LOCSIN v. PUERTO GALERA RESORT HOTEL, INC.

Revocation of
Agency
G.R. No. 233678 DIVISION: FIRST Ponente HERNANDO, J. Date July 27, 2022

Petitioner: CECILIA YULO LOCSIN Respondents PUERTO GALERA RESORT

SUBSTITUTED BY MR. LEANDRO Y. HOTEL, INC. ALSO REPRESENTED BY
LOCSIN, LUISITO B. PADILLA AND LUISITO B.
PADILLA, IN HIS OWN CAPACITY

I. Facts of the case

 Quinto is the registered owner of a hotel complex located in Oriental Mindoro. In 1993,
Padilla, a resort manager and developer, entered a lease contract with Quinto over the hotel
complex for a term of 10 years. In the said contract, Padilla was given the right to introduce
improvements to the property. The contract of lease was further extended up to 2013 and
authorized Padilla to construct new structures and to renovate the premises.
 Padilla and Quinto executed a Memorandum of Agreement wherein they undertook to look
for prospective tenants or lessees of the hotel complex together with all its improvements; to
jointly share in the earnings to be derived from the rentals thereof, and to defend, protect, or
enforce their rights, title and/or interests in the said property individually or collectively.
 Padilla and Quinto agreed to lease the hotel complex to Cecilia pursuant to the MOA, for a
period of 10 years beginning June 1, 2006, with a guaranteed monthly rental of P90,000.00.
Cecilia paid a security deposit of P500,000.00, and immediately took possession of the hotel
complex. All keys to the hotel complex were turned over to her. Cecilia paid monthly
rentals thereafter. After one year, Quinto visited the hotel complex and to his utter shock
discovered that the place was a total mess and in a state of ruin.
 Quinto immediately informed Padilla about the damage. Padilla arrived the next day and
reported the incident to the police. According to Padilla, the estimated cost of the damages
and losses amounted to P12,500,000.00. Initially, Padilla, through counsel, wrote letters to
Cecilia to set up a meeting with her to discuss the matter but the said letters were left
unanswered. This prompted Padilla to send a demand letter to Cecilia demanding her to pay
the amount of P12,500,000.00 to cover the losses and damages sustained by the hotel
complex.
 In response, Cecilia claimed that the contract of lease was not yet perfected and was at best,
in its preparatory stages, thus she cannot be held liable for the said losses and damages.
Padilla, in his personal capacity and in behalf of PGRHI and Quinto, instituted the instant
complaint for damages against Cecilia pursuant to the August 28, 2007 Special Power of
Attorney executed by Quinto in his favor. Cecilia moved for the dismissal of the complaint
but the same was denied by the trial court. Cecilia then filed her Answer with Counterclaims
for damages and attorney's fees. She countered that there was no perfected contract of lease
to begin with, thus, complainants had no cause of action against her. Cecilia claimed that the
execution of the lease contract was conditioned upon Quinto's timely presentation of the
original title covering the hotel complex and since Quinto failed in this aspect, the contract
was not finalized.
 Based on Quinto's revocation of the August 28, 2007, SPA, the trial court granted Quinto's
Motion to Dismiss in an Order dated March 4, 2013. The trial court explained that the said
revocation expressly repudiated Padilla's authority to represent Quinto in this case. Further,
the trial court held that the complaint failed to state a cause of action as Padilla and PGRHI
are not real parties in interest who stand to be benefited or injured by the judgment in the
suit. Finally, the trial court clarified that there was no perfected contract of lease between
the parties as the lease agreement failed to materialize. In another Order dated April 7, 2015,
the trial court denied Cecilia's claim for damages, but awarded attorney's fees in the amount
of P500,000.00, P100,000.00 in litigation expenses and costs of suit in her favor pursuant to
Article 2208 of the Civil Code, on the ground that she was compelled to litigate and incur
expenses to protect her interests.
 In a Decision dated April 4, 2017, the CA granted the appeal, thereby reversing and setting
aside the RTC Orders dated March 4, 2013 and April 18, 2013. The CA held that the agency
between Quinto and Padilla is one coupled with interest, hence, irrevocable. Accordingly,
the dismissal of the complaint was improper. The CA likewise reversed and set aside the
April 22, 2015 Order of the trial court awarding attorney's fees and litigation expenses in
 favor of Cecilia for lack of actual finding of her entitlement thereto except for the sole
reason that she was compelled to litigate to protect her interest.

