CA - Affirmed.
It held that the Fund is distinct from RMCs account
Business Trust
I. Introduction
Cases:
101. MBTC v. Board of Trustees of Riverside Mills Corp.
Provident and Retirement Fund
METROPOLITAN BANK & TRUST COMPANY, INC. (as successor-in-interest of the
banking operations of Global Business Bank, Inc. formerly known as PHILIPPINE
BANKING CORPORATION),
Petitioner,
vs. THE BOARD OF TRUSTEES OF RIVERSIDE MILLS CORPORATION PROVIDENT
AND RETIREMENT FUND, represented by ERNESTO TANCHI, JR., CESAR
SALIGUMBA, AMELITA SIMON, EVELINA OCAMPO and CARLITOS Y. LIM, RMC
UNPAID EMPLOYEES ASSOCIATION, INC., and THE INDIVIDUAL BENEFICIARIES OF
THE PROVIDENT AND RETIREMENT FUND OF RMC,
Respondents.
FACTS: RMC established a Provident and Retirement Plan
(RMCPRF) for its regular employees. In 1979, the Board of
Trustees of RMCPRF (the Board) entered into an Investment
Management Agreement with the petitioner where the latter
shall act as an agent of the Board and shall hold, manage, invest
and reinvest the Fund in Trust Account No. 1797 in its behalf. The
Agreement shall be in force for one (1) year and shall be deemed
automatically renewed unless sooner terminated either by
petitioner bank or by the Board. Paragraph 13 of the Plan
likewise provided that:
“...but no such action shall operate to permit any part of the assets of
the Fund to be used for, or diverted to purposes other than for the
exclusive benefit of the members of the Plan and their beneficiaries. In
no event shall any part of the assets of the Fund revert to [RMC] before
all liabilities of the Plan have been satisfied...”
In 1984, RMC ceased business operations but the
petitioner continued to render investment services to
respondent Board. Petitioner then informed respondent Board
that petitioner’s BOD had decided to apply the remaining trust
assets held by it in the name of RMCPRF against part of the
outstanding obligations of RMC.
Subsequently, respondent RMC Unpaid Employees
Association, Inc. (Association), representing the terminated
employees of RMC, learned of Trust Account No. 1797. Through
counsel, they demanded payment of their share. When such
demand went unheeded, the Association, along with the
individual members of RMCPRF, filed a complaint for accounting
against the Board and its officers as well as petitioner bank.
On June 2, 1998, during the trial, the Board passed a
Resolution in court declaring that the Fund belongs exclusively to
the employees of RMC. It authorized petitioner to release the
proceeds of Trust Account No. 1797 through the Board, as the
court may direct.
RTC - declared invalid the reversion and application of the
proceeds of the Fund to the outstanding obligation of RMC to
petitioner bank.
in petitioner bank and may not be used except for the benefit of
the members of RMCPRF. Citing Paragraph 13 of the Plan
ISSUE: Whether or not the proceeds of the RMCPRF may be
applied to satisfy RMC’s debt to Philbank.
RULING: The petition has no merit.
RATIO: A trust is a "fiduciary relationship with respect to
property which involves the existence of equitable duties
imposed upon the holder of the title to the property to deal with
it for the benefit of another." A trust is either express or implied.
Express trusts are those which the direct and positive acts of the
parties create, by some writing or deed, or will, or by words
evincing an intention to create a trust.
Here, the RMC Provident and Retirement Plan created
an express trust to provide retirement benefits to the regular
employees of RMC. RMC retained legal title to the Fund but held
the same in trust for the employees-beneficiaries. Thus, the
allocation under the Plan is directly credited to each member’s
account:
The trust was likewise a revocable trust as RMC
reserved the power to terminate the Plan after all the liabilities
of the Fund to the employees under the trust had been paid.
Paragraph 13 of the Plan provided that "[i]n no event shall any
part of the assets of the Fund revert to the Company before all
liabilities of the Plan have been satisfied."
Employees’ trusts or benefit plans are intended to
provide economic assistance to employees upon the occurrence
of certain contingencies, particularly, old age retirement, death,
sickness, or disability. They give security against certain hazards
to which members of the Plan may be exposed. They are
independent and additional sources of protection for the
working group and established for their exclusive benefit and for
no other purpose.18 Here, while the Plan provides for a reversion
of the Fund to RMC, this cannot be done until all the liabilities of
the Plan have been paid. And when RMC ceased operations in
1984, the Fund became liable for the payment not only of the
benefits of qualified retirees at the time of RMC’s closure but also
of those who were separated from work as a consequence of the
closure.
A member who is separated for cause shall not be
entitled to withdraw the total amount representing his
contribution and that of the Company including the earned
interest thereon, and the employer’s contribution shall be
retained in the fund.
To be sure, the cessation of business by RMC is an
authorized cause for the termination of its employees. Hence,
not only those qualified for retirement should receive their total
benefits under the Fund, but those laid off should also be entitled
to collect the balance of their account as of the last day of the
month prior to RMC’s closure. In addition, the Plan provides that
the separating member shall be paid a maximum of 40% of the
amount representing the Company’s contribution and its income
standing to his credit. Until these liabilities shall have been
settled, there can be no reversion of the Fund to RMC.
 It must be stressed that the RMC Provident and
Retirement Plan was primarily established for the benefit of
regular and permanent employees of RMC. As such, the Board
may not unilaterally terminate the Plan without due regard to
any accrued benefits and rightful claims of members-employees.
Besides, the Board is bound by the prohibition on the reversion
of the Fund to RMC before all the liabilities of the Plan have been
satisfied.
As to the contention that the functions of the Board of
Trustees ceased upon with RMC’s closure, the same is likewise
untenable.
Under Section 12227 of the Corporation Code, a dissolved
corporation shall nevertheless continue as a body corporate for three
(3) years for the purpose of prosecuting and defending suits by or
against it and enabling it to settle and close its affairs, to dispose and
convey its property and to distribute its assets, but not for the purpose
of continuing the business for which it was established. Within those
three (3) years, the corporation may appoint a trustee or receiver who
shall carry out the said purposes beyond the three (3)-year winding-up
period. Thus, a trustee of a dissolved corporation may commence a suit
which can proceed to final judgment even beyond the three (3)-year
period of liquidation.
