CIVIL LAW; Express Trust: Intention to create an express trust must be firmly established; merely designating a bank account as an "ITF" (In Trust For) account is not sufficient to establish an express trust

In Goyanko, Jr. v. UCPB, G.R. No. 179096, 6 February 2013, the Petitioners filed a complaint against UCPB for recovery of sum of money.

Specifically, Petitioners claim that UCPB should not have allowed Philippine Asia Lending Investors, Inc. (“Phil Asia” or "PALII") to have withdrawn the money deposited with the said bank since it was made under the name of “Phil Asia: ITF (In Trust For) the Heirs of Joseph Goyanko, Sr.

According to the Petitioners, when Phil Asia opened the said account with UCPB, using the words “ITF”, the bank was charged with the knowledge that it was being opened in trust for the heirs. Thus, when UCPB allowed Phil Asia to withdraw almost the entire amount deposited, the bank acted negligently or in bad faith, thus making it liable to return the amount withdrawn.

In disposing of the case, the Supreme Court examined the factual milieu and ruled that no express trust was created. Contrary to the petitioners’ (heirs) argument, the mere use of the words “ITF” is not sufficient to establish an express trust in favor of the heirs:

“A trust, either express or implied, is the fiduciary 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." Express or direct trusts are created by the direct and positive acts of the trustor or of the parties. No written words are required to create an express trust. This is clear from Article 1444 of the Civil Code, but, the creation of an express trust must be firmly shown; it cannot be assumed from loose and vague declarations or circumstances capable of other interpretations.

In Rizal Surety & Insurance Co. v. CA, we laid down the requirements before an express trust will be recognized:

Basically, these elements include a competent trustor and trustee, an ascertainable trust res, and sufficiently certain beneficiaries. . . . each of the above elements is required to be established, and, if any one of them is missing, it is fatal to the trusts (sic). Furthermore, there must be a present and complete disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will take place in the future. It is essential, too, that the purpose be an active one to prevent trust from being executed into a legal estate or interest, and one that is not in contravention of some prohibition of statute or rule of public policy. There must also be some power of administration other than a mere duty to perform a contract although the contract is for a third-party beneficiary. A declaration of terms is essential, and these must be stated with reasonable certainty in order that the trustee may administer, and that the court, if called upon so to do, may enforce, the trust. [emphasis ours]

Under these standards, we hold that no express trust was created. First, while an ascertainable trust res and sufficiently certain beneficiaries may exist, a competent trustor and trustee do not. Second, UCPB, as trustee of the ACCOUNT, was never under any equitable duty to deal with or given any power of administration over it. On the contrary, it was PALII that undertook the duty to hold the title to the ACCOUNT for the benefit of the HEIRS. Third, PALII, as the trustor, did not have the right to the beneficial enjoyment of the ACCOUNT. Finally, the terms by which UCPB is to administer the ACCOUNT was not shown with reasonable certainty. While we agree with the petitioner that a trust's beneficiaries need not be particularly identified for a trust to exist, the intention to create an express trust must first be firmly established, along with the other elements laid above; absent these, no express trust exists.

Contrary to the petitioner's contention, PALII's letters and UCPB's records established UCPB's participation as a mere depositary of the proceeds of the investment. In the March 28, 1996 letter, PALII manifested its intention to pursue an active role in and up to the turnover of those proceeds to their rightful owners, while in the November 15, 1996 letter, PALII begged the petitioner to trust it with the safekeeping of the investment proceeds and documents. Had it been PALII's intention to create a trust in favor of the HEIRS, it would have relinquished any right or claim over the proceeds in UCPB's favor as the trustee. As matters stand, PALII never did. (Emphasis and underscoring supplied)”

In absence of the above elements indicating the creation of an express trust, the Supreme Court held that UCPB did not become a trustee by the mere opening of a deposit account. Hence, as no trust was created, the relationship between UCPB and Phil Asia remained to be that of a creditor and debtor, and UCPB rightfully paid Phil Asia upon the latter’s demand in accordance with its deposit contract.

LEGAL ETHICS; Lawyers must not present and offer in evidence any document they know to be false; this includes false allegations or statements in letters sent to opposing parties

Trinidad, et al. v. Atty. Villarin, A.C. No. 9310, 27 February 2013 is an administrative case against a lawyer for allegedly harassing complainants through demand letters sent to them.