II. Issue/s
Whether the SPA or the contract of agency between Padilla and Quinto had been effectively revoked
by Quinto?

III. Ratio/Legal Basis

 In a contract of agency, "a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter." A contract
of agency is generally revocable because it is a personal contract of representation based on
trust and confidence reposed by the principal in his agent. As the power of the agent to act
depends on the will and license of the principal he or she represents, the power of the agent
ceases when the will or permission is withdrawn by the principal. Thus, generally, the
agency may be revoked by the principal at will.
 However, an exception to the revocability of a contract of agency is when it is coupled with
interest, e.g., if a bilateral contract depends upon the agency, or if it is the means of fulfilling
an obligation already contracted. The reason for its irrevocability is because the agency
becomes part of another obligation or agreement. It is not solely the rights of the principal,
but also that of the agent and third persons, which are affected. Hence, the law provides that
in such cases, the agency cannot be revoked at the sole will of the principal.
 The agency granted by Quinto to Padilla is coupled with interest because it is the means of
fulfilling an obligation already contracted which is the MOA between Padilla and Quinto
dated October 15, 2004. In the said MOA, it was specifically stated that Padilla had
introduced "very substantial improvements" to the hotel complex during his lease and on
account of the parties' respective interests in the property. Pursuant to the MOA, Padilla and
Quinto agreed to lease the hotel complex to Cecilia, who in turn, paid a security deposit of
P500,000.00, took over the possession and operations of the property and paid the monthly
rentals thereafter. However, a year after its turnover to Cecilia, the hotel complex was totally
damaged and the substantial improvements introduced by Padilla therein were either stolen
or completely destroyed.
 In accordance with this authority and to protect his and Quintos' interests over the subject
property pursuant to the October 15, 2004 MOA, Padilla filed the instant complaint for
damages against Cecilia. Indubitably, the lease agreement over the hotel complex is the
subject matter of the agency, and it is clear from the records that Padilla has a material
interest in the subject matter as he has introduced substantial improvements therein. In view
of their respective interests, Quinto being the owner and Padilla being the author of the
improvements found in the hotel complex, both agreed to lease the property and to share in
the earnings from the lease contract entered with Cecilia over the subject property. The
August 28, 2007 SPA, therefore, is the means of fulfilling an obligation already contracted,
which is the October 15, 2004 MOA in this case.
 As borne out by the records, the object of the lease agreement between Quinto and Cecilia is
the hotel complex situated in Occidental Mindoro, owned by Quinto. Even Cecilia admitted
to this albeit, claiming that she merely signified her interest to lease the subject property but
no contract of lease was ever perfected. To argue, therefore, that the subject matter of the
agency is the lease agreement and not the hotel complex and its improvements is illogical if
not preposterous. It is worth stressing that the lease agreement pertained to the hotel complex
along with the improvements made therein. Thus, the lease agreement cannot be separated
from its object. Simply put, the lease agreement over the hotel complex and its
improvements is the subject matter of the agency granted by Quinto to Padilla. Thus, they
are not separate and distinct from each other such that the lease agreement can stand alone
without its object. Quinto in this case cannot revoke at his whim and pleasure the SPA which
he had executed in favor of Padilla and duly acknowledged before a notary public. The
agency, to stress, is one coupled with interest which is irrevocable since Padilla has a
material interest in the hotel complex having spent a substantial amount of money for its
renovation and improvement. The mutual interest of Quinto and Padilla being the owner and
developer, respectively, of the hotel complex is exactly the reason why they entered into a
MOA wherein they agreed to look for potential lessees of the hotel complex with a view to
sharing in the actual income derived therefrom.

IV. Disposition
 WHEREFORE, the instant petition is DENIED. The April 4, 2017 Decision and the July 20, 2017
Resolution of the Court of Appeals in CA-G.R. CV No. 105148 are AFFIRMED.