In the same manner, during and beyond the three (3)-year
winding-up period of RMC, the Board of Trustees of RMCPRF may do no
more than settle and close the affairs of the Fund. The Board retains its
authority to act on behalf of its members, albeit, in a limited capacity. It
may commence suits on behalf of its members but not continue
managing the Fund for purposes of maximizing profits. Here, the Board’s
act of issuing the Resolution authorizing petitioner to release the Fund
to its beneficiaries is still part of the liquidation process, that is,
satisfaction of the liabilities of the Plan, and does not amount to doing
business. Hence, it was properly within the Board’s power to
promulgate.
102. PNB v. Aznar
G.R. No. 171805
PHILIPPINE NATIONAL BANK, Petitioner,
vs. MERELO B. AZNAR; MATIAS B. AZNAR III; JOSE L. AZNAR (deceased),
represented by his heirs; RAMON A. BARCENILLA; ROSARIO T. BARCENILLA; JOSE
B. ENAD (deceased), represented by his heirs; and RICARDO GABUYA (deceased),
represented by his heirs, Respondents.
G.R. No. 172021
MERELO B. AZNAR and MATIAS B. AZNAR III, Petitioners,
vs. PHILIPPINE NATIONAL BANK, Respondent.
FACTS:
• This case is consolidated with G.R. 172021, Merelo and Matias
Aznar v. PNB
• 1958: Rural Insurance and Surety Company, Inc. (RISCO)
ceased operation due to business reverses
- In plaintiffs’ (Anzar et al.) desire to rehabilitate RISCO,
they contributed a total amount of P212,720.00
- This was used to purchase 3 parcels of land in Cebu
- Two in the Municipality of Talisay and One in the District of
Lahug, Cebu City
• After the purchase of the lots, titles were issued in the name of
RISCO
• The amount contributed by plaintiffs constituted as liens and
encumbrances on the properties as annotated in the titles of said
lots
- Such annotation was made pursuant to the Minutes of the
Special Meeting of the Board of Directors of RISCO on March
14, 1961, and a part of it says:
- “And that the respective contributions above-mentioned (Aznar et
al.) shall constitute as their lien or interest on the property
described above, if and when said property are titled in the name
of RISCO, subject to registration as their adverse claim in pursuance
of the Provision of Land Registration Act, until such time their
respective contributions are refunded to them completely”
• Thereafter, various subsequent annotations were made on the
same titles, including the Notice of Attachment and Writ of
Execution both dated August 3, 1962 in favor of Philippine
National Bank (PNB)
• As a result, a Certificate of Sale was issued in favor of PNB,
being the lone and highest bidder of the 3 parcels of land
- This prompted Aznar et al. to file the instant case seeking
the quieting of their supposed title to the subject properties
• Trial court ruled against PNB on the basis that there was an
express trust created over the subject properties whereby RISCO
was the trustee and the stockholders, Aznar, et al., were the
beneficiaries
• Court of Appeals opined that the monetary contributions made
by Aznar, et al. to RISCO can only be characterized as a load
secured by a lien on the subjected lots, rather than an expressed
trust
ISSUE: Whether or not there was a trust contract between RISCO
and Aznar, et al.
RULING: No. There was no trust contract created.
RATIO: At the outset, the Court agrees with the Court of Appeals
that the agreement contained in the Minutes of the Special
Meeting of the RISCO Board of Directors held on March 14, 1961
was a loan by the therein named stockholders to RISCO. Careful
perusal of the Minutes relied upon by plaintiffs-appellees in their
claim, showed that their contributions shall constitute as “lien or
interest on the property.” The term lien as used in the Minutes is
defined as "a discharge on property usually for the payment of
some debt or obligation. Hence, from the use of the word "lien"
in the Minutes, we find that the money contributed by plaintiffs-
appellees was in the nature of a loan, secured by their liens and
interests duly annotated on the titles. The annotation of their
lien serves only as collateral and does not in any way vest
ownership of property to plaintiffs.
We are not persuaded by the contention of Aznar, et al., that the
language of the subject Minutes created an express trust.
Trust is the right to the beneficial enjoyment of property, the
legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the property for
the benefit of the beneficiary. Express trusts are intentionally
created by the direct and positive acts of the settlor or the trustor
- by some writing, deed, or will or oral declaration. It is created
not necessarily by some written words, but by the direct and
positive acts of the parties. The creation of an express trust must
be manifested with reasonable certainty and cannot be inferred
from loose and vague declarations or from ambiguous
circumstances susceptible of other interpretations. At most,
what Aznar, et al., had was merely a right to be repaid the
amount loaned to RISCO. Unfortunately, the right to seek
repayment or reimbursement of their contributions used to
purchase the subject properties is already barred by prescription
10 Years because it was based on a written contract (the minutes
by the Board of Directors) in 1961 and the quieting of the title
suit was brought only in 1998.
103. Torbela v. Rosario
This is a consolidated case:
The petitioners in G.R. No. 140528 are siblings Maria Torbela, Pedro Torbela,
Eufrosina Torbela Rosario, Leonila Torbela Tamin, Fernando Torbela, Dolores
Torbela Tablada, Leonora Torbela Agustin, and Severina Torbela Ildefonso
(Torbela siblings).
The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario), who
was married to, but now legally separated from, Dr. Andres T. Rosario (Dr.
Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the nephew of
the other Torbela siblings.
FACTS: The Torbela siblings executed a deed of absolute
quitclaim on December 9, 1964 for P9.00 over Lot No. 356-A (the
property) in favor of Dr. Rosario. Four days after, a TCT was
issued in Dr. Rosario’s name covering the property. Another deed
of absolute quitclaim was subsequently executed on December
28, 1964 by Dr. Rosario, for a consideration of P1.00,
acknowledging that he only borrowed the lot from the Torbela
siblings and was already returning the same. This deed was
notarized but not immediately annotated. Dr. Rosario used the
land as mortgage for a loan he obtained through DBP for
P70,000.00. He used the proceeds of the loan to build a 4 story
building which was initially used as a hospital but later converted
into a commercial space. Dr. Rosario fully paid the loan from DBP
and the mortgage was cancelled and ratified by a notary public.
