Wilson Go and Peter Go vs. The Estate of the Late Felisa Tamio de Buena Ventura, et al.

An express trust is created by the intention of the trustor, and no particular words are required; a registered owner's written acknowledgement that the property was transferred merely to accommodate another's loan establishes an express trust, not an implied one. A purchaser who knows of an adverse claim annotation and of occupation by persons other than the seller but fails to investigate is not a purchaser in good faith.

Felisa Tamio de Buenaventura owned a parcel of land in Quezon City, where she built and occupied the D'Lourds Building until her death. Her daughter Bella was married to Delfin Guerrero, Sr.; Felimon Buenaventura, Sr. was Felisa's common-law husband; and Resurrecion Bihis was another daughter whose family later claimed rights in the property. The property was covered by Torrens titles, and the dispute turned on whether the transfer of the title to Bella, Delfin, Sr., and Felimon, Sr. made them owners or merely trustees for Felisa.

On March 17, 1959, Felisa Tamio de Buenaventura purchased from Carmen Zaragosa, Inc. a 533-square-meter parcel of land at Retiro corner Kanlaon Streets, Sta. Mesa Heights, Quezon City, and TCT No. 45951/T-233 was issued in her name. She constructed the three-storey D'Lourds Building on the property and resided there until her death on February 19, 1994. On February 10, 1960, Felisa supposedly sold the property to her daughter Bella Guerrero, Bella's husband Delfin Guerrero, Sr., and Felimon Buenaventura, Sr., Felisa's common-law husband; Bella and Delfin, Sr. paid ₱15,000.00 as consideration. TCT No. 45951/T-233 was cancelled and TCT No. 49869 was issued in the names of Felimon, Sr. and Bella, married to Delfin, Sr. Sometime in 1968, Resurrecion A. Bihis, Felisa's other daughter and Bella's sister, began occupying the second floor of the D'Lourds Building and stayed there until her death in 2007. After TCT No. 49869 was irretrievably destroyed, Bella caused its reconstitution, and TCT No. RT-74910 (49869) was issued in the same names.

When Felisa died on February 19, 1994, she allegedly bequeathed in a disputed last will and testament half of the subject property to Resurrecion and her daughters Rhea A. Bihis and Regina A. Bihis, collectively the Bihis Family. On April 19, 1994, the Bihis Family caused the annotation of an adverse claim on TCT No. RT-74910 (49869). The purported will also declared Bella as administrator of the subject property, and on May 24, 1994, Bella filed a petition for probate of Felisa's will. She was eventually appointed administratrix of the Estate of Felisa, and in an inventory of Felisa's properties, Bella included the subject property as part of the estate.

On January 22, 1997, the Bihis Family's adverse claim was cancelled. The following day, January 23, 1997, Felimon Buenaventura, Jr. and Teresita Robles, also known as Rosalina Buenaventura Mariano, apparently the heirs of Felimon, Sr., executed a purported Extrajudicial Settlement of the Estate of Felimon Buenaventura, Sr. and caused its annotation on TCT No. RT-74910 (49869). By virtue thereof, TCT No. RT-74910 (49869) was cancelled and TCT No. N-170416 was issued in the names of the Heirs of Felimon, Sr., Bella, Delfin A. Guerrero, Jr., and Lester Alvin A. Guerrero. On the same day, through a Deed of Sale of even date, the subject property was sold to Wilson Go and Peter Go for ₱4,500,000.00, a transaction unknown to the Bihis Family. TCT No. N-170416 was cancelled and TCT No. 170475 was issued in the names of Wilson and Peter, who thereafter filed ejectment cases against the occupants and/or lessees of the property. In July 1997, the probate court revoked Bella's appointment as administratrix of the Estate of Felisa and granted letters of administration to Resurrecion.