THE HEIRS OF TEODORO RIBAC vs. RIBAC-PUTOLAN

Implied Trust
G.R. No. 249754 DIVISION: Ponente LOPEZ, JHOSEP, Date October 19, 2022
SECOND J.
Petitioner: THE HEIRS OF Respondents NARCISA RIBAC-PUTOLAN AND
TEODORO* RIBAC (DECEASED), ANTONINA RIBAC-BLANCO
REPRESENTED BY HIS HEIRS AND
ISSUES: AUGUSTINA, MARIANO, VICTOR,
REYNANTE,** DAYLA, AND ROSALIE, ALL
SURNAMED RIBAC,

I. Facts of the case

 Teodoro Ribac was the registered owner of a parcel of agricultural land covered by OCT
No. P-10565, located in Poblacion, Magsaysay, Davao del Sur. The heirs of Teodoro
claimed that they acquired it by virtue of a homestead patent and were issued the
corresponding certificate of title. Teodoro predeceased his parents, Bartolome and Lucresia
Ribac on December 2, 1977.

 In July 1992, after the death of Lucresia, Marciano Ribac, the eldest son of Spouses Ribac,
called for a meeting attended by the heirs and siblings of Teodoro. Marciano allegedly
proposed that the oral partition made by their parents during their lifetime be reduced into
writing and that the properties allotted to them be surveyed so that each of them could have
their respective titles over the portions assigned to them. However, it did not push through as
no one was willing to shoulder the cost of the expenses.

 On October 18, 1994, the heirs of Teodoro, led by Conrado Manigque, husband of one of
Teodoro's daughters, occupied one-half portion of the property and began constructing their
houses. Thereafter, the heirs of Teodoro caused the cancellation of OCT No. P-10565 under
the name of Teodoro, and another title was issued in their names.

 On November 24, 1994, the sisters of Teodoro, Narcisa Ribac-Putolan and Antonina Ribac-
Blanco filed a Complaint for Partition, Conveyance, Cancellation of Existing Title and
Issuance of a New Title in Lieu Thereof, and Damages with Preliminary Mandatory
Injunction against the heirs of Teodoro with Branch 21, Regional Trial Court, Bansalan,
Davao del Sur.

 Narcisa and Antonina argued that Teodoro was merely holding the subject property in trust
for the true owners, Spouses Ribac. They claimed that the properties of Spouses Ribac,
including the subject property in dispute, were named after their three sons, namely:
Marciano, Modesto, and Teodoro, leaving them without any property registered under their
name. Narcisa and Antonina maintained that in 1960, their parents apportioned among their
siblings the subject property and the three properties that were individually registered under
the names of their three sons. Narcisa claimed that she bad introduced improvements in the
area allocated to her by planting fruit trees, transforming 70% of the land area into irrigated
rice land, and constructing a fish pond.

 During the trial, Narcisa and Antonina testified in open court and presented two witnesses to
corroborate their claims. These were Genaro Dumayas and Juanito Pejeras. On the other
hand, for the heirs of Teodoro, only Mariano Ribac, son of Teodoro, testified, as he was the
lone witness and was presented by their counsel, Atty. Leonardo Suario.

 The RTC held in its Decision that the subject property was merely held in trust by Teodoro
for the other heirs of Spouses Ribac, especially his sisters.It held that the subsequent
transfer of title in the names of the heirs of Teodoro is void. The RTC added that Narcisa
and Antonina's action for reconveyance of the subject property based on implied trust is not
barred by the 10-year prescriptive period since they are in actual, continuous, and peaceful
possession of the subject property.
  The new counsel of the heirs of Teodoro entered his appearance and sought a new trial but
was denied. Thus they appealed to the Court of Appeals which affirmed the Judgment of the
Court a quo and when the heirs of Teodoro moved for Reconsideration the same was
denied.

II. Issue/s
Whether there is an implied trust between Teodoro and his sisters Narcisa and Antonina?

III. Ratio/Legal Basis

 NO, there is NO implied trust between Teodoro and his sisters Narcisa and Antonina.