However, Dr. Rosario took another loan from PNB. He later
acquired a third loan from Banco Filipino and bought out the loan
from PNB cancelling the mortgage with PNB. Rosario failed to pay
their loan in Banco Filipino and the property was extrajudicially
foreclosed, where Banco Filipino was the lone bidder thereof.
Meanwhile, back in 1965, the Torbela siblings sought to register
their ownership over the lot and to perfect their title but couldn’t
because the title was still with DBP. They showed as proof the
deed of absolute quitclaim presented executed by Rosario
himself. In 1986, they filed a civil case for recovery of ownership
and possession and damages. They tried to redeem the lot from
Banco Filipino but failed. TCT was issued to Banco FIlipino. The
Torbela’s claim they have right over the rents of the building
through accession because they are the land owners.
The Torbela siblings filed before the RTC for recovery of
ownership and possession of the lot. Subsequently the complaint
was amended to implead Banco Filipino. In relation to the
extrajudicial foreclosure, the siblings filed a case for annulment
of extrajudicial foreclosure. Failing to redeem the property, the
siblings filed for the annulment of the Certificate of Final Sale to
Banco Filipino.
RTC – The mortgage executed by Sps. Rosario to Banco Filipino
and the extrajudicial foreclosure of the subject property are both
valid, and that Banco Filipino the rightful owner of the same.
CA – Affirmed with modification, deleting attorney’s fees to
Banco Filipino and giving the right of first refusal to the Torbela
siblings.
ISSUE: Whether or not there was an express trust between the
Torbela siblings and Dr. Rosario.
RULING: Yes. There was an express trust between them.
RATIO: Indeed, the Torbela siblings executed a Deed of Absolute
Quitclaim on December 12, 1964 in which they transferred and
conveyed Lot No. 356-A to Dr. Rosario for the consideration of
P9.00. However, the Torbela siblings explained that they only
executed the Deed as an accommodation so that Dr. Rosario
could have Lot No. 356-A registered in his name and use said
property to secure a loan from DBP.
Considering the foregoing, the Court agrees with the RTC and the
Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust
for the Torbela siblings.
Trust is the right to the beneficial enjoyment of property, the
legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the property for
the benefit of the beneficiary. Trust relations between parties
may either be express or implied. An express trust is created by
the intention of the trustor or of the parties, while an implied
trust comes into being by operation of law.
Express trusts are created by direct and positive acts of the
parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a trust.
Under Article 1444 of the Civil Code, [n]o particular words are
required for the creation of an express trust, it being sufficient
that a trust is clearly intended. It is possible to create a trust
without using the word trust or trustee. Conversely, the mere
fact that these words are used does not necessarily indicate an
intention to create a trust. The question in each case is whether
the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial
whether or not he knows that the relationship which he intends
to create is called a trust, and whether or not he knows the
precise characteristics of the relationship which is called a trust.
In Tamayo v. Callejo, the Court recognized that a trust may have a
constructive or implied nature in the beginning, but the registered
owners subsequent express acknowledgement in a public document of
a previous sale of the property to another party, had the effect of
imparting to the aforementioned trust the nature of an express trust.
The same situation exists in this case. When Dr. Rosario was able to
register Lot No. 356-A in his name under TCT No. 52751 on December
16, 1964, an implied trust was initially established between him and the
Torbela siblings under Article 1451 of the Civil Code, which provides:
ART. 1451. When land passes by succession to any person and he causes RTC - No express trust. There was no evidence of another
the legal title to be put in the name of another, a trust is established by document showing Robertos undertaking to return the subject
implication of law for the benefit of the true owner. properties. Instead, there was an implied trust.

CA - Affirmed dispositive portion. But dismissed the petitioner’s

Dr. Rosarios execution of the Deed of Absolute Quitclaim on claim that Roberto was merely a trustee.
December 28, 1964, containing his express admission that he
only borrowed Lot No. 356-A from the Torbela siblings, ISSUE: Whether or not there was an implied trust was created.
eventually transformed the nature of the trust to an express one.
The express trust continued despite Dr. Rosario stating in his RULING: Yes. There is an implied trust.
Deed of Absolute Quit Claim that he was already returning Lot
No. 356-A to the Torbela siblings as Lot No. 356-A remained RATIO: The Court held that “A trust is the legal relationship
registered in Dr. Rosarios name under TCT No. 52751 and Dr. between one person having an equitable ownership of property
Rosario kept possession of said property, together with the and another person owning the legal title to such property, the
improvements thereon. equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain powers
by the latter. Trusts are either express or implied.”
104. Estate of Margarita D. Cabacungan v. Laigo
ESTATE OF MARGARITA D. CABACUNGAN, represented by LUZ
The Court also held that “Express or direct trusts are created by
LAIGO-ALI, Petitioner,
the direct and positive acts of the parties, by some writing or
vs. MARILOU LAIGO, PEDRO ROY LAIGO, STELLA BALAGOT and
deed, or will, or by oral declaration in words evincing an intention
SPOUSES MARIO B. CAMPOS AND JULIA S. CAMPOS,
to create a trust.”
Respondents.

The Court, moreover, held that “Implied trusts—also called

FACTS: Margarita Cabacungan owned three parcels of
“trusts by operation of law,” “indirect trusts” and “involuntary
unregistered land in La Union which are covered by tax
trusts”—arise by legal implication based on the presumed
declaration all in her name. Sometime in 1968, Margarita’s son,
intention of the parties or on equitable principles independent
Roberto Laigo, Jr. applied for a non-immigrant visa to the United
of the particular intention of the parties. They are those which,
States, and to support his application, he allegedly asked
without being expressed, are deducible from the nature of the
Margarita to transfer the tax declarations of the properties in his
transaction as matters of intent or, independently of the
name. For said purpose, Margarita, unknown to her other
particular intention of the parties, as being inferred from the
children, executed an Affidavit of Transfer of Real Property
transaction by operation of law basically by reason of equity.”
whereby the subject properties were transferred by donation to
Roberto.
