May 30, 2011 G.R. No. 171805.* lots.

lots. Such annotation was made pursuant to the Minutes of the Special Meeting of the Board of Directors of
PHILIPPINE NATIONAL BANK, petitioner, vs. MERELO B. AZNAR RISCO (hereinafter referred to as the “Minutes”) on March 14, 1961, pertinent portion of which states:
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Judgments; Judgment on the Pleadings; Judgment on the pleadings is based exclusively upon the allegations The President then explained that in a special meeting of the stockholders previousl 3. y called for the
appearing in the pleadings of the parties and the annexes, if any, without consideration of any evidence aliunde. — purpose of putting up certain amount of P212,720.00 for the rehabilitation of the Company, the following
Judgment on the pleadings is, therefore, based exclusively upon the allegations appearing in the pleadings of the stockholders contributed the amounts indicated opposite their names:218
parties and the annexes, if any, without consideration of any evidence aliunde. However, when it appears that not all
the material allegations of the complaint were admitted in the answer for some of them were either denied or As a result, a Certificate of Sale was issued in favor of Philippine National Bank, being the lone and highest
disputed, and the defendant has set up certain special defenses which, if proven, would have the effect of nullifying bidder of the three (3) parcels of land known as Lot Nos. 3597 and 7380, covered by T.C.T. Nos. 8921 and 8922,
plaintiff’s main cause of action, judgment on the pleadings cannot be rendered. respectively, both situated at Talisay, Cebu, and Lot No. 1328-C covered by T.C.T. No. 24576 situated at Cebu City,
for the amount of Thirty-One Thousand Four Hundred Thirty Pesos (P31,430.00). Thereafter, a Final Deed of Sale
Trusts; Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another.— dated May 27, 1991 in favor of the Philippine National Bank was also issued and Transfer Certificate of Title No.
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary 24576 for Lot 1328-C (corrected to 1323-C) was cancelled and a new certificate of title, TCT 119848 was issued in
relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between the name of PNB on August 26, 1991.
parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties. An
implied trust comes into being by operation of law. This prompted plaintiffs-appellees to file the instant complaint seeking the quieting of their supposed title
to the subject properties, declaratory relief, cancellation of TCT and reconveyance with temporary restraining order
Same; Express trusts are intentionally created by the direct and positive acts of the settlor or the trustor—by and preliminary injunction. Plaintiffs alleged that the subsequent annotations on the titles are subject to the prior
some writing, deed, or will or oral declaration.—Express trusts, sometimes referred to as direct trusts, are annotation of their liens and encumbrances. Plaintiffs further contended that the subsequent writs and processes
intentionally created by the direct and positive acts of the settlor or the trustor—by some writing, deed, or will or oral annotated on the titles are all null and void for want of valid service upon RISCO and on them, as stockholders. They
declaration. It is created not necessarily by some written words, but by the direct and positive acts of the parties. This argued that the Final Deed of Sale and TCT No. 119848 are null and void as these were issued only after 28 years and
is in consonance with Article 1444 of the Civil Code, which states that “[n]o particular words are required for the that any right which PNB may have over the properties had long become stale.
creation of an express trust, it being sufficient that a trust is clearly intended.”
Defendant PNB on the other hand countered that plaintiffs have no right of action for quieting of title
since the order of the court directing the issuance of titles to PNB had already become final and executory and
The facts of this case, as stated in the Decision dated September 29, 2005 of the Court of Appeals, their validity cannot be attacked except in a direct proceeding for their annulment.
are as follows:
Defendant further asserted that plaintiffs, as mere stockholders of RISCO do not have any legal or
“In 1958, RISCO ceased operation due to business reverses. In plaintiffs’ desire to rehabilitate RISCO, they equitable right over the properties of the corporation. PNB posited that even if plaintiff’s monetary lien had not
contributed a total amount of P212,720.00 which was used in the purchase of the three (3) parcels of land described expired, their only recourse was to require the reimbursement or refund of their contribution.”
