PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant, vs.JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.

Pablo Lorenzo and Delfin Joven for plaintiff-appellant.Office of the Solicitor-General Hilado for defendant-appellant.

LAUREL, J.:

On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, deceased, brought this action in the Court of First Instance of Zamboanga against the defendant, Juan Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the plaintiff as inheritance tax on the estate of the deceased, and for the collection of interst thereon at the rate of 6 per cent per annum, computed from September 15, 1932, the date when the aforesaid tax was [paid under protest. The defendant set up a counterclaim for P1,191.27 alleged to be interest due on the tax in question and which was not included in the original assessment. From the decision of the Court of First Instance of Zamboanga dismissing both the plaintiff's complaint and the defendant's counterclaim, both parties appealed to this court.

It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will (Exhibit 5) and considerable amount of real and personal properties. On june 14, 1922, proceedings for the probate of his will and the settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga. The will was admitted to probate. Said will provides, among other things, as follows:

4. I direct that any money left by me be given to my nephew Matthew Hanley.

5. I direct that all real estate owned by me at the time of my death be not sold or otherwise disposed of for a period of ten (10) years after my death, and that the same be handled and managed by the executors, and proceeds thereof to be given to my nephew, Matthew Hanley, at Castlemore, Ballaghaderine, County of Rosecommon, Ireland, and that he be directed that the same be used only for the education of my brother's children and their descendants.

6. I direct that ten (10) years after my death my property be given to the above mentioned Matthew Hanley to be disposed of in the way he thinks most advantageous.

x x x           x x x           x x x

8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew, Matthew Hanley, is a son of my said brother, Malachi Hanley.

The Court of First Instance of Zamboanga considered it proper for the best interests of ther estate to appoint a trustee to administer the real properties which, under the will, were to pass to Matthew Hanley ten years after the two executors named in the will, was, on March 8, 1924, appointed trustee. Moore took his oath of office and gave bond on March 10, 1924. He acted as trustee until February 29, 1932, when he resigned and the plaintiff herein was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that the estate left by the deceased at the time of his death consisted of realty valued at P27,920 and personalty valued at P1,465, and allowing a deduction of P480.81, assessed against the estate an inheritance tax in the amount of P1,434.24 which, together with the penalties for deliquency in payment consisting of a 1 per cent monthly interest from July 1, 1931 to the date of payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74. On March 15, 1932, the defendant filed a motion in the testamentary proceedings pending before the Court of First Instance of Zamboanga (Special proceedings No. 302) praying that the trustee, plaintiff herein, be ordered to pay to the Government the said sum of P2,052.74. The motion was granted. On September 15, 1932, the plaintiff paid said amount under protest, notifying the defendant at the same time that unless the amount was promptly refunded suit would be brought for its recovery. The defendant overruled the plaintiff's protest and refused to refund the said amount hausted, plaintiff went to court with the result herein above indicated.

In his appeal, plaintiff contends that the lower court erred:

I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir, Matthew Hanley, from the moment of the death of the former, and that from the time, the latter became the owner thereof.

II. In holding, in effect, that there was deliquency in the payment of inheritance tax due on the estate of said deceased.

III. In holding that the inheritance tax in question be based upon the value of the estate upon the death of the testator, and not, as it should have been held, upon the value thereof at the expiration of the period of ten years after which, according to the testator's will, the property could be and was to be delivered to the instituted heir.

IV. In not allowing as lawful deductions, in the determination of the net amount of the estate subject to said tax, the amounts allowed by the court as compensation to the "trustees" and paid to them from the decedent's estate.

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V. In not rendering judgment in favor of the plaintiff and in denying his motion for new trial.

The defendant-appellant contradicts the theories of the plaintiff and assigns the following error besides:

The lower court erred in not ordering the plaintiff to pay to the defendant the sum of P1,191.27, representing part of the interest at the rate of 1 per cent per month from April 10, 1924, to June 30, 1931, which the plaintiff had failed to pay on the inheritance tax assessed by the defendant against the estate of Thomas Hanley.

The following are the principal questions to be decided by this court in this appeal: (a) When does the inheritance tax accrue and when must it be satisfied? (b) Should the inheritance tax be computed on the basis of the value of the estate at the time of the testator's death, or on its value ten years later? (c) In determining the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees? (d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable to the tax-payer be given retroactive effect? (e) Has there been deliquency in the payment of the inheritance tax? If so, should the additional interest claimed by the defendant in his appeal be paid by the estate? Other points of incidental importance, raised by the parties in their briefs, will be touched upon in the course of this opinion.

(a) The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 as amended, of the Administrative Code, imposes the tax upon "every transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance in anticipation of inheritance,devise, or bequest." The tax therefore is upon transmission or the transfer or devolution of property of a decedent, made effective by his death. (61 C. J., p. 1592.) It is in reality an excise or privilege tax imposed on the right to succeed to, receive, or take property by or under a will or the intestacy law, or deed, grant, or gift to become operative at or after death. Acording to article 657 of the Civil Code, "the rights to the succession of a person are transmitted from the moment of his death." "In other words", said Arellano, C. J., ". . . the heirs succeed immediately to all of the property of the deceased ancestor. The property belongs to the heirs at the moment of the death of the ancestor as completely as if the ancestor had executed and delivered to them a deed for the same before his death." (Bondad vs. Bondad, 34 Phil., 232. See also, Mijares vs. Nery, 3 Phil., 195; Suilong & Co., vs. Chio-Taysan, 12 Phil., 13; Lubrico vs. Arbado, 12 Phil., 391; Innocencio vs. Gat-Pandan, 14 Phil., 491; Aliasas vs.Alcantara, 16 Phil., 489; Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs. Ignacio, 19 Phil., 434; Bowa vs. Briones, 38 Phil., 27; Osario vs. Osario & Yuchausti Steamship Co., 41 Phil., 531; Fule vs. Fule, 46 Phil., 317; Dais vs. Court of First Instance of Capiz, 51 Phil., 396; Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that while article 657 of the Civil Code is applicable to testate as well as intestate succession, it operates only in so far as forced heirs are concerned. But the language of article 657 of the Civil Code is broad and makes no distinction between different classes of heirs. That article does not speak of forced heirs; it does not even use the word "heir". It speaks of the rights of succession and the transmission thereof from the moment of death. The provision of

section 625 of the Code of Civil Procedure regarding the authentication and probate of a will as a necessary condition to effect transmission of property does not affect the general rule laid down in article 657 of the Civil Code. The authentication of a will implies its due execution but once probated and allowed the transmission is effective as of the death of the testator in accordance with article 657 of the Civil Code. Whatever may be the time when actual transmission of the inheritance takes place, succession takes place in any event at the moment of the decedent's death. The time when the heirs legally succeed to the inheritance may differ from the time when the heirs actually receive such inheritance. "Poco importa", says Manresa commenting on article 657 of the Civil Code, "que desde el falleimiento del causante, hasta que el heredero o legatario entre en posesion de los bienes de la herencia o del legado, transcurra mucho o poco tiempo, pues la adquisicion ha de retrotraerse al momento de la muerte, y asi lo ordena el articulo 989, que debe considerarse como complemento del presente." (5 Manresa, 305; see also, art. 440, par. 1, Civil Code.) Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of the date.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay the tax arose as of the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as amended by Act No. 3031, in relation to section 1543 of the same Code. The two sections follow:

SEC. 1543. Exemption of certain acquisitions and transmissions. — The following shall not be taxed:

(a) The merger of the usufruct in the owner of the naked title.

(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the trustees.

(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the desire of the predecessor.

In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater than that paid by the first, the former must pay the difference.

SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:

(a) In the second and third cases of the next preceding section, before entrance into possession of the property.

(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial testamentary or intestate proceedings shall be instituted prior to the expiration of said period,

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the payment shall be made by the executor or administrator before delivering to each beneficiary his share.

If the tax is not paid within the time hereinbefore prescribed, interest at the rate of twelve per centum per annum shall be added as part of the tax; and to the tax and interest due and unpaid within ten days after the date of notice and demand thereof by the collector, there shall be further added a surcharge of twenty-five per centum.

A certified of all letters testamentary or of admisitration shall be furnished the Collector of Internal Revenue by the Clerk of Court within thirty days after their issuance.

It should be observed in passing that the word "trustee", appearing in subsection (b) of section 1543, should read "fideicommissary" or "cestui que trust". There was an obvious mistake in translation from the Spanish to the English version.

The instant case does fall under subsection (a), but under subsection (b), of section 1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or donee. Under the subsection, the tax should have been paid before the delivery of the properties in question to P. J. M. Moore as trustee on March 10, 1924.

(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real properties are concerned, did not and could not legally pass to the instituted heir, Matthew Hanley, until after the expiration of ten years from the death of the testator on May 27, 1922 and, that the inheritance tax should be based on the value of the estate in 1932, or ten years after the testator's death. The plaintiff introduced evidence tending to show that in 1932 the real properties in question had a reasonable value of only P5,787. This amount added to the value of the personal property left by the deceased, which the plaintiff admits is P1,465, would generate an inheritance tax which, excluding deductions, interest and surcharge, would amount only to about P169.52.

If death is the generating source from which the power of the estate to impose inheritance taxes takes its being and if, upon the death of the decedent, succession takes place and the right of the estate to tax vests instantly, the tax should be measured by the vlaue of the estate as it stood at the time of the decedent's death, regardless of any subsequent contingency value of any subsequent increase or decrease in value. (61 C. J., pp. 1692, 1693; 26 R. C. L., p. 232; Blakemore and Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs. Moore, 178 U.S., 41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 969.) "The right of the state to an inheritance tax accrues at the moment of death, and hence is ordinarily measured as to any beneficiary by the value at that time of such property as passes to him. Subsequent appreciation or depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.)

Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure (vol. 37, pp. 1574, 1575) that, in the case of contingent remainders,

taxation is postponed until the estate vests in possession or the contingency is settled. This rule was formerly followed in New York and has been adopted in Illinois, Minnesota, Massachusetts, Ohio, Pennsylvania and Wisconsin. This rule, horever, is by no means entirely satisfactory either to the estate or to those interested in the property (26 R. C. L., p. 231.). Realizing, perhaps, the defects of its anterior system, we find upon examination of cases and authorities that New York has varied and now requires the immediate appraisal of the postponed estate at its clear market value and the payment forthwith of the tax on its out of the corpus of the estate transferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In re Huber, 86 N. Y. App. Div., 458; 83 N. Y. Supp., 769; Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519; Estate of Brez, 172 N. Y., 609; 64 N. E., 958; Estate of Post, 85 App. Div., 611; 82 N. Y. Supp., 1079. Vide also, Saltoun vs. Lord Advocate, 1 Peter. Sc. App., 970; 3 Macq. H. L., 659; 23 Eng. Rul. Cas., 888.) California adheres to this new rule (Stats. 1905, sec. 5, p. 343).

But whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxable at the time of the predecessor's death, notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary, and the tax measured by the value of the property transmitted at that time regardless of its appreciation or depreciation.

(c) Certain items are required by law to be deducted from the appraised gross in arriving at the net value of the estate on which the inheritance tax is to be computed (sec. 1539, Revised Administrative Code). In the case at bar, the defendant and the trial court allowed a deduction of only P480.81. This sum represents the expenses and disbursements of the executors until March 10, 1924, among which were their fees and the proven debts of the deceased. The plaintiff contends that the compensation and fees of the trustees, which aggregate P1,187.28 (Exhibits C, AA, EE, PP, HH, JJ, LL, NN, OO), should also be deducted under section 1539 of the Revised Administrative Code which provides, in part, as follows: "In order to determine the net sum which must bear the tax, when an inheritance is concerned, there shall be deducted, in case of a resident, . . . the judicial expenses of the testamentary or intestate proceedings, . . . ."

A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney vs. Saunders, 16 How., 535; 14 Law. ed., 1047). But from this it does not follow that the compensation due him may lawfully be deducted in arriving at the net value of the estate subject to tax. There is no statute in the Philippines which requires trustees' commissions to be deducted in determining the net value of the estate subject to inheritance tax (61 C. J., p. 1705). Furthermore, though a testamentary trust has been created, it does not appear that the testator intended that the duties of his executors and trustees should be separated. (Ibid.; In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's Estate, 161 N. Y. Supp., 455.) On the contrary, in paragraph 5 of his will, the testator expressed the desire that his real estate be handled and managed by his executors until the expiration of the period of ten years therein provided. Judicial expenses are expenses of administration (61 C. J., p. 1705) but, in State vs. Hennepin County Probate Court (112 N. W., 878; 101 Minn., 485), it was said: ". . . The compensation of a trustee, earned, not in the administration of the estate, but in the management thereof for the benefit of the legatees or devises, does not come properly within the class or reason for exempting

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administration expenses. . . . Service rendered in that behalf have no reference to closing the estate for the purpose of a distribution thereof to those entitled to it, and are not required or essential to the perfection of the rights of the heirs or legatees. . . . Trusts . . . of the character of that here before the court, are created for the the benefit of those to whom the property ultimately passes, are of voluntary creation, and intended for the preservation of the estate. No sound reason is given to support the contention that such expenses should be taken into consideration in fixing the value of the estate for the purpose of this tax."

(d) The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley under the provisions of section 1544 of the Revised Administrative Code, as amended by section 3 of Act No. 3606. But Act No. 3606 went into effect on January 1, 1930. It, therefore, was not the law in force when the testator died on May 27, 1922. The law at the time was section 1544 above-mentioned, as amended by Act No. 3031, which took effect on March 9, 1922.

It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The taxpayer can not foresee and ought not to be required to guess the outcome of pending measures. Of course, a tax statute may be made retroactive in its operation. Liability for taxes under retroactive legislation has been "one of the incidents of social life." (Seattle vs. Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup. Ct. Rep., 44.) But legislative intent that a tax statute should operate retroactively should be perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct. Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs. Insurance Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should be considered as prospective in its operation, whether it enacts, amends, or repeals an inheritance tax, unless the language of the statute clearly demands or expresses that it shall have a retroactive effect, . . . ." (61 C. J., P. 1602.) Though the last paragraph of section 5 of Regulations No. 65 of the Department of Finance makes section 3 of Act No. 3606, amending section 1544 of the Revised Administrative Code, applicable to all estates the inheritance taxes due from which have not been paid, Act No. 3606 itself contains no provisions indicating legislative intent to give it retroactive effect. No such effect can begiven the statute by this court.

The defendant Collector of Internal Revenue maintains, however, that certain provisions of Act No. 3606 are more favorable to the taxpayer than those of Act No. 3031, that said provisions are penal in nature and, therefore, should operate retroactively in conformity with the provisions of article 22 of the Revised Penal Code. This is the reason why he applied Act No. 3606 instead of Act No. 3031. Indeed, under Act No. 3606, (1) the surcharge of 25 per cent is based on the tax only, instead of on both the tax and the interest, as provided for in Act No. 3031, and (2) the taxpayer is allowed twenty days from notice and demand by rthe Collector of Internal Revenue within which to pay the tax, instead of ten days only as required by the old law.

Properly speaking, a statute is penal when it imposes punishment for an offense committed against the state which, under the Constitution, the Executive has the

power to pardon. In common use, however, this sense has been enlarged to include within the term "penal statutes" all status which command or prohibit certain acts, and establish penalties for their violation, and even those which, without expressly prohibiting certain acts, impose a penalty upon their commission (59 C. J., p. 1110). Revenue laws, generally, which impose taxes collected by the means ordinarily resorted to for the collection of taxes are not classed as penal laws, although there are authorities to the contrary. (See Sutherland, Statutory Construction, 361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C. C. A., 104; 53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P., 430; 25 Nev. 143.) Article 22 of the Revised Penal Code is not applicable to the case at bar, and in the absence of clear legislative intent, we cannot give Act No. 3606 a retroactive effect.

(e) The plaintiff correctly states that the liability to pay a tax may arise at a certain time and the tax may be paid within another given time. As stated by this court, "the mere failure to pay one's tax does not render one delinqent until and unless the entire period has eplased within which the taxpayer is authorized by law to make such payment without being subjected to the payment of penalties for fasilure to pay his taxes within the prescribed period." (U. S. vs. Labadan, 26 Phil., 239.)

The defendant maintains that it was the duty of the executor to pay the inheritance tax before the delivery of the decedent's property to the trustee. Stated otherwise, the defendant contends that delivery to the trustee was delivery to the cestui que trust, the beneficiery in this case, within the meaning of the first paragraph of subsection (b) of section 1544 of the Revised Administrative Code. This contention is well taken and is sustained. The appointment of P. J. M. Moore as trustee was made by the trial court in conformity with the wishes of the testator as expressed in his will. It is true that the word "trust" is not mentioned or used in the will but the intention to create one is clear. No particular or technical words are required to create a testamentary trust (69 C. J., p. 711). The words "trust" and "trustee", though apt for the purpose, are not necessary. In fact, the use of these two words is not conclusive on the question that a trust is created (69 C. J., p. 714). "To create a trust by will the testator must indicate in the will his intention so to do by using language sufficient to separate the legal from the equitable estate, and with sufficient certainty designate the beneficiaries, their interest in the ttrust, the purpose or object of the trust, and the property or subject matter thereof. Stated otherwise, to constitute a valid testamentary trust there must be a concurrence of three circumstances: (1) Sufficient words to raise a trust; (2) a definite subject; (3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing." (69 C. J., pp. 705,706.) There is no doubt that the testator intended to create a trust. He ordered in his will that certain of his properties be kept together undisposed during a fixed period, for a stated purpose. The probate court certainly exercised sound judgment in appointment a trustee to carry into effect the provisions of the will (see sec. 582, Code of Civil Procedure).

