ANDRES SUMAOANG vs. RTC

FACTS:

To protect their interests over the homestead, petitioner and his brothers, Vitaliano and Pedro Sumaoang, engaged the services of private respondent Atty. Jorge A. Pascua, promising him, in a letter dated 17 December 1964 2 a contingent fee of "not less than one-half (1/2)" of the entire homestead, if recovered. As counsel for the Sumaoangs, Atty. Pascua filed a formal protest with the Bureau of Lands contesting the legality of the issuance of Homestead Patent No. V-5218 to Florencio Domingo. On 7 February 1962, the Bureau of Lands rendered a decision 3 declaring Homestead Patent No. V-5218 inoperative and ordered that steps be taken towards the filing of a reversion case with the view to cancelling that homestead patent and its corresponding certificate of title, and disposing of the land to petitioner and his brothers — as heirs of Sebastian Sumaoang — should the facts so warrant. Pursuant to the above decision of the Bureau of Lands, the Solicitor General filed, on behalf of the Republic of the Philippines, a reversion case against Florencio and Regino Domingo for the cancellation of Homestead Patent No. V-5218 and Original Certificate of Title No. T-1201 before the CFI of Isabela. In that case, Atty. Pascua filed, on behalf of petitioner and his brothers, a complaint-in-intervention claiming preferential rights to the land in favor of his clients. 4 After trial, the lower court rendered a decision 5 dated 17 February 1971 declaring the homestead patent, as well as the certificate of title, null and void and ordered the reversion of the land to the State subject to the rights of petitioner and his brothers. The decision became final and executory on 11 February 1973. In 1977, petitioner and his brothers took possession of Lot No. 3098 and subdivided it among themselves.

Not having received compensation for his professional services as counsel, Atty. Pascua filed sometime in 1979 a complaint for collection of attorney's fees against his former clients, petitioner and his brothers, before the CFI of Guimba, Nueva Ecija. The trial court stated in its judgment dated 31 August 1982 that Atty. Pascua was entitled only to "the equivalent of one-half of the property — in its peso valuation" and somehow ordered petitioner and his brothers to pay attorney's fees in the amount of P110,000.00.

The decision of 31 August 1982 of the CFI of Guimba became final and executory. On motion of Atty. Pascua, the trial court on 22 April 1983 ordered the issuance of a writ of execution. The corresponding writ of execution was issued by the Branch Clerk of Court on 25 January 1985.  The Deputy Provincial Sheriff then levied upon and sold at public auction the entire lot of 21.3445 hectares here involved to Atty. Pascua as the sole and hence the highest bidder, for and in consideration of P110,000.00 as partial payment of the judgment obligation.

Petitioner brought the present Petition 10 asking for the nullification of the 31 August 1982 decision of the Guimba CFI, as well as the writ of execution, the notice of levy and auction sale and the certificate of sale issued in favor of Atty. Pascua.

ISSUE:

W/N title of the property acquired by Atty.Pascua at public sale is under an implied trust in favor of petitioner and his brothers, to the extent of one-half (1/2) of that property.

HELD:

Yes. Respondent Atty. Pascua, under the circumstances of this case, must be regarded as holding the title of the property acquired by him at public sale under an implied trust in favor of petitioner and his brothers, to the extent of one-half (1/2) of that property.

A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or retentions of property of which equity, in accordance with its fundamental principles and the traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust.

And specifically applicable to the case at bar is the doctrine that "A constructive thrust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it."

The consequences of an implied trust are, principally, that the implied trustee shall deliver the possession and reconvey title to the property to the beneficiary of the trust, and to pay to the latter the fruits and other net profit received from such property during the period of wrongful or unconscionable holding, and otherwise to adjust the equities between the trustee holding the legal title and the beneficiaries of the trust. 23

Applying the provisions of Article 1456 of the Civil Code and the foregoing principles of the general law of trusts, SC treat the present so-called "Petition for Annulment of the Decision of the CFI, etc." as a "Petition for Reconveyance" and, accordingly, require private respondent Atty. Pascua to reconvey or cause the reconveyance of one-half (1/2) of the 21.3445 hectares of land here involved, plus one-half (1/2) of all profits (net of expenses and taxes) which Atty. Pascua may have derived from or in respect of such land during the time he has held the same, to petitioner and his brothers, Vitaliano and Pedro Sumaoang.