Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 83122 October 19, 1990
ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON,
ROBERT E. PARNELL, CARLOS K. CATOLICO and THE PHILIPPINE
AMERICAN GENERAL INSURANCE COMPANY, INC., respondents.
Albino B. Achas for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.

GUTIERREZ, JR., J.:

This is a petition for review of the January 29, 1988 decision of the Court of Appeals and
the April 27, 1988 resolution denying the petitioners' motion for reconsideration, which
decision and resolution reversed the decision dated June 23,1986 of the Court of First
Instance of Manila, Branch 34 in Civil Case No. 121126 upholding the petitioners' causes
of action and granting all the reliefs prayed for in their complaint against private
respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private
respondent Philippine American General Insurance Company, Inc. (Philamgen for short)
since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds
of non-life insurance, and in consideration of services rendered was entitled to receive the
full agent's commission of 32.5% from Philamgen under the scheduled commission rates
(Exhibits "A" and "1"). From 1973 to 1975, Valenzuela solicited marine insurance from
one of his clients, the Delta Motors, Inc. (Division of Electronics Airconditioning and
Refrigeration) in the amount of P4.4 Million from which he was entitled to a commission
of 32% (Exhibit "B"). However, Valenzuela did not receive his full commission which
amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta Motors.
During the period 1976 to 1978, premium payments amounting to P1,946,886.00 were
paid directly to Philamgen and Valenzuela's commission to which he is entitled amounted
to P632,737.00.

In 1977, Philamgen started to become interested in and expressed its intent to share in the
commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis (Exhibit
"C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on the
sharing of the commission with Valenzuela (Exhibit E). This was followed by another
sharing proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly reiterated his
objection to the proposals of respondents stating that: "It is with great reluctance that I
have to decline upon request to signify my conformity to your alternative proposal
regarding the payment of the commission due me. However, I have no choice for to do
otherwise would be violative of the Agency Agreement executed between our
goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido
Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela.
They: (a) reversed the commission due him by not crediting in his account the
commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b)
placed agency transactions on a cash and carry basis; (c) threatened the cancellation of
policies issued by his agency (Exhibits "H" to "H-2"); and (d) started to leak out news
that Valenzuela has a substantial account with Philamgen. All of these acts resulted in the
decline of his business as insurance agent (Exhibits "N", "O", "K" and "K-8"). Then on
December 27, 1978, Philamgen terminated the General Agency Agreement of Valenzuela
(Exhibit "J", pp. 1-3, Decision Trial Court dated June 23, 1986, Civil Case No. 121126,
Annex I, Petition).
The petitioners sought relief by filing the complaint against the private respondents in the
court a quo (Complaint of January 24, 1979, Annex "F" Petition). After due proceedings,
the trial court found:
xxx xxx xxx
Defendants tried to justify the termination of plaintiff Arturo P. Valenzuela as one of
defendant PHILAMGEN's General Agent by making it appear that plaintiff Arturo P.
Valenzuela has a substantial account with defendant PHILAMGEN particularly Delta
Motors, Inc.'s Account, thereby prejudicing defendant PHILAMGEN's interest (Exhibits
6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the Civil Code of the Philippines (Article
1868) and the provisions of the General Agency Agreement as their basis for terminating
plaintiff Arturo P. Valenzuela as one of their General Agents.
That defendants' position could have been justified had the termination of plaintiff Arturo
P. Valenzuela was (sic) based solely on the provisions of the Civil Code and the
conditions of the General Agency Agreement. But the records will show that the principal
cause of the termination of the plaintiff as General Agent of defendant PHILAMGEN was
his refusal to share his Delta commission.

That it should be noted that there were several attempts made by defendant Bienvenido
M. Aragon to share with the Delta commission of plaintiff Arturo P. Valenzuela. He had
persistently pursued the sharing scheme to the point of terminating plaintiff Arturo P.
Valenzuela, and to make matters worse, defendants made it appear that plaintiff Arturo P.
Valenzuela had substantial accounts with defendant PHILAMGEN.
Not only that, defendants have also started (a) to treat separately the Delta Commission of
plaintiff Arturo P. Valenzuela, (b) to reverse the Delta commission due plaintiff Arturo P.
Valenzuela by not crediting or applying said commission earned to the account of
plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P. Valenzuela's agency
transactions on a "cash and carry basis", (d) sending threats to cancel existing policies
issued by plaintiff Arturo P. Valenzuela's agency, (e) to divert plaintiff Arturo P.
Valenzuela's insurance business to other agencies, and (f) to spread wild and malicious
rumors that plaintiff Arturo P. Valenzuela has substantial account with defendant
PHILAMGEN to force plaintiff Arturo P. Valenzuela into agreeing with the sharing of his
Delta commission." (pp. 9-10, Decision, Annex 1, Petition).
xxx xxx xxx
These acts of harrassment done by defendants on plaintiff Arturo P. Valenzuela to force
him to agree to the sharing of his Delta commission, which culminated in the termination
of plaintiff Arturo P. Valenzuela as one of defendant PHILAMGEN's General Agent, do
not justify said termination of the General Agency Agreement entered into by defendant
PHILAMGEN and plaintiff Arturo P. Valenzuela.
That since defendants are not justified in the termination of plaintiff Arturo P. Valenzuela
as one of their General Agents, defendants shall be liable for the resulting damage and
loss of business of plaintiff Arturo P. Valenzuela. (Arts. 2199/2200, Civil Code of the
Philippines). (Ibid, p. 11)
The court accordingly rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
defendants ordering the latter to reinstate plaintiff Arturo P. Valenzuela as its General
Agent, and to pay plaintiffs, jointly and severally, the following:
1. The amount of five hundred twenty-one thousand nine hundred sixty four and 16/100
pesos (P521,964.16) representing plaintiff Arturo P. Valenzuela's Delta Commission with
interest at the legal rate from the time of the filing of the complaint, which amount shall
be adjusted in accordance with Article 1250 of the Civil Code of the Philippines;
2. The amount of seventy-five thousand pesos (P75,000.00) per month as compensatory
damages from 1980 until such time that defendant Philamgen shall reinstate plaintiff
Arturo P. Valenzuela as one of its general agents;

3. The amount of three hundred fifty thousand pesos (P350,000.00) for each plaintiff as
moral damages;
4. The amount of seventy-five thousand pesos (P75,000.00) as and for attorney's fees;
5. Costs of the suit. (Ibid., P. 12)
From the aforesaid decision of the trial court, Bienvenido Aragon, Robert E. Parnell,
Carlos K. Catolico and PHILAMGEN respondents herein, and defendants-appellants
below, interposed an appeal on the following:
ASSIGNMENT OF ERRORS
I
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P.
VALENZUELA HAD NO OUTSTANDING ACCOUNT WITH DEFENDANT
PHILAMGEN AT THE TIME OF THE TERMINATION OF THE AGENCY.
II
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO P.
VALENZUELA IS ENTITLED TO THE FULL COMMISSION OF 32.5% ON THE
DELTA ACCOUNT.
III
THE LOWER COURT ERRED IN HOLDING THAT THE TERMINATION OF
PLAINTIFF ARTURO P. VALENZUELA WAS NOT JUSTIFIED AND THAT
CONSEQUENTLY DEFENDANTS ARE LIABLE FOR ACTUAL AND MORAL
DAMAGES, ATTORNEYS FEES AND COSTS.
IV
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES AGAINST
DEFENDANT PHILAMGEN WAS PROPER, THE LOWER COURT ERRED IN
AWARDING DAMAGES EVEN AGAINST THE INDIVIDUAL DEFENDANTS WHO
ARE MERE CORPORATE AGENTS ACTING WITHIN THE SCOPE OF THEIR
AUTHORITY.
V
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN FAVOR OF
PLAINTIFF ARTURO P. VALENZUELA WAS PROPER, THE LOWER COURT
ERRED IN AWARDING DAMAGES IN FAVOR OF HOSPITALITA VALENZUELA,
WHO, NOT BEING THE REAL PARTY IN INTEREST IS NOT TO OBTAIN RELIEF.