P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him (sec. 582 in relation to sec. 590, Code of Civil Procedure). The mere fact that the estate of the deceased was placed in trust did not remove it from the operation of our inheritance tax laws or exempt it from the payment of the inheritance tax. The corresponding inheritance tax should have been paid on or before March 10, 1924, to

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escape the penalties of the laws. This is so for the reason already stated that the delivery of the estate to the trustee was in esse delivery of the same estate to the cestui que trust, the beneficiary in this case. A trustee is but an instrument or agent for the cestui que trust (Shelton vs. King, 299 U. S., 90; 33 Sup. Ct. Rep., 689; 57 Law. ed., 1086). When Moore accepted the trust and took possesson of the trust estate he thereby admitted that the estate belonged not to him but to his cestui que trust (Tolentino vs. Vitug, 39 Phil.,126, cited in 65 C. J., p. 692, n. 63). He did not acquire any beneficial interest in the estate. He took such legal estate only as the proper execution of the trust required (65 C. J., p. 528) and, his estate ceased upon the fulfillment of the testator's wishes. The estate then vested absolutely in the beneficiary (65 C. J., p. 542).

The highest considerations of public policy also justify the conclusion we have reached. Were we to hold that the payment of the tax could be postponed or delayed by the creation of a trust of the type at hand, the result would be plainly disastrous. Testators may provide, as Thomas Hanley has provided, that their estates be not delivered to their beneficiaries until after the lapse of a certain period of time. In the case at bar, the period is ten years. In other cases, the trust may last for fifty years, or for a longer period which does not offend the rule against petuities. The collection of the tax would then be left to the will of a private individual. The mere suggestion of this result is a sufficient warning against the accpetance of the essential to the very exeistence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10 Law. ed., 1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs. Oregon, 7 Wall., 71; 19 Law. ed., 101; Union Refrigerator Transit Co. vs. Kentucky, 199 U. S., 194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River Bridge vs. Warren Bridge, 11 Pet., 420; 9 Law. ed., 773.) The obligation to pay taxes rests not upon the privileges enjoyed by, or the protection afforded to, a citizen by the government but upon the necessity of money for the support of the state (Dobbins vs. Erie Country, supra). For this reason, no one is allowed to object to or resist the payment of taxes solely because no personal benefit to him can be pointed out. (Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct. Rep., 340; 43 Law. ed., 740.) While courts will not enlarge, by construction, the government's power of taxation (Bromley vs. McCaughn, 280 U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will not place upon tax laws so loose a construction as to permit evasions on merely fanciful and insubstantial distictions. (U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U. S. vs. Wigglesirth, 2 Story, 369; Fed. Cas. No. 16,690, followed in Froelich & Kuttner vs. Collector of Customs, 18 Phil., 461, 481; Castle Bros., Wolf & Sons vs. McCoy, 21 Phil., 300; Muñoz & Co. vs. Hord, 12 Phil., 624; Hongkong & Shanghai Banking Corporation vs. Rafferty, 39 Phil., 145; Luzon Stevedoring Co. vs. Trinidad, 43 Phil., 803.) When proper, a tax statute should be construed to avoid the possibilities of tax evasion. Construed this way, the statute, without resulting in injustice to the taxpayer, becomes fair to the government.

That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus, no court is allowed to grant injunction to restrain the collection of any internal revenue tax ( sec. 1578, Revised Administrative Code; Sarasola vs. Trinidad, 40 Phil., 252). In the case of Lim Co Chui vs. Posadas (47 Phil., 461), this court had occassion to demonstrate trenchment adherence to this policy of the law. It held that "the fact that on account of riots directed against the Chinese on October 18, 19, and 20,

1924, they were prevented from praying their internal revenue taxes on time and by mutual agreement closed their homes and stores and remained therein, does not authorize the Collector of Internal Revenue to extend the time prescribed for the payment of the taxes or to accept them without the additional penalty of twenty five per cent." (Syllabus, No. 3.)

". . . It is of the utmost importance," said the Supreme Court of the United States, ". . . that the modes adopted to enforce the taxes levied should be interfered with as little as possible. Any delay in the proceedings of the officers, upon whom the duty is developed of collecting the taxes, may derange the operations of government, and thereby, cause serious detriment to the public." (Dows vs. Chicago, 11 Wall., 108; 20 Law. ed., 65, 66; Churchill and Tait vs. Rafferty, 32 Phil., 580.)

It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax and, therefore, liable for the payment of interest and surcharge provided by law in such cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The interest due should be computed from that date and it is error on the part of the defendant to compute it one month later. The provisions cases is mandatory (see and cf. Lim Co Chui vs. Posadas, supra), and neither the Collector of Internal Revenuen or this court may remit or decrease such interest, no matter how heavily it may burden the taxpayer.

To the tax and interest due and unpaid within ten days after the date of notice and demand thereof by the Collector of Internal Revenue, a surcharge of twenty-five per centum should be added (sec. 1544, subsec. (b), par. 2, Revised Administrative Code). Demand was made by the Deputy Collector of Internal Revenue upon Moore in a communiction dated October 16, 1931 (Exhibit 29). The date fixed for the payment of the tax and interest was November 30, 1931. November 30 being an official holiday, the tenth day fell on December 1, 1931. As the tax and interest due were not paid on that date, the estate became liable for the payment of the surcharge.

In view of the foregoing, it becomes unnecessary for us to discuss the fifth error assigned by the plaintiff in his brief.

We shall now compute the tax, together with the interest and surcharge due from the estate of Thomas Hanley inaccordance with the conclusions we have reached.

At the time of his death, the deceased left real properties valued at P27,920 and personal properties worth P1,465, or a total of P29,385. Deducting from this amount the sum of P480.81, representing allowable deductions under secftion 1539 of the Revised Administrative Code, we have P28,904.19 as the net value of the estate subject to inheritance tax.

The primary tax, according to section 1536, subsection (c), of the Revised Administrative Code, should be imposed at the rate of one per centum upon the first

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ten thousand pesos and two per centum upon the amount by which the share exceed thirty thousand pesos, plus an additional two hundred per centum. One per centum of ten thousand pesos is P100. Two per centum of P18,904.19 is P378.08. Adding to these two sums an additional two hundred per centum, or P965.16, we have as primary tax, correctly computed by the defendant, the sum of P1,434.24.

To the primary tax thus computed should be added the sums collectible under section 1544 of the Revised Administrative Code. First should be added P1,465.31 which stands for interest at the rate of twelve per centum per annum from March 10, 1924, the date of delinquency, to September 15, 1932, the date of payment under protest, a period covering 8 years, 6 months and 5 days. To the tax and interest thus computed should be added the sum of P724.88, representing a surhcarge of 25 per cent on both the tax and interest, and also P10, the compromise sum fixed by the defendant (Exh. 29), giving a grand total of P3,634.43.

As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is legally due from the estate. This last sum is P390.42 more than the amount demanded by the defendant in his counterclaim. But, as we cannot give the defendant more than what he claims, we must hold that the plaintiff is liable only in the sum of P1,191.27 the amount stated in the counterclaim.

The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances. So ordered.

ANA CALLEJON SALINAS, ET AL., plaintiffs-appellants, vs.FELISA ROMAN TUASON and JOSE MORENO ROMAN, defendants-appellants.

Eduardo Gutierrez Repide and N. B. Villanueva for plaintiffs-appellants.Araneta and Zaragoza for defendants-appellants.

JOHNSON, J.:

This action was commenced on the 26th day of March, 1928 in the Court of First Instance of the City of Manila for the purpose of recovering the sum of P30,000 with interest at 10 per cent from November 24, 1918. The plaintiffs were residents of the Kingdom of Spain, represented in this action by the Consul General of Spain in the Philippine Islands.

The plaintiffs alleged that they were the heirs of Francisco Callejon Salinas, who died in Spain in 1911; that the amount of P30,000 which they claimed from the defendants was the proceeds from the sale of two parcels of land situated in San Antonio, Province of Nueva Ecija, particularly described in paragraph four of the complaint; that said lands belonged to their predecessor Francisco Callejon Salinas, who had been a resident of the Philippine Islands; that said lands were administered by Jose Moreno Lahaba, also a Spaniard, resident of the Philippine Islands, who died in Manila on May 2, 1920; that on November 24, 1918, said Moreno Lahaba sold said

parcels of land for the sum of P30,000, but failed and refused to account for that sum to his principal or the heirs of the latter; that said sum passed by way of inheritance to the heirs of Moreno Lahaba, the defendants herein; that said defendants, as such heirs, likewise refused to account to the plaintiffs for said sum of P30,000.

The defendants demurred to the complaint on the grounds of (a) lack of jurisdiction, (b) res judicata and (c) prescription. The demurrer was overruled, whereupon the defendants filed an answer denying generally and specifically each and every allegation of the complaint, and also containing the following special defenses: (a) That the court did not have jurisdiction of the subject matter; (b) that the plaintiff's claim was res judicata; (c) that the action has prescribed; (d) that the deceased Jose Moreno Lahaba, as agent or representative of Francisco Callejon Salinas, had accounted to his principal for the proceeds from the sale of the lands in question, resulting from said accounting a balance of P2,500 in favor of his principal; (e) that said amount was paid to the heirs of his principal; and ( f ) that Moreno Lahaba had spent P16,000 for clearing said lands and for the survey and registration thereof. The defendants prayed that they be absolved from the complaint with costs against the plaintiffs.

Upon the issue thus presented, the cause was brought on for trial. After hearing the evidence and on March 10, 1930, Simplicio del Rosario, judge, arrived at the conclusion that the plaintiffs were entitled to recover said sum of P30,000 from the defendants after deducting therefrom the expenses incurred by Moreno Lahaba for the survey and registration of said lands and also for attorney's fees and taxes, all amounting to P3,491.60; and rendered a judgment ordering the defendants to pay to the plaintiffs said sum of P30,000 after deducting therefrom said expenses of P3,491.60, with legal interest on the balance from the date of the commencement of this action. The dispositive part of the decision reads as follows:

SE CONDENA a los demandados al pago de la cantidad de treinta mil pesos (P30,000) a favor de los demandantes, de las que se deben descontar los gastos de medicion, titulacion, honorarios de abogado y pagos de amillaramiento que sumados ascienden a P3,491.60, mas los interes legales de la cantidad remanente a contar desde la presentacion de la demanda en causa.

From that judgment both parties appealed.

The defendants-appellants make the following assignments of error:

1. The court erred in not declaring that it had no jurisdiction over the subject matter of the litigation;

2. The court erred in holding that the claim of P2,500 filed by the plaintiffs before the committee on claims does not constitute res judicata of this action;

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3. The court erred in holding that the present action has not prescribed;

4. The court erred in finding that Jose Moreno Lahaba was indebted to plaintiffs for more than P2,500; and

5. The court erred in overruling the demurrer, and in sentencing the defendants to pay to the plaintiffs the amount stated in the judgment.

The plaintiffs-appellants make the following assignments of error:

1. The court erred in allowing in favor of the defendants the sum of P3,491.60, representing alleged expenses incurred by Moreno Lahaba in connection with the lands in question;

2. The court erred in not ordering the defendants to pay legal interest on the amount of the judgment from the 24th day of November, 1918; and

3. The court erred in not ordering the defendants to pay the costs and also damages by reason of their misappropriation of the proceeds of the sale of lands.

A careful examination of the record shows that the following facts were established by a large preponderance of the evidence.

Francisco Callejon Salinas, the plaintiffs' predecessor, a former resident of the Philippine Islands, died in Spain on May 31, 1911. The record does not disclose the date when he left the Islands. In 1900 he appointed Teodosio Pintado y Fernandez as his attorney in fact to administer his properties here, with express authority to delegate his powers as such attorney, or to appoint his successor. On April 24, 1905, Teodosio Pintado y Fernandez appointed Jose Moreno Lahaba as attorney in fact or agent for Callejon Salinas.

Jose Moreno Lahaba administered the properties of Callejon Salinas and rendered accounts of his administration from April 24, 1905 up to the time of the death of his principal in 1911. His last letter to his principal is dated June 31st (30th), 1911. He died on May 2, 1920, but from July, 1911 up to the time of his death in 1920 he had not rendered any report of his administration in spite of inquiries made by the heirs of his principal, Francisco Callejon Salinas. Among the properties administered by him were included the two parcels of land in question.

Sometime before the death of Jose Moreno Lahaba, the Spanish Consul in the Philippine Islands, Vicente Palmaroli, at the request of the plaintiffs, as heirs of Francisco Callejon Salinas, made inquiries from Moreno Lahaba about the properties administered by him. Prior thereto said heirs had made direct inquiries from Moreno Lahaba but received no reply whatsoever. Moreno Lahaba told the Spanish Consul that he had only P2,500 in his possession belonging to his principal, which he was

ready to deliver to the consul upon his production of written authority from said heirs to receive the same in their behalf. Pending the receipt of said authority, Jose Moreno Lahaba died. So the consul presented a claim for P2,500 to the commissioners in the intestate proceedings of the deceased Moreno Lahaba. Said claim was allowed and paid and delivered to the said heirs of Francisco Callejon Salinas.

After the receipt of said amount the heirs of Callejon Salinas requested the Spanish Consul to make further inquiries about other properties under the administration of Moreno Lahaba. The Spanish Consul, with the assistance of attorney Eduardo Gutierrez Repide, found that on November 24, 1918, Moreno Lahaba had sold in the name of Francisco Callejon Salinas the two parcels of land in question to Tomas Ortiz Luis for P30,000 (Exhibit D). According to the deed of sale the whole price was paid in cash; but according to the evidence, only the sum of P5,000 was paid at the time of the sale, and the balance was paid in annual installments of P5,000. Five days after the sale, or on November 29, 1918, the vendee executed a mortgage on said lands in favor of Jose Moreno Lahaba (Exhibit H) for P25,000 to secure the unpaid balance of the price of said lands.

When Moreno Lahaba died on May 2, 1920, a balance of P20,000 of said mortgage was still unpaid. Said amount was entered in the inventory of his estate (Exhibit A) as conjugal property, and in the settlement of that estate it passed to the defendants as heirs of Moreno Lahaba. Said mortgage credit was paid to them long before the commencement of this action.

The defendants-appellants in their first assignment of error contend that the lower court did not have jurisdiction of the subject matter of this action. Their theory is that the plaintiffs' claim for P30,000 is a claim against the estate of Jose Moreno Lahaba, and said claim not having been presented before the commissioners of said estate, is now barred, and the lower court did not have jurisdiction to take cognizance of an action for the recovery of said amount.

This contention cannot be sustained. The amount of P30,000 which the plaintiffs are seeking to recover is not a claim against the estate of Moreno Lahaba. It is not an indebtedness of Moreno Lahaba or his estate. Said amount represents the price of trust property administered by him, of which he and his heirs failed and refused to account. The only appropriate manner to recover said trust property, in view of the trustee's failure and refusal to account for it, is by an action in court, and the lower court acted correctly in taking jurisdiction of the case.

In their second assignment of error the defendants-appellants contend that the payment to the heirs of Callejon Salinas of the sum of P2,500 constitutes res judicata. It does constitute res judicata as to that amount only, but not as to the amount of P30,000 claimed in this action.

With reference to third assignment of error of the defendants-appellants, to wit, that the lower court erred in holding that the present action has not prescribed, it may be said that there is absolutely no evidence in the record to show that the plaintiffs failed to demand from time to time from Moreno Lahaba and his heirs all the trust property

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in his or their possession belonging to Callejon Salinas. As a matter of fact, the plaintiffs, through the Spanish Consul General, time and again requested Moreno Lahaba and his heirs to return to them all of said trust property, but Moreno Lahaba and his heirs denied and concealed the existence of the P30,000 in question. As soon as the plaintiffs secured positive knowledge of the existence of said amount as trust property belonging to their predecessor, they commenced this action for the recovery thereof.

As a general rule, a trust estate is exempt from the operation of the statute of limitations. A trustee, however, may acquire the trust estate by prescription provided there is repudiation of the trust and this fact is known to the cestui que trust. The repudiation must be clear, open and unequivocal. In that case the statute will commence to run from and after said repudiation and the knowledge thereof by the cestui. Furthermore, prescription in order to be available as a defense, the trustee must prove that there was a direct repudiation of the trust and that the cestui que trust or beneficiary had knowledge thereof. Such is the rule as found in Vol. 37, C. J., secs. 249, 295 and 296, pp. 923-926.

SEC. 294. (2) Repudiation of Trust and Assertion of Adverse Claim — (a) In General. — In the case of an express trust limitations do not start to run in favor of the trustee until the trust is repudiated. A doctrine, the validity of which has been questioned, applying to all express trusts, regardless of the manner in which the trust was created, is that if the trustee openly repudiates the trust and asserts an adverse claim to the trust property, these facts being known to the cestui que trust, the statute begins to run in the trustee's favor, although not until then, and even though the trust is a resulting one, or a trust ex maleficio, . . . . And the general rule above stated applies in favor of persons who become trustees by construction of law, and in case of a voluntary constructive trust. As the statute of limitations is an affirmative defense to be alleged and proved, it is incumbent upon the trustee to show that there was a direct repudiation of the trust and that the cestui que trust had knowledge thereof. Every intendment and presumption is against a repudiation.