In addition, the Court held that “Implied trusts are further
classified into constructive trusts and resulting trusts.
Roberto adopted respondents Pedro Laigo and Marilou Laigo. In
Constructive trusts, on the one hand, come about in the main by
July 1990, Roberto sold the aforementioned three parcel of land.
operation of law and not by agreement or intention. They arise
One parcel of land was sold to spouses Mario and Julia Campos
not by any word or phrase, either expressly or impliedly, evincing
and the rest were sold to Pedro Laigo and Marilou Laigo. These
a direct intention to create a trust, but one which arises in order
sales were not known to Margarita and her other children.
to satisfy the demands of justice.”
The Court further held that “Resulting trusts arise from the
Spouses Campos advanced that they were innocent purchasers
nature or circumstances of the consideration involved in a
for value and in good faith. Further, they noted that Margarita’s
transaction whereby one person becomes invested with legal
claim was already barred by prescription and laches owing to her
title but is obligated in equity to hold his title for the benefit of
long inaction in recovering the subject properties.
another. This is based on the equitable doctrine that valuable
Marilou and Pedro contends to be buyers in good faith and for
consideration and not legal title is determinative of equitable
value. They also believed that Margarita’s cause of action had
title or interest and is always presumed to have been
already been barred by laches, and that even assuming the
contemplated by the parties.”
contrary, the cause of action was nevertheless barred by
prescription as the same had accrued way back in 1968 upon the
Finally, the Court held that “A trust will follow the property—
execution of the affidavit of transfer by virtue of which an
through all changes in its state and form as long as such property,
implied trust had been created. In this regard, they emphasized
its products or its proceeds, are capable of identification, even
that the law allowed only a period of ten (10) years within which
into the hands of a transferee other than a bona fide purchaser
an action to recover ownership of real property or to enforce an
for value, or restitution will be enforced at the election of the
implied trust thereon may be brought, but Margarita merely let
beneficiary through recourse against the trustee or the
it pass.
transferee personally. This is grounded on the principle in
property law that ownership continues and can be asserted by
the true owner against any withholding of the object to which
the ownership pertains, whether such object of the ownership is
found in the hands of an original owner or a transferee, or in a
different form, as long as it can be identified.”
105. Advent Capital and Finance Corp. v. Alcantara
ADVENT CAPITAL AND G.R. FINANCE CORPORATION, Petitioner,
vs. NICASIO I. ALCANTARA and EDITHA I. ALCANTARA, Respondents.
FACTS: On July 16, 2001 Advent Capital filed a petition for
rehabilitation with the RTC. The RTC named Atty. Danilo
Conception (Conception) as rehabilitation receiver. Upon audit,
Conception found that respondents Nicasio and Editha Alcantara
(the Alcantaras) owed Advent Capital P27,398,026.59,
representing trust fees. Conception then requested Belson
Securities, Inc. (Belson)to deliver to him the P7,635,597.50 in
cash dividends that Belson held under the Alcantaras’ trust
account. Conception claimed that the dividends, as trust fees,
formed part of Advent Capital assets which Belson refused, citing
the Alcantaras’ objections and the absence of an appropriate
order from the rehabilitation court.
Rehabilitation Court – (Advent v. Alcantara) Consequently,
Conception filed a motion for the rehabilitation court to direct
Belson to release the money to him. The Alcantaras appeared to
oppose. This court granted this motion, to which Belson
complied.
CA – (Alcantara v. Advent) Annuled the rehabilitation court’s
order. Ruling that the Alcantaras owned those dividends and did
not form part of Advent’s Capital assets. Rehabilitation
proceedings referred only to the assets and liabilities of the
company proper, not to those belonging to the Trust Department
which held assets belonging to other people.
ISSUE: Whether or not the cash dividends held by Belson are
required to be conveyed to the rehabilitation receiver for his
disposition.
RULING: No.
RATIO: Advent Capital asserts that the cash dividends in Belsons
possession formed part of its assets based on paragraph 9 of its
Trust Agreement with the Alcantaras, which states:
9. Trust Fee: Other Expenses As compensation for its services hereunder,
the TRUSTEE shall be entitled to a trust or management fee of 1 (one) %
per annum based on the quarterly average market value of the Portfolio
or a minimum annual fee of P5,000.00, whichever is higher. The said
trust or management fee shall automatically be deducted from the
Portfolio at the end of each calendar quarter. The TRUSTEE shall likewise
be reimbursed for all reasonable and necessary expenses incurred by it
in the discharge of its powers and duties under this Agreement, and in
all cases, the TRUSTEE shall have a first lien on the Portfolio for the
payment of the trust fees and other reimbursable expenses
Accordingly Advent Capital could automatically deduct its
management fees from the portfolio.
However, the trust fees claimed by Conception was for past
quarters, these should have been deducted as they became due.
At the time Advent Capital made its move to collect its supposed
management fees, it neither had possession nor control of the
money it wanted to apply to its claim. For banks, their trust
agreement authorizes the automatic collection.
Here Advent Capital did not exercise its right to cause the
automatic deduction at the end of every quarter of its supposed
management fee when it had full control of the dividends. The
Alcantaras can assume that the management fee has already
been deducted, hence, the burden of proof is on Advent Capital
to prove otherwise. Advent Capital merely managed in trust for
the benefit of the Alcantaras the latter’s portfolio, which under
Paragraph 2 of the Trust Agreement, includes not only the
principal but also its income or proceeds. The trust property is
only fictitiously attributed by law to the trustee to the extent that
the rights and powers vested in a nominal owner shall be used
by him on behalf of the real owner.
The real owner of the trust property is the trustor-beneficiary. In
this case, the trustors-beneficiaries are the Alcantaras. Thus,
Advent Capital could not dispose of the Alcantaras portfolio on
its own. The income and principal of the portfolio could only be
withdrawn upon the Alcantaras written instruction or order to
Advent Capital. The latter could not also assign or encumber the
portfolio or its income without the written consent of the
Alcantaras. All these are stipulated in the Trust Agreement.