On January 29, 1988, respondent Court of Appeals promulgated its decision in the
appealed case. The dispositive portion of the decision reads:
WHEREFORE, the decision appealed from is hereby modified accordingly and judgment
is hereby rendered ordering:
1. Plaintiff-appellee Valenzuela to pay defendant-appellant Philamgen the sum of one
million nine hundred thirty two thousand five hundred thirty-two pesos and seventeen
centavos (P1,902,532.17), with legal interest thereon from the date of finality of this
judgment until fully paid.
2. Both plaintiff-appellees to pay jointly and severally defendants-appellants the sum of
fifty thousand pesos (P50,000.00) as and by way of attorney's fees.
No pronouncement is made as to costs. (p. 44, Rollo)
There is in this instance irreconcilable divergence in the findings and conclusions of the
Court of Appeals, vis-a-visthose of the trial court particularly on the pivotal issue whether
or not Philamgen and/or its officers can be held liable for damages due to the termination
of the General Agency Agreement it entered into with the petitioners. In its questioned
decision the Court of Appeals observed that:
In any event the principal's power to revoke an agency at will is so pervasive, that the
Supreme Court has consistently held that termination may be effected even if the
principal acts in bad faith, subject only to the principal's liability for damages (Danon v.
Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G. 2158 and Infante V.
Cunanan, 93 Phil. 691, cited in Paras, Vol. V, Civil Code of the Philippines Annotated
[1986] 696).
The lower court, however, thought the termination of Valenzuela as General Agent
improper because the record will show the principal cause of the termination of the
plaintiff as General Agent of defendant Philamgen was his refusal to share his Delta
commission. (Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it necessary in the interest of
substantial justice to scrutinize the evidence and records of the cases. While it is an
established principle that the factual findings of the Court of Appeals are final and may
not be reviewed on appeal to this Court, there are however certain exceptions to the rule
which this Court has recognized and accepted, among which, are when the judgment is
based on a misapprehension of facts and when the findings of the appellate court, are
contrary to those of the trial court (Manlapaz v. Court of Appeals, 147 SCRA 236
[1987]); Guita v. Court of Appeals, 139 SCRA 576 [1986]). Where the findings of the
Court of Appeals and the trial court are contrary to each other, this Court may scrutinize
the evidence on record (Cruz v. Court of Appeals, 129 SCRA 222 [1984]; Mendoza v.
Court of Appeals, 156 SCRA 597 [1987]; Maclan v. Santos, 156 SCRA 542 [1987]).
When the conclusion of the Court of Appeals is grounded entirely on speculation,

surmises or conjectures, or when the inference made is manifestly mistaken, absurd or

impossible, or when there is grave abuse of discretion, or when the judgment is based on
a misapprehension of facts, and when the findings of facts are conflict the exception also
applies (Malaysian Airline System Bernad v. Court of Appeals, 156 SCRA 321 [1987]).
After a painstaking review of the entire records of the case and the findings of facts of
both the court a quo and respondent appellate court, we are constrained to affirm the trial
court's findings and rule for the petitioners.
We agree with the court a quo that the principal cause of the termination of Valenzuela as
General Agent of Philamgen arose from his refusal to share his Delta commission. The
records sustain the conclusions of the trial court on the apparent bad faith of the private
respondents in terminating the General Agency Agreement of petitioners. It is axiomatic
that the findings of fact of a trial judge are entitled to great weight (People v. Atanacio,
128 SCRA 22 [1984]) and should not be disturbed on appeal unless for strong and cogent
reasons, because the trial court is in a better position to examine the evidence as well as
to observe the demeanor of the witnesses while testifying (Chase v. Buencamino, Sr., 136
SCRA 365 [1985]; People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans., Inc. v.
Court of Appeals, 147 SCRA 82 [1987]). In the case at bar, the records show that the
findings and conclusions of the trial court are supported by substantial evidence and there
appears to be no cogent reason to disturb them (Mendoza v. Court of Appeals. 156 SCRA
597 [1987]).
As early as September 30,1977, Philamgen told the petitioners of its desire to share the
Delta Commission with them. It stated that should Delta back out from the agreement, the
petitioners would be charged interests through a reduced commission after full payment
by Delta.
On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by 50%
thus giving them an agent's commission of 16.25%. On February 8, 1978, Philamgen
insisted on the reduction scheme followed on June 1, 1978 by still another insistence on
reducing commissions and proposing two alternative schemes for reduction. There were
other pressures. Demands to settle accounts, to confer and thresh out differences
regarding the petitioners' income and the threat to terminate the agency followed. The
petitioners were told that the Delta commissions would not be credited to their account
(Exhibit "J"). They were informed that the Valenzuela agency would be placed on a cash
and carry basis thus removing the 60-day credit for premiums due. (TSN., March 26,
1979, pp. 54-57). Existing policies were threatened to be cancelled (Exhibits "H" and
"14"; TSN., March 26, 1979, pp. 29-30). The Valenzuela business was threatened with
diversion to other agencies. (Exhibit "NNN"). Rumors were also spread about alleged
accounts of the Valenzuela agency (TSN., January 25, 1980, p. 41). The petitioners
consistently opposed the pressures to hand over the agency or half of their commissions
and for a treatment of the Delta account distinct from other accounts. The pressures and
demands, however, continued until the agency agreement itself was finally terminated.

It is also evident from the records that the agency involving petitioner and private
respondent is one "coupled with an interest," and, therefore, should not be freely
revocable at the unilateral will of the latter.
In the insurance business in the Philippines, the most difficult and frustrating period is the
solicitation and persuasion of the prospective clients to buy insurance policies. Normally,
agents would encounter much embarrassment, difficulties, and oftentimes frustrations in
the solicitation and procurement of the insurance policies. To sell policies, an agent exerts
great effort, patience, perseverance, ingenuity, tact, imagination, time and money. In the
case of Valenzuela, he was able to build up an Agency from scratch in 1965 to a highly
productive enterprise with gross billings of about Two Million Five Hundred Thousand
Pesos (P2,500,000.00) premiums per annum. The records sustain the finding that the
private respondent started to covet a share of the insurance business that Valenzuela had
built up, developed and nurtured to profitability through over thirteen (13) years of
patient work and perseverance. When Valenzuela refused to share his commission in the
Delta account, the boom suddenly fell on him.
The private respondents by the simple expedient of terminating the General Agency
Agreement appropriated the entire insurance business of Valenzuela. With the termination
of the General Agency Agreement, Valenzuela would no longer be entitled to commission
on the renewal of insurance policies of clients sourced from his agency. Worse, despite
the termination of the agency, Philamgen continued to hold Valenzuela jointly and
severally liable with the insured for unpaid premiums. Under these circumstances, it is
clear that Valenzuela had an interest in the continuation of the agency when it was
unceremoniously terminated not only because of the commissions he should continue to
receive from the insurance business he has solicited and procured but also for the fact that
by the very acts of the respondents, he was made liable to Philamgen in the event the
insured fail to pay the premiums due. They are estopped by their own positive averments
and claims for damages. Therefore, the respondents cannot state that the agency
relationship between Valenzuela and Philamgen is not coupled with interest. "There may
be cases in which an agent has been induced to assume a responsibility or incur a liability,
in reliance upon the continuance of the authority under such circumstances that, if the
authority be withdrawn, the agent will be exposed to personal loss or liability" (See MEC
569 p. 406).
Furthermore, there is an exception to the principle that an agency is revocable at will and
that is when the agency has been given not only for the interest of the principal but for the
interest of third persons or for the mutual interest of the principal and the agent. In these
cases, it is evident that the agency ceases to be freely revocable by the sole will of the
principal (See Padilla, Civil Code Annotated, 56 ed., Vol. IV p. 350). The following
citations are apropos:
The principal may not defeat the agent's right to indemnification by a termination of the
contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706, 32 ALR
196).

