Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179597 February 3, 2014

IGLESIA FILIPINA INDEPENDIENTE, Petitioner,

DECISION

PERALTA, J.:

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that the Decision 1of
the Court of Appeals (CA), promulgated on June 30, 2006, and the Resolution2 dated August 23, 2007, denying
petitioner's motion for reconsideration thereof, be reversed and set aside.

The CA's narration of facts is accurate, to wit:

The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly registered religious corporation, was the
owner of a parcel of land described as Lot 3653, containing an area of 31,038 square meters, situated at Ruyu (now
Leonarda), Tuguegarao, Cagayan, and covered by Original Certificate of Title No. P-8698. The said lot is subdivided
as follows: Lot Nos. 3653-A, 3653-B, 3653-C, and 3653-D.

Between 1973 and 1974, the plaintiff-appellee, through its then Supreme Bishop Rev. Macario Ga, sold Lot 3653-D,
with an area of 15,000 square meters, to one Bienvenido de Guzman.

On February 5, 1976, Lot Nos. 3653-A and 3653-B, with a total area of 10,000 square meters, were likewise sold by
Rev. Macario Ga, in his capacity as the Supreme Bishop of the plaintiff-appellee, to the defendant Bernardino Taeza,
for the amount of ₱100,000.00, through installment, with mortgage to secure the payment of the balance.
Subsequently, the defendant allegedly completed the payments.

In 1977, a complaint for the annulment of the February 5, 1976 Deed of Sale with Mortgage was filed by the Parish
Council of Tuguegarao, Cagayan, represented by Froilan Calagui and Dante Santos, the President and the
Secretary, respectively, of the Laymen's Committee, with the then Court of First Instance of Tuguegarao, Cagayan,
against their Supreme Bishop Macario Ga and the defendant Bernardino Taeza.

The said complaint was, however, subsequently dismissed on the ground that the plaintiffs therein lacked the
personality to file the case.

After the expiration of Rev. Macario Ga's term of office as Supreme Bishop of the IFI on May 8, 1981, Bishop Abdias
dela Cruz was elected as the Supreme Bishop. Thereafter, an action for the declaration of nullity of the elections was
filed by Rev. Ga, with the Securities and Exchange Commission (SEC).

In 1987, while the case with the SEC is (sic) still pending, the plaintiff-appellee IFI, represented by Supreme Bishop
Rev. Soliman F. Ganno, filed a complaint for annulment of the sale of the subject parcels of land against Rev. Ga and
the defendant Bernardino Taeza, which was docketed as Civil Case No. 3747. The case was filed with the Regional
Trial Court of Tuguegarao, Cagayan, Branch III, which in its order dated December 10, 1987, dismissed the said case
without prejudice, for the reason that the issue as to whom of the Supreme Bishops could sue for the church had not
yet been resolved by the SEC.

On February 11, 1988, the Securities and Exchange Commission issued an order resolving the leadership issue of
the IFI against Rev. Macario Ga.
Meanwhile, the defendant Bernardino Taeza registered the subject parcels of land. Consequently, Transfer
Certificate of Title Nos. T-77995 and T-77994 were issued in his name.

The defendant then occupied a portion of the land. The plaintiff-appellee allegedly demanded the defendant to vacate
the said land which he failed to do.

In January 1990, a complaint for annulment of sale was again filed by the plaintiff-appellee IFI, this time through
Supreme Bishop Most Rev. Tito Pasco, against the defendant-appellant, with the Regional Trial Court of Tuguegarao
City, Branch 3.

On November 6, 2001, the court a quo rendered judgment in favor of the plaintiff-appellee. It held that the deed of
1âw phi 1

sale executed by and between Rev. Ga and the defendant-appellant is null and void.3

The dispositive portion of the Decision of Regional Trial Court of Tuguegarao City (RTC) reads as follows:

WHEREFORE, judgment is hereby rendered:

1) declaring plaintiff to be entitled to the claim in the Complaint;

2) declaring the Deed of Sale with Mortgage dated February 5, 1976 null and void;

3) declaring Transfer Certificates of Title Numbers T-77995 and T-77994 to be null and void ab initio;

4) declaring the possession of defendant on that portion of land under question and ownership thereof as
unlawful;

