[ G.R. No. 37504. December 18, 1974 ] 158 Phil. 1008; 71 OG 6534 (October 6, 1975)
SECOND DIVISION
[ G.R. No. 37504. December 18, 1974 ]
ROBERTO ESCAY, ET AL., PETITIONERS, VS. COURT OF APPEALS, ET AL., RESPONDENTS. R E S O L U T I O N
FERNANDEZ, J.:
This Resolution is in support of Our minute Resolution of February 7, 1974 which denied “for lack of merit” petitioners’ Petition for Review on Certiorari of the Decision of the Court of Appeals in CA-G.R. No. 35965,-R, entitled Roberto Escay, et al., vs. Testate Estate of Jose G. Escay, Sr. et al., and of Our vote to deny their motion for reconsideration of said resolution. Respondents have filed their Comment on the said motion for reconsideration and the petitioners have filed their Reply thereto. Afterwards, the parties filed their respective Memoranda.
I THE FACTS
Very briefly, the pertinent facts are as follows: Emilio and Jose Escay, now both deceased, were brothers. In his lifetime, Emilio mortgaged his properties now in question, to the Philippine National Bank. He died in 1924 before he could pay his obligation with the bank which had mounted. The bank then filed in 1930 a foreclosure suit against the estate of Emilio represented by the administrator, Atty. Eduardo Arboleda. Pending the said suit, on April 28, 1933, a contract hereafter referred to as original contract was entered among the Philippine National Bank, Jose Escay, Sr., and the administrator, Atty. Arboleda, under which Jose assumed the mortgage indebtedness of his deceased brother Emilio. This was agreed to by Magdalena Vda. de Escay, widow of Emilio, in her own behalf and as guardian ad litem of their children. When it was discovered that the original contract failed to state the transfer of the ownership of the properties in question to Jose Escay, Sr., in consideration of his assumption of the mortgage indebtedness of Emilio (subject to the right of repurchase of the heirs of Emilio within five (5) years after the mortgage indebtedness had been fully paid), a supplementary contract was entered into among the Philippine National Bank, the administrator, Atty. Arboleda and Jose Escay, Sr. This was approved by the probate court taking cognizance of the estate of the deceased Emilio Escay in its order of February 24, 1934. In 1941, Magdalena Vda. de Escay, Roberto and the other children filed a complaint against Jose Escay, Sr. and Atty. Arboleda (administrator of the deceased Emilio), for the recovery of the ownership and possession of the properties in question. This case was provisionally dismissed after defendants have answered, upon motion of the parties on July 24, 1944.
II NO ABUSE OF DISCRETION ON THE PART OF THE COURT OF APPEALS
The questions raised by the petitioners are basically factual and because the Court of Appeals did not commit a grave abuse of discretion in its findings of fact contained in its decision now challenged before Us by the petitioners, this Court correctly denied petitioners’ petition “for lack of merit”. It is for the same fundamental ground that I vote to deny the motion for reconsideration now pending before Us. As a matter of fact, it is my view that the decision of the Court of Appeals was correct. The present opinion, being one which explains why We denied petitioners’ petition “for lack of merit,” and why We vote to deny their motion for reconsideration, will touch only on the principal points. The issues in this case, particularly those reiterated in the Motion for Reconsideration, may be summarized as follows:
1. Validity of the original contract, the supplementary contract, and the Order approving the latter; 2. Acquisition of the properties by adverse possession; 3. Holding of the properties in trust (implied) for the heirs of Emilio Escay.
