Pigao v. Rabanillo
REITERATIONFacts
The Antecedents: In 1947, the late Eusebio Pigao and his family occupied a 240-square meter lot in Quezon City, which was then government property owned by the People's Homesite and Housing Corporation (PHHC). Eusebio applied to purchase the lot, and a contract to sell was executed. In 1959, Eusebio executed a deed of assignment of rights over half of the property to respondent Samuel Rabanillo for a consideration. Rabanillo occupied this front half, built a residence, and paid amortizations for his portion. In 1970, Eusebio mortgaged the same half-portion to Rabanillo. After full payment of amortizations in 1973, PHHC issued a deed of sale to Eusebio, and a Transfer Certificate of Title (TCT) No. 197941 was issued in his name. Rabanillo later executed an affidavit of adverse claim, which was annotated on Eusebio's title. Eusebio died in 1979, survived by his children, the petitioners. Procedural History: Following the destruction of the original TCT No. 197941, petitioner Estrella Pigao applied for its reconstitution, resulting in TCT No. RT-11374 in Eusebio's name, which notably lacked Rabanillo's adverse claim annotation. In 1992, petitioners executed an extrajudicial settlement of Eusebio's estate, leading to the issuance of TCT No. 56210 for the entire lot in their names. Rabanillo continued to occupy the front half through a tenant. On January 29, 1996, petitioners filed a civil case against Rabanillo and his tenant, seeking to quiet title and recover possession of the front half, asserting that the deed of assignment and mortgage were clouds on their title. The Regional Trial Court (RTC) ruled in favor of the petitioners, declaring them absolute owners and nullifying the deed of assignment. However, the Court of Appeals (CA) reversed the RTC decision, ordering the cancellation of TCT No. 56210 and the issuance of a new title in the names of both Eusebio's children and Samuel Rabanillo, allotting the front half to Rabanillo and the back half to the children. The Petition: Petitioners seek review of the CA decision, arguing that the CA erred in declaring the deed of assignment valid and in finding an implied trust relationship. They contend that the deed of assignment was void due to violations of Commonwealth Act No. 141 (CA 141) and PHHC rules prohibiting the alienation of rights over the awarded lot. Petitioners also argue that the CA erred in applying Article 1448 of the Civil Code regarding implied trusts, as the assignment itself was contrary to public policy. They specifically challenge the CA's reliance on a deed of assignment executed in 1959, asserting that such a transfer was prohibited during the period of restriction for PHHC lots and that the CA improperly considered evidence not presented during trial. The core of their petition is that the assignment of rights was invalid from the outset, thus precluding any subsequent claim of ownership or trust by Rabanillo.
Issue(s)
Whether the deed of assignment executed by Eusebio Pigao in favor of respondent Samuel Rabanillo is valid. Whether an implied trust relationship was created over the front half portion of the lot in favor of respondent.
Ruling
The petition is GRANTED. The Court of Appeals decision dated October 29, 2001 is REVERSED and SET ASIDE. The decision of the Regional Trial Court of Quezon City, Branch 95 in Civil Case No. Q-96-26270 is REINSTATED.
Ratio Decidendi
On the validity of the deed of assignment: The Court held that the deed of assignment executed by Eusebio Pigao in favor of respondent was null and void ab initio for being contrary to public policy. While Commonwealth Act No. 141 (Public Land Act) was inapplicable as the lot was not acquired under free patent or homestead provisions, the Court found that the PHHC had a policy of providing decent housing to those unable to provide for themselves. Eusebio, as a bona fide occupant, had a vested right to purchase the property, but this right was personal and could not be transferred to a third party without PHHC's consent. The assignment to respondent, who was not a bona fide occupant, frustrated this public policy. Furthermore, the deed of sale from PHHC to Eusebio contained a prohibition against alienation within one year without PHHC's written consent. There was no showing that PHHC's approval for the assignment was obtained, thus rendering the assignment invalid. The Court also rejected petitioners' attempt to introduce a conditional contract to sell between PHHC and another applicant as evidence, as it was not presented during trial and was not a matter of judicial notice. On the existence of an implied trust: The Court disagreed with the CA's finding of an implied trust under Article 1448 of the Civil Code. While respondent paid half of the amortizations and realty taxes, the Court reiterated that the enforcement of a trust would be invalid if it contravened public policy. To recognize an implied trust in this case would be to validate the assignment of rights that was already declared null and void for being contrary to public policy. The Court cited Ramos v. Court of Appeals, stating that a trust is invalid if its enforcement would be against public policy, even if it does not involve a criminal or tortious act. Therefore, even though respondent shouldered part of the purchase price, no implied trust could be established because it would circumvent the prohibition against the alienation of rights that was intended to uphold the government's policy of providing housing.
Main Doctrine
A deed of assignment of rights over a PHHC lot is null and void ab initio if it contravenes public policy, specifically the policy of providing decent housing to those unable to provide for themselves, and if done without the consent of the PHHC. Enforcement of an implied trust that would contravene public policy is also invalid.