 In the case of De Romero v. Court of Appeals, this Court ruled that no substantial evidence
was presented to prove that a homestead patent awardee was merely holding the property in
trust for the benefit of his siblings. This Court held that:

 A trust is the legal relationship between a person having an equitable ownership in property
and another person owning the legal title to such property, the equitable ownership of the
former entitling him to performance of certain duties and the exercise of certain powers by
the latter. Trust relations between parties may be express or implied. 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 evidencing an intention to create a trust. Implied trusts are those which
without being express, are deducible from the nature of the transaction as matters of intent,
or which are superinduced on the transaction by operation of law as a matter of equity,
independently of the particular intention of the parties. Implied trusts may either be resulting
or constructive trusts, both coming into by operation of law.

 Resulting trusts are based on the equitable doctrine that valuable consideration and not legal
title determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or hold the legal right to property, which he
ought not, in equity and good conscience, to hold.

 However, it has been held that a trust will not be created when, for the purpose of evading
the law prohibiting one from taking or holding real property, he takes a conveyance thereof
in the name of a third person.

 Here, if the argument of respondents that an implied trust was created between Teodoro and
respondents were to be sustained, this Court would be condoning an outright circumvention
of the Public Land Act. Section 90 (e) of Commonwealth Act No. 141
 Upholding the finding that respondents were the rightful owners of the subject property
contravenes the restriction imposed in Section 90 (e) of Commonwealth Act No. 141 on the
homestead awarded to Teodoro "since a homestead applicant is required to occupy and
cultivate the land for [their] own and [their] family's benefit, and not for the benefit of
someone else." Therefore, no implied trust could have been created by the purported
arrangement between Teodoro and respondents.

IV. Disposition
ACCORDINGLY, this Court SETS ASIDE the Resolution dated November 27, 2019. The case
is REMANDED to Branch 21, Regional Trial Court, Bansalan, Davao del Sur for the reception of
evidence and adjudication of the claim of petitioners heirs of Teodoro Ribac, namely: Augustina,
Mariano, Victor, Reynante, Dayla, and Rosalie, all surnamed Ribac, that no implied trust could have
been created because Teodoro Ribac acquired the subject property through a homestead patent.
PNB BINALBAGAN BRANCH VS. TAD-Y ET. AL.
Constructive Trust
G.R. No. 214588 DIVISION: FIRST Ponente GAERLAN, J. Date September 07, 2022

