Questions of Law, Property in Trust, Fraud in Transfer or Property

The fundamental issue is who owns the disputed shares of stock in Northern Islands.

The Supreme Court reminds petitioner Lincoln Continental that what it filed with the Supreme Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended. It is a rule in this jurisdiction that in petitions for review under Rule 45, only questions or errors of law may be raised. There is a question of law when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts, or when the issue does not call for an examination of the probative value of the evidence presented. There is a question of fact when the doubt arises as to the truth or falsehood of facts or when there is a need to calibrate the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the situation. Obviously, the issue raised by the instant petition for review on certiorari, involves a factual matter, hence, is outside the domain of this Court. However, in the interest of justice and in order to settle this controversy once and for all, a ruling from this Court is imperative.

One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln Continental held the disputed shares of stock of Northern Islands merely in trust for the Guy sisters. In fact, the evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis that this factual finding by the trial court was affirmed by the Court of Appeals, being supported by evidence, and is, therefore, final and conclusive upon the Supreme Court.

Article 1440 of the Civil Code provides that: ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary.

In the early case of Gayondato v. Treasurer of the Philippine Islands, the Supreme Court defines trust, in its technical sense, as a right of property, real or personal, held by one party for the benefit of another. Differently stated, a trust is a fiduciary relationship with respect to property, subjecting the person holding the same to the obligation of dealing with the property for the benefit of another person.

Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But record shows that there is no evidence to support their claim.Rather, the evidence on record clearly indicates that the stock certificates representing the contested shares are in respondents possession. Significantly, there is no proof to support his allegation that the transfer of the shares of stock to respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is never presumed but must be established by clear and convincing evidence. Gilbert failed to discharge this burden. The Supreme Court agrees with the Court of Appeals that respondent sisters own the shares of stocks, Gilbert being their mere trustee. Verily, the Supreme Court finds no reversible error in the challenged Decision of the Court of Appeals (Special Second Division) in CA-G.R. CV No. 85937. (G.R. No. 165849; December 10, 2007)