Where the principal terminates or repudiates the agent's employment in violation of the
contract of employment and without cause ... the agent is entitled to receive either the
amount of net losses caused and gains prevented by the breach, or the reasonable value of
the services rendered. Thus, the agent is entitled to prospective profits which he would
have made except for such wrongful termination provided that such profits are not
conjectural, or speculative but are capable of determination upon some fairly reliable
basis. And a principal's revocation of the agency agreement made to avoid payment of
compensation for a result which he has actually accomplished (Hildendorf v. Hague, 293
NW 2d 272; Newhall v. Journal Printing Co., 105 Minn 44,117 NW 228; Gaylen
Machinery Corp. v. Pitman-Moore Co. [C.A. 2 NY] 273 F 2d 340)
If a principal violates a contractual or quasi-contractual duty which he owes his agent, the
agent may as a rule bring an appropriate action for the breach of that duty. The agent may
in a proper case maintain an action at law for compensation or damages ... A wrongfully
discharged agent has a right of action for damages and in such action the measure and
element of damages are controlled generally by the rules governing any other action for
the employer's breach of an employment contract. (Riggs v. Lindsay, 11 US 500, 3L Ed
419; Tiffin Glass Co. v. Stoehr, 54 Ohio 157, 43 NE 2798)
At any rate, the question of whether or not the agency agreement is coupled with interest
is helpful to the petitioners' cause but is not the primary and compelling reason. For the
pivotal factor rendering Philamgen and the other private respondents liable in damages is
that the termination by them of the General Agency Agreement was tainted with bad
faith. Hence, if a principal acts in bad faith and with abuse of right in terminating the
agency, then he is liable in damages. This is in accordance with the precepts in Human
Relations enshrined in our Civil Code that "every person must in the exercise of his rights
and in the performance of his duties act with justice, give every one his due, and observe
honesty and good faith: (Art. 19, Civil Code), and every person who, contrary to law,
wilfully or negligently causes damages to another, shall indemnify the latter for the same
(Art. 20, id). "Any person who wilfully causes loss or injury to another in a manner
contrary to morals, good customs and public policy shall compensate the latter for the
damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and
uncollected premiums which the respondent court ordered Valenzuela to pay Philamgen
the amount of One Million Nine Hundred Thirty-Two Thousand Five Hundred ThirtyTwo and 17/100 Pesos (P1,932,532,17) with legal interest thereon until fully paid
(Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that the respondent
court erred in holding Valenzuela liable. We find no factual and legal basis for the award.
Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is
to put an end to and render the insurance policy not binding
Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or contract of
insurance is valid and binding unless and until the premiums thereof have been paid
except in the case of a life or industrial life policy whenever the grace period provision
applies (P.D. 612, as amended otherwise known as the Insurance Code of 1974)

In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419
[1979]) we held that the non-payment of premium does not merely suspend but puts an
end to an insurance contract since the time of the payment is peculiarly of the essence of
the contract. And in Arce v. The Capital Insurance and Surety Co. Inc.(117 SCRA 63,
[1982]), we reiterated the rule that unless premium is paid, an insurance contract does not
take effect. Thus:
It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v. Delgado, 9 SCRA
177 [1963] was decided in the light of the Insurance Act before Sec. 72 was amended by
the underscored portion. Supra. Prior to the Amendment, an insurance contract was
effective even if the premium had not been paid so that an insurer was obligated to pay
indemnity in case of loss and correlatively he had also the right to sue for payment of the
premium. But the amendment to Sec. 72 has radically changed the legal regime in that
unless the premium is paid there is no insurance. " (Arce v. Capitol Insurance and Surety
Co., Inc., 117 SCRA 66; Emphasis supplied)
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as valid for the purpose of collecting
premiums and invalid for the purpose of indemnity. (Citing Insurance Law and Practice
by John Alan Appleman, Vol. 15, p. 331; Emphasis supplied)
The foregoing findings are buttressed by Section 776 of the insurance Code (Presidential
Decree No. 612, promulgated on December 18, 1974), which now provides that no
contract of Insurance by an insurance company is valid and binding unless and until the
premium thereof has been paid, notwithstanding any agreement to the contrary (Ibid., 92
SCRA 425)
Perforce, since admittedly the premiums have not been paid, the policies issued have
lapsed. The insurance coverage did not go into effect or did not continue and the
obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more
liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for
the unpaid premiums would be the height of injustice and unfair dealing. In this instance,
with the lapsing of the policies through the nonpayment of premiums by the insured there
were no more insurance contracts to speak of. As this Court held in the Philippine
Phoenix Surety case, supra "the non-payment of premiums does not merely suspend but
puts an end to an insurance contract since the time of the payment is peculiarly of the
essence of the contract."
The respondent appellate court also seriously erred in according undue reliance to the
report of Banaria and Banaria and Company, auditors, that as of December 31, 1978,
Valenzuela owed Philamgen P1,528,698.40. This audit report of Banaria was
commissioned by Philamgen after Valenzuela was almost through with the presentation
of his evidence. In essence, the Banaria report started with an unconfirmed and unaudited
beginning balance of account of P1,758,185.43 as of August 20, 1976. But even with that
unaudited and unconfirmed beginning balance of P1,758,185.43, Banaria still came up