The issue of express trust was raised for the first time by petitioners in their reply to respondents’ Comment to their Motion for Reconsideration. The additional issue of whether or not full payment of the obligation of the estate of Emilio Escay to the Philippine National Bank was made by Jose Escay, Sr. was raised in petitioners’ brief. (a) On The First Issue - Petitioners contend: a) That the contract and the supplementary contract are not deeds of sale, because the petitioners, represented by their mother and guardian ad litem, merely intended under these contracts to transfer the possession, administration and supervision of these properties to respondents; it was never the intention of the petitioners as heirs of the testate estate of their father Emilio Escay to transfer the ownership of the properties in question to the respondents; b) That the original and supplementary contracts are fictitious and simulated for lack of consideration and an action to annul a non-existent contract does not prescribe; c) That the supplementary contract was null and void because it was approved by the Court without their knowledge and consent, considering that there was no written notice to them as required by Section 714 of the Code of Civil Procedure, hence, this supplementary contract and the order of the Court approving the same are null and void ab initio; d) That the order of the Court approving the supplementary contract was null and void because the Court had no power to approve the sale of properties of the testate estate of Emilio Escay for the purpose of paying the mortgage lien thereon under Sec. 718 of the Code of Civil Procedure, considering that such a sale would in effect be a foreclosure on the real property of the testate estate which is not within the power of the probate court to authorize; consequently, the supplementary contract could not have conferred ownership over the properties of the petitioners in question in favor of the respondents; and e) That the contract, Exhibit F (erroneously referred to by oversight as Exhibit H in the Decision of the Court of Appeals) and the supplementary contract, Exhibit were antichretic contracts and, therefore, by virtue of said contracts no ownership over the properties of the petitioners in question could have been transferred to the respondents (this issue was not raised in the motion for reconsideration but only in their brief, and according to the Court of Appeals was only raised for the first time on appeal). We now hold, as the Court of Appeals has held that: It is true that the original contract failed to provide for the transfer of the properties to Jose Escay, Sr., but, as the Court of Appeals held:
“Magdalena Vda. de Escay, as heir and as guardian ad litem of the heirs of Emilio Escay, gave her conformity to the deed of conveyance, Exhibit “H” in the document Exhibit “G” which had been reproduced above. She gave her consent to the contract executed by Atty. Arboleda, as administrator of the estate of Emilio Escay, in favor of Jose Escay and the bank ’en el cual los derechos de la testamentaria en los totes de terreno actualmental hipotecados al Banco Nacional Filipino, quedan transpasados al Sr. Jose Escay, obligandose este ultimo en asumir toda la obligacion de la testamentaria a favor del Banco Nacional Filipino.’ She had, therefore, for herself, and as guardian ad litem of her children, given her consent to the transfer of the rights of the estate to the lots mortgaged to the bank in favor of Jose Escay. Unfortunately, the transfer or conveyance of these lots to Jose Escay was not provided for in the deed of conveyance, Exhibit “H”. This oversight could have been due to the fact that the deed of conveyance was drawn by Atty. Recto of the bank, and his interest was only the protection and preservation of the rights of the bank, and had forgotten to provide for the consideration of the assumption of the obligation of the estate by Jose Escay. Jose Escay did not appear to be represented by counsel, and the absence of this consideration was discovered only when the contract was submitted to Atty. Hilado. Atty. Arboleda, as previously stated, took this matter with the widow and the bank, and the widow agreed to the execution of the supplementary contract.” (Decision of Court of Appeals, pp. 10-11).
It is clear that the intention in the original contract was to transfer the properties to Jose Escay, Sr. since this intention was confirmed in the written consent, Exhibit “G”, executed by Magdalena Vda. de Escay. It is not true that Magdalena Vda. de Escay understood the original contract or her written conformity to mean only the transfer of possession and administration of the properties. In the supplementary contract (Exh. I) the testate estate of Emilio Escay already clearly transferred all rights over the properties in question to Jose Escay, Sr. This transfer of properties was specified as follows:
“2-o x x x En realidad era la intencion de las partes que en consideraciones a sus asuncion de dichas obligacion el abintestato la cederia las propiedades hipotecadas el Banco Nacional Filipino, pero por discuido involuntario esta condicion se dejo de incluir en el contrato.” “3-o Que para subsanar el referido error en el otorgamiento de contrato tantas veces mencionado, el administrador judicial del abintestato del finado Emilio Escay por el presente CEDE y TRASPARSA al Sr. Jose Escay, sus herederos, derechobabientes legales las parcelas de terreno, con sus mejoras, que se describen como sigue.” (Record on Appeal, pp. 32-33).
