Salao vs. Salao

An express trust over immovable property cannot be proved by parol evidence, and an implied trust — while provable orally — requires proof as fully convincing as if a document establishing the trust were shown; absent such proof, and where the Torrens title has stood unchallenged for decades, an action for reconveyance is barred by prescription and laches.

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal had four children: Patricio, Alejandra, Juan (Banli), and Ambrosia. Manuel Salao died in 1885; Patricio predeceased Valentina, leaving one son, Valentin Salao. Valentina Ignacio died on May 28, 1914, and her estate was administered by Ambrosia and extrajudicially partitioned among her three surviving children and her grandson Valentin by deed dated December 29, 1918 (notarized May 22, 1919). Two of Valentina's children — Juan Y. Salao, Sr. and Ambrosia Salao — were engaged in the fishpond business and secured Torrens titles (OCT No. 185 in 1911 and OCT No. 472 in 1917) for two fishponds in Pampanga (later Bataan): the 47-hectare Calunuran fishpond and the 97-hectare Pinanganacan (Lewa) fishpond, registered in their names as co-owners. The dispute arose when the heirs of Valentin Salao claimed a one-third interest in these fishponds, asserting they were acquired with funds from an estate allegedly inherited from Manuel Salao and held in trust for Valentin.

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal had four children: Patricio, Alejandra, Juan (Banli), and Ambrosia. Manuel Salao died in 1885. Patricio died in 1886, survived by his only child, Valentin Salao. Valentina Ignacio died on May 28, 1914, whereafter her estate was administered by her daughter Ambrosia. The estate was extrajudicially partitioned by deed dated December 29, 1918 (notarized May 22, 1919) among her three surviving children — Alejandra, Juan, and Ambrosia — and her grandson Valentin, representing his deceased father Patricio. The partition covered approximately seventeen hectares of fishponds and ricelands in Barrio Dampalit, all inherited from or purchased by Valentina. Valentin received the largest fishpond (50,469 sq. m.), a smaller fishpond (6,989 sq. m.), and riceland (9,905 sq. m.), with an aggregate value exceeding his distributive share by ₱5,365.75, which he was directed to pay his co-heirs. The deed expressly stated that Ambrosia's administration had been satisfactory and she was not obligated to render an accounting.

Separately from the properties in the 1919 partition, Juan Y. Salao, Sr. and Ambrosia Salao secured Original Certificate of Title No. 185 in 1911 for a 47-hectare fishpond at Sitio Calunuran, Lubao, Pampanga (later part of Bataan, also known as Lot No. 540 of the Hermosa cadastre). In 1916, they filed an application for registration of a 96-hectare swampland at Sitio Lewa, Barrio Pinanganacan, Lubao, purchased from the heirs of Engracio Santiago. Judge Percy M. Moir rendered judgment on October 26, 1916, adjudicating the land to Juan Salao and Ambrosia Salao in equal shares. OCT No. 472 was issued on March 12, 1917 for this Pinanganacan (Lewa) fishpond (Lot No. 544). After securing these titles, Juan and Ambrosia exercised full dominical rights over the properties — selling the Calunuran fishpond under pacto de retro to Vicente Villongco in 1911 and to Eligio Naval in 1914, redeeming it on both occasions — all to the exclusion of Valentin Salao.

Juan Y. Salao, Sr. died on November 3, 1931. Valentin Salao died on February 9, 1933. Valentin's estate was extrajudicially partitioned on December 28, 1934 between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza, and consisted solely of the two fishponds he had inherited in 1918 from his grandmother, Valentina Ignacio. No mention was made of any interest in the Calunuran or Lewa fishponds. On April 8, 1940, Ambrosia Salao donated to her grandniece Benita Salao three lots in Barrio Dampalit; Benita did not demand delivery of the Calunuran fishpond at that time. On September 30, 1944, during the Japanese occupation, Ambrosia donated her one-half proindiviso share in both fishponds to her nephew Juan S. Salao, Jr. (Juani), who had already inherited the other half from his father, Juan Y. Salao, Sr. The deed of donation was registered only on April 5, 1950. Ambrosia Salao died on September 14, 1945.