On October 17, 1997, the Estate of Felisa, represented by the Bihis Family, and the Bihis Family in their personal capacities filed a complaint for reconveyance and damages before the Regional Trial Court of Quezon City against Bella, Delfin, Jr., Lester, Wilson, Peter, and the Register of Deeds of Quezon City. They alleged that Felisa, during her lifetime, merely entrusted the subject property to Felimon, Sr., Bella, and Delfin, Sr. for the purpose of assisting Bella and Delfin, Sr. to obtain a loan and mortgage from the Government Service Insurance System; that Felisa agreed to have the title transferred to Bella and Felimon, Sr. to facilitate the transaction but never divested herself of ownership, as evidenced by her continuous residence on the property and her leasing of several units to tenants. They relied on a letter dated September 21, 1970 addressed to Delfin, Sr., in which Felisa reminded Bella, Delfin, Sr., and Felimon, Sr. that the property was merely entrusted to them for Bella and Delfin, Sr. to procure a GSIS loan; Bella's and Delfin, Sr.'s signatures appeared at the bottom of the letter. They also alleged that Wilson and Peter were buyers in bad faith because they were aware of facts and circumstances that would have warranted further inquiry into the validity of the sellers' title, including the occupation of the building by persons other than the sellers, such as the Bihis Family.

In their defense, Bella and Felimon, Jr. claimed that the subject property was owned by Bella and the late Felimon, Sr., as evidenced by TCT No. RT-74910 (49869), which had been issued to them as early as February 10, 1960 and had subsisted for almost thirty-seven years without having been voided or nullified by a court decree. They asserted that they had exercised acts of ownership over the property, such as mortgaging it and leasing the building to third parties, and that Bella's act of including the property in the inventory of the Estate of Felisa was merely due to inadvertence. Wilson, for his part, claimed that when he and Peter purchased the property on January 23, 1997, he was not aware of the judicial settlement of the Estate of Felisa. He testified that before acquiring the property he verified the validity of the title with the Registry of Deeds, and that two months had lapsed before the sale was consummated because his lawyer advised him to request Bella to cancel the encumbrance annotated on the title. He claimed that his lawyer merely advised him to ask for cancellation of the annotation but that he was not aware of the details surrounding it; that the annotation was eventually cancelled; and that he learned the property was included in the Estate of Felisa only when the complaint was filed. He maintained that he and Peter were purchasers in good faith.

The RTC found that the Bihis Family had been in actual possession of the subject property and that Wilson knew of the annotation on the title and of the occupation of the property by individuals other than the sellers. The CA likewise found that the Bihis Family had been in actual possession of the subject property and that Wilson and Peter failed to make the necessary inquiries into the validity of the sellers' title despite knowing of the adverse claim annotation and the occupation by persons other than the sellers.

• Ownership Under Torrens Title (G.R. No. 212045): The Guerrero petitioners maintained that the subject property was owned by Bella and the late Felimon, Sr., as evidenced by TCT No. RT-74910 (49869) issued as early as February 10, 1960; that the title had subsisted for almost thirty-seven years without having been voided or nullified by a court decree; that they exercised acts of ownership by mortgaging the property and leasing the building to third parties; and that Bella's inclusion of the property in the inventory of Felisa's estate was merely inadvertent.
• Good Faith Purchase (G.R. No. 211972): Petitioners Wilson and Peter argued that they were purchasers in good faith; Wilson claimed that before acquiring the property he verified the validity of the title with the Registry of Deeds, that he was unaware of the judicial settlement of Felisa's estate, and that he learned the property was included in that estate only when the complaint was filed.

• Trust and Retained Ownership: Respondents alleged that Felisa merely entrusted the subject property to Felimon, Sr., Bella, and Delfin, Sr. to assist Bella and Delfin, Sr. in obtaining a loan and mortgage from the GSIS; that Felisa agreed to transfer the title only to facilitate the transaction but never divested herself of ownership, as shown by her continuous residence, her leasing of units, and the September 21, 1970 letter.
• Bad Faith of Wilson and Peter: Respondents alleged that Wilson and Peter were buyers in bad faith because they were aware of facts and circumstances that would have warranted further inquiry into the validity of the sellers' title, including the occupation of the building by individuals other than the sellers, such as the Bihis Family.

