G.R. No. 259051, February 26, 2025
EDWARD C. CIACHO, PETITIONER, vs. SPOUSES ADOLFO T. DE GUIA AND FE ALMA V. DE GUIA [DECEASED]; AND BAYANI S. CERILLA [DECEASED], SUBSTITUTED BY HIS HEIRS, MARY BERNADETTE G. CERILLA AND BYATRES MARI CERILLA-BOHOL, RESPONDENTS.

FACTS

In 1994, Adolfo De Guia convinced Bayani Cerilla to invest in two parcels of land facing foreclosure. Cerilla redeemed the properties for over Php 1.6 million, and new titles were issued in his name after Adolfo executed Deeds of Absolute Sale (DOAS) in his favor. The original plan was for Adolfo to eject illegal settlers using Cerilla’s funds; when Adolfo failed, title was transferred to Cerilla to enable him to eject the settlers. Subsequently, Cerilla executed a DOAS over the same properties back to Adolfo, who then annotated an Adverse Claim on the titles. The parties then executed a Memorandum of Agreement (MOA) for Adolfo to sell the properties to Cerilla for Php 15,000,000.00, conditioned on Adolfo shouldering the costs of sale and ejectment. Adolfo acknowledged receipt of Php 1,675,660.07 from Cerilla as partial payment, which coincided with the initial redemption sum. The conditions under the MOA were not fulfilled, so the sale was not consummated. Meanwhile, Cerilla executed a DOAS over the properties in favor of Edward Ciacho for Php 9,000,000.00. Adolfo filed a complaint to annul the sale between Cerilla and Ciacho. The Regional Trial Court (RTC) annulled the sale, and the Court of Appeals (CA) affirmed. The ponencia (main decision) found the transactions between Adolfo and Cerilla to be absolutely simulated, with Cerilla as an accommodation party, and consequently held the sale from Cerilla to Ciacho void.

ISSUE

Whether the legal relationship between Adolfo and Cerilla constituted an implied trust, thereby making the subsequent sale from Cerilla (as trustee) to Ciacho valid, albeit potentially actionable for breach of trust, rather than an absolutely simulated contract rendering the sale void.

RULING

Justice Caguioa, in a separate concurring opinion, agreed with the result of denying the petition and affirming the CA but based his reasoning on different grounds. He posited that the arrangement between Adolfo and Cerilla was not an absolutely simulated contract where parties intended not to be bound at all. Instead, the convoluted transactions indicated an intention to be bound for business purposes, such as facilitating easy sale and obtaining money through mortgages. He concluded that an implied trust was created under Article 1451 of the Civil Code, where property is sold but the vendor reserves beneficial ownership. Here, Cerilla became the trustee (legal owner) and Adolfo the beneficiary (beneficial owner) of the Subject Properties. Consequently, the sale from Cerilla (trustee) to Ciacho was valid as Cerilla had the legal title and capacity to sell. However, Cerilla breached the implied trust by selling the properties without fulfilling the terms of the trust arrangement with Adolfo. Therefore, Adolfo’s proper cause of action was not for annulment of the sale to Ciacho, but for damages against Cerilla for breach of trust. Since the CA affirmed the RTC’s finding of no evidence to support an award of damages, Adolfo’s complaint should be dismissed.