This transfer of properties was in consideration of the assumption by the latter of the entire obligation of the said testate estate with the Philippine National Bank, subject only to the right of the heirs of said testate estate of Emilio Escay to repurchase the properties within five (5) years after Jose Escay, Sr. shall have fully paid the testate estate obligation with the Philippine National Bank, Bacolod Branch. This supplementary contract only set down in writing what was already agreed at the execution of the original contract and confirmed later by Magdalena Vda. de Escay in Exhibit “G”. The original contract and supplementary contract were therefore deeds of sale with assumption of obligation and by virtue of these contracts the ownership of the testate estate of Emilio Escay over the properties in question was transferred to Jose Escay, Sr. There can be no question that the guardian ad litem and mother, Magdalena Vda. de Escay, as representative of the minor heirs, intended to transfer their rights over the properties in question, and so, they gave their conformity to the transfer of their rights over the properties of the testate estate of Emilio Escay already mortgaged to the Philippine National Bank, in favor of Jose Escay, Sr., provided that the latter shall assume all the obligations of the said testate estate in favor of the Philippine National Bank. This original contract and the supplementary contract were executed by the judicial administrator of the testate estate of Emilio Escay after a series of conferences with the widow, Magdalena Vda. de Escay as guardian ad litem of her minor children and heirs of the testate estate of Emilio Escay, the Philippine National Bank represented by Atty. Recto, and Mr. Jose Escay, Sr. It must be noted that the decision to sell the properties in question to Jose Escay, Sr. was a concerted decision by all of these four persons. It should also be noted that prior to the execution of the original contract on April 28, 1933, the Philippine National Bank had already filed an action for foreclosure of the properties of the testate estate and these contracts were executed so that the properties of the testate estate would not be sold at public auction to strangers, in which instance the heirs would have very much less time to repurchase the properties than if the properties were to be sold to Jose Escay, Sr. who could give the heirs a longer period of time within which to repurchase the properties, as he did in fact give them a longer period, because he gave them five (5) years within which to repurchase the properties from and after the time that he shall have fully paid the bank the full amount of the obligation of the testate estate. This was the background of the execution of the original contract, the conformity of Magdalena Vda. de Escay as heir and guardian ad litem, and the supplementary contract. Furthermore, it is a fact that in 1936, petitioner Roberto Escay, oldest son of Emilio Escay, executed a contract of lease, Exhibit 8, where he acknowledged Jose Escay, Sr. to be the owner of the properties in question, and his mother, Magdalena Vda. de Escay , also signed as witness thereto, showing that they knew that there was already a genuine sale of the properties to Jose Escay, Sr. Consequently, the lower court and the Court of Appeals did not err in holding that the true intention of the parties expressed in the original contract and in the supplementary contract was for the testate estate of Emilio Escay to transfer its full ownership to the properties in question to Jose Escay, Sr. in consideration for his assumption of the obligation of the testate estate, subject only to the right to repurchase given to the heirs of Emilio Escay within five (5) years from and after Jose Escay, Sr. shall have fully paid the obligation of the testate estate with the Philippine National Bank. (Decision of the Court of Appeals, pp. 6-7, 11-13, 17, 18). It is true that in order to be valid, this supplementary contract must be approved by the Court with prior written notice to the heirs. But the heirs of the testate estate of Emilio Escay approved this contract through their guardian ad litem, Magdalena Vda. de Escay, who was their mother. This approval and conformity to the said supplementary contract is embodied in the document dated May 13, 1933 and which has been marked as Exhibit “G”. Actually the conformity was executed before the supplementary contract, but since the supplementary contract was executed only in view of the omission of the consideration in the original contract and the fact that the guardian ad litem, also as heir, had already expressed her conformity to the transfer of the properties after the execution of the original contract, this conformity to the original contract was therefore in effect also her conformity to the supplementary contract. In other words, under this document Exhibit “G”, Magdalena Vda. de Escay, in her capacity as guardian ad litem of the minor heirs of the testate estate of Emilio Escay, also in effect gave her conformity to the supplementary contract as she was agreeable to the original contract authorized by and entered into among the judicial administrator of the testate estate of Emilio Escay (Eduardo P. Arboleda), Jose Escay, Sr., and the Philippine National Bank on April 28, 1932. Furthermore, as found out by the Court of Appeals:
“In any case, according to the records of Special Proceedings No. 3148, copy of the order approving the supplementary contract was sent by registered mail to Magdalena Vda. de Escay. No action was taken by Magdalena Vda. de Escay to set aside the order approving the supplementary contract. While the receipt of the notice by Atty. Arboleda on behalf of Magdalena Vda. de Escay, and the sending of the copy of the order approving the supplementary contract to Magdalena Vda. de Escay, might not be sufficient to satisfy the requirement of written notice to the heirs, her silence strongly supports the inference that the matter was really taken up by Atty. Arboleda and herself with Atty. Recto, and that she had consented to the execution of the supplementary contract.” (Decision p. 12)
The minor heirs had given their consent to the supplementary contract through their guardian ad litem and therefore it was not null and void, and the Order approving it was valid. The heirs through the guardian ad litem gave their conformity to the transfer of rights in favor of Jose Escay, Sr. in the document, Exhibit “G”. Said the Court of Appeals: “On May 13, 1933, Magdalena Vda. de Escay, in her own behalf and as guardian ad litem of her children, gave her conformity to the instrument of conveyance, Exhibit “H” as follows;
Por la presente hago constar que doy me conformided y estoy conforme al contrato otorgado por y entre el Sr. Jose Escay y el Banco Nacional Filipino de fecha 28 de Abril de 1933, en el cual los derechos de la testamentaria en los lotes de terreno actualmente hipotecados al Banco Nacional Filipino, quedan traspasados al Sr. Jose Escay, obligandose este ultimo en asumir toda la obligacion de la testamentaria a favor del Banco Nacional Filipino. Bacolod, Negros Occidental, 13 de Mayo de 1933,” (Decision of the Court of Appeals, Exhibit “G”, pp. 6-7).
