidence offered at trial; attaching a document to a pleading without offer deprives the opponent of examination and hampers appellate review. Applied to disregard the Bernabe contract first submitted on review.

• "The proscription under CA 141 on re-sale within the five-year restricted period referred to free patents and homestead lands only." — States the controlling limitation of Section 118, Commonwealth Act No. 141, rejecting its application to a PHHC-owned lot conveyed by deed of sale.
• "It is settled that courts will only consider as evidence that which has been formally offered." — States the formal-offer rule barring consideration of the pro-forma contract first attached on review without trial offer or opportunity to object.
• "Thus, any transfer of an applicant's right to buy a lot was invalid if done without the consent of PHHC." — States the ratio for voiding the assignment as contrary to PHHC housing policy, independent of Commonwealth Act No. 141.
• "as an exception to the law on trusts, "[a] trust or a provision in the terms of a trust is invalid if the enforcement of the trust or provision would be against public policy"" — States the public-policy exception, borrowed from Ramos vs. Court of Appeals, defeating the claimed Article 1448 resulting trust.

• Morales vs. Court of Appeals, G.R. No. 117228, 19 June 1997, 274 SCRA 282 — Followed as controlling exposition of trusts, distinguishing express and implied (resulting and constructive) trusts and defining purchase-money resulting trust and its requisites and exceptions.
• Ramos vs. Court of Appeals, G.R. No. 108121, 10 May 1994, 232 SCRA 348 — Followed to hold invalid a trust whose enforcement would be against public policy, even without criminal or tortious performance, and to bar doing impliedly what cannot be stipulated expressly.
• Candido vs. Court of Appeals, 323 Phil. 95, 99-100 (1996) — Followed for the formal-offer rule that only evidence formally offered may be considered and that failure to offer cannot be cured by attachment to pleadings.
• Martires vs. Court of Appeals, G.R. Nos. 78036-37, 3 August 1990, 188 SCRA 306, 311; Godoy vs. Ramirez, G.R. No. L-46612, 29 November 1988, 168 SCRA 85, 90; Kempis vs. Gonzales, G.R. No. L-31701, 31 October 1974, 60 SCRA 439, 448-449; Guardiano vs. Encarnacion, 139 Phil. 702, 709 (1969) — Cited as a line supporting PHHC preference for bona fide occupants of its lots.
• Amper, et al. vs. The Hon. Presiding Judge, Branch III, CFI-Misamis Or., et al., 207 Phil. 282, 289 (1983); Del Rosario vs. Bonga, G.R. No. 136308, 23 January 2001, 350 SCRA 101, 112 — Cited to support inapplicability of the Commonwealth Act No. 141 five-year prohibition except to free patents and homesteads.

• Section 118, Commonwealth Act No. 141, as amended — Prohibits encumbrance or alienation of lands acquired under free patent or homestead from approval of application and for five years after issuance of patent or grant. Held inapplicable because the lot was PHHC corporate property, not free patent or homestead land.
• Article 1448, Civil Code — Provides an implied trust when property is sold with legal estate granted to one party but price paid by another for beneficial interest. Held unenforceable here because the underlying assignment was void and enforcement would contravene public policy.
• Sections 1 and 2, Rule 129, Revised Rules of Court — Govern mandatory and discretionary judicial notice. Held not to authorize notice of an alleged standard PHHC clause proved only by an un-offered contract involving a different lot and party.
• Section 2(a), Commonwealth Act No. 648, as amended — States PHHC purpose to acquire, develop, subdivide, lease and sell lands and buildings to provide decent housing for those unable otherwise to provide themselves therewith. Relied upon to characterize the purchase right as personal and consent-dependent.
• Condition (2), PHHC Final Deed of Sale (1973) — Prohibited transfer or alienation within one year from title issuance without vendor's written consent and only to persons qualified to acquire residential lands. Cited as consistent with the policy requiring PHHC consent.

Reynato S. Puno (on leave, Chairperson), Angelina Sandoval-Gutierrez (Acting Chairperson), Adolfo S. Azcuna, Cancio C. Garcia. No separate concurring reasoning was included beyond concurrence in the decision.