with the amount of P3,865.49 as Valenzuela's balance as of December 1978 with

Philamgen (Exh. "38-A-3"). In fact, as of December 31, 1976, and December 31, 1977,
Valenzuela had no unpaid account with Philamgen (Ref: Annexes "D", "D-1", "E",
Petitioner's Memorandum). But even disregarding these annexes which are records of
Philamgen and addressed to Valenzuela in due course of business, the facts show that as
of July 1977, the beginning balance of Valenzuela's account with Philamgen amounted to
P744,159.80. This was confirmed by Philamgen itself not only once but four (4) times on
different occasions, as shown by the records.
On April 3,1978, Philamgen sent Valenzuela a statement of account with a beginning
balance of P744,159-80 as of July 1977.
On May 23, 1978, another statement of account with exactly the same beginning balance
was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another statement of account with
P744,159.80 as the beginning balance.
And on December 20, 1978, a statement of account with exactly the same figure was sent
to Valenzuela.
It was only after the filing of the complaint that a radically different statement of accounts
surfaced in court. Certainly, Philamgen's own statements made by its own accountants
over a long period of time and covering examinations made on four different occasions
must prevail over unconfirmed and unaudited statements made to support a position made
in the course of defending against a lawsuit.
It is not correct to say that Valenzuela should have presented its own records to refute the
unconfirmed and unaudited finding of the Banaria auditor. The records of Philamgen
itself are the best refutation against figures made as an afterthought in the course of
litigation. Moreover, Valenzuela asked for a meeting where the figures would be
reconciled. Philamgen refused to meet with him and, instead, terminated the agency
agreement.
After off-setting the amount of P744,159.80, beginning balance as of July 1977, by way
of credits representing the commission due from Delta and other accounts, Valenzuela
had overpaid Philamgen the amount of P530,040.37 as of November 30, 1978. Philamgen
cannot later be heard to complain that it committed a mistake in its computation. The
alleged error may be given credence if committed only once. But as earlier stated, the
reconciliation of accounts was arrived at four (4) times on different occasions where
Philamgen was duly represented by its account executives. On the basis of these
admissions and representations, Philamgen cannot later on assume a different posture and
claim that it was mistaken in its representation with respect to the correct beginning
balance as of July 1977 amounting to P744,159.80. The Banaria audit report
commissioned by Philamgen is unreliable since its results are admittedly based on an
unconfirmed and unaudited beginning balance of P1,758,185.43 as of August 20,1976.

As so aptly stated by the trial court in its decision:

Defendants also conducted an audit of accounts of plaintiff Arturo P. Valenzuela after the
controversy has started. In fact, after hearing plaintiffs have already rested their case.
The results of said audit were presented in Court to show plaintiff Arturo P. Valenzuela's
accountability to defendant PHILAMGEN. However, the auditor, when presented as
witness in this case testified that the beginning balance of their audit report was based on
an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of August 20, 1976, which was
unverified and merely supplied by the officers of defendant PHILAMGEN.
Even defendants very own Exhibit 38- A-3, showed that plaintiff Arturo P. Valenzuela's
balance as of 1978 amounted to only P3,865.59, not P826,128.46 as stated in defendant
Bienvenido M. Aragon's letter dated December 20,1978 (Exhibit 14) or P1,528,698.40 as
reflected in defendant's Exhibit 46 (Audit Report of Banaria dated December 24, 1980).
These glaring discrepancy (sic) in the accountability of plaintiff Arturo P. Valenzuela to
defendant PHILAMGEN only lends credence to the claim of plaintiff Arturo P.
Valenzuela that he has no outstanding account with defendant PHILAMGEN when the
latter, thru defendant Bienvenido M. Aragon, terminated the General Agency Agreement
entered into by plaintiff (Exhibit A) effective January 31, 1979 (see Exhibits "2" and "2A"). Plaintiff Arturo P. Valenzuela has shown that as of October 31, 1978, he has overpaid
defendant PHILAMGEN in the amount of P53,040.37 (Exhibit "EEE", which
computation was based on defendant PHILAMGEN's balance of P744,159.80 furnished
on several occasions to plaintiff Arturo P. Valenzuela by defendant PHILAMGEN
(Exhibits H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ and , ZZ-2).
Prescinding from the foregoing, and considering that the private respondents terminated
Valenzuela with evidentmala fide it necessarily follows that the former are liable in
damages. Respondent Philamgen has been appropriating for itself all these years the gross
billings and income that it unceremoniously took away from the petitioners. The
preponderance of the authorities sustain the preposition that a principal can be held liable
for damages in cases of unjust termination of agency. In Danon v. Brimo, 42 Phil. 133
[1921]), this Court ruled that where no time for the continuance of the contract is fixed by
its terms, either party is at liberty to terminate it at will, subject only to the ordinary
requirements of good faith. The right of the principal to terminate his authority is absolute
and unrestricted, except only that he may not do so in bad faith.
The trial court in its decision awarded to Valenzuela the amount of Seventy Five
Thousand Pesos (P75,000,00) per month as compensatory damages from June 1980 until
its decision becomes final and executory. This award is justified in the light of the
evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-1") showing that
the average gross premium collection monthly of Valenzuela over a period of four (4)
months from December 1978 to February 1979, amounted to over P300,000.00 from
which he is entitled to a commission of P100,000.00 more or less per month. Moreover,
his annual sales production amounted to P2,500,000.00 from where he was given 32.5%

commissions. Under Article 2200 of the new Civil Code, "indemnification for damages
shall comprehend not only the value of the loss suffered, but also that of the profits which
the obligee failed to obtain."
The circumstances of the case, however, require that the contractual relationship between
the parties shall be terminated upon the satisfaction of the judgment. No more claims
arising from or as a result of the agency shall be entertained by the courts after that date.
ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29,
1988 and resolution of April 27, 1988 of respondent court are hereby SET ASIDE. The
decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is
REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED
TWENTY ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS
(P521,964.16) representing the petitioners Delta commission shall earn only legal
interests without any adjustments under Article 1250 of the Civil Code and that the
contractual relationship between Arturo P. Valenzuela and Philippine American General
Insurance Company shall be deemed terminated upon the satisfaction of the judgment as
modified.
SO ORDERED.

Valenzuela v CA G.R. No. 83122 October 19, 1990

J. Gutierrez Jr.
Facts:
Petitioner Valenzuela, a General Agent respondent Philamgen, was authorized to solicit and sell all
kinds of non-life insurance. He had a 32.5% commission rate. From 1973 to 1975, Valenzuela solicited
marine insurance from Delta Motors, Inc. in the amount of P4.4 Million from which he was entitled to
a commission of 32%. However, Valenzuela did not receive his full commission which amounted to
P1.6 Million from the P4.4 Million. Premium payments amounting to P1,946,886.00 were paid
directly to Philamgen. Valenzuelas commission amounted to P632,737.00.
Philamgen wanted to cut Valenzuelas commission to 50% of the amount. He declined.
When Philamgen offered again, Valenzuela firmly reiterated his objection.
Philamgen took drastic action against Valenzuela. They: reversed the commission due him, threatened
the cancellation of policies issued by his agency, and started to leak out news that Valenzuela has a
substantial debt with Philamgen. His agency contract was terminated.
The petitioners sought relief by filing the complaint against the private respondents. The trial court
found that the principal cause of the termination as agent was his refusal to share his Delta
commission.
The court considered these acts as harassment and ordered the company to pay for the resulting
damage in the value of the commission. They also ordered the company to pay 350,000 in moral
damages.
The company appealed. The CA ordered Valenzuela to pay the entire amount of the commission.
Hence, this appeal by Valenzuela.
Issue:
1. WON the agency contract is coupled with interest on the part of agent Valenzuela.
2. Whether or not Philamgen can be held liable for damages due to the termination of the General
Agency Agreement it entered into with the petitioners.
3. WON Valenzuela should pay the premiums he collected.
Held: Yes. Yes. Petition granted
Ratio:
1. In any event the principal's power to revoke an agency at will is so pervasive, that the Supreme
Court has consistently held that termination may be effected even if the principal acts in bad faith,
subject only to the principal's liability for damages.
The Supreme Court accorded great weight on the trial courts factual findings and found the cause of
the conflict to be Valenzuelas refusal to share the commission. Philamgen told the petitioners of its
desire to share the Delta Commission with them. It stated that should Delta back out from the
agreement, the petitioners would be charged interests through a reduced commission after full
payment by Delta.
Philamgen proposed reducing the petitioners' commissions by 50% thus giving them an agent's
commission of 16.25%. The company insisted on the reduction scheme. The company pressured the
agents to share the income with the threat to terminate the agency. The petitioners were also told that