106. Goyanko v. UCPB
JOSEPH GOYANKO, JR., as administrator of the Estate of Joseph
Goyanko, Sr., Petitioner,
vs. UNITED COCONUT PLANTERS BANK, MANGO AVENUE BRANCH,
Respondent.
Trustor – PALII
Trustee – UCPB
Beneficiary – the HEIRS (as contended by the petitioner)
FACTS: In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested
Two Million Pesos (P2,000,000.00) with Philippine Asia Lending
Investors, Inc. family, represented by the petitioner, and his
illegitimate family presented conflicting claims to PALII for the
release of the investment. Pending the investigation of the
conflicting claims, PALII deposited the proceeds of the
investment with UCPB on October 29, 19965 under the name
"Phil Asia: ITF (In Trust For) The Heirs of Joseph Goyanko, Sr."
(ACCOUNT). On September 27, 1997, the deposit under the
ACCOUNT was P1,509,318.76.
On December 11, 1997, UCPB allowed PALII to withdraw One
Million Five Hundred Thousand Pesos (P1,500,000.00) from the
Account, leaving a balance of only P9,318.76. When UCPB
refused the demand to restore the amount withdrawn plus legal
interest from December 11, 1997, the petitioner filed a
complaint before the RTC. In its answer to the complaint, UCPB
admitted, among others, the opening of the ACCOUNT under the
name "ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.," (ITF
HEIRS) and the withdrawal on December 11, 1997.
RTC – Dismissed the petitioner’s complaint. RTC did not consider
the words “ITF HEIRS” sufficient to charge UCPB with knowledge
of any trust relation between PALII and Goyankos’s heirs.
CA – partially granted the petitioner’s appeal. Affirmed the RTC
but deleted the award of attorney’s fees and litigation expenses.
Holding that no express or implied trust was created. The words
“ITF HEIRS” insufficient to establish the existence of a trust.
Petitioner: There is a trust relation. The naming of the cestui que
trust is not necessary as it suffices that they are adequately
certain or identifiable.
Respondent: No trust relation. The account only involves and
ordinary deposit which created a debtor-creditor relationship.
ISSUE: Whether or not a trust was established.
RULING: No.
RATIO: A trust, either express or implied, is the fiduciary
relationship “between one person having an equitable
ownership of property and another person owning the legal title
to such property, the equitable ownership of the former entitling
him to the performance of certain duties and the exercise of
certain powers by the latter." Express or direct trusts are created
by the direct and positive acts of the trustor or of the parties. No
written words are required to create an express trust. This is
clear from Article 1444 of the Civil Code, but, the creation of an
express trust must be firmly shown; it cannot be assumed from
loose and vague declarations or circumstances capable of other
interpretations.
In Rizal Surety & Insurance Co. v. CA, we laid down the
requirements before an express trust will be recognized:
Basically, these elements include a competent trustor and trustee, an
ascertainable trust res, and sufficiently certain beneficiaries. xxx each
of the above elements is required to be established, and, if any one of
them is missing, it is fatal to the trusts (sic). Furthermore, there must
be a present and complete disposition of the trust property,
notwithstanding that the enjoyment in the beneficiary will take place
in the future. It is essential, too, that the purpose be an active one to
prevent trust from being executed into a legal estate or interest, and one
that is not in contravention of some prohibition of statute or rule of
public policy. There must also be some power of administration other
than a mere duty to perform a contract although the contract is for a
third party beneficiary. A declaration of terms is essential, and these
must be stated with reasonable certainty in order that the trustee may
administer, and that the court, if called upon so to do, may enforce, the
trust.
Contrary to petitioner’s contention, the letters and records
established UCPB’s participation as a mere depositary only. PALII
manifested its intention to pursue an active role in and up to the
turnover of the proceeds to their rightful owners, while in
November 15, 1996, in a letter PALII begged the Petitioner to
trust it with the safekeeping of the investment proceeds and
documents. Had it been PALII’s intention to create a trust in favor
of the HEIRS, it would have relinquished any right or claim over
the proceeds in UCPB’s favor as the trustee. As matters stand,
PALII never did. While the words "ITF HEIRS" may have created
the impression that a trust account was created, a closer scrutiny
reveals that it is an ordinary savings account. the word "ITF" was
merely used to distinguish the ACCOUNT from PALII’s other
accounts with UCPB. A trust can be created without using the
word "trust" or "trustee," but the mere use of these words does
not automatically reveal an intention to create a trust. If at all,
these words showed a trustee-beneficiary relationship between
PALII and the HEIRS.
Since the records and the petitioner’s own admission showed
that the ACCOUNT was opened by PALII, UCPB’s receipt of the
deposit signified that it agreed to pay PALII upon its demand and
only upon its order. Thus, when UCPB allowed PALII to withdraw
from the ACCOUNT, it was merely performing its contractual
obligation under their savings deposit agreement. No negligence
or bad faith can be imputed to UCPB for this action. As far as
UCPB was concerned, PALII is the account holder and not the
HEIRS.
107. Morales v. CA
RODOLFO MORALES, represented by his heirs, and PRISCILA MORALES,
petitioners,
Vs. COURT OF APPEALS (Former Seventeenth Division), RANULFO ORTIZ,
JR., and ERLINDA ORTIZ, respondents.
Celso Avelino – Seller
Ranulfo & Erlinda Ortiz – Spouses-Buyers
Rodolfo Morales – Nephew-Builder
Priscila Morales – Seller’s Other Sister / Mother of Builder
FACTS: Seller owns two adjoining parcels of land on which he
constructed a house where he let his parents and sister lived
while he worked as City Fiscal of Calbayog, then Immigration
Officer, and, later on, as Judge of CFI Cebu. While in Cebu,
without the Seller’s knowledge, his Nephew built a beauty shop
on his property. When he was offering to sell the property to
prospective buyer Spouses, the latter did an ocular inspection
and was able to talk with the Nephew, who encouraged them to
buy the property and assured them that he will vacate the
premises if notified by the seller to do so. The sale was
consummated and the Spouses paid the purchase price.