Under this document, the widow gave her conformity to the supplementary contract which was drafted by Atty. Recto of the Philippine National Bank and there was no evidence that Atty. Recto had confederated with either Atty. Arboleda or the widow (Decision of the Court of Appeals, pp. 6 and 18). The lower court and Court of Appeals were correct in holding that the heirs gave their consent and conformity to this supplementary contract which was therefore a valid contract of transfer of absolute ownership of the properties in question of the testate estate of Emilio Escay to Jose Escay, Sr. This holding of the lower court and the Court of Appeals is solidly backed up by the following facts; (a) The testimony of Atty. Eduardo P. Arboleda that he probably gave a copy of the Motion for the Approval of the “contrato suplementario”, Exhibit “I”, to Magdalena Vda. de Escay, since according to him he never did anything in connection with the transaction without prior notice, consent, approval and conformity of the guardian ad litem of the minor heirs, Magdalena Vda. de Escay. “Atty. Arboleda, as previously stated, took up this matter with the widow and the bank, and the widow agreed to the execution of a supplementary contract. The supplementary contract was executed by Atty. Arboleda and submitted by Jose Escay to the Court for approval. Unfortunately again, the copy which was intended for Magdalena Vda. de Escay was received not by Magdalena, but by Atty. Arboleda. Atty. Arboleda testified that he must have given her the copy. It is understandable that Atty. Arboleda could not here definitely state that he had delivered the copy of the document to Magdalena in view of the fact that the incident happened about 30 years before he testified. In any case, according to the records of Special Proceedings No. 3148, copy of the order approving the supplementary contract was sent by registered mail to Magdalena Vda. de Escay. No action was taken by Magdalena Vda. de Escay to set aside the order approving the supplementary contract. While the receipt of the notice by Atty. Arboleda on behalf of Magdalena Vda. de Escay, and the sending of the copy of the other approving the supplementary contract to Magadalena Vda. de Escay, might not be sufficient to satisfy the requirement of written notice to the heirs, her silence strongly supports the inference that the matter was really taken up by Atty. Recto, and that she had consented to the execution of the supplementary contract.” (Decision of the Court of Appeals, pp. 11-12). (b) A copy of the Order of the Court approving the “contrato suplementario” was sent to Magdalena Vda. de Escay by registered mail and she did not take any action whatsoever in order to set aside the said order. If it were really true that she did not have prior notice of the “contrato suplementario” and that she was not agreeable to the terms thereof because she was not willing to transfer the ownership of the properties in question to Jose Escay, Sr. under the “contrato suplementario”, why is it that she did not do anything or take any action in order that the Court will set aside its order approving the said “contrato suplementario”, Exhibit “I”? This is clear and convincing evidence that Magdalena Vda, de Escay knew, consented, approved and was in full conformity with, the terms and conditions set forth under the “contrato suplementario” and that the intention was really to transfer the properties of the estate of Emilio Escay to Jose Escay, Sr. in consideration of the assumption by the latter of all the obligations of the said estate with the Philippine National Bank. The contract and “contrato suplementario” were not merely antichretic contracts. They were documents of sale which passed ownership over the properties in question to Jose Escay, Sr. Petitioners argued (for the first time when they were already appealing) that under these contracts, Jose Escay, Sr. was only supposed to take possession and administration of the properties and by assuming the obligation of the testate estate of the Philippine National Bank, he became a creditor of the testate estate of Emilio Escay. As the Court of Appeals rightly ruled, under the contract and the “contrato suplementario”, Jose Escay, Sr. did not become a creditor of the testate estate of Emilio Escay. He became a debtor of the Philippine National Bank. He was not charged with the duty of appropriating for himself the fruits of the properties in order to satisfy his credit in the testate estate of Emilio Escay but that his obligation was to assume and pay the obligation of the testate estate with the Philippine National Bank and within five (5) years from full payment of said obligation the estate may repurchase the properties from him. Clearly, therefore, Jose Escay, Sr. did not become the creditor of the testate estate of Emilio Escay after paying the obligation of said testate estate with the Philippine National Bank. He became the owner subject only to the right of repurchase by the heirs of the properties within five (5) years after full payment of the obligation with the Philippine National Bank. Said the Court of Appeals:
“Moreover, the deed of conveyance, Exhibit “H”, and the supplementary contract, Exhibit “I”, are not antichretic contracts. It was a sale and transfer of property from the debtor to a buyer, who in consideration thereof, assumed the obligation of the debtor to the creditor. Jose Escay, Sr. did not become a creditor of the estate. He became the debtor of the Philippine National Bank. Neither did he become a creditor of the estate of Emilio Escay by virtue of the supplementary contract, Exhibit I. Jose Escay, Sr. became the owner of the properties, subject only to the right of estate or the heirs to repurchase the same within five years after Jose Escay, Sr. have completely paid the debts to the bank.” (Decision, page 17).
The supplementary contract did not contravene Section 718 of the Code of Civil Procedure. Petitioners also argue that the order of the Court approving the “contrato suplementario” was null and void because it authorized the sale of the property of the testate estate in order to pay or satisfy the mortgage lien thereon which was not sanctioned by Sec. 718 of the Code of Civil Procedure. In effect, according to the petitioners, the probate court allowed the foreclosure of the properties of the testate estate in order to satisfy the mortgage lien thereon and the court had no authority to do this under the aforecited provision of the Code of Civil Procedure. The Court of Appeals was correct in disposing of this argument by holding that this section of the Code of Civil Procedure cannot impair the substantive right of the owners of the properties, who were the heirs of the testate estate, to sell what belonged to them. It held that since the sale of the properties was with prior notice, consent, conformity and approval of the heirs, their right to dispose of their properties cannot be curtailed by this procedural law. “A rule of procedure cannot prevail over the will of the owner insofar as the dispositions of his properties ore concerned.” (Decision of Court of Appeals, p. 16). The original and supplementary contracts were supported by valuable consideration. Petitioners argue that the contract and the supplementary contract are null and void for lack of consideration; consequently, they are non-existent contracts because they are simulated and fictitious and the action to set them aside does not prescribe. Petitioners’ premises are not well-founded. The contract and the supplementary contract were supported by valuable consideration, which was the assumption of the mortgage indebtedness with the Philippine National Bank, and in view thereof, Jose Escay, Sr. paid the following:
(a) Outright payment upon the execution of contract of more than P4,000 representing arrearages of the testate estate of its amortizations with the Philippine National Bank; (b) Immediate delivery of 750 piculs to the bank at P6.30 per picul as partial payment of the estate obligations; (c) Subsequent yearly payments of 450 piculs beginning with the crop year 1933-34 until the obligations were fully liquidated; (d) Payment upon the execution of the contract of more than P1,128.00 to wipe out the testate estate obligations with the Pacific Commercial Company.
These are undoubtedly valuable considerations which represent much money at the time when the price of sugar per picul was only P6.30 (as compared to the present average price which ranges from P100 to P120 per picul). The payments made by Jose Escay, Sr. were certainly valuable consideration which supported the original contract and the supplementary contract now under consideration. Petitioners also argue that assumption of the mortgage indebtedness of the testate estate of Emilio Escay by Jose Escay, Sr. was motivated by pure beneficence. This is not true because this assumption of obligation was in consideration of the transfer of the properties of the testate estate to Jose Escay, Sr. as intended in the original contract and as contained in the written conformity of the widow and in the supplementary contract (par. 5-0). The obligation of the testate estate of Emilio Escay to the Philippine National Bank was fully paid by Jose Escay, Sr. The Court of Appeals has already made a finding of fact, which is binding upon Us, that fall payment of the obligation to the Philippine National Bank had already been made (Decision of the Court of Appeals, p. 18). And on this premise of extinguishment of the said obligations, the Court of Appeals also found that:
“Jose Escay paid in full the obligation of the estate to the bank and mortgaged the properties to the Compania General de Tabacos.” (Decision, p. 14).