the Delta commissions would not be credited to their account. This continued until the agency was
terminated.
Records also show that the agency is one "coupled with an interest," and, therefore, should not be
freely revocable at the unilateral will of the company.
The records sustain the finding that the private respondent started to covet a share of the insurance
business that Valenzuela had built up, developed and nurtured. The company appropriated the entire
insurance business of Valenzuela. Worse, despite the termination of the agency, Philamgen continued
to hold Valenzuela jointly and severally liable with the insured for unpaid premiums.
Under these circumstances, it is clear that Valenzuela had an interest in the continuation of the agency
when it was unceremoniously terminated not only because of the commissions he procured, but also
Philamgens stipulation liability against him for unpaid premiums. The respondents cannot state that
the agency relationship between Valenzuela and Philamgen is not coupled with interest.
There is an exception to the principle that an agency is revocable at will and that is when the agency
has been given not only for the interest of the principal but also for the mutual interest of the principal
and the agent. The principal may not defeat the agent's right to indemnification by a termination of the
contract of agency. Also, if a principal violates a contractual or quasi-contractual duty which he owes
his agent, the agent may as a rule bring an appropriate action for the breach of that duty.
2. Hence, if a principal acts in bad faith and with abuse of right in terminating the agency, then he is
liable in damages. The Civil Code says that "every person must in the exercise of his rights and in the
performance of his duties act with justice, give every one his due, and observe honesty and good faith:
(Art. 19, Civil Code), and every person who, contrary to law, wilfully or negligently causes damages
to another, shall indemnify the latter for the same (Art. 20, Civil Code).
3. As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and
uncollected premiums which the appellate court ordered Valenzuela to pay, the respondent court erred
in holding Valenzuela liable.
Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end
to and render the insurance policy not binding.
Philippine Phoenix- non-payment of premium does not merely suspend but puts an end to an
insurance contract since the time of the payment is peculiarly of the essence of the contract.
Section 776 of the insurance Code says that no contract of insurance by an insurance company is valid
and binding unless and until the premium has been paid, notwithstanding any agreement to the
contrary
Since the premiums have not been paid, the policies issued have lapsed. The insurance coverage did
not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Philam can t
demand from or sue Valenzuela for the unpaid premiums.
The court held that the CAs giving credence to an audit that showed Valenzuela owing Philamgen
P1,528,698.40 was unwarranted. Valenzuela had no unpaid account with Philamgen. But, facts show
that the beginning balance of Valenzuela's account with Philamgen amounted to P744,159.80. 4
statements of account were sent to the agent.
It was only after the filing of the complaint that a radically different statement of accounts surfaced in
court. Certainly, Philamgen's own statements made by its own accountants over a long period of time
and covering examinations made on four different occasions must prevail over unconfirmed and
unaudited statements made to support a position made in the course of defending against a lawsuit.

The records of Philamgen itself are the best refutation against figures made as an afterthought in the
course of litigation. Moreover, Valenzuela asked for a meeting where the figures would be reconciled.
Philamgen refused to meet with him and, instead, terminated the agency agreement.
After off-setting the amount, Valenzuela had overpaid Philamgen the amount of P530,040.37 as of
November 30, 1978. Philamgen cannot later be heard to complain that it committed a mistake in its
computation. The alleged error may be given credence if committed only once. But as earlier stated,
the reconciliation of accounts was arrived at four (4) times on different occasions where Philamgen
was duly represented by its account executives. On the basis of these admissions and representations,
Philamgen cannot later on assume a different posture and claim that it was mistaken in its
representation with respect to the correct beginning balance as of July 1977 amounting to
P744,159.80. The audit report commissioned by Philamgen is unreliable since its results are
admittedly based on an unconfirmed and unaudited beginning balance of P1,758,185.43.
Philamgen has been appropriating for itself all these years the gross billings and income that it took
away from the petitioners. A principal can be held liable for damages in cases of unjust termination of
agency. This Court ruled that where no time for the continuance of the contract is fixed by its terms,
either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith.
The right of the principal to terminate his authority is absolute and unrestricted, except only that he
may not do so in bad faith.
The circumstances of the case, however, require that the contractual relationship between the parties
shall be terminated upon the satisfaction of the judgment. No more claims arising from or as a result
of the agency shall be entertained by the courts after that date.

Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
SOLEDAD CAEZO, substituted by WILLIAM
CAEZO and VICTORIANO CAEZO
Petitioners,

- versus -

CONCEPCION ROJAS,
Respondent.

G.R. No. 148788

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
November 23, 2007

x-----------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

This is a petition for review on certiorari from the Decision[1] of the Court of Appeals,
dated September 7, 2000, in CA-G.R. SP No. 53236, and Resolution dated May 9, 2001.

On January 29, 1997, petitioner Soledad Caezo filed a Complaint [2]for the recovery of real
property plus damages with the Municipal Trial Court (MTC) of Naval, Biliran, against her fathers
second wife, respondent Concepcion Rojas. The subject property is an unregistered land with an area
of 4,169 square meters, situated at Higatangan, Naval, Biliran. Caezo attached to the complaint a Joint

Affidavit[3] executed on May 10, 1979 by Isidro Catandijan and Maximina Caezo attesting to her
acquisition of theproperty.
In her complaint, the petitioner alleged that she bought the parcel of land in 1939 from
Crisogono Limpiado, although the transaction was not reduced into writing. Thereafter, she
immediately took possession of the property. When she and her husband left for Mindanao in 1948,
she entrusted the said land to her father, Crispulo [4] Rojas, who took possession of, and cultivated, the
property. In 1980, she found out that the respondent, her stepmother, was in possession of the property
and was cultivating the same. She also discovered that the tax declaration over the property was
already in the name of Crispulo Rojas.[5]

In her Answer, the respondent asserted that, contrary to the petitioners claim, it was her husband,
Crispulo Rojas, who bought the property from Crisogono Limpiado in 1948, which accounts for the
tax declaration being in Crispulos name. From then on, until his death in 1978, Crispulo possessed and
cultivated the property. Upon his death, the property was included in his estate, which was
administered by a special administrator, Bienvenido Ricafort. The petitioner, as heir, even received her
share in the produce of the estate. The respondent further contended that the petitioner ought to have
impleaded all of the heirs as defendants. She also argued that the fact that petitioner filed the
complaint only in 1997 means that she had already abandoned her right over the property.[6]
On July 3, 1998, after hearing, the MTC rendered a Decision in favor of the petitioner, thus:
WHEREFORE, premises considered, the Court finds a preponderance of evidence in
favor of plaintiff Soledad Caezo and against defendant Concepcion Rojas by
declaring plaintiff the true and lawful owner of the land more particularly described
under paragraph 5 of the complaint and hereby orders defendant Concepcion Rojas:
a)
b)
c)

To vacate and surrender possession of the land to

plaintiff;
To pay plaintiff the sum of P34,000.00 actual
damages, P10,000.00 for attorneys fees
and litigation expenses; and
To pay the costs.

