G.R. No. 125256 & G.R. No. 126973 ; May 2, 2006
JESUS DURAN and DEMETRIA A. DURAN, Petitioners, vs. COURT OF APPEALS, JORGE OLIVAR, et al., Respondents.

FACTS

The petitioners and private respondents were all lessees of a parcel of land owned by Antonina Oporto. When Oporto decided to sell the property, the parties collectively agreed to purchase it. The private respondents designated petitioner Jesus Duran as their agent to negotiate with Oporto for a lower purchase price. However, Duran subsequently purchased the entire lot in his own name for P37,000.00 without the knowledge of the private respondents, who discovered the transaction only when Duran initiated barangay proceedings for their ejectment.
The private respondents filed an action for reconveyance before the Regional Trial Court (RTC), which ruled in their favor, ordering Duran to convey specific portions of the lot to them upon reimbursement of the acquisition cost. Duran, meanwhile, filed a separate action for unlawful detainer against the private respondents in the Municipal Trial Court, which he won. On appeal, the RTC affirmed the ejectment ruling. Both the reconveyance and the ejectment cases were elevated to the Court of Appeals.

ISSUE

The core issues were: (1) whether an agency relationship was created between Duran and the private respondents for the purchase of the land; (2) whether a constructive trust arose from Duran’s actions; and (3) whether the resolution of the reconveyance case was indispensable to determining possession in the ejectment suit.

RULING

The Supreme Court denied the petitions and affirmed the Court of Appeals. The Court upheld the finding that a verbal contract of agency existed wherein Duran was constituted as the common agent to negotiate and purchase the property for the benefit of all the lessees. By purchasing the property in his own name to the exclusion of his co-lessees, Duran violated his fiduciary duty as an agent.
This breach gave rise to a constructive trust under Article 1456 of the Civil Code, which provides that a person acquiring property through mistake or fraud is considered a trustee of an implied trust for the benefit of the real owner. Duran, having acquired the title through fraud or breach of confidence, became a constructive trustee for the private respondents. Consequently, he was legally obligated to reconvey the portions they occupied upon reimbursement.
Regarding the ejectment case, the Court ruled that the issue of possession was correctly resolved based on the outcome of the reconveyance action. Since Duran was holding the property in trust and was duty-bound to convey it, he could not assert a better right of possession as an absolute owner against the beneficiaries of the trust. The determination of the agency and trust relationship was thus indispensable to resolving who had the better right to possess the property. The procedural challenge on the timeliness of the appeal was also rejected, as a motion for reconsideration of an RTC decision in an appealed ejectment case is permissible.