In disposing of the case, the Supreme Court found Atty. Villarin to have acted without malice when he sent the letters to vacate to Complainants since a lawyer “is expected to champion the cause of his client with wholehearted fidelity, care, and devotion.” This simply means that his client is entitled to the benefit of any and every remedy and defense that is recognized by our laws, to wit:

“Proceeding to the contested demand letters, we adopt the recommendation of the IBP board of governors that the issuance thereof was not malicious.  According to its Report, respondent counsel merely acted on his legal theory that the HLURB Decision was not binding on his client, since it had not received the summons. Espousing the belief that the proceedings in the HLURB were void, Villarin pursued the issuance of demand letters as a prelude to the ejectment case he would later on file to protect the property rights of his client.

As the lawyer of Purence Realty, respondent is expected to champion the cause of his client with wholehearted fidelity, care, and devotion. This simply means that his client is entitled to the benefit of any and every remedy and defense — including the institution of an ejectment case — that is recognized by our property laws. In Legarda v. Court of Appeals, we held that in the full discharge of their duties to the client, lawyers shall not be afraid of the possibility that they may displease the general public.”

However, the Supreme Court reminded the Bar that the duty to pursue a client’s case with zeal comes with a limitation and that is, that any means adopted by a lawyer in pursuit of a client’s claim should be within the bounds of law. “[Lawyers] should only make such defense only when they believe it to be honestly debatable under the law.”

                “Nevertheless, the Code of Professional Responsibility provides the limitation that lawyers shall perform their duty to the client within the bounds of law. They should only make such defense only when they believe it to be honestly debatable under the law. In this case, respondent's act of issuing demand letters, moved by the understanding of a void HLURB Decision, is legally sanctioned. If his theory holds water, the notice to vacate becomes necessary in order to file an action for ejectment. Hence, he did not resort to any fraud or chicanery prohibited by the Code, just to maintain his client's disputed ownership over the subdivision lots.

Even so, respondent cannot be considered free of error. The factual findings of the IBP board of governors reveal that in his demand letter, he brazenly typified one of the complainants, Florentina Lander, as an illegal occupant. However, this description is the exact opposite of the truth, since the final and executory HLURB Decision had already recognized her as a subdivision lot buyer who had a right to complete her payments in order to occupy her property. Respondent is very much aware of this ruling when he filed an Omnibus Motion to set aside the HLURB Decision and the appurtenant Writ of Execution.

Given that respondent knew that the aforementioned falsity totally disregarded the HLURB Decision, he thus advances the interest of his client through means that are not in keeping with fairness and honesty. What he does is clearly proscribed by Rule 19.01 of the Code of Professional Responsibility, which requires that a lawyer shall employ only fair and honest means to attain lawful objectives. Lawyers must not present and offer in evidence any document that they know is false.”

As can be seen from the above disquisition, while the Supreme Court agreed with the findings of the IBP that no malice attended the sending of the letters to Complainants by Atty. Villarin, the latter’s act of naming or referring to one of the complainants as an “illegal occupant”, when he very well knew of the finality of the HLURB’s decision in their (one of the Complainants) favor is not in accord with the ethics of the legal profession, particularly Rule 19.01 of the Code of Professional Responsibility, which requires a lawyer to “employ only fair and honest means to attain lawful objectives” and not to “present and offer in evidence any document that they know is false.”

Accordingly, the Supreme Court reprimanded Atty. Villarin with a warning that a repetition of the same or similar act shall be dealt with more severely.

CIVIL PROCEDURE; Order granting Motion for Execution Pending Appeal Must State the Good Reason/s Therefor

In Carpio v. Court of Appeals, et al., G.R. No. 183102, 27 February 2013, the Supreme Court held that when a Motion for Execution Pending Appeal is granted by the trial court, the said court must state or indicate the good reasons therefor in its order, otherwise the issuance of a writ pending appeal will be void and of no effect.

“In any case, we proceed to rule that because the writ of execution was void, all actions and proceedings conducted pursuant to it were also void and of no legal effect. To recall, this Court affirmed the Decision of the CA in CA-G.R. SP No. 84632, annulling the RTC's Omnibus Order granting the Motion for Immediate Execution pending appeal. We affirmed the CA Decision because of the RTC's failure to state any reason, much less good reason, for the issuance thereof as required under Section 2, Rule 39. In the exercise by the trial court of its discretionary power to issue a writ of execution pending appeal, we emphasize the need for strict compliance with the requirement for the statement of a good reason, because execution pending appeal is the exception rather than the rule.