SO ORDERED.[7]

Despite the respondents objection that the verbal sale cannot be proven without infringing the Statute
of Frauds, the MTC gave credence to the testimony of the petitioners two witnesses attesting to the
fact that Crisogono Limpiado sold the property to the petitioner in 1939. The MTC also found no

evidence to show that Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It held
that the 1948 tax declaration in Crispulos name had little significance on respondents claim,
considering that in 1948, the country was then rehabilitating itself from the ravages of the Second
World War and the government was more interested in the increase in tax collection than the
observance of the niceties of law.[8]

The respondent appealed the case to the Regional Trial Court (RTC) of Naval, Biliran. On October 12,
1998, the RTC reversed the MTC decision on the ground that the action had already prescribed and
acquisitive prescription had set in. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the decision of the Municipal Trial Court of
Naval, Biliran awarding ownership of the disputed land to the plaintiff and further
allowing recovery of damages is hereby REVERSED in toto. There is no award of
damages.
The said property remains as the legitime of the defendant Concepcion Rojas and her
children.
SO ORDERED.[9]

However, acting on petitioners motion for reconsideration, the RTC amended its original
decision on December 14, 1998.[10] This time, it held that the action had not yet prescribed
considering that the petitioner merely entrusted the property to her father. The ten-year prescriptive
period for the recovery of a property held in trust would commence to run only from the time the
trustee repudiates the trust. The RTC found no evidence on record showing that Crispulo Rojas ever
ousted the petitioner from the property. The dispositive portion of the amended decision reads as
follows:
WHEREFORE, in view of the foregoing considerations, the decision of this
Court dated October 12, 1998 is hereby set aside and another is hereby entered
modifying the decision of the Court a quo and declaring Soledad Rojas Vda. De
Caezo as the true and lawful owner of a parcel of land, more particularly described
and bounded as follows:
A parcel of land situated at Higatangan, Naval, Biliran,
bounded on the North by Policarpio Limpiado; on the South by
Fidel Limpiado; on the East by Seashore; and on the West by
Crispolo (sic) Limpiado with an approximate area of 4,169 square
meters per Tax Declaration No. 2258, later under Tax Declaration
No. 4073 in the name of Crispolo Rojas and later in the name of the
Heirs of Crispolo Rojas.

Further, ordering defendant-appellant Concepcion Rojas and all persons

claiming rights or interest under her to vacate and surrender possession of the land
aforecited to the plaintiff or any of her authorized representatives, Ordering the
Provincial and/or Municipal Assessors Office to cancel the present existing Tax
Declaration in the name of Heirs of Crispolo Rojas referring to the above-described
property in favor of the name of Soledad Rojas Vda. De Caezo, Ordering the
defendant-appellant Concepcion Rojas to pay the plaintiff-appellee the sum
of P34,000.00 in actual damages, and to pay for the loss of her share in money value
of the products of the coconuts of said land from 1979 to 1997 and to pay further
until the case is terminated at the rate of P200.00 per quarter based on the regular
remittances of the late Crispolo Rojas to the plaintiff-appellee, and to pay the costs.
SO ORDERED.[11]

The respondent filed a motion to reconsider the Amended Decision but the RTC denied the
same in an Order dated April 25, 1999.

She then filed a petition for review with the Court of Appeals (CA), which reversed the
Amended Decision of the RTC on September 7, 2000, thus:
WHEREFORE, the amended decision dated December 14, 1998rendered in
Civil Case No. B-1041 is hereby REVERSED and SET ASIDE. The complaint filed
by Soledad Caezo before the Municipal Trial Court of Naval, Biliran is hereby
DISMISSED on grounds of laches and prescription and for lack of merit.
SO ORDERED.[12]

The CA held that the petitioners inaction for several years casts a serious doubt on her claim
of ownership over the parcel of land. It noted that 17 years lapsed since she discovered that respondent
was in adverse possession of the property before she instituted an action to recover the same.And
during the probate proceedings, the petitioner did not even contest the inclusion of the property in the
estate of Crispulo Rojas. [13]
The CA was convinced that Crispulo Rojas owned the property, having bought the same from
Crisogono Limpiado in 1948. Supporting this conclusion, the appellate court cited the following
circumstances: (1) the property was declared for taxation purposes in Crispulos name and he had been
paying the taxes thereon from 1948 until his death in 1978; (2) Crispulo adversely possessed the same
property from 1948 until his death in 1978; and (3) upon his death in 1978, the property was included
in his estate, the proceeds of which were distributed among his heirs.[14]

The CA further held that, assuming that there was an implied trust between the petitioner and
her father over the property, her right of action to recover the same would still be barred by
prescription since 49 years had already lapsed since Crispulo adversely possessed the contested
property in 1948.[15]
On May 9, 2001, the CA denied the petitioners motion for reconsideration for lack of merit.
[16]

In this petition for review, the petitioner, substituted by her heirs, assigns the following errors:
That the Court of Appeals committed grave abuse of discretion in setting
aside petitioners contention that the Petition for Review filed by respondent
CONCEPCION ROJAS before the Court of Appeals was FILED OUT OF TIME;
That the Court of Appeals erred and committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it decided that the filing of the case
by SOLEDAD CAEZO for Recovery of Real Property was already barred by
PRESCRIPTION AND LACHES.[17]

The petitioner insists that the respondents petition for review before the CA was filed out of
time. The petitioner posits that the CA may not grant an additional extension of time to file the petition
except for the most compelling reason. She contends that the fact that respondents counsel needed
additional time to secure the certified copy of his annexes cannot be considered as a compelling reason
that would justify an additional period of
extension. She admits, though, that this issue was raised for the first time in their motion for
reconsideration, but insists that it can be raised at any time since it concerns the jurisdiction of the CA
over the petition.
The petitioner further posits that prescription and laches are unavailing because there was an
express trust relationship between the petitioner and Crispulo Rojas and his heirs, and express trusts
do not prescribe. Even assuming that it was not an express trust, there was a resulting trust which
generally does not prescribe unless there is repudiation by the trustee.
For her part, the respondent argues that the petitioners are now estopped from questioning the
CA Resolution granting her second motion for extension to file the petition for review. She notes that
the petitioner did not raise this issue in the comment that she filed in the CA. In any case, the grant of
the second extension of time was warranted considering that the certified true copy of the assailed

RTC orders did not arrive at the office of respondents counsel in Cebu City in time for the filing of the
petition.

On the merits, the respondent asserts that the complaint is barred by prescription, laches and
estoppel. From 1948 until his death in 1978, Crispulo cultivated the property and was in adverse,
peaceful and continuous possession thereof in the concept of owner. It took the petitioner 49 years
from 1948 before she filed the complaint for recovery of the property in 1997. Granting that it was
only in 1980 that she found out that the respondent adversely possessed the property, still petitioner
allowed 17 years to elapse before she asserted her alleged right over the property.
Finally, the respondent maintains that the other co-owners are indispensable parties to the
case; and because they were not impleaded, the case should be dismissed.
The petition has no merit.
On the procedural issue raised by the petitioner, we find no reversible error in the grant by the
CA of the second motion for extension of time to file the respondents petition. The grant or denial of a
motion for extension of time is addressed to the sound discretion of the court.[18] The CA obviously
considered the difficulty in securing a certified true copy of the assailed decision because of the
distance between the office of respondents counsel and the trial court as a compelling reason for the
request. In the absence of any showing that the CA granted the motion for extension capriciously, such
exercise of discretion will not be disturbed by this Court.
On the second issue, the petitioner insists that her right of action to recover the property
cannot be barred by prescription or laches even with the respondents uninterrupted possession of the
property for 49 years because there existed between her and her father an express trust or a resulting
trust.Indeed, if no trust relations existed, the possession of the property by the respondent, through her
predecessor, which dates back to 1948, would already have given rise to acquisitive prescription in
accordance with Act No. 190 (Code of Civil Procedure).[19] Under Section 40 of Act No. 190, an action
for recovery of real property, or of an interest therein, can be brought only within ten years after the
cause of action accrues. This period coincides with the ten-year period for acquisitive prescription
provided under Section 41[20] of the same Act.
Thus, the resolution of the second issue hinges on our determination of the existence of a trust
over the property --- express or implied --- between the petitioner and her father.