On January 26, 1951, plaintiffs' counsel wrote to Juan S. Salao, Jr. claiming a one-third share in the two fishponds and demanding accounting of net fruits. Juani denied the claim in his answer dated February 6, 1951, asserting that the sole owners were his father and Ambrosia, as shown by the Torrens titles. Plaintiffs filed their original complaint on January 9, 1952 in the CFI of Bataan, and amended it on January 28, 1955, seeking annulment of the donation and reconveyance of the Calunuran fishpond as Valentin's supposed one-third share. Juan S. Salao, Jr. pleaded the indefeasibility of the Torrens title, the Statute of Frauds, prescription, and laches, and counterclaimed for moral damages, attorney's fees, and litigation expenses. He died in 1958 and was substituted by his widow, children, and the administrator of his estate. After trial, the court dismissed both the complaint and the counterclaim. Both parties appealed; the Court of Appeals elevated the case to the Supreme Court because the amounts involved exceeded ₱200,000.

• Sufficiency of Defendant's Denial: Plaintiffs contended that Juan S. Salao, Jr.'s answer was in effect an admission of the allegations in their first cause of action — that there was a co-ownership among Ambrosia, Juan, Alejandra, and Valentin regarding the Dampalit property as early as 1904 or 1905, that common funds were invested in the acquisition of the two fishponds, that the Calunuran fishpond was verbally adjudicated to Valentin in the 1919 partition, and that there was a verbal stipulation to register the lands only in Juan's name.
• Existence of a Trust: Plaintiffs argued that their action was to enforce a trust that defendant Juan S. Salao, Jr. allegedly violated, claiming that the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao, the funds used in its acquisition having come from earnings of properties allegedly inherited from Manuel Salao.
• Reconveyance: Plaintiffs sought annulment of the donation made by Ambrosia to Juan S. Salao, Jr. and reconveyance of the Calunuran fishpond as Valentin's supposed one-third share in the 145 hectares of fishpond registered in the names of Juan and Ambrosia.

• Indefeasibility of Torrens Title: Defendants contended that the sole owners of the two fishponds were Juan Y. Salao, Sr. and Ambrosia Salao, as shown by the Torrens titles issued in 1911 and 1917, and that Juani was the donee of Ambrosia's one-half share.
• Prescription and Laches: Defendants invoked the Statute of Frauds, prescription, and laches as affirmative defenses, noting that more than forty years had elapsed between the registration of the titles and the filing of the action.
• Counterclaim for Damages: Defendants disputed the trial court's finding that plaintiffs filed in good faith, contending they were entitled to moral damages (₱200,000), attorney's fees, and litigation expenses (not less than ₱22,000) because the plaintiffs acted maliciously or in bad faith in suing them.

• Adequacy of Defendant's Answer: Whether the answer of Juan S. Salao, Jr., which specifically denied the allegations of the complaint and set forth positive defenses, constituted an admission of the material averments of the complaint.
• Existence of Trust: Whether the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao, either as an express trust or an implied trust (resulting or constructive).
• Prescription and Laches: Whether plaintiffs' action for reconveyance had already prescribed or was barred by laches.
• Validity of the Donation: Whether the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her one-half share in the two fishponds was valid.
• Defendants' Counterclaim: Whether defendants were entitled to moral damages, attorney's fees, and litigation expenses.