SEC. 295. (b) Necessity for Notice — But a trustee's repudiation of an express trust, or a trust subject to the rule governing express trusts, and his assertion of an adverse interest will not be sufficient to start the statute of limitations in motion, unless knowledge or notice of such repudiation and claim is brought home to the cestui que trust, and the statute begins to run when and only when the cestui que trust acquires the knowledge or receives the notice.

SEC. 296. (c) Character and Circumstances of Repudiation and Notice — To set the statute in motion the trustee's repudiation and adverse claim, whether by acts or words — repudiation may be proved by circumstances — must be clear, open and unequivocal, and must be so clearly and fully made known to the cestui que trust as to make it incumbent upon him to assert his equitable rights. Mere failure of the trustee to respond to repeated inquiries

addressed to him by the cestui que trust is not enough. To constitute a repudiation there must be something said or done by the trustee in open contravention of the terms of the trust, and of such character that the relations of the parties will become and continue hostile.

Under the facts hereinbefore stated, the defense of prescription is not available to the defendants. There was no open, clear and unequivocal repudiation of the trust by Jose Moreno Lahaba. Neither was there any knowledge on the part of Callejon Salinas and his heirs of any such repudiation. On the contrary, there was concealment and misappropriation on the part of Moreno Lahaba of the property entrusted to his administration and care.

The last two assignments of error of the defendants-appellants are sufficiently answered by the foregoing arguments and the facts above stated.

With reference to the assignments of error of the plaintiffs-appellants, we are of the opinion that none of the alleged errors were committed by the lower court. The amount of P3,491.60 was correctly allowed by the lower court in favor of the defendants. It represented expenses actually incurred by Moreno Lahaba for the survey and registration of the lands in question and for taxes paid thereon.

The judgment appealed from is in accordance with the facts and the law, and the same should be and is hereby affirmed, with costs against the defendants-appellants. So ordered.

O’Laco v Co co chit

D E C I S I O N

BELLOSILLO, J p:

History is replete with cases of erstwhile close family relations put asunder by property disputes. This is one of them. It involves half-sisters each claiming ownership over a parcel of land. While petitioner Emilia O'Laco asserts that she merely left the certificate of title covering the property with private respondent O Lay Kia for safekeeping, the latter who is the former's older sister insists that the title was in her possession because she and her husband bought the property from their conjugal funds. To be resolved therefore is the issue of whether a resulting trust was intended by them in the acquisition of the property. The trial court declared that there was no trust relation of any sort between the sisters. 1 The Court of Appeals ruled otherwise. 2 Hence, the instant petition for review on certiorari of the decision of the appellate court together with its resolution denying reconsideration. 3

It appears that on 31 May 1943, the Philippine Sugar Estate Development Company, Ltd., sold a parcel of land, Lot No. 5, Block No. 10, Plan Psu-10038, situated at Oroquieta St., Sta. Cruz, Manila, with the Deed of Absolute Sale naming Emilia

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O'Laco as vendee; thereafter, Transfer Certificate of Title No. 66456 was issued in her name.

On 17 May 1960, private respondent-spouses Valentin Co Cho Chit and O Lay Wa learned from the newspapers that Emilia O'Laco sold the same property to the Roman Catholic Archbishop of Manila for P230,000.00, with assumption of the real estate mortgage constituted thereon. 4

On 22 June 1960, respondent-spouses Valentin Co Cho Chit and O Lay Kia sued petitioner-spouses Emilia O'Laco and Hugo Luna to recover the purchase price of the land before the then Court of First Instance of Rizal, respondent-spouses asserting that petitioner Emilia O'Laco knew that they were the real vendees of the Oroquieta property sold in 1943 by Philippine Sugar Estate Development Company, Ltd., and that the legal title thereto was merely placed in her name. They contend that Emilia O'Laco breached the trust when she sold the land to the Roman Catholic Archbishop of Manila. Meanwhile, they asked the trial court to garnish all the amounts still due and payable to petitioner-spouses arising from the sale, which was granted on 30 June 1960. 5

Petitioner-spouses deny the existence of any form of trust relation. They aver that Emilia O'Laco actually bought the property with her own money; that she left the Deed of Absolute Sale and the corresponding title with respondent-spouses merely for safekeeping; that when she asked for the return of the documents evidencing her ownership, respondent-spouses told her that these were misplaced or lost; and, that in view of the loss, she filed a petition for issuance of a new title, and on 18 August 1944 the then Court of First Instance of Manila granted her petition.

On 20 September 1976, finding no trust relation between the parties, the trial court dismissed the complaint together with the counterclaim. Petitioners and respondents appealed.

On 9 April 1981, the Court of Appeals set aside the decision of the trial court thus —

". . . We set aside the decision of the lower court dated September 20, 1976 and the order of January 5, 1977 and another one is hereby entered ordering the defendants-appellees to pay plaintiffs-appellants jointly and severally the sum of P230,000.00 representing the value of the property subject of the sale with assumption of mortgage to the Roman Catholic Archbishop of Manila with legal interest from the filing of the complaint until fully paid, the sum of P10,000.00 as attorney's fees, plus costs."

On 7 August 1981, the Court of Appeals denied reconsideration of its decision, prompting petitioners to come to this Court for relief.

Petitioners contend that the present action should have been dismissed. They argue that the complaint fails to allege that earnest efforts toward a compromise were exerted considering that the suit is between members of the same family, and no trust

relation exists between them. Even assuming ex argumenti that there is such a relation, petitioners further argue, respondents are already barred by laches.

We are not persuaded. Admittedly, the present action is between members of the same family since petitioner Emilia O'Laco and respondent O Lay Kia are half-sisters. Consequently, there should be an averment in the complaint that earnest efforts toward a compromise have been made, pursuant to Art. 222 of the New Civil Code, 6 or a motion to dismiss could have been filed under Sec. 1, par. (j), Rule 16, of the Rules of Court. 7 For, it is well-settled that the attempt to compromise as well as the inability to succeed is a condition precedent to the filing of a suit between members of the same family. 8 Hence, the defect in the complaint is assailable at any stage of the proceedings, even on appeal, for lack of cause of action. 9

But, plaintiff may be allowed to amend his complaint to correct the defect if the amendment does not actually confer jurisdiction on the court in which the action is filed, i.e., if the cause of action was originally within that court's jurisdiction. 10 In such case, the amendment is only to cure the perceived defect in the complaint, thus may be allowed.

In the case before Us, while respondent-spouses did not formally amend their complaint, they were nonetheless allowed to introduce evidence purporting to show that earnest efforts toward a compromise had been made, that is, respondent O Lay Kia importuned Emilia O'Laco and pressed her for the transfer of the title of the Oroquieta property in the name of spouses O Lay Kia and Valentin Co Cho Chit, just before Emilia's marriage to Hugo Luna. 11 But, instead of transferring the title as requested, Emilia sold the property to the Roman Catholic Archbishop of Manila. This testimony was not objected to by petitioner-spouses. Hence, the complaint was deemed accordingly amended to conform to the evidence, 12 pursuant to Sec. 5, Rule 10 of the Rules of Court which reads —

"SECTION 5. Amendment to conform to or authorize presentation of evidence. — When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as, if they had been raised in the pleadings . . ." (emphasis supplied).

Indeed, if the defendant permits evidence to be introduced without objection and which supplies the necessary allegations of a defective complaint, then the evidence is deemed to have the effect of curing the defects of the complaint. 13 The insufficiency of the allegations in the complaint is deemed ipso facto rectified. 14

But the more crucial issue before Us is whether there is a trust relation between the parties in contemplation of law.

We find that there is. By definition, trust relations between parties may either be express or implied. 15 Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words evincing an intention to create a trust. 16 Implied trusts are those which, without being express,

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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.17 Implied trusts may either be resulting or constructive trusts, both coming into being by operation of law. 18

Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest 19 and are presumed always to have been contemplated by the parties. They arise from the nature or 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. 20 On the other hand, constructive trusts are created by the construction of equity in order to satisfy the demands of justice 21 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. 22

Specific examples of resulting trusts may be found in the Civil Code, particularly Arts. 1448, 1449, 1451,1452 and 1453, 23 while constructive trusts are illustrated in Arts. 1450, 1454, 1455 and 1456. 24

Unlike express trusts concerning immovables or any interest therein which cannot be proved by parol evidence, 25 implied trusts may be established by oral evidence. 26 However, in order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation were proven by an authentic document. 27 It cannot be established upon vague and inconclusive proof. 28

After a thorough review of the evidence on record, We hold that a resulting trust was indeed intended by the parties under Art. 1448 of the New Civil Code which states —

"ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary . . ." (emphasis supplied).

First. As stipulated by the parties, the document of sale, the owner's duplicate copy of the certificate of title, insurance policies, receipt of initial premium of insurance coverage and real estate tax receipts ware all in the possession of respondent spouses which they offered in evidence. As emphatically asserted by respondent O Lay Kia, the reason why these documents of ownership remained with her is that the land in question belonged to her. 29

Indeed, there can be no persuasive rationalization for the possession of these documents of ownership by respondent-spouses for seventeen (17) years after the Oroquieta property was purchased in 1943 than that of precluding its possible sale, alienation or conveyance by Emilia O'Laco, absent any machination or fraud. This continued possession of the documents, together with other corroborating evidence

spread on record, strongly suggests that Emilia O'Laco merely held the Oroquieta property in trust for respondent-spouses.

Second. It may be worth to mention that before buying the Oroquieta property, respondent-spouses purchased another property situated in Kusang-Loob, Sta. Cruz, Manila, where the certificate of title was placed in the name of Ambrosio O'Laco, older brother of Emilia, under similar or identical circumstances. The testimony of former counsel for respondent-spouses, then Associate Justice Antonio G. Lucero of the Court of Appeals, is enlightening —

"Q In the same conversation he told you how he would buy the property (referring to the Oroquieta property), he and his wife?

"A Yes, Sir, he did.

"Q What did he say?

xxx xxx xxx

"A He said he and his wife has (sic) already acquired by purchase a certain property located at Kusang-Loob, Sta. Cruz, Manila. He told me he would like to place the Oroquieta Maternity Hospital in case the negotiation materialize(s) in the name of a sister of his wife (O'Laco)" (emphasis supplied). 30

On the part of respondent-spouses, they explained that the reason why they did not place these Oroquieta and Kusang-Loob properties in their name was that being Chinese nationals at the time of the purchase they did not want to execute the required affidavit to the effect that they were allies of the Japanese. 31 Since O Lay Kia took care of Emilia who was still young when her mother died, 32 respondent-spouses did not hesitate to place the title of the Oroquieta property in Emilia's name.

Quite significantly, respondent-spouses also instituted an action for reconveyance against Ambrosio O'Laco when the latter claimed the Kusang-Loob property as his own. A similar stipulation of facts was likewise entered, i.e., respondent-spouses had in their possession documents showing ownership of the Kusang-Loob property which they offered in evidence. In that case, the decision of the trial court, now final and executory, declared respondent-spouses as owners of the Kusang-Loob property and ordered Ambrosio O'Laco to reconvey it to them. 33

Incidentally, Ambrosio O'Laco thus charged respondent spouses Valentin Co Cho Cit and O Lay Kia before the Anti-Dummy Board, docketed as Case No. 2424, for their acquisition of the Kusang-Loob and Oroquieta properties. 34 He claimed that respondent-spouses utilized his name in buying the Kusang-Loob property while that of petitioner O'Laco was used in the purchase of the Oroquieta property. In effect, there was an implied admission by Ambrosio that his sister Emilia, like him, was merely used as a dummy. However, the Anti-Dummy Board exonerated respondent-

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spouses since the purchases were made in 1943, or during World War II, when the Anti-Dummy Law was not enforceable.

Third. The circumstances by which Emilia O'Laco obtained a new title by reason of the alleged loss of the old title then in the possession of respondent-spouses cast serious doubt on the veracity of her ownership. The petitions respectively filed by Emilia O'Laco and Ambrosio O'Laco for the Oroquieta and the Kusang-Loob properties were both granted on the same day, 18 August 1944, by the then Court of First Instance of Manila. These orders were recorded in the Primary Entry Book of the Register of Deeds of Manila at the same time, 2:35 o'clock in the afternoon of 1 September 1944, in consecutive entries, Entries Nos. 246117-18. 35 This coincidence lends credence to the position of respondent-spouses that there was in fact a conspiracy between the siblings Ambrosio and Emilia to defraud and deprive respondents of their title to the Oroquieta and Kusang-Loob properties.

Fourth. Until the sale of the Oroquieta property to the Roman Catholic Archbishop of Manila, petitioner Emilia O'Laco actually recognized the trust. Specifically, when respondent spouses learned that Emilia was getting married to Hugo, O Lay Kia asked her to have the title to the property already transferred to her and her husband Valentin, and Emilia assured her that "would be arranged (maaayos na)" after her wedding. 36 Her answer was an express recognition of the trust, otherwise, she would have refused the request outright. Petitioners never objected to this evidence; nor did they attempt to controvert it.

Fifth. The trial court itself determined that "Valentin Co Cho Chit and O Lay Kia had some money with which they could buy the property." 37 In fact, Valentin was the Chief Mechanic of the Paniqui Sugar Mills, was engaged in the buy and sell business, operated a gasoline station, and owned an auto supply store as well as a ten-door apartment in Caloocan City. 38 In contrast, Emilia O'Laco failed to convince the Court that she was financially capable of purchasing the Oroquieta property. In fact, she opened a bank account only in 1946 and likewise began filing income tax returns that same year, 39 while the property in question was bought in 1943. Respondent-spouses even helped Emilia and her brothers in their expenses and livelihood. Emilia could only give a vague account on how she raised the money for the purchase of the property. Her narration of the transaction of sale abounds with "I don't know" and "I don't remember." 40

Having established a resulting trust between the parties, the next question is whether prescription has set in.

As differentiated from constructive trusts, where the settled rule is that prescription may supervene, in resulting trust, the rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust. 41 Once the resulting trust is repudiated, however, it is converted into a constructive trust and is subject to prescription.

A resulting trust is repudiated if the following requisites concur: (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui

trust; (b) such positive acts of repudiation have been made known to the cestui qui trust; and, (c) the evidence thereon is clear and convincing. 42

In Tale v. Court of Appeals 43 the Court categorically ruled that an action for reconveyance based on an implied or constructive trust must perforce prescribe in ten (10) years, and not otherwise, thereby modifying previous decisions holding that the prescriptive period was four (4) years.

Neither the registration of the Oroquieta property in the name of petitioner Emilia O'Laco nor the issuance of a new Torrens title in 1944 in her name in lieu of the alleged loss of the original may be made the basis for the commencement of the prescriptive period. For, the issuance of the Torrens title in the name of Emilia O'Laco could not be considered adverse, much less fraudulent. Precisely, although the property was bought by respondent-spouses, the legal title was placed in the name of Emilia O'Laco. The transfer of the Torrens title in her name was only in consonance with the deed of sale in her favor. Consequently, there was no cause for any alarm on the part of respondent-spouses. As late as 1959, or just before she got married, Emilia continued to recognize the ownership of respondent-spouses over the Oroquieta property. Thus, until that point, respondent-spouses were not aware of any act of Emilia which would convey to them the idea that she was repudiating the resulting trust. The second requisite is therefore absent. Hence, prescription did not begin to run until the sale of the Oroquieta property, which was clearly an act of repudiation.

But immediately after Emilia sold the Oroquieta property which is obviously a disavowal of the resulting trust, respondent-spouses instituted the present suit for breach of trust. Correspondingly, laches cannot lie against them.

After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the recognition, and ordinarily will not be in fault for omitting to bring an action to enforce his rights. 44 There is no running of the prescriptive period if the trustee expressly recognizes the resulting trust. 45 Since the complaint for breach of trust was filed by respondent-spouses two (2) months after acquiring knowledge of the sale, the action therefore has not yet prescribed.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court of Appeals of 9 April 1981, which reversed the trial court, is AFFIRMED. Costs against petitioners.

TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA and ANTONIO, all surnamed PEREZ Y TUASON, PHILIPPINE NATIONAL BANK, Judicial Guardian, J. ANTONIO ARANETA, trustee-appellee, vs.ANTONIO M. PEREZ, judicial guardian-appellant.

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Araneta and Araneta for trustee-appellee.Alfonso Felix, Jr. for judicial guardian-appellant.

CONCEPCION, J.:

These are two (2) incidents of the trusteeship of the minors Benigno, Angela and Antonio, all surnamed Perez Y Tuason. The issue in G.R. No. L-16185 is whether or not the trustee, J. Antonio Araneta — hereinafter referred to as the appellee — may be allowed to pay a sum of money to the law firm, Araneta & Araneta, of which he is a member, for services rendered to him, in his aforementioned capacity as such trustee, in several judicial proceedings, whereas G.R. No. L-16186 concerns the question whether the purchase of certain shares of stock nude by the appellee for the benefit of the trusteeship merits judicial approval. Both questions were decided by the Court of First Instance of Rizal (Quezon City Branch) in the affirmative. Hence, this appeal by Antonio M. Perez — hereinafter referred to as the appellant — as guardian of the person of said minors.

With respect to G.R. No. L-16185, it appears that the law firm Araneta & Araneta, through its assistant, Atty. Francisco T. Papa, had rendered services, as counsel for the appellee, in connection with the following:

1. The approval of his accounts for January to March, 1956, which were objected to by the appellant. Said objection was, on October 19, 1956, overruled by the lower court, the action of which was affirmed by this Court in G.R. No. L-11788, on May 16, 1958, on appeal taken by appellant.

2. The appellee's accounts for April to June, 1957; which were approved by the lower court on July 13, 1957, despite appellant's objection thereto. Although appellant appealed to the Supreme Court, he, subsequently, withdrew the appeal.