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as follows:
Aznar, et al., filed a Manifestation and Motion for Judgment on the Pleadings on October 5, 1998.
6

“A parcel of land (Lot No. 3597 of the Talisay-Minglanilla Estate, G.L.R.O. Record No. 3732) situated
Thus, the trial court rendered the November 18, 1998 Decision, which ruled against PNB on the basis
in the Municipality of Talisay, Province of Cebu, Island of Cebu. x x x containing an area of
SEVENTY[-]EIGHT THOUSAND ONE HUNDRED EIGHTY[-]FIVE SQUARE METERS (78,185) more that there was an express trust created over the subject properties whereby RISCO was the trustee and
or less. x x x” covered by Transfer Certificate of Title No. 8921 in the name of Rural Insurance & Surety the stockholders, Aznar, et al., were the beneficiaries or the cestui que trust. The dispositive portion of
Co., Inc.”; the said ruling reads:
“A parcel of land (Lot 7380 of the Talisay Minglanilla Estate, G.L.R.O. Record No. 3732), situated in “WHEREFORE, judgment is hereby rendered as follows:
the Municipality of Talisay, Province of Cebu, Island of Cebu. x x x containing an area of THREE Declaring the Minutes of the Special Meeting of the Board of Directors of RISCO approved on
HUNDRED TWENTY[-]NINE THOUSAND FIVE HUNDRED FORTY[-]SEVEN SQUARE METERS March 14, 1961 (Annex “E,” Complaint) annotated on the titles to subject properties on May 15,
(329,547), more or less. x x x” covered by Transfer Certificate of Title No. 8922 in the name of Rural 1962 as an express trust whereby RISCO was a mere trustee and the above-mentioned
Insurance & Surety Co., Inc.” and
stockholders as beneficiaries being the true and lawful owners of Lots 3597, 7380 and 1323; 
“A parcel of land (Lot 1323 of the subdivision plan Psd-No. 5988), situated in the District of Lahug,
City of Cebu, Island of Cebu. x x x containing an area of FIFTY[-]FIVE THOUSAND SIX HUNDRED a)
FIFTY[-]THREE (55,653) SQUARE METERS, more or less.” covered by Transfer Certificate of Title No. Declaring all the subsequent annotations of court writs and processes, to wit: Entry No. 7416-V-4-
24576 in the name of Rural Insurance & Surety Co., Inc.” D.B., 7417-V-4-D.B., 7512-V-4-D.B., and 7513-V-4-D.B. in TCT No. 8921 for Lot 3597 and
TCT No. 8922 for Lot 7380; Entry No. 1660-V-7-D.B., Entry No. 1661-V-7-D.B., Entry No.
After the purchase of the above lots, titles were issued in the name of RISCO. The amount contributed by 1861-V-7-D.B., Entry No. 1862-V-7-D.B., Entry No. 4329-V-7-D.B., Entry No. 3761-V-7-D.B.
plaintiffs constituted as liens and encumbrances on the aforementioned properties as annotated in the titles of said and Entry No. 26522 v. 34, D.B. on TCT No. 24576 for Lot 1323-C, and all other subsequent
annotations thereon in favor of third persons, as null and void; b)
 Directing the Register of Deeds of the Province of Cebu and/or the Register of Deeds of Cebu City, While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not
as the case may be, to cancel all these annotations mentioned in paragraph b) above the titles;  vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being
c) equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned
by the corporation as a distinct legal person.”