Supporting this finding is the significant fact that the petitioners’ complaint in this case filed in 1959 does not contain any express and categorical allegation that Jose Escay, Sr. had not paid in full the obligation of the estate of Emilio Escay to the Philippine National Bank. Furthermore, the petitioners themselves had averred as an allegation of fact in the complaint filed in 1941, Exhibit L, that:
“THIRD CAUSE OF ACTION”
1.-
That in view of the execution of the two documents copied and stated in the first cause of action, the defendant Jose Escay had the titles of ownership of the lots therein mentioned issued in his name by the Register of Deeds of this province; took possession of them thereof for his exclusive benefit, and in order to hasten the expiration of the five-year period stated in the “contrato suplementario”, paid in full the mortgage indebtedness with Philippine National Bank." (Complainant in Civil Case No. 8829, CFI - Negros Occidental entitled “Magdalena Vda. de Escay, et al., vs. Jose Escay, Sr., et al., p. 10, Exhibit “L”).
Petitioners have pointed out that the annotation of the encumbrance relating to the said obligation still appears on the titles covering the properties in question. But this is certainly of no significance for the reason that it is the standard and accepted practice in all banking transactions that no new mortgage for a bigger loan shall be granted by the same bank on the same collateral unless the prior mortgage debt shall have first been liquidated, although the bank and the borrower never take the trouble of having the annotation of the prior and liquidated mortgage debt on the title of the collateral cancelled before the next annotation of the subsequent mortgage debt is made on the title. One reason is to save on registration expenses. Thus, it happens as a matter of ordinary practice and procedure that annotations of extinguished mortgages are never cancelled on titles of collaterals, although the mortgage debts have already been paid. This was exactly what happened in this case. And the fact that the obligation of the testate estate of Emilio Escay to the Philippine National Bank had been paid in full was the reason why Jose Escay, Sr. was able to use the same properties in question as collateral for his subsequent loan from the Compania General de Tabacos. The five-year period for the repurchase of the properties in question by the heirs of the late Emilio Escay had expired long ago. As already stated in the foregoing discussion, it was averred as an allegation of fact in the petitioners’ complaint filed in 1941 that Jose Escay, Sr. “inorder to hasten the expiration of the five year period stated in the “contrato suplementario”, paid in full the mortgage indebtedness with the Philippine National Bank.” Although full payment of the obligation was made before 1941, nevertheless in the absence of records (which have already been lost), even assuming that full payment was made only in 1941, there can be no doubt that the 5-year period for repurchase had expired long ago. Petitioners contend that the repurchase price was not clearly stated because the value of the improvements was not specified. This may be so but this could easily have been fixed had the heirs of Emilio Escay made any offer to repurchase, which they never did. What should have been very clear to them was that their period to repurchase was five (5) years from full payment of the obligation of the testate estate to the Philippine National Bank. On the basis of this provision in the supplementary contract, Jose Escay, Sr. had acquired the full ownership of the properties in question from the testate estate of Emilio Escay. (b) On the Second Issue - Petitioners also argue that since the properties in question are registered lands under the Torrens system, the lower court and the Court of Appeals erred in holding that the respondents have acquired the properties by adverse possession or acquisitive prescription under Sec. 41, Act 190. Petitioners, however, have lost sight of the fact that as early as 1939, the titles over the properties in question were transferred to Jose Escay, Sr. who was therefore the registered owner thereof since that time. These are titled properties in the name of Jose Escay, Sr. since 1939 and, therefore, this matter of acquisitive prescription in his favor really need not be discussed except for the fact that this was raised as an alternative defense. Speaking of Jose Escay, Sr., the Court of Appeals said that “He alone was possessing and enjoying the fruits of the properties and he introduced permanent improvements consisting of roads and fruit trees. This possession in the concept of owner was continuous, uninterrupted, public, open and adverse, and recognized particularly by plaintiff Roberto Escay and by his mother Magdalena Vda. de Escay.” (Decision, p. 14). This possession by Jose Escay, Sr. in the character described by the Court of Appeals was acknowledged by the petitioners themselves when: (a) In their complaint in 1941 in the case which was provisionally dismissed in 1944, the petitioners also admitted and acknowledged the adverse and exclusive possession by Jose Escay, Sr. and his successor in their allegations of fact; and (b) In their complaint in this case filed in 1959, they also reiterated the allegation of fact in their complaint of 1941 that the properties in question have been