Since the writ of execution was manifestly void for having been issued without compliance with the rules, it is without any legal effect. In other words, it is as if no writ was issued at all. Consequently, all actions taken pursuant to the void writ of execution must be deemed to have not been taken and to have had no effect. Otherwise, the Court would be sanctioning a violation of the right to due process of the judgment debtors — respondent-spouses herein.” (Emphasis and underscoring supplied)

CIVIL LAW; Damages: Actual, Temperate, Exemplary, and Moral Damages

Gonzales, et al. v. Camarines Sur II Electric Cooperative, Inc. (CASURECO), et al., G.R. No. 181096, 6 March 2013, is a case on the propriety of the grant of damages, as well as the amounts thereof, to Petitioners.

Actual and Temperate Damages

In upholding the appellate court’s ruling that actual damages cannot be granted, the Supreme Court explained that since no documentary proof was presented by the Petitioners to support their claim of actual damages, it may not be awarded. Indeed, while the Petitioners were able to enumerate their expenditures in their Complaint, they admittedly failed to back it up with the proper documentary proof (i.e., receipts or invoices):

“Despite the enumeration of expenditures, the claim of petitioners for actual damages cannot be granted. In People v. Buenavidez, this Court stressed that only expenses supported by receipts, and not merely a list thereof, shall be allowed as bases for the award of actual damages. As admitted by petitioners themselves, none of these expenses, which were incurred over a span of seven years, was backed up by documentary proof such as a receipt or an invoice. Considering, therefore, that adequate compensation is awarded only if the pecuniary loss suffered is proven by competent proof and by the best evidence obtainable showing the actual amount of loss, the CA correctly denied petitioners' claims for actual damages.

The Supreme Court, however, granted the alternative prayer of temperate damages in favor of the Petitioners since both the court a quo and the trial court recognized that there was some pecuniary loss suffered:

“Here, the RTC acknowledged that petitioners suffered some form of pecuniary loss when it accepted as fact that they went back and forth to the office of CASURECO at Del Rosario, Naga City, to settle the account of the Samsons. Although the CA did not review this factual finding, we find that the RTC's pronouncement on this matter was nonetheless substantiated by the evidence on record given the attached letters with postages, documents, and testimonies that signified an ongoing transaction between the parties to settle the electric charges. Indeed, they were at least able to prove that they incurred undue costs in pursuing their rights against CASURECO.

Hence, the award of temperate damages to petitioners is in order. Given that these are more than nominal but less than compensatory damages, we deem it reasonable under the circumstances to award them P3,000.”

Note that, in the above case, the Supreme Court explained that while the issue on the grant of temperate damages was raised for the first time on appeal, it may nevertheless grant the same considering that the newly-raised question or issue is related closely or dependent on an assigned error, citing the case of Viron Transportation Co., Inc. v. Delos Santos, 399 Phil. 243 (2000).

Also, even if the pecuniary loss suffered by the claimant is capable of documentary proof, the Supreme Court explained that an award of temperate damages is not precluded, as it is “drawn from equity to provide relief to those definitely injured.” Hence, “it may be allowed so long as the court is convinced that the aggrieved party suffered some pecuniary loss.”

“Article 2224 of the Civil Code provides that temperate damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty.

Notwithstanding the wording of the Civil Code cited above, we have already settled in jurisprudence that even if the pecuniary loss suffered by the claimant is capable of proof, an award of temperate damages is not precluded. The grant of temperate damages is drawn from equity to provide relief to those definitely injured. Therefore, it may be allowed so long as the court is convinced that the aggrieved party suffered some pecuniary loss.”

Exemplary Damages and Attorney’s Fees

On the issue of exemplary damages, the Supreme Court sided with the Petitioners and ruled that its deletion was improper, given the findings of the court a quo that there was evident bad faith on the part of CASURECO, which clearly betrayed the compromise agreement it entered into with the Petitioners by refusing to remove old accountabilities of the apartment unit, and unjustifiably and repetitively reflecting them for 7 years in several electric bills of the Petitioners with threat of electric service disconnection.