3. In 1958, appellant instituted CA-G.R. No. 22810-R of the Court of Appeals for a writ of certiorari and mandamus against the appellee and the lower court, the latter having sustained the action of the appellee in withholding certain sums from the shares of the minors aforementioned in the net income of the trust estate for July to September, 1957, in view of the appellant's refusal to reimburse to said estate identical sums received in the form of allowances for the period from April to June, 1957, in excess of the shares of said minors in the net income for that period. After appropriate proceedings, the Court of Appeals rendered a decision on June 25, 1958, dismissing said petition.

The lower court authorized the payment of P5,500.00 for the services thus rendered by Araneta & Araneta, which appellant assails upon the ground that, pursuant to Section 7 of Rule 86 of the Rules of Court:

When the executor or administrator is an attorney he shall not charge against the estate any professional fees for legal services rendered by him.

that the services above referred to inured to the benefit, not of the trust estate, but of the trustee; that the amount of the award is excessive; and that the lower court should have required the introduction of evidence on the extent of the services rendered by the aforementioned law firm before making said award.

Appellant's pretense is untenable. Said Section 7 of Rule 86 refers only to "executors or administrators" of the estate of deceased persons, and does not necessarily apply to trustees. It is true that some functions of the former bear a close analogy with those of the latter. Moreover, a trustee, like, an executor or administrator, holds an office of trust, particularly when, as in the case of appellee herein, the trustee acts as such under judicial authority. Hence, generally, the policy set forth in said Section 7 of Rule 86 — basically sound and wise as it is — should be applicable to trustees. The duties of executors or administrators are, however, fixed and/or limited by law, whereas those of trustee of an express trust — like that which we have under consideration — are, usually, governed by the intention of the trustor or of the parties, if established by contract (Art. 1441, Civil Code of the Philippines). Besides, the duties of trustees may cover a much wider range than those of executors or administrators of the estate of deceased persons. Again the application of Section 7 of Rule 86 to all trusteeships without distinction may dissuade deserving persons from accepting the position of trustee and consequently have a deterrent effect upon the establishment of trusts, at a time when a sizeable part of the burden to undertake important and even essential activities in advanced and/or developing communities or states, particularly in the field of education, science and social welfare, is borne by foundations or other similar organizations based upon the principles of trust. We believe it, therefore, to be the better policy to acknowledge the authority of courts of justice to exercise a sound judgment in determining, in the light of the peculiar circumstances obtaining in each case, whether or not a trustee shall be allowed to pay attorney's fees and charge the same against the trust estate, independently of his compensation as a trustee.

In the case at bar, considering that the appellee was merely defending himself in the proceedings that required the services of counsel; that in each case the stand taken by the appellee was upheld by the court; that the will creating the trust and designating the appellee as trustee explicitly grants him the right to collect for his services such reasonable fees; that, in view of the nature of the relations between the trustor and the trustee, on the one hand, and the trustor and appellant on the other, there can be little doubt but that the trustor would have sanctioned the payment of the attorney's fees involved in this incident; and that it may have been more costly for the trust estate to engage the services of a law firm other than that of Araneta & Araneta, we are not prepared to hold that the lower court has erred in authorizing the payment of said attorney's fees by herein appellee.

For the rest, it is well settled that "a trustee may be indemnified out of the trust estate for his expenses in rendering and proving his accounts and for costs and counsel fees" in connection therewith (54 Am. Jur. 415-416), apart from the fact that the nature of the professional services in question appeared in the records before the

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lower court and that the amount of P5,500 fixed by the same as compensation for such services is not excessive.

Referring now to G.R. No. L-16186, it appears that from July to September, 1958, the appellee had bought for the trust estate, through a broker (Pedro Nolasco da Silva & Co.), a total of 118 common shares of stock of the Philippine-American Drug Co. at P100 each, and that, upon submission of appellee's accounts for said period, appellant objected to the items of expenses relative to the acquisition of said common shares, upon the ground that the investment therein is "unwise in that (the operation of) said company has not, to our knowledge, proved profitable and unlawful in that it is actually an act of self-dealing between the trustee and the beneficiaries of the trust", because the former (appellee) is, also, a stockholder of said company. After the introduction of the evidence of both parties, the lower court overruled the objection and approved said accounts.

It is not disputed that appellee holds, in his individual capacity, 199 out of 30,000 common shares of stock of the Philippine-American Drug Co., whereas his children own 270 out of 5,000 preferred shares of stock of the same enterprise. As a consequence, the interest of appellees and his children in said company is not such as to warrant the charge that the purchase of 118 common stocks for the trust estate amounts to self-dealing by the appellee with himself. What is more, said purchase by the trustee may be considered as an indication that he had displayed in the management of the trust estate the same interest he had in the protection of his own property.

Upon the other hand, it has, also, been established that the book value of each of said 118 common shares of stock, purchased by the trustee at P100 each, is P202.80; that in 1954 the Philippine-American Drug Co. had paid a cash dividend of 6%, side from declaring a 33-1/3% stock dividend for its common shares; and that 6-½ % and 4% cash dividends were paid in 1955 and 1957, respectively. Furthermore, the statement of accounts of the company for the years 1954, 1955, 1956 and 1957, satisfied the lower court that the enterprise "is financially stable and sound". Under the circumstances, we cannot say that the investment in question is unwise.

Appellant's allegation to the effect that shares of stock of the San Miguel Brewery pay higher returns, even if true, does not establish his pretense. Whether an investment is good or not does not depend upon the general, abstract possibility of better investments. Again, one factor that should be taken into account is the degree of influence that the investor may have upon the management of the enterprise concerned, which appellee admittedly has in the Philippine-American Drug Co., but which it is not claimed he wields in the San Miguel Brewery Co.

HERBERT CANG, petitioner, vs.COURT OF APPEALS and Spouses RONALD V. CLAVANO and MARIA CLARA CLAVANO, respondents.

 

ROMERO, J.:

Can minor children be legally adopted without the written consent of a natural parent on the ground that the latter has abandoned them? The answer to this interesting query, certainly not one of first impression, would have to be reached, not solely on the basis of law and jurisprudence, but also the hard reality presented by the facts of the case.

This is the question posed before this Court in this petition for review on certiorari of the Decision 1 of the Court of Appeals affirming the decree of adoption issued by the Regional Trial Court of Cebu City, Branch 14, 2 in Special Proceedings No. 1744-CEB, "In the Matter of the Petition for Adoption of the minors Keith, Charmaine and Joseph Anthony, all surnamed Cang, Spouses Ronald V. Clavano and Maria Clara Diago Clavano, petitioners."

Petitioner Herbert Cang and Anna Marie Clavano who were married on January 27, 1973, begot three children, namely: Keith, born on July 3, 1973; Charmaine, born on January 23, 1977, and Joseph Anthony, born on January 3, 1981.

During the early years of their marriage, the Cang couple's relationship was undisturbed. Not long thereafter, however, Anna Marie learned of her husband's alleged extramarital affair with Wilma Soco, a family friend of the Clavanos.

Upon learning of her husband's alleged illicit liaison, Anna Marie filed a petition for legal separation with alimony pendente lite 3 with the then Juvenile and Domestic Relations Court of Cebu 4 which rendered a decision 5 approving the joint manifestation of the Cang spouses providing that they agreed to "live separately and apart or from bed and board." They further agreed:

(c) That the children of the parties shall be entitled to a monthly support of ONE THOUSAND PESOS (P1,000.00) effective from the date of the filing of the complaint. This shall constitute a first lien on the net proceeds of the house and lot jointly owned by the parties situated at Cinco Village, Mandaue City;

(d) That the plaintiff shall be entitled to enter into any contract or agreement with any person or persons, natural or juridical without the written consent of the husband; or any undertaking or acts that ordinarily requires husband's consent as the parties are by this agreement legally separated; 6

Petitioner then left for the United States where he sought a divorce from Anna Marie before the Second Judicial District Court of the State of Nevada. Said court issued the

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divorce decree that also granted sole custody of the three minor children to Anna Marie, reserving "rights of visitation at all reasonable times and places" to petitioner. 7

Thereafter, petitioner took an American wife and thus became a naturalized American citizen. In 1986, he divorced his American wife and never remarried.

While in the United States, petitioner worked in Tablante Medical Clinic earning P18,000.00 to P20,000.00 a month 8 a portion of which was remitted to the Philippines for his children's expenses and another, deposited in the bank in the name of his children.

Meanwhile, on September 25, 1987, private respondents Ronald V. Clavano and Maria Clara Diago Clavano, respectively the brother and sister-in-law of Anna Marie, filed Special Proceedings No. 1744-CEB for the adoption of the three minor Cang children before the Regional Trial Court of Cebu. The petition bears the signature of then 14-year-old Keith signifying consent to his adoption. Anna Marie likewise filed an affidavit of consent alleging that her husband had "evaded his legal obligation to support" his children; that her brothers and sisters including Ronald V. Clavano, had been helping her in taking care of the children; that because she would be going to the United States to attend to a family business, "leaving the children would be a problem and would naturally hamper (her) job-seeking venture abroad;" and that her husband had "long forfeited his parental rights" over the children for the following reasons:

1. The decision in Civil Case No. JD-707 allowed her to enter into any contract without the written consent of her husband;

2. Her husband had left the Philippines to be an illegal alien in the United States and had been transferring from one place to another to avoid detection by Immigration authorities, and

3. Her husband had divorced her.

Upon learning of the petitioner for adoption, petitioner immediately returned to the Philippines and filed an opposition thereto, alleging that, although private respondents Ronald and Maria Clara Clavano were financially capable of supporting the children while his finances were "too meager" compared to theirs, he could not "in conscience, allow anybody to strip him of his parental authority over his beloved children."

Pending resolution of the petition for adoption, petitioner moved to reacquire custody over his children alleging that Anna Marie had transferred to the United States thereby leaving custody of their children to private respondents. On January 11, 1988, the Regional Trial Court of Cebu City, Branch 19, issued an order finding that Anna Marie had, in effect, relinquished custody over the children and, therefore, such custody should be transferred to the father. The court then directed the Clavanos to deliver custody over the minors to petitioner.

On March 27, 1990, the Regional Trial Court of Cebu City, Branch 14, issued a decree of adoption with a dispositive portion reading as follows:

WHEREFORE, premises considered, the petition for adoption of the minors Keith, Charmaine and Joseph Anthony all surnamed Cang, by the petitioner-spouses Ronald V. Clavano and Maria Clara Diago Clavano is hereby granted and approved. These children shall henceforth be known and called as Keith D. Clavano, Charmaine D. Clavano and Joseph Anthony D. Clavano respectively. Moreover, this Decree of Adoption shall:

(1) Confer upon the adopted children the same rights and duties as though they were in fact the legitimate children of the petitioners;

(2) Dissolve the authority vested in the parents by nature, of the children; and,

(3) Vest the same authority in the petitioners.

Furnish the Local Civil Registrar of Cebu City, Philippines with a copy of this Decree of Adoption for registration purposes.

SO ORDERED.

In so ruling, the lower court was "impelled" by these reasons:

(1) The Cang children had, since birth, developed "close filial ties with the Clavano family, especially their maternal uncle," petitioner Ronald Clavano.

(2) Ronald and Maria Clara Clavano were childless and, with their printing press, real estate business, export business and gasoline station and mini-mart in Rosemead, California, U.S.A., had substantial assets and income.

(3) The natural mother of the children, Anna Marie, nicknamed "Menchu," approved of the adoption because of her heart ailment, near-fatal accident in 1981, and the fact that she could not provide them a secure and happy future as she "travels a lot."

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(4) The Clavanos could provide the children moral and spiritual direction as they would go to church together and had sent the children to Catholic schools.

(5) The children themselves manifested their desire to be adopted by the Clavanos — Keith had testified and expressed the wish to be adopted by the Clavanos while the two younger ones were observed by the court to have "snuggled" close to Ronald even though their natural mother was around.

On the other hand, the lower court considered the opposition of petitioner to rest on "a very shaky foundation" because of its findings that:

(1) Petitioner was "morally unfit to be the father of his children" on account of his being "an improvident father of his family" and an "undisguised Lothario." This conclusion is based on the testimony of his alleged paramour, mother of his two sons and close friend of Anna Marie, Wilma Soco, who said that she and petitioner lived as husband and wife in the very house of the Cangs in Opao, Mandaue City.

(2) The alleged deposits of around $10,000 that were of "comparatively recent dates" were "attempts at verisimilitude" as these were joint deposits the authenticity of which could not be verified.

(3) Contrary to petitioner's claim, the possibility of his reconciliation with Anna Marie was "dim if not nil" because it was petitioner who "devised, engineered and executed the divorce proceedings at the Nevada Washoe County court."

(4) By his naturalization as a U.S. citizen, petitioner "is now an alien from the standpoint of Philippine laws" and therefore, how his "new attachments and loyalties would sit with his (Filipino) children is an open question."

Quoting with approval the evaluation and recommendation of the RTC Social Worker in her Child Study Report, the lower court concluded as follows:

Simply put, the oppositor Herbert Cang has abandoned his children. And abandonment of a child by its (sic) parent is commonly specified by statute as a ground for dispensing with his consent to its (sic) adoption (Re Cozza, 163 Cal. 514 P. 161, Ann. [As. 1914A, 214]). Indeed, in such case, adoption will be allowed not only without the consent of the parent, but even against his opposition (Re McKeag, 141 Cal. 403, 74 P. 1039, 99 Am. St. Rep. 80; Re Camp. 131 Gal. 469,63 P. 736, 82 Am. St. Rep. 371; Graham v. Francis, 83 Colo. 346, 265 P. 690, citing R.C.L.; Seibert, 170 Iowa, 561, 153 N.W. 160, citing R.C.L.; Steams v. Allen, 183 Mass. 404, 67 N.E. 349; 97 Am. St. Rep. 441; Wilson v. Otis, 71 N.H. 483, 53 A. 439, 93 Am. St. Rep. 564; Nugent v. Powell, 4 Wyo, 173, 33 P. 23, 20 L.R.A. 199, 62 Am. St. Rep. 17.) 9

Before the Court of Appeals, petitioner contended that the lower court erred in holding that it would be in the best interest of the three children if they were adopted by private respondents Ronald and Maria Clara Clavano. He asserted that the petition for adoption was fatally defective and tailored to divest him of parental authority because: (a) he did not have a written consent to the adoption; (b) he never abandoned his children; (c) Keith and Charmaine did not properly give their written consent; and (d) the petitioners for adoption did not present as witness the representative of the Department of Social Welfare and Development who made the case study report required by law.

The Court of Appeals affirmed the decree of adoption stating:

Art. 188 of the Family Code requires the written consent of the natural parents of the child to be adopted. It has been held however that the consent of the parent who has abandoned the child is not necessary (Dayrit vs. Piccio, 92 Phil. 729; Santos vs. Ananzanso, 16 SCRA 344). The question therefore is whether or not oppositor may be considered as having abandoned the children. In adoption cases, abandonment connotes any conduct on the part of the parent to forego parental duties and relinquish parental claims to the child, or the neglect or refusal to perform the natural and legal obligations which parents owe their children (Santos vs. Ananzanso, supra), or the withholding of the parent's presence, his care and the opportunity to display voluntary affection. The issue of abandonment is amply covered by the discussion of the first error.

Oppositor argues that he has been sending dollar remittances to the children and has in fact even maintained bank accounts in their names. His duty to provide support comes from two judicial pronouncements. The first, the decision in JD-707 CEB, supra, obliges him to pay the children P1,000.00 a month. The second is mandated by the divorce decree of the Nevada, U.S.A. Federal Court which orders him to pay monthly support of US$50.00 for each child. Oppositor has not submitted any evidence to show

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compliance with the decision in JD-101 CEB, but he has submitted 22 cancelled dollar checks (Exhs. 24 to 45) drawn in the children's names totalling $2,126.98. The last remittance was on October 6, 1987 (Exh. 45). His obligation to provide support commenced under the divorce decree on May 5, 1982 so that as of October 6, 1987, oppositor should have made 53 remittances of $150.00, or a total of $7,950.00. No other remittances were shown to have been made after October 6, 1987, so that as of this date, oppositor was woefully in arrears under the terms of the divorce decree. And since he was totally in default of the judgment in JD-707 CEB, the inevitable conclusion is oppositor had not really been performing his duties as a father, contrary to his protestations.

True, it has been shown that oppositor had opened three accounts in different banks, as follows —

Acct. No. Date Opened Balance Name of Bank

———— —————— ———— ——————

1) 118-606437-4 July 23, 1985 $5,018.50 Great Western Savings,

Oct. 29, 1987 Daly City, Cal., U.S.A.

2) 73-166-8 March 5, 1986 3,129.00 Matewan National Bank

Oct. 26, 1987 of Williamson, West

Virginia, U.S.A.

3) 564-146883 December 31, 1986 2,622.19 Security Pacific National

Oct. 29, 1987 Bank, Daly City, Cal.,

U.S.A.

The first and third accounts were opened however in oppositor's name as trustee for Charmaine Cang and Joseph Anthony Cang, respectively. In other words, the accounts are operated and the amounts withdrawable by oppositor himself and it cannot be said that they belong to the minors. The second is an "or" account, in the names of Herbert Cang or Keith Cang. Since Keith is a minor and in the Philippines, said account is operable only by oppositor and the funds withdrawable by him alone.