5) ordering the defendant and his heirs and successors-in-interest to vacate the premises in question and
surrender the same to plaintiff; [and]

6) condemning defendant and his heirs pay (sic) plaintiff the amount of ₱100,000.00 as actual/consequential
damages and ₱20,000.00 as lawful attorney's fees and costs of the amount (sic).4

Petitioner appealed the foregoing Decision to the CA. On June 30, 2006, the CA rendered its Decision reversing and
setting aside the RTC Decision, thereby dismissing the complaint.5 The CA ruled that petitioner, being a corporation
sole, validly transferred ownership over the land in question through its Supreme Bishop, who was at the time the
administrator of all properties and the official representative of the church. It further held that "[t]he authority of the
then Supreme Bishop Rev. Ga to enter into a contract and represent the plaintiff-appellee cannot be assailed, as
there are no provisions in its constitution and canons giving the said authority to any other person or entity." 6

Petitioner then elevated the matter to this Court via a petition for review on certiorari, wherein the following issues are
presented for resolution:

A.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THE FEBRUARY 5, 1976
DEED OF SALE WITH MORTGAGE AS NULL AND VOID;

B.) ASSUMING FOR THE SAKE OF ARGUMENT THAT IT IS NOT VOID, WHETHER OR NOT THE
COURT OF APPEALS ERRED IN NOT FINDING THE FEBRUARY 5, 1976 DEED OF SALE WITH
MORTGAGE AS UNENFORCEABLE, [and]

C.) WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT TAEZA
HEREIN AS BUYER IN BAD FAITH.7

The first two issues boil down to the question of whether then Supreme Bishop Rev. Ga is authorized to enter into a
contract of sale in behalf of petitioner.
Petitioner maintains that there was no consent to the contract of sale as Supreme Bishop Rev. Ga had no authority to
give such consent. It emphasized that Article IV (a) of their Canons provides that "All real properties of the Church
located or situated in such parish can be disposed of only with the approval and conformity of the laymen's
committee, the parish priest, the Diocesan Bishop, with sanction of the Supreme Council, and finally with the approval
of the Supreme Bishop, as administrator of all the temporalities of the Church." It is alleged that the sale of the
property in question was done without the required approval and conformity of the entities mentioned in the Canons;
hence, petitioner argues that the sale was null and void.

In the alternative, petitioner contends that if the contract is not declared null and void, it should nevertheless be found
unenforceable, as the approval and conformity of the other entities in their church was not obtained, as required by
their Canons.

Section 113 of the Corporation Code of the Philippines provides that:

Sec. 113. Acquisition and alienation of property. - Any corporation sole may purchase and hold real estate and
personal property for its church, charitable, benevolent or educational purposes, and may receive bequests or gifts
for such purposes. Such corporation may mortgage or sell real property held by it upon obtaining an order for that
purpose from the Court of First Instance of the province where the property is situated; x x x Provided, That in cases
where the rules, regulations and discipline of the religious denomination, sect or church, religious society or order
concerned represented by such corporation sole regulate the method of acquiring, holding, selling and mortgaging
real estate and personal property, such rules, regulations and discipline shall control, and the intervention of the
courts shall not be necessary.8

Pursuant to the foregoing, petitioner provided in Article IV (a) of its Constitution and Canons of the Philippine
Independent Church,9 that "[a]ll real properties of the Church located or situated in such parish can be disposed of
only with the approval and conformity of the laymen's

committee, the parish priest, the Diocesan Bishop, with sanction of the Supreme Council, and finally with the approval
of the Supreme Bishop, as administrator of all the temporalities of the Church."

Evidently, under petitioner's Canons, any sale of real property requires not just the consent of the Supreme Bishop
but also the concurrence of the laymen's committee, the parish priest, and the Diocesan Bishop, as sanctioned by the
Supreme Council. However, petitioner's Canons do not specify in what form the conformity of the other church
entities should be made known. Thus, as petitioner's witness stated, in practice, such consent or approval may be
assumed as a matter of fact, unless some opposition is expressed. 10

Here, the trial court found that the laymen's committee indeed made its objection to the sale known to the Supreme
Bishop.11 The CA, on the other hand, glossed over the fact of such opposition from the laymen's committee, opining
that the consent of the Supreme Bishop to the sale was sufficient, especially since the parish priest and the Diocesan
Bishop voiced no objection to the sale.12

The Court finds it erroneous for the CA to ignore the fact that the laymen's committee objected to the sale of the lot in
question. The Canons require that ALL the church entities listed in Article IV (a) thereof should give its approval to the
transaction. Thus, when the Supreme Bishop executed the contract of sale of petitioner's lot despite the opposition
made by the laymen's committee, he acted beyond his powers.