Unfortunately, despite due notice from the Seller, the Nephew
refused to vacate or demolish the beauty shop unless he is
reimbursed for P35k. The Spouses also subsequently found out
that the Nephew also then occupied the dilapidated residential
building, which the former had sought to repair. The Spouses
then filed a case to recover the property against the Nephew
(later substituted by his heirs).
According to the Nephew’s mother, sister of the Seller, (aside
from the one who live in the house constructed) who also
intervened in the case, the property was inherited by her
together with their other siblings, except for the Seller who was
away for 30 years because of his job. The Seller, being the only
son, was allowed by their father to acquire the property with
money coming from the father. She further alleged that the
constructed house was built by their parents and that the built
beauty shop was with the knowledge and consent of the Seller.
She intervened arguing that the sale was fraudulent for including
her share and the beauty shop of her son. The Trial Court ruled
in favor of the Spouses and ordered the Nephew to vacate and
remove the beauty shop. The court noted that the seller’s
siblings and their descendants had not disputed the Seller’s
ownership of the property nor the extra judicial-partition
effected on the property, even though two of the Sister-
Intervenor’s children were lawyers. It further noted that the
claim of ownership by the buyer Spouses were based on
documentary evidence (Deed of Conveyance, tax declarations
transferred to the wife-buyer, etc.), as against the evidence
presented by the Seller’s Sister and Nephew which were only
testimonial. Furthermore, the other sisters did not join them and
intervened in the case. The court further ruled that their claim of
implied trust is untenable, because in order for implied trust to
exist there must be evidence of an equitable obligation of the
trustee to convey, which was absent in this case. The CA affirmed
the decision of the trial court.
RTC - In favor of Sps. Ortiz. Celso, not his parents, is the true
owner of the premises in question.
CA - Affirmed RTC.
ISSUE: Whether or not the Seller was a mere trustee (implied) for
his parents and siblings.
RULING: No.
RATIO: As a rule, the burden of proving the existence of a trust is
on the party asserting its existence, and such proof must be clear
and satisfactorily show the existence of the trust and its
elements. While implied trusts may be proved by oral evidence,
the evidence must be trustworthy and received by the courts
with extreme caution, and should not be made to rest on loose,
equivocal or indefinite declarations. A trust is the legal
relationship between one person having an equitable
ownership in property and another person owning the legal
title to such property, the equitable ownership of the former
entitling him to the performance of certain duties and the
exercise of certain powers by the latter. The characteristics of a
trust are: (a) it is a relationship; (b) it is a relationship of
fiduciary character; (c) It is a relationship with respect to
property, not one involving merely personal duties; (d) it
involves the existence of equitable duties imposed upon the
holder of the title to the property to deal with it for the benefit
of another; and (e) it arises as a result of a manifestation of
intention to create the relationship.
A resulting trust, also sometimes referred to as a PURCHASE
MONEY RESULTING TRUST, is exemplified by Article 1448 of the
Civil Code, which reads: Art. 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. However, if the person to whom the
title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being
disputably presumed that there is a gift in favor of the child. To
give rise to a purchase money resulting trust, it is essential that
there be: (1) an actual payment of money, property or services,
or an equivalent, constituting valuable consideration, (2) and
such consideration must be furnished by the alleged beneficiary
of a resulting trust.
The Court agreed with the lower courts that the current situation
falls within the exception under the third sentence of Article
1448.
Also fatal to the case of the Sister and the Nephew is the
declaration of their other sister, Concepcion, who disclaimed any
interest on the property and executed a Confirmation that their
brother bought the property using his own funds. If indeed the
property was merely held in trust by Celso for his parents,
Concepcion would have been entitled to a proportionate part
thereof as co-heir. However, by her Confirmation, Concepcion
made a solemn declaration against interest. Furthermore, the
Seller’s sisters did not do anything to have their respective shares
in the property conveyed to them after the death of their father.
Neither is there any evidence that during his lifetime, their father
demanded from the Seller that the latter convey the land, which
was mute and eloquent proof of the father’s recognition that the
Seller was the to be the absolute owner of the property.
108. Government v. Abadilla
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, petitioner,
vs. ANASTASIA ABADILLA, ET AL., claimants. THE MUNICIPALITY OF
TAYABAS, ET AL., claimants-appellees, MARIA PALAD, ET AL., claimants-
appellants.
FACTS: A school teacher originally owned three parcels of land,
by composicion gratuita. Before dying, he executed a
holographic will party in Spanish and partly in Tagalog, leaving
their possession to his widow. The will contained a Tagalog
clause which translated read: That the coconut land in
Colongcolong, which I have put under cultivation, be used by my
wife after my death during her life or until she marries, but from
this cocoanut land shall be taken what is to be lent to the persons
who are to plant cocoanut trees and that which is to be paid to
them as their share of the crop if any should remain; and that she
try to earn with the product of the cocoanut trees of which those
bearing fruit are annually increasing; and if the times
aforementioned should arrive, I prepare and donate it to
secondary college to be erected in the capital of Tayabas; so this
will be delivered by my wife and the executors to the
Ayuntamiento of this town, should there be any, and if not, to
the civil governor of this province in order to cause the manager
thereof to comply with my wishes for the good of many and the
welfare of the town.
After the school teacher died, the widow remained in possession
of the land and remarried. Subsequently, collateral heirs of the
deceased brought an action against the widow for the partition
of the lands arguing that she, by reason of her second marriage,
had lost the right to their exclusive use and possession. The
municipality of Tayabas intervened claiming the land based on
the said clause in the will. During the pendency of the action, an
agreement was arrived at by the parties, where two lots were
turned over to the municipality as its share of the inheritance
under the will, and the remaining lot left in the possession of the
widow. Based on the agreement, the action was dismissed with
the concurrence of all the parties, but reserving to the collateral
heirs the right to bring another action. The municipality of
Tayabas the widow had uninterrupted possession of their
respective lots. The court also ordered registration of the three
lots in the name of the governor of Tayabas in trust for the
secondary school to be established. The widow and the collateral
heirs appealed.