The bank accounts do not really serve what oppositor claimed in his offer of evidence "the aim and purpose of providing for a better future and security of his family." 10

Petitioner moved to reconsider the decision of the Court of Appeals. He emphasized that the decree of legal separation was not based on the merits of the case as it was based on a manifestation amounting to a compromise agreement between him and Anna Marie. That he and his wife agreed upon the plan for him to leave for the United States was borne out by the fact that prior to his departure to the United States, the family lived with petitioner's parents. Moreover, he alone did not instigate the divorce proceedings as he and his wife initiated the "joint complaint" for divorce.

Petitioner argued that the finding that he was not fit to rear and care for his children was belied by the award to him of custody over the children in Civil Case No. JD-707. He took exception to the appellate court's findings that as an American citizen he could no longer lay claim to custody over his children because his citizenship would not take away the fact that he "is still a father to his children." As regards his alleged illicit relationship with another woman, he had always denied the same both in Civil Case No. JD-707 and the instant adoption case. Neither was it true that Wilma Soco was a neighbor and family friend of the Clavanos as she was residing in Mandaue City seven (7) kilometers away from the Clavanos who were residents of Cebu City. Petitioner insisted that the testimony of Wilma Soco should not have been given weight for it was only during the hearing of the petition for adoption that Jose Clavano, a brother of Ronald, came to know her and went to her residence in Iligan City to convince her to be a witness for monetary considerations. Lastly, petitioner averred that it would be hypocritical of the Clavanos to claim that they could love the children much more than he could. 11

His motion for reconsideration having been denied, petitioner is now before this Court, alleging that the petition for adoption was fatally defective as it did not have his written consent as a natural father as required by Article 31 (2) of Presidential Decree No. 603, the Child and Youth Welfare Code, and Article 188 (2) of the Family Code.

Art. 31 of P.D. No. 603 provides —

Art. 31. Whose Consent is Necessary. — The written consent of the following to the adoption shall be necessary:

(1) The person to be adopted, if fourteen years of age or, over;

(2) The natural parents of the child or his legal guardian of the Department of Social Welfare or any duly licensed child placement agency under whose care the child may be;

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(3) The natural children, fourteen years and above, of the adopting parents. (Emphasis supplied)

On December 17, 1986, then President Corazon C. Aquino issued Executive Order No. 91 amending Articles 27, 28, 29, 31, 33 and 35 of the Child and Youth Welfare Code. As thus amended, Article 31 read:

Art. 31. Whose Consent is Necessary. — The written consent of the following to the adoption shall be necessary:

(1) The person to be adopted, if fourteen years of age or over;

(2) The natural parents of the child or his legal guardian after receiving counselling and appropriate social services from the Ministry of Social Services and Development or from a duly licensed child-placement agency;

(3) The Ministry of Social Services and Development or any duly licensed child-placement agency under whose care and legal custody the child may be;

(4) The natural children, fourteen years and above, of the adopting parents. (Emphasis supplied)

Jurisdiction being a matter of substantive law, the established rule is that the statute in force at the time of the commencement of the action determines the jurisdiction of the court. 12 As such, when private respondents filed the petition for adoption on September 25, 1987, the applicable law was the Child and Youth Welfare Code, as amended by Executive Order No. 91.

During the pendency of the petition for adoption or on August 3, 1988, the Family Code which amended the Child and Youth Welfare Code took effect. Article 256 of the Family Code provides for its retroactivity "insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other laws." As amended by the Family Code, the statutory provision on consent for adoption now reads:

Art. 188. The written consent of the following to the adoption shall be necessary:

(1) The person to be adopted, if ten years of age or over;

(2) The parents by nature of the child, the legal guardian, or the proper government instrumentality;

(3) The legitimate and adopted children, ten years of age or over, of the adopting parent or parents;

(4) The illegitimate children, ten years of age or over, of the adopting parents, if living with said parent and the latter's spouse, if any; and

(5) The spouse, if any, of the person adopting or to be adopted. (Emphasis supplied)

Based on the foregoing, it is thus evident that notwithstanding the amendments to the law, the written consent of the natural parent to the adoption has remained a requisite for its validity. Notably, such requirement is also embodied in Rule 99 of the Rules of Court as follows:

Sec. 3. Consent to adoption. — There shall be filed with the petition a written consent to the adoption signed by the child, if fourteen years of age or over and not incompetent, and by the child's spouse, if any, and by each of its known living parents who is not insane or hopelessly intemperate or has not abandoned the child, or if the child is in the custody of an orphan asylum, children's home, or benevolent society or person, by the proper officer or officers of such asylum, home, or society, or by such persons; but if the child is illegitimate and has not been recognized, the consent of its father to the adoption shall not be required. (Emphasis supplied)

As clearly inferred from the foregoing provisions of law, the written consent of the natural parent is indispensable for the validity of the decree of adoption. Nevertheless, the requirement of written consent can be dispensed with if the parent has abandoned the child 13 or that such parent is "insane or hopelessly intemperate." The court may acquire jurisdiction over the case even, without the written consent of the parents or one of the parents provided that the petition for adoption alleges facts sufficient to warrant exemption from compliance therewith. This is in consonance with the liberality with which this Court treats the procedural aspect of adoption. Thus, the Court declared:

. . . . The technical rules of pleading should not be stringently applied to adoption proceedings, and it is deemed more important that the petition should contain facts relating to the child and its

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parents, which may give information to those interested, than that it should be formally correct as a pleading. Accordingly, it is generally held that a petition will confer jurisdiction if it substantially complies with the adoption statute, alleging all facts necessary to give the court jurisdiction. 14

In the instant case, only the affidavit of consent of the natural mother was attached to the petition for adoption. Petitioner's consent, as the natural father is lacking. Nonetheless, the petition sufficiently alleged the fact of abandonment of the minors for adoption by the natural father as follows:

3. That the children's mother, sister of petitioner RONALD V. CLAVANO, has given her express consent to this adoption, as shown by Affidavit of Consent, Annex "A". Likewise, the written consent of Keith Cang, now 14 years of age appears on page 2 of this petition; However, the father of the children, Herbert Cang, had already left his wife and children and had already divorced the former, as evidenced by the xerox copy of the DECREE OF DIVORCE issued by the County of Washoe, State of Nevada, U.S.A. (Annex "B") which was filed at the instance of Mr. Cang, not long after he abandoned his family to live in the United States as an illegal immigrant. 15

The allegations of abandonment in the petition for adoption, even absent the written consent of petitioner, sufficiently vested the lower court with jurisdiction since abandonment of the child by his natural parents is one of the circumstances under which our statutes and jurisprudence 16 dispense with the requirement of written consent to the adoption of their minor children.

However, in cases where the father opposes the adoption primarily because his consent thereto was not sought, the matter of whether he had abandoned his child becomes a proper issue for determination. The issue of abandonment by the oppositor natural parent is a preliminary issue that an adoption court must first confront. Only upon, failure of the oppositor natural father to prove to the satisfaction of the court that he did not abandon his child may the petition for adoption be considered on its merits.

As a rule, factual findings of the lower courts are final and binding upon this Court. 17 This Court is not expected nor required to examine or contrast the oral and documentary evidence submitted by the parties. 18 However, although this Court is not a trier of facts, it has the authority to review and reverse the factual findings of the lower courts if it that these do not conform to the evidence on record. 19

In Reyes v. Court of Appeals, 20 this Court has held that the exceptions to the rule that factual findings of the trial court are final and conclusive and may not be reviewed on appeal are the following: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of discretion; (3) when the finding is grounded entirely on speculations, surmises or conjectures; (4) when the judgment of

the Court of Appeals is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.

This Court finds that both the lower court and the Court of Appeals failed to appreciate facts and circumstances that should have elicited a different conclusion 21 on the issue of whether petitioner has so abandoned his children, thereby making his consent to the adoption unnecessary.

In its ordinary sense, the word "abandon'' means to forsake entirely, to forsake or renounce utterly. The dictionaries trace this word to the root idea of "putting under a ban." The emphasis is on the finality and publicity with which a thing or body is thus put in the control of another, hence, the meaning of giving up absolutely, with intent never to resume or claim one's rights or interests. 22 In reference to abandonment of a child by his parent, the act of abandonment imports "any conduct of the parent which evinces a settled purpose to forego all parental duties and relinquish all parental claims to the child." It means "neglect or refusal to perform the natural and legal obligations of care and support which parents owe their children." 23

In the instant case, records disclose that petitioner's conduct did not manifest a settled purpose to forego all parental duties and relinquish all parental claims over his children as to, constitute abandonment. Physical estrangement alone, without financial and moral desertion, is not tantamount to abandonment. 24 While admittedly, petitioner was physically absent as he was then in the United States, he was not remiss in his natural and legal obligations of love, care and support for his children. He maintained regular communication with his wife and children through letters and telephone. He used to send packages by mail and catered to their whims.

Petitioner's testimony on the matter is supported by documentary evidence consisting of the following handwritten letters to him of both his wife and children:

1. Exh. 1 — a 4-page updated letter of Menchu (Anna Marie) addressed to "Dear Bert" on a C. Westates Carbon Phil. Corp. stationery. Menchu stated therein that it had been "a long time since the last time you've heard from me excluding that of the phone conversation we've had." She discussed petitioner's intention to buy a motorbike for Keith, expressing apprehension over risks that could be engendered by Keith's use of it. She said that in the "last phone conversation" she had with petitioner on the birthday of "Ma," she forgot to tell petitioner that Keith's voice had changed; he had become a "bagito" or a teen-ager with many

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"fans" who sent him Valentine's cards. She told him how Charmaine had become quite a talkative "almost dalaga" who could carry on a conversation with her angkong and how pretty she was in white dress when she won among the candidates in the Flores de Mayo after she had prayed so hard for it. She informed him, however, that she was worried because Charmaine was vain and wont to extravagance as she loved clothes. About Joeton (Joseph Anthony), she told petitioner that the boy was smart for his age and "quite spoiled" being the youngest of the children in Lahug. Joeton was mischievous but Keith was his idol with whom he would sleep anytime. She admitted having said so much about the children-because they might not have informed petitioner of "some happenings and spices of life" about themselves. She said that it was "just very exciting to know how they've grown up and very pleasant, too, that each of them have (sic) different characters." She ended the letter with the hope that petitioner was "at the best of health." After extending her regards "to all," she signed her name after the word "Love." This letter was mailed on July 9, 1986 from Cebu to petitioner whose address was P.O. Box 2445, Williamson, West Virginia 25661 (Exh. 1-D).

2. Exh. 2 — letter dated 11/13/84 on a green stationery with golden print of "a note from Menchu" on the left upper corner. Anna Marie stated that "we" wrote to petitioner on Oct. 2, 1984 and that Keith and Joeton were very excited when petitioner "called up last time." She told him how Joeton would grab the phone from Keith just so petitioner would know what he wanted to order. Charmaine, who was asleep, was so disappointed that she missed petitioner's call because she also wanted something that petitioner should buy. Menchu told petitioner that Charmaine wanted a pencil sharpener, light-colored T-shirts for her walking shorts and a (k)nap sack. Anna Marie informed petitioner that the kids were growing up and so were their needs. She told petitioner to be "very fatherly" about the children's needs because those were expensive here. For herself, Anna Marie asked for a subscription of Glamour and Vogue magazines and that whatever expenses he would incur, she would "replace" these. As a postscript, she told petitioner that Keith wanted a size 6 khaki-colored "Sperry topsider shoes."

3. Exh. 3 — an undated note on a yellow small piece of paper that reads:

Dear Herbert,

Hi, how was Christmas and New Year? Hope you had a wonderful one.

By the way thanks for the shoes, it was a nice one. It's nice to be thought of at X'mas. Thanks again.

Sincerely,

Menchu

4. Exh. 4 — a two-page undated letter of Keith on stationery of Jose Clavano, Inc. addressed to "Dear Dad." Keith told his father that they tried to tell their mother "to stay for a little while, just a few weeks after classes start(s)" on June 16. He informed petitioner that Joeton would be in Kinder I and that, about the motorbike, he had told his mother to write petitioner about it and "we'll see what you're (sic) decision will be." He asked for chocolates, nuts, basketball shirt and shorts, rubber shoes, socks, headband, some clothes for outing and perfume. He told petitioner that they had been going to Labug with their mother picking them up after Angkong or Ama had prepared lunch or dinner. From her aerobics, his mother would go for them in Lahug at about 9:30 or 10:00 o'clock in the evening. He wished his father "luck and the best of health" and that they prayed for him and their other relatives. The letter was ended with "Love Keith."

5. Exh. 5 — another undated long letter of Keith. He thanked his father for the Christmas card "with $40.00, $30.00 and $30.00" and the "card of Joeton with $5.00 inside." He told petitioner the amounts following his father's instructions and promise to send money through the mail. He asked his father to address his letter directly to him because he wanted to open his own letters. He informed petitioner of activities during the Christmas season — that they enjoyed eating, playing and giving surprises to their mother. He apprised him of his daily schedule and that their mother had been closely supervising them, instructing them to fold their blankets and pile up their pillows. He informed petitioner that Joeton had become very smart while Charmaine, who was also smart, was very demanding of their mother. Because their mother was leaving for the United States on February 5, they would be missing her like they were missing petitioner. He asked for his "things" and $200.00. He told petitioner more anecdotes about Joeton like he would make the sign of the cross even when they would pass by the Iglesia ni Cristo church and his insistence that Aquino was not dead because he had seen him on the betamax machine. For Keith, Charmaine had become "very maldita" who was not always satisfied with her dolls and things but Joeton was full of surprises. He ended the letter with "Love your son, Keith." The letter was mailed on February 6, 1985 (Exh. 5-D).

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6. Exh. 6 — an undated letter Charmaine. She thanked petitioner for the bathing suit, key chain, pencil box, socks, half shirt, pencil sharpener and $50.00. She reminded him of her birthday on January 23 when she would turn 9 years old. She informed him that she wore size 10 and the size of her feet was IM. They had fun at Christmas in Lahug but classes would start on January 9 although Keith's classes had started on January 6. They would feel sad again because Mommy would be leaving soon. She hoped petitioner would keep writing them. She signed, "Love, Charmaine."

7. Exh . 7 — an undated letter of Keith. He explained to petitioner that they had not been remiss in writing letters to him. He informed him of their trip to Manila — they went to Malacañang, Tito Doy Laurel's house, the Ministry of Foreign Affairs, the executive house, Tagaytay for three days and Baguio for one week. He informed him that he got "honors," Charmaine was 7th in her class and Joeton had excellent grades. Joeton would be enrolled in Sacred Heart soon and he was glad they would be together in that school. He asked for his "reward" from petitioner and so with Charmaine and Joeton. He asked for a motorbike and dollars that he could save. He told petitioner that he was saving the money he had been sending them. He said he missed petitioner and wished him the best. He added that petitioner should call them on Sundays.

8. Exh. 8 — a letter from Joeton and Charmaine but apparently written by the latter. She asked for money from petitioner to buy something for the school and "something else." She, promised not to spend so much and to save some. She said she loved petitioner and missed him. Joeton said "hi!" to petitioner. After ending the letter with "Love, Joeton and Charmaine," she asked for her prize for her grades as she got seventh place.

9. Exh. 9 — undated letter of Keith. He assured petitioner that he had been writing him; that he would like to have some money but he would save them; that he learned that petitioner had called them up but he was not around; that he would be going to Manila but would be back home May 3; that his Mommy had just arrived Thursday afternoon, and that he would be the "official altar boy." He asked petitioner to write them soon.

10. Exh. 10 — Keith thanked petitioner for the money he sent. He told petitioner that he was saving some in the bank and he was proud because he was the only one in his group who saved in the bank. He told him that Joeton had become naughty and would claim as his own the shirts sent to Keith by petitioner. He advised petitioner to send pants and shirts to Joeton, too, and asked for a pair of topsider shoes and candies. He informed petitioner that he was a member of the basketball team and that his mom would drive

for his group. He asked him to call them often like the father of Ana Christie and to write them when he would call so that they could wait for it. He informed petitioner that they had all grown bigger and heavier. He hoped petitioner would be happy with the letter that had taken him so long to write because he did not want to commit any mistakes. He asked petitioner to buy him perfume (Drakkar) and, after thanking petitioner, added that the latter should buy something for Mommy.

11. Exh. 11 — a Christmas card "For My Wonderful Father" dated October 8, 1984 from Keith, Charmaine and Joeton.

12. Exh. 12 — another Christmas card, "Our Wish For You" with the year '83 written on the upper right hand corner of the inside page, from Keith, Charmaine and Joeton.

13. Exh. 13 — a letter of Keith telling petitioner that he had written him even when their Mom "was there" where she bought them clothes and shoes. Keith asked petitioner for $300.00. Because his mother would not agree to buy him a motorbike, he wanted a Karaoke unit that would cost P12,000.00. He informed petitioner that he would go to an afternoon disco with friends but their grades were all good with Joeton receiving "stars" for excellence. Keith wanted a bow and arrow Rambo toys and G.I. Joe. He expressed his desire that petitioner would come and visit them someday.

14. Exh. 14 — a letter of Keith with one of the four pages bearing the date January 1986. Keith told his father that they had received the package that the latter sent them. The clothes he sent, however, fitted only Keith but not Charmaine and Joeton who had both grown bigger. Keith asked for grocery items, toys and more clothes. He asked, in behalf of his mother, for low-heeled shoes and a dress to match, jogging pants, tights and leotards that would make her look sexy. He intimated to petitioner that he had grown taller and that he was already ashamed to be asking for things to buy in the grocery even though his mother had told him not to be shy about it.