under the adverse and exclusive possession of Jose Escay, Sr. and the respondents as his successors-in-interest in concept of an owner. (c) On the Third Issue - Petitioners contend that since the titles over the properties in question were transferred to the name of respondents’ predecessor-in-interest, Jose Escay, Sr., by fraudulent means, an implied trust was created between the testate estate of Emilio Escay and Jose Escay, Sr. under which, by operation of law, Jose Escay, Sr. became a trustee of the properties in question in favor of the heirs of Emilio Escay as the cestui que trust; consequently, the respondents are duty bound to reconvey the properties in question to the petitioners whose right to recover the properties does not prescribe. Petitioners also argue that the original contract, Exhibit “F”, and the supplementary contract, Exhibit “I”, created in their favor an express trust because the true intention of the parties was that only the possession and administration of the properties of petitioners in question should be transferred to respondents’ predecessor-in-interest Jose Escay, Sr., which properties he was supposed to hold in trust for the petitioners until such time as he shall have fully liquidated the obligations of the testate estate of Emilio Escay, and since an action based on an express trust does not prescribe the right of petitioners to recover the properties in question from the respondents does not prescribe and therefore the respondents can be ordered to reconvey the properties in question to petitioners. As the Court of Appeals held, no fraud was proved (Decision, p. 18). On the other hand the evidence is clear that the original and supplementary contracts were the result of a series of negotiations by the testate estate of Emilio Escay through its Judicial Administrator and legal representative; its creditor, the Philippine National Bank; the heirs represented by their guardian ad litem, Magdalena Vda. de Escay and Jose Escay, Sr. As the Court of Appeals found, in these negotiations, in the series of conference Jose Escay, Sr. did not appear to have been represented by counsel. The contract and the “contrato suplementario” were both prepared for execution by the Judicial Administrator and by the lawyer of the bank, Atty. Recto. It is not fair to imply that the Philippine National Bank at that time was a party to a fraud. What interest would the Philippine National Bank have in fraudulently divesting the testate estate of Emilio Escay of its ownership of the properties in question? As the Court of Appeals observed, there is no evidence whatsoever that Atty. Recto or the Philippine National Bank contrived and confederated with the Judicial Administrator of the testate estate or the heirs through their guardian ad litem, Magdalena Vda. de Escay. Indeed, it is ridiculous to even imagine that the Philippine National Bank with no interest to serve except its own would lend itself as a party to a fraud in order to divest the testate estate of Emilio Escay of its rightful ownership over the properties in question. As a matter of fact, according to the Court of Appeals, it was perhaps because Atty. Recto had no interest to serve other than the interest of the Bank that he overlooked to state in the original contract that the consideration for the assumption by Jose Escay, Sr. of the obligations of the testate estate with the Bank was the transfer of ownership of the properties of the estate to him. Since there was no fruad, there was no trust relation that arose. Petitioners’ original theory was implied or constructive trust. Petitioners now contend that the trust being a result of the agreement of the parties is after all an express trust. Settled is the rule that a party may not change his theory on appeal. In the lower court petitioners relied on implied trust. In their brief in the Court of Appeals, the petitioners did not discuss at all their theory of implied trust in the lower court. In their motion for reconsideration of the decision of the Court of Appeals, however, petitioners again relied on their theory of implied trust. Before this Highest Tribunal, in their petition for review on certiorari of the decision of the Court of Appeals, petitioners relied again on their theory of implied trust. In their motion for reconsideration of the resolution of February 7, 1974, of this Highest Tribunal, they stuck to their theory of implied trust. And now, in their reply to respondents’ comment on their motion for reconsideration of Our resolution of February 7, 1974, which denied for lack of merit the said petition for review, petitioners have raised this issue of express trust. And they now claim that an action based on express trust does not prescribe and the property held in trust cannot be acquired by adverse possession or acquisitive prescription. In any case, an express trust concerning an immovable cannot be proved by parole evidence, and actions based on express trust also prescribe and the property held in trust may be acquired by adverse possession from the moment the trust is repudiated by the trustee. On this point, the Court of Appeals held in this case:
“And assuming an express trust, the trust had been repudiated by Jose Escay, Sr. when in 1941 he refused to transfer the property to the appellants, and appellants filed Civil Case No. 8829 in 1941 for the recovery of the properties.” (Decision p. 19).