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Directing the Register of Deeds of the Province of Cebu to cancel and/or annul TCTs Nos. 8921 and
8922 in the name of RISCO, and to issue another titles in the names of the plaintiffs; and d)
Directing Philippine National Bank to reconvey TCT No. 119848 in favor of the plaintiffs.” 7 In the case at bar, there is no allegation, much less any proof, that the corporate existence of RISCO
has ceased and the corporate property has been liquidated and distributed to the stockholders. The
records only indicate that, as per Securities and Exchange Commission (SEC) Certification dated June 27
PNB appealed the adverse ruling to the Court of Appeals which, in its September 29, 2005
18, 1997, the SEC merely suspended RISCO’s Certificate of Registration beginning on September 5,
Decision, set aside the judgment of the trial court. Although the Court of Appeals agreed with the trial
1988 due to its non-submission of SEC required reports and its failure to operate for a continuous period
court that a judgment on the pleadings was proper, the appellate court opined that the monetary
of at least five years.
contributions made by Aznar, et al., to RISCO can only be characterized as a loan secured by a
lien on the subject lots, rather than an express trust.
Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the
properties at issue in this case on the strength of the Minutes which, at most, is merely evidence of
Thus, it directed PNB to pay Aznar, et al., the amount of their contributions plus legal interest
a loan agreement between them and the company.
from the time of acquisition of the property until finality of judgment. The dispositive portion of the
decision reads:
“WHEREFORE, premises considered, the assailed Judgment is hereby SET ASIDE. There is no indication or even a suggestion that the ownership of said properties were transferred to
A new judgment is rendered ordering Philippine National Bank to pay plaintiffs-appellees the amount of them which would require no less that the said properties be registered under their names. For this
their lien based on the Minutes of the Special Meeting of the Board of Directors duly annotated on the titles, reason, the complaint should be dismissed since Aznar, et al., have no cause to seek a quieting of title
plus legal interests from the time of appellants’ acquisition of the subject properties until the finality of this over the subject properties.
judgment.
At most, what Aznar, et al., had was merely a right to be repaid the amount loaned to RISCO.
ISSUE: WON RESPONDENTS HAS RIGHTS OVER THE PROPERTY OF THE CORP. (RISCO) Unfortunately, the right to seek repayment or reimbursement of their contributions used to purchase the
subject properties is already barred by prescription.
RULING: NO.

The contention is meritorious. IN the case at bar, the Minutes which was approved on March 14, 1961 is considered as a written
contract between Aznar, et al., and RISCO for the reimbursement of the contributions of the former. As
Indeed, we find that Aznar, et al., have no right to ask for the quieting of title of the properties such, the former had a period of ten (10) years from 1961 within which to enforce the said written
at issue because they have no legal and/or equitable rights over the properties that are derived contract. However, it does not appear that Aznar, et al., filed any action for reimbursement or refund of
from the previous registered owner which is RISCO, the pertinent provision of the law is Section 2 their contributions against RISCO or even against PNB. Instead the suit that Aznar, et al., brought before
of the Corporation Code (Batas Pambansa Blg. 68), which states that “[a] corporation is an the trial court only
artificial being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.” WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is DENIED for lack of merit. The
petition of PNB in G.R. No. 171805 is GRANTED. The Complaint, docketed as Civil Case No. CEB-
As a consequence thereof, a corporation has a personality separate and distinct from those of 21511, filed by Aznar, et al., is hereby DISMISSED. No costs.
its stockholders and other corporations to which it may be connected. 4 Thus, we had previously
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ruled in Magsaysay-Labrador v. Court of Appeals that the interest of the stockholders over the
25 Note.—A motion for judgment on the pleadings admits the truth of all the material and relevant
properties of the corporation is merely inchoate and therefore does not entitle them to intervene in allegations of the opposing party and the judgment must rest on those allegations taken together with
litigation involving corporate property, to wit: such other allegations as are admitted in the pleadings. It is proper when an answer fails to tender an
“Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, issue, or otherwise admits the material allegations of the adverse party’s pleading. (Municipality of Tiwi
consequential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the vs. Betito, 624 SCRA 623 [2010])
management of the corporation and to share in the profits thereof and in the properties and assets thereof on ——o0o——
dissolution, after payment of the corporate debts and obligations.