• Adequacy of Defendant's Answer: No. The answer substantially complied with the Rules of Court; the defendant set forth positive defenses in matters of confession and avoidance that supported his specific denials, distinguishing the case from El Hogar Filipino vs. Santos Investments where a bare general denial was held tantamount to an admission.
• Existence of Trust: No. No express trust was proven — parol evidence is inadmissible to prove an express trust over immovable property under Article 1443 of the Civil Code — and no implied trust was established, the plaintiffs having failed to present clear, satisfactory, and convincing evidence of any fiduciary relation, fraud, or mistake.
• Prescription and Laches: Yes. Even assuming an implied trust existed, the action was barred by prescription and laches, the Calunuran fishpond having been registered in 1911 while the action was filed only in 1952 — more than forty years later — far exceeding the ten-year prescriptive period under Act No. 190.
• Validity of the Donation: Moot. Having concluded that plaintiffs were not entitled to reconveyance, the Court found it unnecessary to pass upon the validity of the donation; even if void, plaintiffs would have no successional rights to Ambrosia's share, as the sole legal heir was her nephew Juan S. Salao, Jr.
• Defendants' Counterclaim: No. The plaintiffs acted in good faith and sincerity in litigating their claim, and the adverse result of an action does not per se make the act wrongful or subject the actor to moral damages or attorney's fees.

• Adequacy of Defendant's Answer: Under Section 6, Rule 9 of the 1940 Rules of Court, an answer must contain either a specific denial or a statement of matters in avoidance. Section 7 required the defendant to deal specifically with each material allegation of fact the truth of which he did not admit. Juan S. Salao, Jr. specifically denied paragraphs 4 to 10 and 12 of the first cause of action and set forth positive defenses supporting those denials. He did so because it was impracticable to state piecemeal his own version of the acquisition of the fishponds or to make a tedious recital of ultimate facts contradicting each allegation. This substantially complied with the rule. The case was distinguished from El Hogar Filipino vs. Santos Investments, where the defendant filed a laconic general denial without any affirmative defenses; there, the denial was held tantamount to an admission. Here, the defendant interposed affirmative defenses by way of confession and avoidance, which is permitted under the rules.

• Existence of Trust: The Court conducted an extensive exegesis on the nature of trusts. Express trusts are created by the intention of the parties and, under Article 1443 of the Civil Code, no express trust concerning an immovable may be proved by parol evidence. Plaintiffs offered not a scintilla of documentary evidence to prove an express trust; their claim rested entirely on oral testimony. As for implied trusts (resulting or constructive), Article 1457 allows them to be proven by oral evidence, but the proof must be as fully convincing as if a document establishing the trust were shown. The trial court's finding that no community of property existed among Juan, Ambrosia, and Valentin when the fishponds were acquired was substantiated by defendants' documentary evidence. The alleged co-ownership over lands inherited from Manuel Salao — the basis of plaintiffs' claim — was not proven by any competent evidence. The existence of Manuel Salao's estate itself was not satisfactorily established; the shifting allegations (two hectares, then seven, then twenty-eight) undermined credibility. The 1919 partition of Valentina Ignacio's estate covered only seventeen hectares and was embodied in a twenty-two-page notarized deed; it was incredible that a partition of 145 hectares of fishponds would have been done merely by word of mouth. The fact that the fishponds were registered land meant any transaction affecting them should be evidenced by a registerable deed. Valentin and his successors never bothered for nearly forty years to procure any documentary evidence of his supposed interest. There was no resulting trust because there was never any intention to create one, and no constructive trust because the registration was not vitiated by fraud or mistake. The Torrens titles, which carry a strong presumption of regularity and validity, stood unrebutted by clear and convincing proof.

• Prescription and Laches: Even assuming an implied trust existed, the action was barred. Under Act No. 190, the longest period of extinctive prescription was only ten years. The Calunuran fishpond was registered in 1911; the written demand for reconveyance was made in 1951; the action was filed in 1952 — more than forty years after registration. Valentin Salao himself never challenged the titles during his lifetime (he died in 1933), and his estate was partitioned in 1934 without any mention of the fishponds. The plaintiffs slept on their rights. The law protects the vigilant, not those who slumber on their rights. Undue delay in enforcement is strongly persuasive of lack of merit and may be destructive of the right itself.