• Nature of Trust: Whether the CA erred in ruling that there was an implied trust created between Felisa, on one hand, and Bella, Delfin, Sr., and Felimon, Sr., on the other.
• Prescription: Whether the action for reconveyance had not yet prescribed.
• Good Faith: Whether Wilson and Peter are purchasers in good faith.

• Nature of Trust: No, but modified. An express trust, not an implied trust, was established. Under Article 1444 of the Civil Code, no particular words are required to create an express trust; the September 21, 1970 letter clearly showed Felisa's intention to transfer title merely to accommodate a GSIS loan while retaining ownership.
• Prescription: No. Express trusts prescribe in ten years from repudiation; repudiation occurred when Bella sold the property to Wilson and Peter on January 23, 1997, and the complaint was filed on October 17, 1997.
• Good Faith: No. Wilson and Peter are not purchasers in good faith; their knowledge of the adverse claim annotation and of occupation by persons other than the sellers required inquiry, which they failed to make.

• Nature of Trust: The Court agreed that a trust existed but held it was express, not implied. Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another; it is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trusts may be express or implied: express trusts are created by the intention of the trustor or of the parties, while implied trusts come into being by operation of law. Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code, no particular words are required for the creation of an express trust; it is sufficient that a trust is clearly intended. The September 21, 1970 letter, whose validity and due execution were never put in issue, unequivocally declared Felisa's intention to transfer title to Bella, Delfin, Sr., and Felimon, Sr. merely to accommodate them in securing a GSIS loan; she retained ownership and wished her heirs to share equally. Although an implied trust may have been created initially, the letter settled the nature of the trust as express. Bella's claim that she signed only to appease her mother did not hold; the mere issuance of a certificate of title does not foreclose co-ownership or trust, and registration does not vest title but is merely evidence of title. Bella never denied the purpose of the sale and relied on the certificate, which was insufficient to prove ownership independent of the express trust.
• Prescription: The action for reconveyance had not prescribed. Express trusts prescribe in ten years from the time the trust is repudiated. Repudiation occurred when Bella, as the remaining trustee, sold the subject property to Wilson and Peter on January 23, 1997. The complaint was filed on October 17, 1997, only a few months after the sale. Thus, prescription had not set in.
• Good Faith: Wilson and Peter are not purchasers in good faith. A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or an interest in, such property and pays a full and fair price at the time of purchase or before notice of another's claim or interest. When land is in the actual possession of persons other than the seller, the buyer must investigate the rights of those in possession; without such inquiry, one cannot claim good faith. Wilson verified the title but admitted that two months lapsed because his lawyer advised him to ask Bella to cancel the annotation on the title; he claimed no knowledge of the annotation's details and knew that individuals other than the sellers occupied the property. This knowledge negated good faith. A person who deliberately ignores a significant fact that would create suspicion in a reasonable man is not an innocent purchaser for value.