Lower Court - Ordered the registration of the three lots in the
name of the governor of the Province of Tayabas in trust for a
secondary school to be established in the municipality of
Tayabas.
ISSUE: Whether or not the property should be given to the
collateral heirs
RULING: NO. A trust can be created even when the cestui que
trust be in esse.
RATIO: According to the court, the clause in the will reveals the
intent of testator which must be given effect, which is to create
a trust for the benefit of a secondary school to be established in
the town of Tayabas, naming as trustee the ayuntamiento of the
town or if there be no ayuntamiento, then the civil governor of
the Province of Tayabas.
Drawing on American precedents, the court notes that in order
that a trust may become effective there must, of course, be a
trustee and a cestui que trust. On the other hand, the claimants’
counsel argue that there is neither in the present case; that there
is no ayuntamiento, no Gobernador Civil of the province, and no
secondary school in the town of Tayabas.
An ayuntamiento corresponds to what in English is termed a
municipal corporation. But in the Philippines, provincial
governors are the chief executives of their respective provinces,
and as the successor of the civil governor of the province under
the Spanish regime, may act as trustee in the present case. In
regard to private trust, it is not always necessary that the cestui
que trust should be named, or even be in esse (“to be”) at the
time the trust is created in his favor. Thus a devise to a father
in trust for accumulation for his children lawfully begotten at
the time of his death has been held to be good although the
father had no children at the time of the vesting of the funds in
him as trustees. In charitable trust such as the one here under
discussion, the rule is still further relaxed.
While the collateral heirs argue that assuming all this to be true
they would nevertheless be entitled to the income of the land
until the cestui que trust is actually in esse. The court however
disagreed. If the trustee holds the legal title and the devise is
valid, the natural heirs of the deceased have no remaining
interest in the land except their right to the reversion in the event
the devise for some reason should fail, an event which has not as
yet taken place. From a reading of the testamentary clause under
discussion it seems quite evident that the intention of the
testator was to have income of the property accumulate for the
benefit of the proposed school until the same should be
established.
For the property in possession of the widow, she was able to
acquire the property through prescription.
CONCURRING & DISSENTING OPINION (MALCOLM, J.)
His view is that the property should not have been awarded to
the widow. The school teacher, in his will, transmitted the
usufructuary rights to the land to his widow "during her life or
until she marries," after which the property was to be delivered
to the ayuntamiento or if there should not be any, to the civil
governor of the Province of Tayabas, for the benefit of a
secondary college. The widow having remarried, the property
should have been turned over to the municipality of Tayabas. The
alleged agreement between the parties cannot alter the facts.
The possession by the widow has been in contravention of the
terms of the trust and in bad faith.
109. Panlilio v. Citibank
FACTS: Amalia Panlilio (Amalia) visited respondent's Makati City
office and deposited one million pesos (PhP1 million) in the
bank's "Citihi" account, a fixed-term savings account with a
higher-than-average interest. On the same day, Amalia also
opened a current or checking account with respondent, to which
interest earnings of the Citihi account were to be credited.
Respondent assigned one of its employees, Jinky Suzara Lee
(Lee), to personally transact with Amalia and to handle the
accounts. Amalia opened the accounts as ITF or "in trust for"
accounts, as they were intended to benefit her minor children, in
case she would meet an untimely death. Amalia's initial intention
was to invest the money in a Citibank product called the Peso
Repriceable Promissory Note (PRPN), a product which had a
higher interest. However, as the PRPN was not available that day,
Amalia put her money in the Citihi savings account. More than a
month later, or on November 28, 1997, Amalia phoned Citibank
saying she wanted to place an investment, this time in the
amount of three million pesos (PhP3 million). During the visit,
Amalia instructed Lee on what to do with the PhP3 million. Later,
she learned that out of the said amount, PhP2,134,635.87 was
placed by Citibank in a Long-Term Commercial Paper (LTCP), a
debt instrument that paid a high interest, issued by the
corporation Camella and Palmera Homes (C&P Homes). The rest
of the money was placed in two PRPN accounts, in trust for each
of Amalia's two children.
Allegations differ between petitioners and respondent as to
whether Amalia instructed Lee to place the money in the LTCP of
C&P Homes. Amalia claims to have called Lee as soon as she
received the first COI in December 1997, and demanded that the
investment in LTCP be withdrawn and placed in a PRPN.
Respondent, however, denies this, claiming that Amalia merely
called to clarify provisions in the COI and did not demand a
withdrawal. Amalia, through counsel, sent her first formal,
written demand to respondent "for a withdrawal of her
investment as soon as possible. Respondent noted that the
investment had a 2003 maturity, was not a deposit, and thus, its
return to the investor was not guaranteed by respondent;
however, it added that the LTCP may be sold prior to maturity
and had in fact been put up for sale, but such sale as "subject to
the availability of buyers in the secondary market." At that time,
respondent was not able to find a buyer for the LTCP. Thus,
petitioners filed with the RTC their complaint against respondent
for a sum of money and damages.
RTC - ruled in favor of plaintiffs.
CA - reversed the decision of the trial court.
ISSUES: (1) whether petitioners are bound by the terms and
conditions of the Directional Investment Management
Agreement (DIMA), Term Investment Application (TIA),
Directional Letter/Specific Instructions, and Confirmations of
Investment (COIs); (2) and whether petitioners are entitled to
take back the money they invested from respondent bank; or
stated differently, whether respondent is obliged to return the
money to petitioners upon their demand prior to maturity.
RULING: (1) yes (2) no
RATIO:
1) The DIMA, Directional Letter and COIs are evidence of the
contract between the parties and are binding on them, following
Article 1159 of the Civil Code which states that contracts have
the force of law between the parties and must be complied with
in good faith.47 In particular, petitioner Amalia affixed her
signatures on the DIMA, Directional Letter and TIA, a clear
evidence of her consent which, under Article 1330 of the same
Code, she cannot deny absent any evidence of mistake, violence,
intimidation, undue influence or fraud.48 As the documents have
the effect of law, an examination is in order to reveal what
underlies petitioners' zeal to exclude these from consideration.