Aside from these letters, petitioner also presented certifications of banks in the U.S.A. showing that even prior to the filing of the petition for adoption, he had deposited amounts for the benefit of his children. 25 Exhibits 24 to 45 are copies of checks sent by petitioner to the children from 1985 to 1989.

These pieces of evidence are all on record. It is, therefore, quite surprising why the courts below simply glossed over these, ignoring not only evidence on financial support but also the emotional exchange of sentiments between petitioner and his family. Instead, the courts below emphasized the meagerness of the amounts he sent to his children and the fact that, as regards the bank deposits, these were

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"withdrawable by him alone." Simply put, the courts below attached a high premium to the prospective adopters' financial status but totally brushed aside the possible repercussion of the adoption on the emotional and psychological well-being of the children.

True, Keith had expressed his desire to be adopted by his uncle and aunt. However, his seeming steadfastness on the matter as shown by his testimony is contradicted by his feelings towards his father as revealed in his letters to him. It is not at all farfetched to conclude that Keith's testimony was actually the effect of the filing of the petition for adoption that would certainly have engendered confusion in his young mind as to the capability of his father to sustain the lifestyle he had been used to.

The courts below emphasized respondents' emotional attachment to the children. This is hardly surprising for, from the very start of their young lives, the children were used to their presence. Such attachment had persisted and certainly, the young ones' act of snuggling close to private respondent Ronald Clavano was not indicative of their emotional detachment from their father. Private respondents, being the uncle and aunt of the children, could not but come to their succor when they needed help as when Keith got sick and private respondent Ronald spent for his hospital bills.

In a number of cases, this Court has held that parental authority cannot be entrusted to a person simply because he could give the child a larger measure of material comfort than his natural parent. Thus, in David v. Court of Appeals, 26 the Court awarded custody of a minor illegitimate child to his mother who was a mere secretary and market vendor instead of to his affluent father who was a married man, not solely because the child opted to go with his mother. The Court said:

Daisie and her children may not be enjoying a life of affluence that private respondent promises if the child lives with him. It is enough, however, that petitioner is earning a decent living and is able to support her children according to her means.

In Celis v. Cafuir 27 where the Court was confronted with the issue of whether to award custody of a child to the natural mother or to a foster mother, this Court said:

This court should avert the tragedy in the years to come of having deprived mother and son of the beautiful associations and tender, imperishable memories engendered by the relationship of parent and child. We should not take away from a mother the opportunity of bringing up her own child even at the cost of extreme sacrifice due to poverty and lack of means; so that afterwards, she may be able to look back with pride and a sense of satisfaction at her sacrifices and her efforts, however humble, to make her dreams of her little boy come true. We should not forget that the relationship between a foster mother and a child is not natural but artificial. If the child turns out to be a failure or forgetful of what its foster parents had done for him, said parents might yet count and appraise (sic) all that they have done and spent for him and with

regret consider all of it as a dead loss, and even rue the day they committed the blunder of taking the child into their hearts and their home. Not so with a real natural mother who never counts the cost and her sacrifices, ever treasuring memories of her associations with her child, however unpleasant and disappointing. Flesh and blood count. . . . .

In Espiritu v. Court of Appeals, 28 the Court stated that "(I)n ascertaining the welfare and best interests of the child, courts are mandated by the Family Code to take into account all relevant considerations." Thus, in awarding custody of the child to the father, the Court said:

A scrutiny of the pleadings in this case indicates that Teresita, or at least, her counsel are more intent on emphasizing the "torture and agony" of a mother separated from her children and the humiliation she suffered as a, result of her character being made a key issue in court rather than the feelings and future, the best interests and welfare of her children. While the bonds between a mother and her small child are special in nature, either parent, whether father or mother, is bound to suffer agony and pain if deprived of custody. One cannot say that his or her suffering is greater than that of the other parent. It is not so much the suffering, pride, and other feelings of either parent but the welfare of the child which is the paramount consideration. (Emphasis supplied) 29

Indeed, it would be against the spirit of the law if financial consideration were to be the paramount consideration in deciding whether to deprive a person of parental authority over his children. There should be a holistic approach to the matter, taking into account the physical, emotional, psychological, mental, social and spiritual needs of the child. 30 The conclusion of the courts below that petitioner abandoned his family needs more evidentiary support other than his inability to provide them the material comfort that his admittedly affluent in-laws could provide. There should be proof that he had so emotionally abandoned them that his children would not miss his guidance and counsel if they were given to adopting parents. The letters he received from his children prove that petitioner maintained the more important emotional tie between him and his children. The children needed him not only because he could cater to their whims but also because he was a person they could share with their daily activities, problems and triumphs.

The Court is thus dismayed that the courts below did not look beyond petitioner's "meager" financial support to ferret out other indications on whether petitioner had in fact abandoned his family. The omission of said courts has led us to examine why the children were subjected to the process of adoption, notwithstanding the proven ties that bound them to their father. To our consternation, the record of the case bears out the fact that the welfare of the children was not exactly the "paramount consideration" that impelled Anna Marie to consent to their adoption.

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In her affidavit of consent, Anna Marie expressly said that leaving the children in the country, as she was wont to travel abroad often, was a problem that would naturally hamper her job-seeking abroad. In other words, the adoption appears to be a matter of convenience for her because Anna Marie herself is financially capable of supporting her children. 31 In his testimony, private respondent Ronald swore that Anna Marie had been out of the country for two years and came home twice or three times, 32 thereby manifesting the fact that it was she who actually left her children to the care of her relatives. It was bad enough that their father left their children when he went abroad, but when their mother followed suit for her own reasons, the situation worsened. The Clavano family must have realized this. Hence, when the family first discussed the adoption of the children, they decided that the prospective adopter should be Anna Marie's brother Jose. However, because he had children of his own, the family decided to devolve the task upon private respondents. 33

This couple, however, could not always be in Cebu to care for the children. A businessman, private respondent Ronald Clavano commutes between Cebu and Manila while his wife, private respondent Maria Clara, is an international flight stewardess. 34 Moreover, private respondent Ronald claimed that he could "take care of the children while their parents are away," 35 thereby indicating the evanescence of his intention. He wanted to have the children's surname changed to Clavano for the reason that he wanted to take them to the United States as it would be difficult for them to get a visa if their surname were different from his. 36 To be sure, he also testified that he wanted to spare the children the stigma of being products of a broken home.

Nevertheless, a close analysis of the testimonies of private respondent Ronald, his sister Anna Marie and their brother Jose points to the inescapable conclusion that they just wanted to keep the children away from their father. One of the overriding considerations for the adoption was allegedly the state of Anna Marie's health — she was a victim of an almost fatal accident and suffers from a heart ailment. However, she herself admitted that her health condition was not that serious as she could still take care of the children. 37 An eloquent evidence of her ability to physically care for them was her employment at the Philippine Consulate in Los Angeles 38 — she could not have been employed if her health were endangered. It is thus clear that the Clavanos' attempt at depriving petitioner of parental authority apparently stemmed from their notion that he was an inveterate womanizer. Anna Marie in fact expressed fear that her children would "never be at ease with the wife of their father." 39

Petitioner, who described himself as single in status, denied being a womanizer and father to the sons of Wilma Soco. 40 As to whether he was telling the truth is beside the point. Philippine society, being comparatively conservative and traditional, aside from being Catholic in orientation, it does not countenance womanizing on the part of a family man, considering the baneful effects such irresponsible act visits on his family. Neither may the Court place a premium on the inability of a man to distinguish between siring children and parenting them. Nonetheless, the actuality that petitioner carried on an affair with a paramour cannot be taken as sufficient basis for the conclusion that petitioner was necessarily an unfit father. 41 Conventional wisdom and common human experience show that a "bad" husband does not necessarily make a "bad" father. That a husband is not exactly an upright man is not, strictly speaking, a

sufficient ground to deprive him as a father of his inherent right to parental authority over the children. 42 Petitioner has demonstrated his love and concern for his children when he took the trouble of sending a telegram 43 to the lower court expressing his intention to oppose the adoption immediately after learning about it. He traveled back to this country to attend to the case and to testify about his love for his children and his desire to unite his family once more in the United States. 44

Private respondents themselves explained why petitioner failed to abide by the agreement with his wife on the support of the children. Petitioner was an illegal alien in the United States. As such, he could not have procured gainful employment. Private respondents failed to refute petitioner's testimony that he did not receive his share from the sale of the conjugal home, 45 pursuant to their manifestation/compromise agreement in the legal separation case. Hence, it can be reasonably presumed that the proceeds of the sale redounded to the benefit of his family, particularly his children. The proceeds may not have lasted long but there is ample evidence to show that thereafter, petitioner tried to abide by his agreement with his wife and sent his family money, no matter how "meager."

The liberality with which this Court treats matters leading to adoption insofar as it carries out the beneficent purposes of the law to ensure the rights and privileges of the adopted child arising therefrom, ever mindful that the paramount consideration is the overall benefit and interest of the adopted child, should be understood in its proper context and perspective. The Court's position, should not be misconstrued or misinterpreted as to extend to inferences beyond the contemplation of law and jurisprudence. 46 The discretion to approve adoption proceedings is not to be anchored solely on best interests of the child but likewise, with due regard to the natural rights of the parents over the child. 47

In this regard, this Court notes private respondents' reliance on the manifestation/compromise agreement between petitioner and Anna Marie which became the basis of the decree of legal separation. According to private respondents' counsel, 48 the authority given to Anna Marie by that decree to enter into contracts as a result of the legal separation was "all embracing" 49 and, therefore, included giving her sole consent to the adoption. This conclusion is however, anchored on the wrong premise that the authority given to the innocent spouse to enter into contracts that obviously refer to their conjugal properties, shall include entering into agreements leading to the adoption of the children. Such conclusion is as devoid of a legal basis as private respondents' apparent reliance on the decree of legal separation for doing away with petitioner's consent to the adoption.

The transfer of custody over the children to Anna Marie by virtue of the decree of legal separation did not, of necessity; deprive petitioner of parental authority for the purpose of placing the children up for adoption. Article 213 of the Family Code states: ". . . in case of legal separation of parents, parental authority shall be exercised by the parent designated by the court." In awarding custody, the court shall take into account "all relevant considerations, especially the choice of the child over seven years of age, unless the parent chosen is unfit."

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If should be noted, however, that the law only confers on the innocent spouse the "exercise" of parental authority. Having custody of the child, the innocent spouse shall implement the sum of parental rights with respect to his rearing and care. The innocent spouse shall have the right to the child's services and earnings, and the right to direct his activities and make decisions regarding his care and control, education, health and religion. 50

In a number of cases, this Court has considered parental authority, the joint exercise of which is vested by the law upon the parents, 51 as

. . . a mass of rights and obligations which the law grants to parents for the purpose of the children's physical preservation and development, as well as the cultivation of their intellect and the education of their hearts and senses. As regards parental authority, "there is no power, but a task; no complex of rights, but a sum of duties; no sovereignty but a sacred trust for the welfare of the minor."

Parental authority and responsibility are inalienable and may not be transferred or renounced except in cases authorized by law. The right attached to parental authority, being purely personal, the law allows a waiver of parental authority only in cases of adoption, guardianship and surrender to a children's home or an orphan institution. When a parent entrusts the custody of a minor to another, such as a friend or godfather, even in a document, what is given is merely temporary custody and it does not constitute a renunciation of parental authority. Even if a definite renunciation is manifest, the law still disallows the same.

The father and mother, being the natural guardians of unemancipated children, are duty-bound and entitled to keep them in their custody and company. 52 (Emphasis supplied)

As such, in instant case, petitioner may not be deemed as having been completely deprived of parental authority, notwithstanding the award of custody to Anna Marie in the legal separation case. To reiterate, that award was arrived at by the lower court on the basis of the agreement of the spouses.

While parental authority may be waived, as in law it may be subject to a compromise, 53 there was no factual finding in the legal separation case that petitioner was such an irresponsible person that he should be deprived of custody of his children or that there are grounds under the law that could deprive him of parental authority. In fact, in the legal separation case, the court thereafter ordered the transfer of custody over the children from Anna Marie back to petitioner. The order was not implemented because of Anna Marie's motion for reconsideration thereon. The Clavano family also vehemently objected to the transfer of custody to the petitioner, such that the latter was forced to file a contempt charge against them. 54

The law is clear that either parent may lose parental authority over the child only for a valid reason. No such reason was established in the legal separation case. In the instant case for adoption, the issue is whether or not petitioner had abandoned his children as to warrant dispensation of his consent to their adoption. Deprivation of parental authority is one of the effects of a decree of adoption. 55 But there cannot be a valid decree of adoption in this case precisely because, as this Court has demonstrated earlier, the finding of the courts below on the issue of petitioner's abandonment of his family was based on a misappreciation that was tantamount to non-appreciation, of facts on record.

As regards the divorce obtained in the United States, this Court has ruled in Tenchavez v. Escaño 56 that a divorce obtained by Filipino citizens after the effectivity of the Civil Code is not recognized in this jurisdiction as it is contrary to State policy. While petitioner is now an American citizen, as regards Anna Marie who has apparently remained a Filipino citizen, the divorce has no legal effect.

Parental authority is a constitutionally protected State policy borne out of established customs and tradition of our people. Thus, in Silva v. Court of Appeals, 57 a case involving the visitorial rights of an illegitimate parent over his child, the Court expressed the opinion that:

Parents have the natural right, as well as the moral and legal duty, to care for their children, see to their upbringing and safeguard their best interest and welfare. This authority and responsibility may not be unduly denied the parents; neither may it be renounced by them. Even when the parents are estranged and their affection for each other is lost, the attachment and feeling for their offsprings invariably remain unchanged. Neither the law not the courts allow this affinity to suffer absent, of course, any real, grave and imminent threat to the well being of the child.

Since the incorporation of the law concerning adoption in the Civil Code, there has been a pronounced trend to place emphasis in adoption proceedings, not so much on the need of childless couples for a child, as on the paramount interest, of a child who needs the love and care of parents. After the passage of the Child and Youth Welfare Code and the Family Code, the discernible trend has impelled the enactment of Republic Act No. 8043 on Intercountry,Adoption 58 and Republic Act No. 8552 establishing the rules on the domestic adoption of Filipino children. 59

The case at bar applies the relevant provisions of these recent laws, such as the following policies in the "Domestic Adoption Act of 1998":

(a) To ensure that every child remains under the care and custody of his/her parent(s) and be provided with love, care, understanding and security towards the full and harmonious development of his/her personality. 60

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(b) In all matters relating to the care, custody and adoption of a child, his/her interest shall be the paramount consideration in accordance with the tenets set forth in the United Nations (UN) Convention on the Rights of the Child. 61

(c) To prevent the child from unnecessary separation from his/her biological parent(s). 62

Inasmuch as the Philippines is a signatory to the United Nations Convention on the Rights of the Child, the government and its officials are duty bound to comply with its mandates. Of particular relevance to instant case are the following provisions:

States Parties shall respect the responsibilities, rights and duties of parents . . . to provide, in a manner consistent with the evolving capacities of the child, appropriate direction and guidance in the exercise by the child of the rights recognized in the present Convention. 63

States Parties shall respect the right of the child who is separated from one or both parents to maintain personal relations and direct contact with both parents on a regular basis, except if it is contrary to the child's best interests. 64

A child whose parents reside in different States shall have the right to maintain on a regular basis, save in exceptional circumstances personal relations and direct contacts with both parents . . . 65

States Parties shall respect the rights and duties of the parents . . . to provide direction to the child in the exercise of his or her right in a manner consistent with the evolving capacities of the child. 66

Underlying the policies and precepts in international conventions and the domestic statutes with respect to children is the overriding principle that all actuations should be in the best interests of the child. This is not, however, to be implemented in derogation of the primary right of the parent or parents to exercise parental authority over him. The rights of parents vis-à-vis that of their children are not antithetical to each other, as in fact, they must be respected and harmonized to the fullest extent possible.

Keith, Charmaine and Joseph Anthony have all grown up. Keith and Charmaine are now of legal age while Joseph Anthony is approaching eighteen, the age of majority. For sure, they shall be endowed with the discretion to lead lives independent of their parents. This is not to state that this case has been rendered moot and academic, for their welfare and best interests regarding their adoption, must be determined as of the time that the petition for adoption was filed. 67 Said petition must be denied as it was

filed without the required consent of their father who, by law and under the facts of the case at bar, has not abandoned them.

WHEREFORE, the instant petition for review on certiorari is hereby GRANTED. The questioned Decision and Resolution of the Court of Appeals, as well as the decision of the Regional Trial Court of Cebu, are SET ASIDE thereby denying the petition for adoption of Keith, Charmaine and Joseph Anthony, all surnamed Cang, by the spouse respondents Ronald and Maria Clara Clavano. This Decision is immediately executory.

REPUBLIC OF THE PHILIPPINES, petitioner, vs.LEONOR VALENCIA, as Natural mother and guardian of her minor children, BERNARDO GO and JESSICA GO; and THE HON. AGAPITO HONTANOSAS, Judge of the COURT OF FIRST INSTANCE OF CEBU, Branch XI.

 

GUTIERREZ, JR., J.:

This is a petition to review the decision of respondent Judge Agapito Hontanosas of the Court of First Instance of Cebu, Branch XI who ordered the Local Civil Registrar of Cebu to make the necessary cancellation and/or correction in the entries of birth of Bernardo Go and Jessica Go in the Civil Registry of the City of Cebu.