• Express Trust; Creation — A trust is the right to beneficial enjoyment of property, legal title to which is vested in another; it is a fiduciary relationship obliging the trustee to deal with the property for the beneficiary. Trusts may be express or implied: express trusts are created by the intention of the trustor or parties, while implied trusts arise by operation of law. Express trusts are created by direct and positive acts, by writing or deed, or will, or by words expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code, no particular words are required; it is sufficient that a trust is clearly intended. The Court applied this to the September 21, 1970 letter, which unequivocally showed Felisa's intention to transfer title merely to accommodate a GSIS loan while retaining ownership.
• Conversion of Implied Trust into Express Trust by Subsequent Acknowledgement — A trust may have a constructive or implied nature in the beginning, but the registered owner's subsequent express acknowledgement in a public document of a previous sale of the property to another party effectively converts it into an express trust. The Court relied on this principle, holding that although an implied trust may have initially existed, Felisa's September 21, 1970 letter settled the trust as express.
• Certificate of Title Does Not Vest Ownership — The mere issuance of a certificate of title in the name of a person does not foreclose the possibility that the real property is under co-ownership with persons not named in the certificate, that the registrant is only a trustee, or that other parties have acquired interests subsequent to issuance. Registration does not vest title; it is merely evidence of such title. Thus, the TCT in the names of Bella, Delfin, Sr., and Felimon, Sr. did not defeat the express trust.
• Prescription of Action for Reconveyance Based on Express Trust — An action for reconveyance based on an express trust prescribes in ten years from the time the trust is repudiated. The Court found repudiation when Bella, as remaining trustee, sold the property to Wilson and Peter on January 23, 1997; because the complaint was filed on October 17, 1997, the action had not prescribed.
• Purchaser in Good Faith; Duty to Investigate Adverse Possession — A purchaser in good faith is one who buys the property of another without notice that some other person has a right to or interest in it and pays a full and fair price at the time of purchase or before notice of another's claim. When land is in the actual possession of persons other than the seller, the buyer must be wary and investigate the rights of those in possession; without such inquiry, one cannot claim good faith. A buyer who fails to discover that the land is in adverse possession of another is a buyer in bad faith.
• Deliberate Ignorance of Suspicious Facts — A person who deliberately ignores a significant fact that would create suspicion in an otherwise reasonable man is not an innocent purchaser for value. Wilson and Peter's knowledge of the adverse claim annotation and of occupation by persons other than the sellers, without further inquiry, negated good faith.

• "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended." — This states the statutory standard under Article 1444 of the Civil Code and is central to the Court's holding that Felisa's September 21, 1970 letter created an express trust despite not using the word "trust."
• "The words of Felisa in the above-quoted letter unequivocally and absolutely declared her intention of transferring the title over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in securing a loan from the GSIS." — This is the ratio for the Court's reclassification of the trust from implied to express, based on Felisa's retained ownership and limited purpose for the transfer.
• "express trusts prescribe in ten (10) years from the time the trust is repudiated." — This is the controlling rule on prescription applied by the Court; because the sale to Wilson and Peter occurred only months before the complaint, the reconveyance action had not prescribed.
• "when a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good faith." — This defines the duty to inquire that Wilson and Peter failed to discharge, supporting the finding that they were not purchasers in good faith.

• Tamayo vs. Callejo, 150-B Phil. 31 (1972) — Recognized that a trust may have a constructive or implied nature in the beginning, but the registered owner's subsequent express acknowledgement in a public document of a previous sale effectively converts it into an express trust; relied on to classify the trust as express.
• Lee Tek Sheng vs. Court of Appeals, 354 Phil. 556 (1998) — Held that the mere issuance of a certificate of title in the name of any person does not foreclose the possibility that the real property may be under co-ownership with persons not named in the certificate or that the registrant may only be a trustee; cited by the CA and relied on by the Court.
• Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste, 605 Phil. 495 (2009) — Cited for the rule that trust relations may either be express or implied, with express trusts created by the intention of the trustor or parties and implied trusts by operation of law.
• Torbela vs. Spouses Rosario, 678 Phil. 1 (2011) — Cited for the creation of express trusts by direct and positive acts and for the rule that express trusts prescribe in ten years from repudiation.
• Heirs of Rosa and Cirila Dumaliang vs. Serban, 545 Phil. 243 (2007) — Cited for the principle that registration does not vest title; it is merely evidence of such title.
• De Leon vs. Ong, 625 Phil. 221 (2010) — Cited for the definition of a purchaser in good faith.
• Rosaroso vs. Soria, G.R. No. 194846, June 19, 2013, 699 SCRA 232 — Cited for the duty of a buyer to investigate when land is in actual possession of persons other than the seller; failure to do so negates good faith.
• Spouses Sarmiento vs. Court of Appeals, 507 Phil. 101 (2005) — Cited for the rule that a person who deliberately ignores a significant fact creating suspicion in a reasonable man is not an innocent purchaser for value.

• 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. The Court applied this provision to hold that Felisa's September 21, 1970 letter created an express trust despite not using the word "trust."

Presbitero J. Velasco, Jr.; Lucas P. Bersamin; Jose Portugal Perez; Marvic M.V.F. Leonen.