Petitioner: PHILIPPINE NATIONAL BANK Respondents ANTONIO TAD-Y, FOR HIMSELF

BINALBAGAN BRANCH, BINALBAGAN, AND AS ATTORNEY-IN-FACT OF PATRICIA
NEGROS OCCIDENTAL TAD-Y, ET AL

I. Facts of the case

 On January 30, 1975, the spouses Jose Tad-y and Patricia Toledanes Tad-y (spouses
obtained an agricultural sugar crop loan from the Binalbagan, Negros Oriental Branch of
PNB, in the amount of P109,000.00. To secure the loan, PNB and the spouses Tad-y
executed a Real Estate Mortgage (REM) over six (6) parcels of land located at Himamaylan
City and Hinigaran, both in Negros Occidental. The REM was annotated on each certificate
of title as Entry No. 201793.
 On August 14, 1975, the spouses Tad-y obtained another agricultural sugar crop loan from
PNB in the amount of P63,000.00. The REM was extended to cover this second loan. The
transaction was annotated on the certificates of title as Entry No. 210254. On August 9,
1988, two of the parcels covered by the REM, Lots 778 and 788, were sold on auction by
the provincial treasurer of Negros Occidental, for failure to pay real property taxes thereon.
PNB participated in the auction and won as the sole bidder, for a total price of P10,609.63.
On August 23, 1989, the provincial treasurer conveyed the parcels to PNB through the
issuance of two Final Bills of Sale. On September 16, 1988, the Certificate of Sale in favor
of PNB was annotated on the certificates of title of Lots 778 and 788 as Entry No. 329629
and Entry No. 329628.
 Sometime in November 1995, the spouses Tad-y availed of the loan restructuring provisions
of Republic Act No. 7202 A year later, the spouses completed the payments on the two
loans. Accordingly, on March 6, 1996, PNB executed a deed of release of the REM.
However, PNB excluded Lots 778 and 788 from the release, claiming that it had already
acquired title to said lots by virtue of the auction sale. Through letters dated July 19, 2001
and October 23, 2003, Patricia Toledanes Tad-y (Patricia) asked PNB to release Lots 778
and 788 and manifested her willingness to reimburse PNB for the price it paid in the auction
sale. In response, PNB reiterated that it had already acquired ownership of Lots 778 and
788; but it was willing to negotiate the repurchase of the lots.
 On March 23, 2004, Patricia and her children (the Tad-ys), represented by herein
respondent Antonio Tad-y, filed the present complaint for breach of contract and
reconveyance of property before the RTC of Himamaylan City.
 After due proceedings, the RTC rendered its decision in favor of the Tad-ys, citing
paragraphs (c) and (d) of the REM. On appeal by PNB, the CA affirmed the RTC decision.
It rejected PNB's contention that it had no obligation to pay the real property taxes on the
mortgaged properties under the REM.
 The CA refused to pass upon PNB's contention that the action for breach of contract and
reconveyance had already prescribed, finding that the issue was not raised in PNB's answer
 and should therefore be deemed waived. Hence, PNB is barred from raising the matter for
the first time on appeal. Finally, the CA sustained the RTC's conclusion, based on paragraph
(d) of the REM, that by virtue of its failure to pay the real estate taxes on Lots 778 and 788,
PNB was constituted as attorney-in-fact of the spouses Tad-y; and, therefore, PNB's
acquisition of the disputed lots inures to the benefit of the Tad-ys.
 The CA went on to rule that a constructive trust was created over the disputed lots, thus: 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. The relation of trustee and cestui 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.
Therefore, the subject properties acquired by defendant-appellant bank shall be considered
held in trust for plaintiffs-appellees.
 PNB filed a motion for reconsideration, which the CA denied through the herein assailed
resolution; hence, the present petition.

II. Issue/s
Whether or not a constructive trust was created over the disputed properties by operation of
law?

III. Ratio/Legal Basis

 Article 1456 of the Civil Code provides that a person who acquires property through mistake
or fraud is considered a trustee of a trust created by force of law for the benefit of the person
from whom the property comes. The trust relation created by this provision is called a
constructive trust, which jurisprudence defines as: “a trust not created by any words, either
expressly or impliedly, evincing a direct intention to create a trust but by the construction of
equity in order to satisfy the demands of justice and prevent unjust enrichment. It does not
arise by agreement or intention but by operation of law 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.”
 In Berico v. Court of Appeals, the Court explained that the fraud contemplated in Article
1456 of the Civil Code “is understood to be either actual or constructive fraud. Actual fraud
is intentional fraud; it consists in deception, intentionally practiced to induce another to part
with property or to surrender some legal right, and which accomplishes the end designed.
Constructive fraud, on the other hand, is a breach of legal or equitable duty which,
irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its
tendency to deceive others, to violate public or private confidence, or to injure public
interests. The latter usually proceeds from a breach of duty arising out of a fiduciary or
confidential relationship.”
 In the case at bar, PNB is guilty of constructive fraud for breaching its fiduciary duty to the
spouses Tad-y under the REM, when it refused to release the disputed lots. It has been
established that PNB acquired the disputed lots through the 1988 auction sale on behalf of
the spouses Tad-y, pursuant to the power-of-attorney provisions under paragraph (d) of the
REM. As earlier mentioned, when the loans were fully paid in 1996, without PNB having
exercised its right to foreclose on the mortgaged properties, PNB lost any interest it had in
the disputed properties; and should have perforce turned them over to the Tad-ys.
 Likewise, PNB, as the agent of the spouses Tad-y, cannot acquire title to the disputed
properties, since it bought them on the latter's behalf and held them strictly for the purpose of
foreclosure: an option which it never exercised.

IV. Disposition
WHEREFORE, the present petition is hereby DENIED. The April 16, 2013, Decision and the
September 4, 2014 Resolution of the Court of Appeals in CA-G.R. CV No. 01412 are AFFIRMED.