A trust is the legal relationship between one person having an equitable ownership of property
and another person owning the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and the exercise of certain powers by the latter.
[21]

Trusts are either express or implied. [22] Express trusts are those which are created by the direct and

positive acts of the parties, by some writing or deed, or will, or by words evincing an intention to
create a trust.[23] Implied trusts are those which, without being expressed, are deducible from the nature
of the transaction as matters of intent or, independently, of the particular intention of the parties, as
being superinduced on the transaction by operation of law basically by reason of equity. [24] An implied
trust may either be a resulting trust or a constructive trust.
It is true that in express trusts and resulting trusts, a trustee cannot acquire by prescription a
property entrusted to him unless he repudiates the trust.[25] The following discussion is instructive:
There is a rule that a trustee cannot acquire by prescription the ownership of
property entrusted to him, or that an action to compel a trustee to convey property
registered in his name in trust for the benefit of the cestui que trust does not
prescribe, or that the defense of prescriptioncannot be set up in an action to recover
property held by a person in trustfor the benefit of another, or that property held in
trust can be recovered by the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he does not acquire by
prescription the property held in trust. Thus, Section 38 of Act 190 provides that the
law of prescription does not apply "in the case of a continuing and subsisting trust."
The rule of imprescriptibility of the action to recover property held in
trust may possibly apply to resulting trusts as long as the trustee has not repudiated
the trust.
xxxx
Acquisitive prescription may bar the action of the beneficiary against the
trustee in an express trust for the recovery of the property held in trust where (a) the
trustee has performed unequivocal acts of repudiation amounting to an ouster of
the cestui que trust; (b) such positive acts of repudiation have been made known to
the cestui que trust, and (c) the evidence thereon is clear and conclusive.[26]

As a rule, however, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust and its
elements.[27] The presence of the following elements must be proved: (1) a trustor or settlor who
executes the instrument creating the trust; (2) a trustee, who is the person expressly designated to carry
out the trust; (3) the trust res, consisting of duly identified and definite real properties; and (4)

the cestui que trust, or beneficiaries whose identity must be clear.[28] Accordingly, it was incumbent
upon petitioner to prove the existence of the trust relationship.And petitioner sadly failed to discharge
that burden.
The existence of express trusts concerning real property may not be established by parol
evidence.[29] It must be proven by some writing or deed. In this case, the only evidence to support the
claim that an express trust existed between the petitioner and her father was the self-serving testimony
of the petitioner. Bare allegations do not constitute evidence adequate to support a conclusion.
They are not equivalent to proof under the Rules of Court.[30]
In one case, the Court allowed oral testimony to prove the existence of a trust, which had been
partially performed. It was stressed therein that what is important is that there should be an intention to
create a trust, thus:
What is crucial is the intention to create a trust. While oftentimes the intention is
manifested by the trustor in express or explicit language, such intention may be
manifested by inference from what the trustor has said or done, from the nature of the
transaction, or from the circumstances surrounding the creation of the purported trust.
However, an inference of the intention to create a trust, made from language,
conduct or circumstances, must be made with reasonable certainty. It cannot rest on
vague, uncertain or indefinite declarations. An inference of intention to create a trust,
predicated only on circumstances, can be made only where they admit of no other
interpretation.[31]

Although no particular words are required for the creation of an express trust, a clear intention
to create a trust must be shown; and the proof of fiduciary relationship must be clear and convincing.
The creation of an express trust must be manifested with reasonable certainty and cannot be inferred
from loose and vague declarations or from ambiguous circumstances susceptible of other
interpretations.[32]
In the case at bench, an intention to create a trust cannot be inferred from the petitioners
testimony and the attendant facts and circumstances. The petitioner testified only to the effect that her
agreement with her father was that she will be given a share in the produce of the property, thus:
Q: What was your agreement with your father Crispulo Rojas when you left
this property to him?
A: Every time that they will make copra, they will give a share.

Q: In what particular part in Mindanao [did] you stay with your husband?
A: Bansalan, Davao del Sur.
Q: And while you were in Bansalan, Davao del Sur, did Crispolo Rojas
comply with his obligation of giving your share the proceeds of the land?
A: When he was still alive, he gave us every three months
sometimes P200.00 and sometimes P300.00.[33]
This allegation, standing alone as it does, is inadequate to establish the existence of a trust because
profit-sharing per se, does not necessarily translate to a trust relation. It could also be present in other
relations, such as in deposit.
What distinguishes a trust from other relations is the separation of the legal title and equitable
ownership of the property. In a trust relation, legal title is vested in the fiduciary while equitable
ownership is vested in a cestui que trust. Such is not true in this case. The petitioner alleged in her
complaint that the tax declaration of the land was transferred to the name of Crispulo without her
consent. Had it been her intention to create a trust and make Crispulo her trustee, she would not have
made an issue out of this because in a trust agreement, legal title is vested in the trustee. The trustee
would necessarily have the right to transfer the tax declaration in his name and to pay the taxes on the
property. These acts would be treated as beneficial to the cestui que trust and would not amount to an
adverse possession.[34]
Neither can it be deduced from the circumstances of the case that a resulting trust was
created. A resulting trust is a species of implied trust that is presumed always to have been
contemplated by the parties, the intention as to which can be found in the nature of their transaction
although not expressed in a deed or instrument of conveyance. A resulting trust is based on the
equitable doctrine that it is the more valuable consideration than the legal title that determines the
equitable interest in property.[35]
While implied trusts may be proved by oral evidence, the evidence must be trustworthy and
received by the courts with extreme caution, and should not be made to rest on loose, equivocal or
indefinite declarations. Trustworthy evidence is required because oral evidence can easily be
fabricated.[36] In order to establish an implied trust in real property by parol evidence, the proof should
be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic
document. An implied trust, in fine, cannot be established upon vague and inconclusive proof. [37] In the
present case, there was no evidence of any transaction between the petitioner and her father from
which it can be inferred that a resulting trust was intended.

In light of the disquisitions, we hold that there was no express trust or resulting
trust established between the petitioner and her father. Thus, in the absence of a trust
relation, we can only conclude that Crispulos uninterrupted possession of the subject
property for 49 years, coupled with the performance of acts of ownership, such as
payment of real estate taxes, ripened into ownership. The statutory period of prescription
commences when a person who has neither title nor good faith, secures a tax declaration
in his name and may, therefore, be said to have adversely claimed ownership of the lot.
[38]
While tax declarations and receipts are not conclusive evidence of ownership and do
not prove title to the land, nevertheless, when coupled with actual possession, they
constitute evidence of great weight and can be the basis of a claim of ownership through
prescription.[39] Moreover, Section 41 of Act No. 190 allows adverse possession
in any character to ripen into ownership after the lapse of ten years. There could be
prescription under the said section even in the absence of good faith and just title.[40]
All the foregoing notwithstanding, even if we sustain petitioners claim that she was the owner
of the property and that she constituted a trust over the property with her father as the trustee, such a
finding still would not advance her case.
Assuming that such a relation existed, it terminated upon Crispulos death in 1978. A trust
terminates upon the death of the trustee where the trust is personal to the trustee in the sense that the
trustor intended no other person to administer it. [41] If Crispulo was indeed appointed as trustee of the
property, it cannot be said that such appointment was intended to be conveyed to the respondent or any
of Crispulos other heirs. Hence, after Crispulos death, the respondent had no right to retain possession
of the property. At such point, a constructive trust would be created over the property by operation of
law. Where one mistakenly retains property which rightfully belongs to another, a constructive trust is
the proper remedial device to correct the situation.[42]
A constructive trust is one created not by any word or phrase, either expressly or impliedly,
evincing a direct intention to create a trust, but one which arises in order to satisfy the demands of
justice. It does not come about by agreement or intention but in the main by operation of law,
construed 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.[43]