This case clearly falls under the category of unenforceable contracts mentioned in Article 1403, paragraph (1) of the
Civil Code, which provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation,
or who has acted beyond his powers;

In Mercado v. Allied Banking Corporation,13 the Court explained that:

Closely analogous cases of unenforceable contracts are those where a person signs a deed of extrajudicial partition
in behalf of co-heirs without the latter's authority;15 where a mother as judicial guardian of her minor children, executes
a deed of extrajudicial partition wherein she favors one child by giving him more than his share of the estate to the
prejudice of her other children;16 and where a person, holding a special power of attorney, sells a property of his
principal that is not included in said special power of attorney. 17

In the present case, however, respondents' predecessor-in-interest, Bernardino Taeza, had already obtained a
transfer certificate of title in his name over the property in question. Since the person supposedly transferring
ownership was not authorized to do so, the property had evidently been acquired by mistake. In Vda. de Esconde v.
Court of Appeals,18 the Court affirmed the trial court's ruling that the applicable provision of law in such cases is Article
1456 of the Civil Code which states that "[i]f property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes."
Thus, in Aznar Brothers Realty Company v. Aying,19 citing Vda. de Esconde,20 the Court clarified the concept of trust
involved in said provision, to wit:

Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the Court stated:

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust, confidence is
reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting
property which is held by the trustee for the benefit of the cestui que trust. 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.

The concept of constructive trusts was further elucidated in the same case, as follows:

. . . implied trusts are those which, without being expressed, are deducible from the nature of the transaction as
matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently
of the particular intention of the parties. In turn, implied trusts are either resulting or constructive trusts. These two are
differentiated from each other as follows:

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 of 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
holds the legal right to property which he ought not, in equity and good conscience, to hold. (Italics supplied)

A constructive trust having been constituted by law between respondents as trustees and petitioner as beneficiary of
the subject property, may respondents acquire ownership over the said property? The Court held in the same case of
Aznar,21 that unlike in express trusts and resulting implied trusts where a trustee cannot acquire by prescription any
property entrusted to him unless he repudiates the trust, in constructive implied trusts, the trustee may acquire the
property through prescription even if he does not repudiate the relationship. It is then incumbent upon the beneficiary
to bring an action for reconveyance before prescription bars the same.

In Aznar,22 the Court explained the basis for the prescriptive period, to wit:

x x x under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art.
1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the true
owner. In this context, and vis-á-vis prescription, Article 1144 of the Civil Code is applicable.

Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
 (1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

xxx xxx xxx

An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it
is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years
from the issuance of the Torrens title over the property.

It has also been ruled that the ten-year prescriptive period begins to run from the date of registration of the deed or
the date of the issuance of the certificate of title over the property, x x x.23

Here, the present action was filed on January 19, 1990,24 while the transfer certificates of title over the subject lots
were issued to respondents' predecessor-in-interest, Bernardino Taeza, only on February 7, 1990. 25

Clearly, therefore, petitioner's complaint was filed well within the prescriptive period stated above, and it is only just
that the subject property be returned to its rightful owner.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated June 30, 2006, and its
Resolution dated August 23, 2007, are REVERSED and SET ASIDE. A new judgment is hereby entered:

(1) DECLARING petitioner Iglesia Filipina Independiente as the RIGHTFUL OWNER of the lots covered by
Transfer Certificates of Title Nos. T-77994 and T-77995;

(2) ORDERING respondents to execute a deed reconveying the aforementioned lots to petitioner;

(3) ORDERING respondents and successors-in-interest to vacate the subject premises and surrender the
same to petitioner; and

(4) Respondents to PAY costs of suit.

SO ORDERED.