Respondent Leonor Valencia, for and in behalf of her minor children, Bernardo Go and Jessica Go filed with the Court of First Instance of Cebu a petition for the cancellation and/or correction of entries of birth of Bernardo Go and Jessica Go in the Civil Registry of the City of Cebu. The case was docketed as Special Proceedings No. 3043-R.

The Solicitor General filed an opposition to the petition alleging that the petition for correction of entry in the Civil Registry pursuant to Article 412 of the New Civil Code of the Philippines in relation to Rule 108 of the Revised Rules of Court, contemplates a summary proceeding and correction of mere clerical errors, those harmless and innocuous changes such as the correction of a name that is merely mispelled, occupation of parents, etc., and not changes or corrections involving civil status, nationality, or citizenship which are substantial and controversial.

Finding the petition to be sufficient in form and substance, the trial court issued an order directing the publication of the petition and the date of hearing thereof in the Cebu Advocate, a newspaper of general circulation in the city and province of Cebu, once a week for three (3) consecutive weeks, and notice thereof, duly served on the Solicitor General, the Local Civil Registrar of Cebu City and Go Eng.

Respondent Leonor Valencia, filed her reply to the opposition wherein she admitted that the present petition seeks substantial changes involving the civil status and

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nationality or citizenship of respondents, but alleged that substantial changes in the civil registry records involving the civil status of parents, their nationality or citizenship may be allowed if- (1) the proper suit is filed, and (2) evidence is submitted, either to support the allegations of the petition or to disprove the same; that respondents have complied with these requirements by filing the present special proceeding for cancellation or correction of entries in the civil registry pursuant to Rule 108 of the Revised Rules of Court and that they have caused reasonable notice to be given to the persons named in the petition and have also caused the order for the hearings of their petition to be published for three (3) consecutive weeks in a newspaper of general circulation in the province.

Subsequently, the Local Civil Registrar of Cebu City filed a motion to dismiss on the ground that since the petition seeks to change the nationality or citizenship of Bernardo Go and Jessica Go from "Chinese" to "Filipino" and their status from "Legitimate" to Illegitimate", and changing also the status of the mother from "married" to "single" the corrections sought are not merely clerical but substantial, involving as they do the citizenship and status of the petitioning minors and the status of their mother.

The lower court denied the motion to dismiss.

After trial on the merits during which the parties were given all the opportunity to present their evidence and refute the evidence and arguments of the other side, the lower court rendered a decision the dispositive portion of which reads:

WHEREFORE, Judgment is hereby rendered granting the instant petition and ordering the Local Civil Registrar of the City of Cebu to make the necessary cancellation and/or correction on the following entries:

A. In the Record of Birth of BERNARDO GO, to register said Bernardo Go as 'FILIPINO' instead of 'CHINESE'; as 'ILLEGITIMATE instead of LEGITIMATE', and his father's (GO ENG) and mother's (LEONOR VALENCIA) civil status as 'SINGLE instead of MARRIED';

B. In the Record of Birth of JESSICA GO to register said Jessica Go as 'FILIPINO' instead of 'CHINESE'; as 'ILLEGITIMATE' instead of 'LEGITIMATE' and father's (GO ENG) and mother's (LEONOR VALENCIA) civil status as 'SINGLE instead of MARRIED': and

C. In both Records of Birth of Bernardo Go and Jessica Go to change the entry on Petitioner's Citizenship from 'CHINESE to FILIPINO'.

Pursuant to Section 6, Rule 103 of the Rules of Court, the Clerk of Court is hereby directed to furnish a copy of this decision to the

Office of the Local Civil Registrar of Cebu City, who shall forthwith enter the cancellation and/'or correction of entries of birth of Bernardo Go and Jessica Go in the Civil Registry as adverted to above.

From the foregoing decision, oppositor-appellant Republic of the Philippines appealed to us by way of this petition for review on certiorari.

The petitioner Republic of the Philippines raises a lone error for the grant of this petition, stating that:

THE LOWER COURT ERRED IN ORDERING THE CORRECTION OF THE PETITIONER'S CITIZENSHIP AND CIVIL STATUS AND THE CITIZENSHIP AND CIVIL STATUS OF HER MINOR CHILDREN BERNARDO GO AND JESSICA GO.

The petitioner premises its case on precedents from the 1954 case of Ty Kong Tin v. Republic (94 Phil. 321) to the 1981 case of Republic v. Caparosso (107 SCRA 67), that entries which can be corrected under Article 412 of the New Civil Code as implemented by Rule 108 of the Revised Rules of Court refer to those mistakes that are clerical in nature or changes that are harmless and innocuous (Wong v. Republic, 115 SCRA 496). In Republic v. Medina (119 SCRA 270) citing the case of Chua Wee, et al, v. Republic (38 SCRA 409), there was this dicta:

From the time the New Civil Code took effect on August 30, 1950 until the promulgation of the Revised Rules of Court on January 1, 1964, there was no law nor rule of court prescribing the procedure to secure judicial authorization to effect the desired innocuous rectifications or alterations in the civil register pursuant to Article 412 of the New Civil Code. Rule 108 of the Revise Rules of Court now provides for such a procedure which should be limited solely to the implementation of Article 412, the substantive law on the matter of correcting entries in the civil register. Rule 108, lie all the other provisions of the Rules of Court, was promulgated by the Supreme Court pursuant to its rule- making authority under Sec. 13 of Art. VIII of the Constitution, which directs that such rules of court 'shall not diminish or increase or modify substantive rights.' If Rule 108 were to be extended beyond innocuous or harmless changes or corrections of errors which are visible to the eye or obvious to the understanding, so as to comprehend substantial and controversial alterations concerning citizenship, legitimacy or paternity or filiation, or legitimacy of marriage, said Rule 108 would thereby become unconstitutional for it would be increasing or modifying substantive rights, which changes are not authorized under Article 412 of the New Civil Code.

xxx xxx xxx

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It is undoubtedly true that if the subject matter of a petition is not for the correction of clerical errors of a harmless and innocuous nature, but one involving nationality or citizenship, which is indisputably substantial as well as controverted, affirmative relief cannot be granted in a proceeding summary in nature. However, it is also true that a right in law may be enforced and a wrong may be remedied as long as the appropriate remedy is used. This Court adheres to the principle that even substantial errors in a civil registry may be corrected and the true facts established provided the parties aggrieved by the error avail themselves of the appropriate adversary proceeding. As a matter of fact, the opposition of the Solicitor General dated February 20, 1970 while questioning the use of Article 412 of the Civil Code in relation to Rule 108 of the Revised Rules of Court admits that "the entries sought to be corrected should be threshed out in an appropriate proceeding.

What is meant by "appropriate adversary proceeding?" Black's Law Dictionary defines "adversary proceeding as follows:

One having opposing parties; contested, as distinguished from an ex parte application, one of which the party seeking relief has given legal warning to the other party, and afforded the latter an opportunity to contest it. Excludes an adoption proceeding." (Platt v. Magagnini, 187 p. 716, 718, 110 Was. 39).

The private respondent distinguishes between summary proceedings contemplated under Article 412 of the Civil Code and fullblown adversary proceedings which are conducted under Rule 108 of the Rules of Court.

She states:

It will please be considered that the nature of the matters that may be changed or corrected are of two kinds. It may either be mistakes that are clerical in nature or substantial ones. Under the first category are those 'harmless and innocuous changes, such as correction of a name that is clearly misspelled, occupation of the parents, etc.,' (Ansaldo v. Republic, No. L-10276, Feb. 14, 1958, 54 O.G. 5886) or 'one' that is visible to the eyes or obvious to the understanding'. (Black v. Republic, No. L-10869, Nov. 28, 1958, 104 Phil. 848).

To the second category falls those which affect the civil status or citizenship or nationality of a party (Ty Kong Tin v. Republic, No. L-5609, Feb. 5, 1954, 94 Phil. 321: Tan Su v. Republic, No. L-12140, April 29, 1959, 105 Phil. 578: Black v. Republic, No. L-10869, Nov. 28, 1958, 104 Phil. 848; Bantoco Coo v. Republic, No. L-14978, May 23,1961, 2 SCRA 42: Barillo v. Republic, No. L-14823, Dec. 28, 1961, 3 SCRA 725).

Changes or corrections in the entries in the civil registry were governed, at first, by Act No. 3753 (Civil Registry Law) which placed these matters exclusively upon the sound judgment and discretion of the civil registrars. With the effectivity of the New Civil Code on August 30, 1950, these matters were governed by Article 412 thereof which prescribes judicial order before an entry in a civil register shall be changed or corrected. This requirement was deemed necessary to forestall the commission of fraud or other mischief in these matters.

But even then, it is not any correction that can be considered under Article 412 of he Civil Code. The nature of the corrections sought has to be considered and if found to refer only to clerical errors the same may be allowed under said article which was construed to contemplate only a summary proceeding.

And so in the Ty Kong Tin case, this Honorable Court took occasion to draw a distinction between what entries in the civil register could be corrected under Article 412 of the New Civil Code and what could not. In the process, to our mind, this Honorable Court set down propositions which hold true not only in that case but also in the subsequent cases for the latter merely reiterated the Ty Kong Tin decision. These are:

First, that proceedings under Article 412 of the New Civil Code are summary:

Second, that corrections in the entires in the civil register may refer to either mere mistakes that are clerical in nature or substantial ones which affects the civil status or -the nationality or citizenship of the persons involved; and

Third, that if the change or correction sought refers to mere correction of mistakes that are clerical in nature the same may be done, under Article 412 of the Civil Code; otherwise, if it refers to a substantial change which affects the civil status or citizenship of a party. the matter should be threshed out in a proper action.

To our humble estimation, these propositions do not altogether bar or preclude substantial changes or corrections involving such details as the civil status or nationality of a party. As a matter of fact, just three years after the Ty Kong Tin decision, this Honorable Court allowed a party to correct mistakes involving such substantial matters as his birthplace and citizenship in the birth certificates of his two sons. (Lim v. Republic, No. L-8932, May 31, 1957, 101 Phil. 1235)

Page 26 of 33

Only that where the correction pertains to matters which are important and controversial certain conditions sine que non have to be complied with. Thus it was held:

If it refers to a substantial change which affects the status or citizenship of a party, the matter should be threshed out in a proper action ... .' (Ty Kong Tin v. Republic, supra)

. . . . for changes involving the civil status of the parents, their nationality or citizenship, those are grave and important matters which may have a bearing and effect on the citizenship and nationality not only of said parents, but of the offsprings, and to seek said changes, it is not only the State, but also all parties concerned and affected should be made parties defendants or respondents, and evidence should be submitted, either to support the allegations of the petition or complaint, or also to disprove the same so that any order or decision in the case may be made in the entry in a civil register that will affect or even determine conclusively the citizenship or nationality of a person therein involved. (Ansaldo v. Republic, 54 O.G. 5886; Emphasis supplied; Reiterated in the cases of: Tan Su v. Republic, supra; Bantoto Coo v. Republic, supra; Barillo v. Republic, supra; San Luis de Castro v. Republic, L-17431, April 30, 1963; Ilu Lin v. Republic, L- 18213, Dec. 24, 1963; Reyes v. Republic, No. L-17642, Nov. 27, 1964; Calicdan Baybayan v. Republic, L-20707, March 18, 1966; Tan v. Republic, L-19847, April 29, 1966).

If at all what is forbidden is, in the words of Mr. Justice J.B.L. Reyes, 'only the entering of material corrections or amendments in the record of birth by virtue of a judgment in a summary action against the Civil Registrar. (Matias v. Republic, No. L-26982, May 8, 1969.

It will thus be gleaned from the foregoing that corrections involving such matters as the civil status of the parents, their nationality or citizenship may be allowed provided the proper suit is filed.

The court's role in hearing the petition to correct certain entries in the civil registry is to ascertain the truth about the facts recorded therein. Under our system of administering justice, truth is best ascertained or approximated by trial conducted under the adversary system,

Excerpts from the Report on Professional Responsibility issued jointly by the Association of American Law Schools and the American Bar Association explain why:

An adversary presentation seems the only effective means for combatting this natural human tendency to judge too swiftly in

terms of the familiar that which is not yet fully known. The arguments of counsel hold the case, as it were, in suspension between two opposing interpretations of it. While the proper classification of the case is thus kept unresolved, there is time to explore all of its peculiarities and nuances.

These are the contributions made by partisan advocacy during the public hearing of the cause. When we take into account the preparation that must precede the hearing, the essential quality of the advocate's contribution becomes even more apparent. Preceding the hearing inquiries must be instituted to determine what facts can be proved or seem sufficiently established to warrant a formal test of their truth during the hearing. There must also be a preliminary analysis of the issues, so that the hearing may have form and direction. These preparatory measures are indispensable whether or not the parties involved in the controversy are represented by advocates.

Where that representation is present there is an obvious advantage in the fact that the area of dispute may be greatly reduced by an exchange of written pleadings or by stipulations of counsel. Without the participation of someone who can act responsibly for each of the parties, this essential narrowing of the issues becomes impossible. But here again the true significance of partisan advocacy lies deeper, touching once more the integrity of the adjudicative process itself. It is only through the advocate's participation that the hearing may remain in fact what it purports to be in theory; a public trial of the facts and issues. Each advocate comes to the hearing prepared to present his proofs and arguments, knowing at the same time that his arguments may fail to persuade and that his proofs may be rejected as inadequate. It is a part of his role to absorb these possible disappointments. The deciding tribunal, on the other hand, comes to the hearing uncommitted. It has not represented to the public that any fact can be proved, that any argument is sound, or that any particular way of stating a litigant's case is the most effective expression of its merits.

xxx xxx xxx

These, then, are the reasons for believing that partisan advocacy plays a vital and essential role in one of the most fundamental procedures of a democratic society. But if we were to put all of these detailed considerations to one side, we should still be confronted by the fact that, in whatever form adjudication may appear, the experienced judge or arbitrator desires and actively seeks to obtain an adversary presentation of the issues. Only when he has had the benefit of intelligent and vigorous advocacy on both sides can he feel fully confident of his decision.

Page 27 of 33

Viewed in this light, the role of the lawyer as a partisan advocate appears, not as a regrettable necessity, but as an indispensable part of a larger ordering of affairs. The institution of advocacy is not a concession to the frailties of human nature, but an expression of human insight in the design of a social framework within which man's capacity for impartial judgment can attain its fullest realization. (44 American Bar Association Journal (1160-1161, 1958)

Provided the trial court has conducted proceedings where all relevant facts have been fully and properly developed, where opposing counsel have been given opportunity to demolish the opposite party's case, and where the evidence has been thoroughly weighed and considered, the suit or proceeding is appropriate.

The pertinent sections of Rule 108 provide:

SEC. 3. Parties — When cancellation or correction of an entry in the civil register is sought, the civil registrar and all persons who have or claim any interest which would be affected thereby shall be made parties to the proceeding.

SEC. 4. Notice and publication.— Upon the filing of the petition, the court shall, by an orde, fix the time and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The court shall also cause the order to be published once in a week for three (3) consecutive weeks in a newspaper of general circulation in the province.

SEC, 5. Opposition. — The civil registrar and any person having or claiming any interest under the entry whose cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or from the last date of publication of such notice, file his opposition thereto.

Thus, the persons who must be made parties to a proceeding concerning the cancellation or correction of an entry in the civil register are-(1) the civil registrar, and (2) all persons who have or claim any interest which would be affected thereby. Upon the filing of the petition, it becomes the duty of the court to-(l) issue an order fixing the time and place for the hearing of the petition, and (2) cause the order for hearing to be published once a week for three (3) consecutive weeks in a newspaper of general circulation in the province. The following are likewise entitled to oppose the petition: (I) the civil registrar, and (2) any person having or claiming any interest under the entry whose cancellation or correction is sought.

If all these procedural requirements have been followed, a petition for correction and/or cancellation of entries in the record of birth even if filed and conducted under Rule 108 of the Revised Rules of Court can no longer be described as "summary".

There can be no doubt that when an opposition to the petition is filed either by the Civil Registrar or any person having or claiming any interest in the entries sought to be cancelled and/or corrected and the opposition is actively prosecuted, the proceedings thereon become adversary proceedings.

In the instant case, a petition for cancellation and/or correction of entries of birth of Bernardo Go and Jessica Go in the Civil Registry of the City of Cebu was filed by respondent Leonor Valencia on January 27, 1970, and pursuant to the order of the trial court dated February 4, 1970, the said petition was published once a week for three (3) consecutive weeks in the, Cebu Advocate, a newspaper of general circulation in the City of Cebu. Notice thereof was duly served on the Solicitor General. the Local Civil Registrar and Go Eng. The order likewise set the case for hearing and directed the local civil registrar and the other respondents or any person claiming any interest under the entries whose corrections were sought, to file their opposition to the said petition. An opposition to the petition was consequently filed by the Republic on February 26, 1970. Thereafter a full blown trial followed with respondent Leonor Valencia testifying and presenting her documentary evidence in support of her petition. The Republic on the other hand cross-examined respondent Leonor Valencia.

We are of the opinion that the petition filed by the respondent in the lower court by way of a special proceeding for cancellation and/or correction of entries in the civil register with the requisite notice and publication and the recorded proceedings that actually took place thereafter could very well be regarded as that proper suit or appropriate action.