  

Inasmuch as there was a finding of evident bad faith on the part of CASURECO, the Supreme Court likewise reinstated the award of attorney’s fees, since the Civil Code provides that attorney’s fees shall be given to the claimant if “exemplary damages are awarded; or if the defendant acted in gross and evident bad faith in refusing to satisfy the former’s plainly valid, just and demandable claim.”

               

Moral Damages

On the reduction of the amount awarded as moral damages by the CA, the Supreme Court reiterated its previous ruling that the fairness thereof may be subject of appellate determination and reduced if found to be far too excessive compared to the actual loss sustained by the claimants.

In this case, however, the Supreme Court held that the award of 50,000.00 as damages is proper in view of the severe sufferings inflicted on the Petitioners by CASURECO. The Supreme Court noted the fact that CASURECO failed to even explain why they failed to update their records despite the compromise agreement and the constant reminders of the Petitioners over the span of 7 years.

CIVIL PROCEDURE; Courts should exercise caution in exercising their authority or power to dismiss a case motu proprio on the ground of the plaintiff’s failure to prosecute

In Republic v. Heirs of Enrique Oribello, Jr., et al., G.R. No. 199501, 6 March 2013, the Supreme Court reminded trial courts to exercise their power to dismiss a case motu proprio with caution. According to the Supreme Court, “[r]esort to such action must be determined according to the procedural history of each case, the situation at the time of the dismissal, and the diligence (or the lack thereof) of the plaintiff to proceed therein. If a lesser sanction would achieve the same result, then dismissal should not be resorted to, thus:

“While it is within the trial court's discretion to dismiss motu proprio the complaint on the ground of plaintiff's failure to prosecute, it must be exercised with caution. Resort to such action must be determined according to the procedural history of each case, the situation at the time of the dismissal, and the diligence (or the lack thereof) of the plaintiff to proceed therein.  As the Court held in Gomez v. Alcantara, if a lesser sanction would achieve the same result, then dismissal should not be resorted to. 

‘Unless a party's conduct is so indifferent, irresponsible, contumacious or slothful as to provide substantial grounds for dismissal, i.e., equivalent to default or non-appearance in the case, the courts should consider lesser sanctions which would still amount to achieving the desired end. In the absence of a pattern or scheme to delay the disposition of the case or of a wanton failure to observe the mandatory requirement of the rules on the part of the plaintiff, as in the case at bar, courts should decide to dispense with rather than wield their authority to dismiss. (Emphasis supplied)’”

In Republic, the trial court therein deemed the Republic of the Philippines to have abandoned its complaint for reversion due to non-appearance at a hearing. The respondent argued that this declaration of abandonment is tantamount to a dismissal of the case for failure to prosecute. Since the Republic failed to appeal the said order, the order should be considered final, hence properly leading to the dismissal of the case.

The Supreme Court did not side with the respondent on this point. Instead, the Supreme Court examined the records and noted that the Republic was merely deemed to have terminated its presentation of evidence. According to the High Court, the records of the case clearly belie the argument that there was manifest lack of intent to prosecute. While there was delay, this was not sufficient to cause the dismissal of the case motu proprio:

“Based on the records, petitioner has presented testimonial evidence on various hearing dates and marked numerous documents during the trial of Civil Case No. 225-0-92. Such acts do not manifest lack of interest to prosecute. Admittedly there was delay in this case. However, such delay is not the delay warranting dismissal of the complaint. To be a sufficient ground for dismissal, delay must not only be lengthy but also unnecessary resulting in the trifling of court processes. There is no proof that petitioner intended to delay the proceedings in this case, much less abuse judicial processes.

While petitioner failed to appear on the hearing of 12 September 1997, such failure does not constitute a ground for the dismissal of the reversion complaint for failure to prosecute. Petitioner's non-appearance on that date should simply be construed as a waiver of the right to present additional evidence.” (Emphasis and underscoring supplied)

RA 9165 - COMPREHENSIVE DANGEROUS DRUGS ACT; Failure of the Prosecution to show observance of the procedural rules does not necessarily lead to the acquittal of the accused save when there is gross disregard of the prescribed safeguards.