• Validity of the Donation: Having concluded that plaintiffs were not entitled to reconveyance, the Court found it unnecessary to rule on the donation's validity. Even if the donation were declared void, plaintiffs would have no successional rights to Ambrosia's share. The sole legal heir of Ambrosia was her nephew Juan S. Salao, Jr., her nearest relative within the third degree. Valentin, if living in 1945, would have been a legal heir together with Juani. But Benita Salao, Valentin's daughter, could not represent him in the succession to Ambrosia's estate because in the collateral line, representation takes place only in favor of the children of brothers or sisters (Article 972, Civil Code). A nephew excludes a grandniece like Benita.

• Defendants' Counterclaim: The record showed that plaintiffs presented fifteen witnesses during a trial lasting from 1954 to 1959, fought tenaciously, and incurred considerable expenses. Although their causes of action were unfounded, the pertinacity and vigor with which they pressed their claim indicated sincerity and good faith. The parties were descendants of common ancestors, and the action was based on an honest supposition about the source of funds. It could not be concluded with certitude that the action was frivolous or intended to harass. The worries and anxiety of a defendant in a litigation not maliciously instituted are not moral damages contemplated by law. The case was not among those enumerated in Articles 2219 and 2220 of the Civil Code, nor analogous to any of them. The adverse result of an action does not per se make the act wrongful; the law could not have meant to impose a penalty on the right to litigate. Once good faith is conceded, there is no basis for awarding attorney's fees and litigation expenses under Article 2208(4)(11) of the Civil Code.

• Parol Evidence Rule for Express Trusts Over Immovable Property — Under Article 1443 of the Civil Code, no express trusts concerning an immovable or any interest therein may be proven by parol evidence. The Court applied this rule to reject plaintiffs' purely oral evidence attempting to establish an express trust over the Calunuran fishpond, a registered real property.

• Standard of Proof for Implied Trusts — While Article 1457 of the Civil Code permits implied trusts to be proven by oral evidence, the proof must be as fully convincing as if the act giving rise to the trust obligation were proven by an authentic document. A trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof or testimony consisting in large part of insecure surmises based on ancient hearsay. The Court found plaintiffs' oral evidence fell far short of this standard.

• Presumption of Validity of Torrens Titles — A Torrens title is generally conclusive of ownership, and a strong presumption exists that Torrens titles were regularly issued and are valid. To maintain an action for reconveyance, proof of the fiduciary relation must be clear and convincing. The Court held that the unrebutted Torrens titles in the names of Juan and Ambrosia, standing for over forty years without challenge, defeated the claim.

• Prescription and Laches in Trust Actions — Even if an implied trust existed, the action for reconveyance is barred by prescription if not filed within the prescriptive period (ten years under Act No. 190). Laches — unreasonable delay in enforcing a right — is not only persuasive of want of merit but may be destructive of the right itself. The Court applied both doctrines given the forty-year gap between registration (1911) and filing of the action (1952).

• Right to Litigate and Good Faith — The adverse result of an action does not per se make the act wrongful and subject the actor to payment of moral damages or attorney's fees. The law does not impose a penalty on the right to litigate; where plaintiffs acted in good faith and sincerity, no award of damages or attorney's fees to the prevailing defendant is warranted.

• "Not a scintilla of documentary evidence was presented by the plaintiffs to prove that there was an express trust over the Calunuran fishpond in favor of Valentin Salao. Purely parol evidence was offered by them to prove the alleged trust." — This passage states the fundamental evidentiary deficiency that defeated the plaintiffs' claim of an express trust, establishing the ratio for rejecting the trust theory.

• "A trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof." — This formulation, drawn from the syllabus of Suarez vs. Tirambulo, articulates the canonical standard for proving trusts against registered land and is frequently cited in subsequent jurisprudence on implied trusts.

• "The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously." — This passage defines the doctrine protecting good-faith litigants from damages liability, distinguishing between unfounded claims and malicious prosecution.

• "Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim, since it is human nature for a person to assert his rights most strongly when they are threatened or invaded." — This articulation of the doctrine of laches explains why the forty-year delay was fatal to the plaintiffs' claim, independent of the prescriptive period.