In Matias v. Republic (28 SCRA 31), we held that:

xxx xxx xxx

. . . In the case of petitioner herein, however, the proceedings were not summary, considering the publication of the petition made by order of the court in order to give notice to any person that might be interested, including direct service on the Solicitor General himself. Considering the peculiar circumstances of this particular case, the fact that no doubt is cast on the truth of petitioner's allegations, or upon her evidence in support thereof, the absence of any showing that prejudice would be caused to any party interested (since petitioner's own father testified in her favor), and the publicity given to the petition, we are of the opinion that the Ty Kong Tin doctrine is not controlling this case. "

Only last year, we had occasion to clarify the Ty Kong Tin doctrine, further. In Republic v. Macli-ing (135 SCRA 367, 370-371), this Court ruled:

The principal ground relied upon in this appeal is that Rule 108 of the Rules of Court upon which private respondents anchor their

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Petition is applicable only to changes contemplated in Article 412 of the Civil Code, which are clerical or innocuous errors, or to corrections that are not controversial and are supported by indubitable evidence. (Tiong v. Republic, 15 SCRA 262 [1965]).

It is true that the change from Esteban Sy to Sy Piao would necessarily affect the Identity of the father. (Barillo v. Republic, 3 SCRA 725 [1961]) In that sense, it can be said to be substantial. However, we find indubitable evidence to support the correction prayed for. . . .

xxx xxx xxx

In the case of Ty Kong Tin v. Republic, 94 Phil. 321 (1954), as well as subsequent cases predicated thereon, we forbade only the entering of material corrections in the record of birth by virtue of a judgment in a summary action. the proceedings below, although filed under Rule 108 of the Rules of Court, were not summary. The Petition was published by order of the lower Court once a week for three consecutive weeks in a newspaper of general circulation in accordance with law. The Solicitor General was served with copy of the Petition as well as with notices of hearings. He filed his Opposition to the Petition. The Local Civil Registrar of the City of Baguio was likewise duly served with copy of the Petition. A Fiscal was always in attendance at the hearings in representation of the Solicitor General. He participated actively in the proceedings, particularly, in the cross-examination of witnesses. And, notwithstanding that all interested persons were cited to appear to show cause why the petition should not be granted, no one appeared to oppose except the State through the Solicitor General. But neither did the State present evidence in support of its Opposition.

To follow the petitioner's argument that Rule 108 is not an appropriate proceeding without in any way intimating what is the correct proceeding or if such a proceeding exists at all, would result in manifest injustice.

Apart from Bernardo Go and Jessica Go, there are four (4) other sisters and one (1) other brother born of the same father and mother. Not only are all five registered as Filipino citizens but they have pursued careers which require Philippine citizenship as a mandatory pre-requisite. To emphasize the strict policy of the government regarding professional examinations, it was the law until recently that to take the board exams for pharmacist, the applicant should possess natural born citizenship. (See. 18, Republic Act 5921 and Sec. 1, P.D. 1350)

The sisters and brother are:

1. Sally Go, born on April 29, 1934 was licensed as a Pharmacist after passing the government board examinations in 1956.

2. Fanny Go, born on July 12, 1936 is a Registered Nurse who passed the government board examinations in 1960.

3. Corazon Go, born on June 20, 1939, during the trial of this case in 1970 was a fourth year medical student, qualified to take the government board examinations after successfully completing the requirements for a career in medicine, and presumably is a licensed physician now.

4. Antonio Go, born February 14, 1942 was an engineering student during the 1970 trial of the case and qualified by citizenship to take government board examinations.

5. Remedios Go, born October 4, 1945 was a licensed Optometrist after passing the government board examinations in 1967.

The above facts were developed and proved during trial. The petitioner failed to refute the citizenship of the minors Bernardo and Jessica Go.

In this petition, it limits itself to a procedural reason to overcome substantive findings by arguing that the proper procedure was not followed.

There are other facts on the record. Leonor Valencia is a registered voter and had always exercised her right of suffrage from the time she reached voting age until the national elections immediately preceding the filing of her petition. The five other sisters and brother are also registered voters and likewise exercised the right of suffrage.

An uncle of the mother's side had held positions in the government having been elected twice as councilor and twice as vice-mayor of Victorias, Negros Occidental. Respondent Leonor Valencia has purchased and registered two (2) parcels of land as per Transfer Certificate of Title No. T-46104 and Transfer Certificate of Title No. T-37275. These allegations are well documented and were never contradicted by the Republic. As correctly observed by the lower court.

The right of suffrage is one of the important rights of a citizen. This is also true with respect to the acquisition of a real property. The evidence further shows that her children had been allowed to take the Board Examinations given by the Government for Filipino citizens only.

It would be a denial of substantive justice if two children proved by the facts to be Philippine citizens, and whose five sisters and brother born of the same mother and father enjoy all the rights of citizens, are denied the same rights on the simple

Page 29 of 33

argument that the "correct procedure" not specified or even intimated has not been followed.

We are, therefore, constrained to deny the petition.

WHEREFORE, the petition is DENIED for lack of merit.

The decision of the lower court is AFFIRMED.

IN THE MATTER OF THE ADOPTION OF STEPHANIE NATHY ASTORGA GARCIA

HONORATO B. CATINDIG, petitioner.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

May an illegitimate child, upon adoption by her natural father, use the surname of her natural mother as her middle name? This is the issue raised in the instant case.

The facts are undisputed.

On August 31, 2000, Honorato B. Catindig, herein petitioner, filed a petition1 to adopt his minor illegitimate child Stephanie Nathy Astorga Garcia. He alleged therein, among others, that Stephanie was born on June 26, 1994;2 that her mother is Gemma Astorga Garcia; that Stephanie has been using her mother’s middle name and surname; and that he is now a widower and qualified to be her adopting parent. He prayed that Stephanie’s middle name Astorga be changed to "Garcia," her mother’s surname, and that her surname "Garcia" be changed to "Catindig," his surname.

On March 23, 2001,3 the trial court rendered the assailed Decision granting the adoption, thus:

"After a careful consideration of the evidence presented by the petitioner, and in the absence of any opposition to the petition, this Court finds that the petitioner possesses all the qualifications and none of the disqualification provided for by law as an adoptive parent, and that as such he is qualified to maintain, care for and educate the child to be adopted; that the grant of this petition would redound to the best interest and welfare of the minor Stephanie Nathy Astorga Garcia. The Court further holds that the petitioner’s care and custody of the child since her birth up to the present constitute more than enough compliance with the requirement of Article 35 of Presidential Decree No. 603.

WHEREFORE, finding the petition to be meritorious, the same is GRANTED. Henceforth, Stephanie Nathy Astorga Garcia is hereby freed from all obligations of obedience and maintenance with respect to her natural mother, and for civil purposes, shall henceforth be the petitioner’s legitimate child and legal heir. Pursuant to Article 189 of the Family Code of the Philippines, the minor shall be known as STEPHANIE NATHY CATINDIG.

Upon finality of this Decision, let the same be entered in the Local Civil Registrar concerned pursuant to Rule 99 of the Rules of Court.

Let copy of this Decision be furnished the National Statistics Office for record purposes.

SO ORDERED."4

On April 20, 2001, petitioner filed a motion for clarification and/or reconsideration5 praying that Stephanie should be allowed to use the surname of her natural mother (GARCIA) as her middle name.

On May 28, 2001,6 the trial court denied petitioner’s motion for reconsideration holding that there is no law or jurisprudence allowing an adopted child to use the surname of his biological mother as his middle name.

Hence, the present petition raising the issue of whether an illegitimate child may use the surname of her mother as her middle name when she is subsequently adopted by her natural father.

Petitioner submits that the trial court erred in depriving Stephanie of a middle name as a consequence of adoption because: (1) there is no law prohibiting an adopted child from having a middle name in case there is only one adopting parent; (2) it is customary for every Filipino to have as middle name the surname of the mother; (3) the middle name or initial is a part of the name of a person; (4) adoption is for the benefit and best interest of the adopted child, hence, her right to bear a proper name should not be violated; (5) permitting Stephanie to use the middle name "Garcia" (her mother’s surname) avoids the stigma of her illegitimacy; and; (6) her continued use of "Garcia" as her middle name is not opposed by either the Catindig or Garcia families.

The Republic, through the Office of the Solicitor General (OSG), agrees with petitioner that Stephanie should be permitted to use, as her middle name, the surname of her natural mother for the following reasons:

First, it is necessary to preserve and maintain Stephanie’s filiation with her natural mother because under Article 189 of the Family Code, she remains to be an intestate heir of the latter. Thus, to prevent any confusion and needless hardship in the future, her relationship or proof of that relationship with her natural mother should be maintained.

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Second, there is no law expressly prohibiting Stephanie to use the surname of her natural mother as her middle name. What the law does not prohibit, it allows.

Last, it is customary for every Filipino to have a middle name, which is ordinarily the surname of the mother. This custom has been recognized by the Civil Code and Family Code. In fact, the Family Law Committees agreed that "the initial or surname of the mother should immediately precede the surname of the father so that the second name, if any, will be before the surname of the mother."7

We find merit in the petition.

Use Of Surname Is Fixed By Law –

For all practical and legal purposes, a man's name is the designation by which he is known and called in the community in which he lives and is best known. It is defined as the word or combination of words by which a person is distinguished from other individuals and, also, as the label or appellation which he bears for the convenience of the world at large addressing him, or in speaking of or dealing with him.8 It is both of personal as well as public interest that every person must have a name.

The name of an individual has two parts: (1) the given or proper name and (2) the surname or family name. The given or proper name is that which is given to the individual at birth or at baptism, to distinguish him from other individuals. The surname or family name is that which identifies the family to which he belongs and is continued from parent to child. The given name may be freely selected by the parents for the child, but the surname to which the child is entitled is fixed by law.9

Thus, Articles 364 to 380 of the Civil Code provides the substantive rules which regulate the use of surname10 of an individual whatever may be his status in life, i.e., whether he may be legitimate or illegitimate, an adopted child, a married woman or a previously married woman, or a widow, thus:

"Art. 364. Legitimate and legitimated children shall principally use the surname of the father.

Art. 365. An adopted child shall bear the surname of the adopter.

x x x

Art. 369. Children conceived before the decree annulling a voidable marriage shall principally use the surname of the father.

Art. 370. A married woman may use:

(1) Her maiden first name and surname and add her husband's surname, or

(2) Her maiden first name and her husband's surname or

(3) Her husband's full name, but prefixing a word indicating that she is his wife, such as ‘Mrs.’

Art. 371. In case of annulment of marriage, and the wife is the guilty party, she shall resume her maiden name and surname. If she is the innocent spouse, she may resume her maiden name and surname. However, she may choose to continue employing her former husband's surname, unless:

(1) The court decrees otherwise, or

(2) She or the former husband is married again to another person.

Art. 372. When legal separation has been granted, the wife shall continue using her name and surname employed before the legal separation.

Art. 373. A widow may use the deceased husband's surname as though he were still living, in accordance with Article 370.

Art. 374. In case of identity of names and surnames, the younger person shall be obliged to use such additional name or surname as will avoid confusion.

Art. 375. In case of identity of names and surnames between ascendants and descendants, the word ‘Junior’ can be used only by a son. Grandsons and other direct male descendants shall either:

(1) Add a middle name or the mother's surname,

(2) Add the Roman numerals II, III, and so on.

x x x"

Law Is Silent As To The Use Of

Middle Name –

As correctly submitted by both parties, there is no law regulating the use of a middle name. Even Article 17611 of the Family Code, as amended by Republic Act No. 9255, otherwise known as "An Act Allowing Illegitimate Children To Use The Surname Of Their Father," is silent as to what middle name a child may use.

The middle name or the mother’s surname is only considered in Article 375(1), quoted above, in case there is identity of names and surnames between ascendants

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and descendants, in which case, the middle name or the mother’s surname shall be added.

Notably, the law is likewise silent as to what middle name an adoptee may use. Article 365 of the Civil Code merely provides that "an adopted child shall bear the surname of the adopter." Also, Article 189 of the Family Code, enumerating the legal effects of adoption, is likewise silent on the matter, thus:

"(1) For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters and both shall acquire the reciprocal rights and obligations arising from the relationship of parent and child, including the right of the adopted to use the surname of the adopters;

x x x"

However, as correctly pointed out by the OSG, the members of the Civil Code and Family Law Committees that drafted the Family Code recognized the Filipino custom of adding the surname of the child’s mother as his middle name. In the Minutes of the Joint Meeting of the Civil Code and Family Law Committees, the members approved the suggestion that the initial or surname of the mother should immediately precede the surname of the father, thus

"Justice Caguioa commented that there is a difference between the use by the wife of the surname and that of the child because the father’s surname indicates the family to which he belongs, for which reason he would insist on the use of the father’s surname by the child but that, if he wants to, the child may also use the surname of the mother.

Justice Puno posed the question: If the child chooses to use the surname of the mother, how will his name be written? Justice Caguioa replied that it is up to him but that his point is that it should be mandatory that the child uses the surname of the father and permissive in the case of the surname of the mother.

Prof. Baviera remarked that Justice Caguioa’s point is covered by the present Article 364, which reads:

Legitimate and legitimated children shall principally use the surname of the father.

Justice Puno pointed out that many names change through no choice of the person himself precisely because of this misunderstanding. He then cited the following example: Alfonso Ponce Enrile’s correct surname is Ponce since the mother’s surname is Enrile but everybody calls him Atty. Enrile. Justice Jose Gutierrez David’s family name is Gutierrez and his mother’s surname is David but they all call him Justice David.

Justice Caguioa suggested that the proposed Article (12) be modified to the effect that it shall be mandatory on the child to use the surname of the father but he may use the surname of the mother by way of an initial or a middle name. Prof. Balane stated that they take note of this for inclusion in the Chapter on Use of Surnames since in the proposed Article (10) they are just enumerating the rights of legitimate children so that the details can be covered in the appropriate chapter.

x x x

Justice Puno remarked that there is logic in the simplification suggested by Justice Caguioa that the surname of the father should always be last because there are so many traditions like the American tradition where they like to use their second given name and the Latin tradition, which is also followed by the Chinese wherein they even include the Clan name.

x x x

Justice Puno suggested that they agree in principle that in the Chapter on the Use of Surnames, they should say that initial or surname of the mother should immediately precede the surname of the father so that the second name, if any, will be before the surname of the mother. Prof. Balane added that this is really the Filipino way. The Committee approved the suggestion."12 (Emphasis supplied)

In the case of an adopted child, the law provides that "the adopted shall bear the surname of the adopters."13 Again, it is silent whether he can use a middle name. What it only expressly allows, as a matter of right and obligation, is for the adoptee to bear the surname of the adopter, upon issuance of the decree of adoption.14

The Underlying Intent of

Adoption Is In Favor of the

Adopted Child –

Adoption is defined as the process of making a child, whether related or not to the adopter, possess in general, the rights accorded to a legitimate child.15 It is a juridical act, a proceeding in rem which creates between two persons a relationship similar to that which results from legitimate paternity and filiation.16 The modern trend is to consider adoption not merely as an act to establish a relationship of paternity and filiation, but also as an act which endows the child with a legitimate status.17 This was, indeed, confirmed in 1989, when the Philippines, as a State Party to the Convention of the Rights of the Child initiated by the United Nations, accepted the principle that adoption is impressed with social and moral responsibility, and that its underlying intent is geared to favor the adopted child.18 Republic Act

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No. 8552, otherwise known as the "Domestic Adoption Act of 1998,"19 secures these rights and privileges for the adopted.20

One of the effects of adoption is that the adopted is deemed to be a legitimate child of the adopter for all intents and purposes pursuant to Article 18921 of the Family Code and Section 1722 Article V of RA 8552.23

Being a legitimate child by virtue of her adoption, it follows that Stephanie is entitled to all the rights provided by law to a legitimate child without discrimination of any kind, including the right to bear the surname of her father and her mother, as discussed above. This is consistent with the intention of the members of the Civil Code and Family Law Committees as earlier discussed. In fact, it is a Filipino custom that the initial or surname of the mother should immediately precede the surname of the father.

Additionally, as aptly stated by both parties, Stephanie’s continued use of her mother’s surname (Garcia) as her middle name will maintain her maternal lineage. It is to be noted that Article 189(3) of the Family Code and Section 1824, Article V of RA 8552 (law on adoption) provide that the adoptee remains an intestate heir of his/her biological parent. Hence, Stephanie can well assert or claim her hereditary rights from her natural mother in the future.

Moreover, records show that Stephanie and her mother are living together in the house built by petitioner for them at 390 Tumana, San Jose, Baliuag, Bulacan. Petitioner provides for all their needs. Stephanie is closely attached to both her mother and father. She calls them "Mama" and "Papa". Indeed, they are one normal happy family. Hence, to allow Stephanie to use her mother’s surname as her middle name will not only sustain her continued loving relationship with her mother but will also eliminate the stigma of her illegitimacy.

Liberal Construction of

Adoption Statutes In Favor Of

Adoption –

It is a settled rule that adoption statutes, being humane and salutary, should be liberally construed to carry out the beneficent purposes of adoption.25 The interests and welfare of the adopted child are of primary and paramount consideration,26 hence, every reasonable intendment should be sustained to promote and fulfill these noble and compassionate objectives of the law.27

Lastly, Art. 10 of the New Civil Code provides that:

"In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail."

This provision, according to the Code Commission, "is necessary so that it may tip the scales in favor of right and justice when the law is doubtful or obscure. It will strengthen the determination of the courts to avoid an injustice which may apparently be authorized by some way of interpreting the law."28

Hence, since there is no law prohibiting an illegitimate child adopted by her natural father, like Stephanie, to use, as middle name her mother’s surname, we find no reason why she should not be allowed to do so.

WHEREFORE, the petition is GRANTED. The assailed Decision is partly MODIFIED in the sense that Stephanie should be allow ed to use her mother’s surname "GARCIA" as her middle name.

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