In People v. Secreto, G.R. No. 198115, 27 February 2013, the Supreme Court explained that, as a general rule, non-compliance with the procedures laid down in Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act of 2002, will not automatically or necessarily lead to the acquittal of the accused. In such cases, the prosecution only needs to prove that, despite the non-observance of procedures laid down in the implementing rules of RA 9165, the integrity and evidentiary value of the seized items were nonetheless preserved.

This is not the case, however, when there is a gross disregard of the prescribed procedural safeguards under law, which, as in the case of Secreto, leads to serious doubt as to the identity of the seized items presented in court, among others. In such cases, the Supreme Court will not hesitate to reverse a ruling of conviction, and the prosecution will not be allowed to rely on the presumption of regularity in the performance of official duties to justify the omissions, since a gross disregard of the procedures laid down in the implementing rules effectively produces irregularity in the performance of official duties.

Acquittal of the Accused due to gross disregard of the procedural safeguards under the law

In Secreto, the Supreme Court ordered the acquittal of the accused due to the failure of the prosecution to prove that proper procedures were observed in the eventual marking and identification of the seized drugs. Specifically, the High Court noted the prosecution's failure to show how the arresting officer, SPO1 Pamor, was able to ensure the integrity of the drugs seized from the time it was entrusted to him at the place of confiscation until the team reached the police station, where he handed the drugs to another officer for marking. It also noted how the prosecution was unable to show to whom the confiscated articles were turned over and the manner they were preserved after the laboratory examination and until their final presentation in court as evidence of the corpus delicti.

The above failures, according to the Supreme Court, raise serious doubt on the integrity and identity of the drugs presented as evidence in court. These failures likewise constitute a “gross, systematic, or deliberate disregard of the procedural safeguards,” necessarily contradicting the presumption of regularity in the performance of official duties. In the end, the Supreme Court ruled that the evidence presented by the prosecution were not enough to overturn the presumption of innocence of the accused and thus, ordered the reversal of the conviction of the court a quo.

Apart from the failure to observe the proper procedure for marking of the drugs confiscated, the Supreme Court also noted the failure of the buy-bust team to observe the rest of the procedures laid down in Section 21 (a) of the Implementing Rules and Regulations of RA 9165, to wit:

“It is also clear from the foregoing that aside from the markings that PO2 Lagmay alleged to have been made in the presence of PO1 Llanderal, who did not testify on this point, the buy-bust team did not observe the procedures laid down in Section 21 (a) of the Implementing Rules and Regulations of R.A. 9165. They did not conduct a physical inventory and no photograph of the confiscated item was taken in the presence of the accused-appellant, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official. In fact, the prosecution failed to present an accomplished Certificate of Inventory.”

Twin conditions needed to be proven to justify non-compliance with the procedural rules

            Notably, in Secreto, the Supreme Court likewise reiterated the twin conditions, which must be proved to justify non-compliance with the procedural rules in buy-bust operations and justify deviation from the said rules: (1) the existence of justifiable grounds, and (2) the preservation of the integrity and evidentiary value of the seized items, thus:

            “In People v. Ancheta, where the sole procedural lapse revolved on the failure to conduct the required physical inventory and the taking of photograph in the presence of the representatives and public officials enumerated in the law despite the fact that the accused had been under surveillance and his name already on the drugs watch list, we ruled: 

‘. . . We further note that, before the saving clause provided under it can be invoked, Section 21(a) of the IRR requires the prosecution to prove the twin conditions of (a) existence of justifiable grounds and (b) preservation of the integrity and the evidentiary value of the seized items. In this case, the arresting officers neither presented nor explained justifiable grounds for their failure to (1) make a physical inventory of the seized items; (2) take photographs of the items; and (3) establish that a representative each from the media and the Department of Justice (DOJ), and any elected public official had been contacted and were present during the marking of the items. These errors were exacerbated by the fact that the officers had ample time to comply with these legal requirements, as they had already monitored and put accused-appellants on their watch list. The totality of these circumstances has led us to conclude that the apprehending officers deliberately disregarded the legal procedure under R.A. 9165. "These lapses effectively produced serious doubts on the integrity and identity of the corpus delicti, especially in the face of allegations of frame-up" Accused-appellants would thereby be discharged from the crimes of which they were convicted.’”

            In the case of Secreto, both requisites were not proven. Hence, the lapses cannot be considered minor deviations from the procedures laid down by law, and the acquittal of the accused is warranted.