• El Hogar Filipino vs. Santos Investments, 74 Phil. 79 — Distinguished. In that case, the defendant filed a laconic answer with a bare general denial and no affirmative defenses, which was held tantamount to an admission. The Court distinguished it because Juan S. Salao, Jr. had set forth positive defenses by way of confession and avoidance, substantially complying with the rules.
• Suarez vs. Tirambulo, 59 Phil. 303 — Followed. The syllabus rule that a trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof was applied to reject plaintiffs' oral evidence.
• Santa Juana vs. Del Rosario, 50 Phil. 110 — Followed. The rule that proof to establish a trust in real property by parol evidence should be as fully convincing as if proven by an authentic document, and cannot rest on insecure surmises based on ancient hearsay, was applied.
• Yumul vs. Rivera and Dizon, 64 Phil. 13 — Followed. The requirement that proof of fiduciary relation in an action for reconveyance must be clear and convincing was applied.
• Legarda and Prieto vs. Saleeby, 31 Phil. 590 — Cited for the principle that the purpose of the Torrens system is to quiet title to land, allowing the owner to rest secure without waiting in the portals of the court.
• De Leon vs. Molo-Peckson, 116 Phil. 1267 — Followed. The rule that a trust must be proven by clear, satisfactory, and convincing evidence and cannot rest on vague and uncertain evidence was applied.
• Barreto vs. Arevalo, 99 Phil. 771 — Followed. The principle that the adverse result of an action does not per se make the act wrongful and that moral damages may not be charged on those who exercise the right to litigate erroneously was applied.
• Pavia vs. Iturralde, 5 Phil. 176 — Followed. The rule that a nephew excludes a grandniece in succession was applied to conclude that plaintiffs had no successional rights to Ambrosia's estate.

• Article 1440, Civil Code — Defines the trustor, trustee, and beneficiary in a trust relationship. Cited to establish the framework for analyzing the alleged trust.
• Article 1441, Civil Code — Classifies trusts as express or implied; express trusts are created by intention, implied trusts by operation of law. Cited to distinguish the types of trust plaintiffs might have been claiming.
• Article 1443, Civil Code — Provides that no express trust concerning an immovable or any interest therein may be proven by parol evidence. Applied as the peremptory rule barring plaintiffs' oral proof of an express trust over the fishpond.
• Article 1444, Civil Code — Provides that no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. Cited in the discussion of express trusts.
• Article 1456, Civil Code — Provides that if property is acquired through mistake or fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the person from whom the property comes. Discussed in the context of constructive trusts; the Court found no fraud or mistake.
• Article 1457, Civil Code — Provides that an implied trust may be proven by oral evidence. Applied as the rule permitting oral proof of implied trusts, subject to the high standard of convincing evidence.
• Article 972, Civil Code — Provides that in the collateral line, representation takes place only in favor of the children of brothers or sisters. Applied to conclude that Benita Salao could not represent her father Valentin in the succession to Ambrosia's estate.
• Articles 2219 and 2220, Civil Code — Enumerate the cases in which moral damages may be recovered. Cited to show that the instant case was not among them nor analogous to any.
• Article 2208(4)(11), Civil Code — Provides that attorney's fees may be recovered in case of a clearly unfounded civil action or where the court deems it just and equitable. The Court held that good faith precluded application of this provision.
• Section 40, Act No. 190 (Code of Civil Procedure) — Provided the longest period of extinctive prescription at ten years. Applied to hold that even if an implied trust existed, the action had prescribed.
• Section 47, Act No. 496 (Land Registration Act) — Provides that a Torrens title is generally conclusive of ownership. Applied to uphold the indefeasibility of the titles in the names of Juan and Ambrosia.
• Section 50, Act No. 496 — Provides that the act of registration is the operative act that conveys and affects land. Applied to show that any transaction affecting registered land should be evidenced by a registerable deed, undermining the credibility of an alleged oral partition.

Barredo (Chairman), Antonio, Concepcion, Jr., and Martin, JJ., concurred. Fernando (Chairman, Second Division), J., took no part. Martin, J., was designated to sit in the Second Division.