As previously stated, the rule that a trustee cannot, by prescription,acquire ownership over
property entrusted to him until and unless he repudiates the trust, applies to express trusts and
resulting implied trusts. However, in constructive implied trusts, prescription may supervene even if
the trustee does not repudiate the relationship. Necessarily, repudiation of the said trust is not a
condition precedent to the running of the prescriptive period. [44] A constructive trust, unlike an express
trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary
and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a
promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor
intends holding the property for the beneficiary.[45] The relation of trustee andcestui que trust does not
in fact exist, and the holding of a constructive trust is for the trustee himself, and therefore, at all times
adverse.

In addition, a number of other factors militate against the petitioners case. First,
the petitioner is estopped from asserting ownership over the subject property by her
failure to protest its inclusion in the estate of Crispulo. The CA, thus, correctly observed
that:
Even in the probate proceedings instituted by the heirs of Crispulo
Rojas, which included her as a daughter of the first marriage, Caezo never
contested the inclusion of the contested property in the estate of her father.
She even participated in the project of partition of her fathers estate which
was approved by the probate court in 1984. After personally receiving her
share in the proceeds of the estate for 12 years, she suddenly claims
ownership of part of her fathers estate in 1997.

The principle of estoppel in pais applies when -- by ones 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 to exist; and the latter
rightfully relies and acts on such belief, so as to be prejudiced if the former is permitted
to deny the existence of those facts.[46] Such a situation obtains in the instant case.

Second, the action is barred by laches. The petitioner allegedly discovered that the
property was being possessed by the respondent in 1980. [47]However, it was only in 1997

that she filed the action to recover the property. Laches is 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.[48]

Finally, the respondent asserts that the court a quo ought to have dismissed the
complaint for failure to implead the other heirs who are indispensable parties. We agree.
We note that the complaint filed by the petitioner sought to recover ownership, not just
possession of the property;thus, the suit is in the nature of an action for reconveyance. It
is axiomaticthat owners of property over which reconveyance is asserted are
indispensable parties. Without them being impleaded, no relief is available, for the court
cannot render valid judgment. Being indispensable parties, their absence in the suit
renders all subsequent actions of the trial court null and void for want of authority to act,
not only as to the absent parties but even as to those present. Thus, when indispensable
parties are not before the court, the action should be dismissed. [49] At any rate, a
resolution of this issue is now purely academic in light of our finding that the complaint
is already barred by prescription, estoppel and laches.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals,
dated September 7, 2000, and Resolution dated May 9, 2001, are AFFIRMED.
SO ORDERED.

Trusts: Caezo vs Soledad G.R. No. 148788

Facts: Petitioner alleges she bought the land and only entrusted to her father for she left and went to
Mindanao. In 1948 she found out that her step mother was in possession of the land. She filed for
recovery and damages against defendant. It reached the court of appeals where the land was awarded
to the defendant because there has been a satisfaction that the father of the petitioner was the owner.
Issue: Whether or not the action of the respondent filed out of time.
Held: Resolution of the issue hinges on the determination of trust - express or implied - by the
petitioner and her father. Intention to create a trust cannot be inferred from the petitioner's testimony;
the petitioner only testified to the effect that her agreement with her father was that she will be given a
share in the produce of the property. Petitioner should not have made an issue in the declaration of
taxes in her father's name if there really was trust. There was no trust that was established. Petitioner is
estopped from asserting ownership by her failure to protest in the decision of the estate of her father.
Her action is barred by laches.

SOLEDAD CAEZO vs. CONCEPCION ROJASG.R. No. 148788, November 23, 2007 NACHURA,
J.
FACTS:The subject property is an unregistered land with an area of 4,169 square meters situated at
Naval, Biliran. In a complaint on 1997, petitioner Soledad Caezo alleged that she
boughtsuch parcel of land in 1939 from Crisogono Limpiado, although the sale was not
reduced intow r i t i n g . T h e r e a f t e r , s h e i m m e d i a t e l y t o o k p o s s e s s i o n o f t h e
p r o p e r t y. I n 1 9 4 8 , s h e a n d h e r husband left for Mindanao and entrusted the said
land
to
her
father,
Crispulo
Rojas,
who
took p o s s e s s i o n o f , a n d c u l t i v a t e d t h e p r o p e r t y . I n 1 9 8 0 , s h e f o u n d
o u t t h a t t h e r e s p o n d e n t , Concepcion Rojas, her stepmother, was in possession of
the property and was cultivating thesame. She also discovered that the tax declaration
over the property was already in the name of his father.Respondent asserted that it was
her husband who bought the property from Limpiado, which accounts for the tax declaration
being in Crispulos name.After the hearing, MTC rendered a decision in favor of the petitioner,
making her the realand lawful owner of the land. Respondent appealed to the RTC of Naval, Biliran,
which
reversedt h e M T C d e c i s i o n o n t h e g r o u n d t h a t t h e a c t i o n h a d a l r e a d y p
r e s c r i b e d a n d a c q u i s i t i v e prescription had set in. However, acting on
petitioners motion for reconsideration, the RTC amended its original decision and held that
the action had not yet prescribed considering that the petitioner merely entrusted the property
to her father. The ten-year prescriptive period for the r e c o v e r y o f a p r o p e r t y h e l d i n
t r u s t w o u l d c o m m e n c e t o r u n o n l y f r o m t h e t i m e t h e t r u s t e e repudiates the
trust. The RTC found no evidence on record showing that Crispulo Rojas ever ousted the
petitioner from the property.Petitioner filed a petition for review with the CA, which
reversed the amended decisionof the RTC. The CA held that, assuming that there was a
trust between the petitioner and her f a t h e r o v e r t h e p r o p e r t y , h e r r i g h t o f
a c t i o n t o r e c o v e r t h e s a m e w o u l d s t i l l b e b a r r e d b y prescription since
49 years had already lapsed since Crispulo adversely possessed the contested property in
1948.Hence, this petition for review.
ISSUE:W h e t h e r o r n o t t h e r e i s a n e x i s t e n c e o f t r u s t o v e r t h e p r o p e r t y
e x p r e s s o r i m p l i e d between the petitioner and her father
HELD: N O N E . A t r u s t i s t h e l e g a l r e l a t i o n s h i p b e t w e e n o n e p e r s o n h
a v i n g a n e q u i t a b l e ownership of property and another person owning the legal title
to such property, the equitableownership of the former entitling him to the performance
of certain duties and the exercise of certain powers by the latter. Trusts are either express or
implied. Express trusts are those whichare created by the direct and positive acts of the
parties, by some writing or deed, or will, or bywords evincing an intention to create a
trust. Implied trusts are those which, without being expressed, are deducible from the nature
of the transaction as matters of intent or, independently,of the particular intention of the parties, as
being superinduced on the transaction by operation of law basically by reason of equity