On the additional issue of extinctive prescription: In the complaint filed by the petitioners in 1941 (Exhibit L), the following allegations of fact were averred: 1. That the obligation of the testate estate of Emilio Escay with Philippine National Bank had been fully paid by Jose Escay, Sr. 2. That Jose Escay, Sr. was already holding the properties in question by adverse and public possession for his exclusive benefit; 3. That the petitioners discovered the alleged fraud in 1941, and at that time Jose Escay, Sr. refused to return the properties in question. The defense of extinctive prescription is available to the respondents on all three points above-stated, to defend themselves against the action for reconveyance brought by the petitioners. On the first point, assuming that the 5-year period to repurchase the properties commenced only in 1941 (when the petitioners alleged in their complaint for reconveyance, Exhibit “L”, against Jose Escay, Sr., that the obligations of the testate estate of Emilio Escay with the Philippine National Bank have been fully paid by Jose Escay, Sr.), since said five years had long since expired, any repurchase right of the petitioners arising therefrom has already been extinguished. On the second point, assuming that Jose Escay, Sr. was not yet the registered owner of the properties since 1939, (although it is admitted by the parties that Jose Escay, Sr. became the registered owner of the properties in question in 1939) his open, public, adverse, and continuous possession of the properties for more than 25 years from the execution and approval of the supplementary contract to the filing of the complaint (Decision of the Court of Appeals, p. 12), has by adverse possession and acquisitive prescription, already extinguished any right of the petitioners to ask for a reconveyance. (Under Sec. 40, Code of Civil Procedure, any action for reconveyance prescribes in ten (10) years.) On the third point, assuming that there was fraud in the transfer of the properties, the lapse of time since the discovery of the alleged fraud in 1941 has extinguished any right on the part of the petitioners to seek the reconveyance of the properties. As the Court of Appeals correctly ruled:
“And assuming the existence of a trust relation, such trust was not an express one. If there was a trust, it arose from law, and therefore an implied trust. And implied trust prescribes in ten years. According to the appellants they discovered the fraud in 1941; the action to enforce an implied trust prescribed ten years thereafter. And assuming an express trust, the trust had been repudiated by Jose Escay, Sr. when in 1941 he refused to transfer the property to the appellants, and appellants filed Civil Case No. 8829 in 1941 for the recovery of the properties. This complaint, as stated above, was dismissed provisionally.” (Decision of the Court of Appeals, pp. 18-19).
The prescriptibility of an action for reconveyance based on implied or constructive trust, is now a settled question in this jurisdiction. It prescribes in ten years. (Bonaga vs. Soler, et al., G.R. No. L-15717, June 30, 1961; J.M. Tuason & Co., Inc. vs. Magdangal, G.R. No. L-15539, Jan. 30, 1962; special attention to footnote No. 1). Alzona vs. Capunitan, No. L-10228, Feb. 28, 1963; Bueno vs. Reyes, L-22587, April 28, 1969; 27 SCRA 1179. Express trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho, et al., 54 O.G. p. 8429, Sec. 40, Code of Civil Procedure). In conclusion, (a) all the findings of fact by the Court of Appeals were supported by the evidence, and (b) in any event, there was no grave abuse of discretion by the Court of Appeals in arriving at its findings. For all these reasons, We voted to dismiss the petitioners’ petition for certiorari, and We now deny their motion for reconsideration. In view of the fact that Justice Barredo dissents, it should be stated that the original resolution of this Court of February 7, 1974 which denied “for lack of merit” the petitioner’s petition for review, was the unanimous decision of this Division when Justice Zaldivar was still with the Court. With the present membership of this Division of five Justices, their unanimous vote is needed for the reconsideration of our Resolution of last February 7, 1974. Inasmuch as four of the members of this Division vote to deny the motion for reconsideration, with the dissent of Justice Barredo, Our denial of the motion for reconsideration stands. Fernando, Chairman, Antonio, and Aquino, JJ., concur. Barredo, J., dissents in a separate opinion.