Under the DIMA, the following provisions appear:
Nature of Agreement – THIS AGREEMENT IS AN AGENCY AND
NOT A TRUST AGREEMENT. AS SUCH, THE PRINCIPAL SHALL AT
ALL TIMES RETAIN LEGAL TITLE TO THE FUNDS AND PROPERTIES
SUBJECT OF THE ARRANGEMENT.
The DIMA, Directional Letter, TIA and COIs, read together,
establish the agreement between the parties as an investment
management agreement, which created a principal-agent
relationship between petitioners as principals and respondent as
agent for investment purposes. The agreement is not a trust or
an ordinary bank deposit; hence, no trustor-trustee beneficiary
or even borrower-lender relationship existed between
petitioners and respondent with respect to the DIMA account.
Respondent purchased the LTCPs only as agent of petitioners;
thus, the latter assumed all obligations or inherent risks entailed
by the transaction under Article 1910 of the Civil Code, which
provides:
Article 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.
2) It is clear that since the money is committed to C&P Homes via
LTCP for five years, or until 2003, petitioners may not seek its
recovery from respondent prior to the lapse of this period.
Petitioners must wait and meanwhile just be content with
receiving their interest regularly. If petitioners want the
immediate return of their investment before the maturity date,
their only way is to find a willing buyer to purchase the LTCP at
an agreed price, or to go directly against the issuer C&P Homes,
not against the respondent.
II. Kinds of Trust
110. Ramos v. Ramos
EMILIANO B. RAMOS, ET AL., plaintiffs-appellants,
vs. GREGORIA T. RAMOS, ET AL., defendants-appellants.
FACTS: Spouses Martin Ramos and Candida Tanate died on
October 4, 1906 and October 26, 1880, respectively. They were
survived by their 3 children. Moreover, Martin was survived by
his 7 natural children. In December 1906, a special proceeding
for the settlement of the intestate estate of said spouses was
conducted. Rafael Ramos, a brother of Martin, administered the
estate for more than 6 years. Eventually, a partition project was
submitted which was signed by the 3 legitimate children and 2 of
the 7 natural children. A certain Timoteo Zayco signed in
representation of the other 5 natural children who were minors.
The partition was sworn to before a justice of peace. The
conjugal hereditary estate was appraised at P74,984.93,
consisting of 18 parcels of land, some head of cattle and the
advances to the legitimate children. ½ thereof represented the
estate of Martin. 1/3 thereof was the free portion or P12,497.98.
The shares of the 7 natural children were to be taken from that
1/3 free portion. Indeed, the partition was made in accordance
with the Old Civil code. Thereafter, Judge Richard Campbell
approved the partition project. The court declared that the
proceeding will be considered closed and the record should be
archived as soon as proof was submitted that each heir had
received the portion adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the
administrator to submit a report showing that the shares of the
heirs had been delivered to them as required by the previous
decision. Nevertheless, the manifestation was not in strict
conformity with the terms of the judge’s order and with the
partition project itself. 8 lots of the Himamaylan Cadastre were
registered in equal shares in the names of Gregoria (widow of
Jose Ramos) and her daughter, when in fact the administrator
was supposed to pay the cash adjudications to each of them as
enshrined in the partition project. Plaintiffs were then
constrained to bring the suit before the court seeking for the
reconveyance in their favor their corresponding participations in
said parcels of land in accordance with Article 840 of the old Civil
Code. Note that 1/6 of the subject lots represents the 1/3 free
portion of martin’s shares which will eventually redound to the
shares of his 7 legally acknowledged natural children. The
petitioners’ action was predicated on the theory that their shares
were merely held in trust by defendants. Nonetheless, no Deed
of Trust was alleged and proven. Ultimately, the lower court
dismissed the complaint on the grounds of res judicata,
prescription and laches.
Lower Court - Dismissed the complaint on the ground of res
judicata.
ISSUE: Whether or not the plaintiff’s shares were held in trust by
the defendants.
RULING: NO.
RATIO: The plaintiffs did not prove any express trust in this case.
The expediente of the intestate proceeding, particularly the
project of partition, the decision and the manifestation as to the
receipt of negatives the existence of an express trust. Those
public documents prove that the estate of Martin Ramos was
settled in that proceeding and that adjudications were made to
his seven natural children. A trust must be proven by clear,
satisfactory, and convincing evidence. It cannot rest on vague
and uncertain evidence or on loose, equivocal or indefinite
declarations. As already noted, an express trust cannot be
proven by parol evidence.
Neither have the plaintiffs specified the kind of implied trust
contemplated in their action. We have stated that whether it is a
resulting or constructive trust, its enforcement may be barred by
laches.
There is a rule that a trustee cannot acquire by prescription the
ownership of property entrusted to him, or that an action to
compel a trustee to convey property registered in his name in
trust for the benefit of the cestui que trust does not prescribed,
or that the defense of prescription cannot be set up in an action
to recover property held by a person in trust for the benefit of
another, or that property held in trust can be recovered by the
beneficiary regardless of the lapse of time. That rule applies
squarely to express trusts. The basis of the rule is that the
possession of a trustee is not adverse. Not being adverse, he
does not acquire by prescription the property held in trust. Thus,
section 38 of Act 190 provides that the law of prescription does
not apply "in the case of a continuing and subsisting trust.” The
rule of imprescriptibility of the action to recover property held in
trust may possibly apply to resulting trusts as long as the trustee
has not repudiated the trust. The rule of imprescriptibility was
misapplied to constructive trusts.
Acquisitive prescription may bar the action of the beneficiary
against the trustee in an express trust for the recovery of the
property held in trust where (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of the
cestui que trust; (b) such positive acts of repudiation have been
made known to the cestui que trust and(c) the evidence thereon
is clear and conclusive (Laguna vs. Levantino, supra; Salinas vs.
Tuason, 55 Phil. 729. Compare with the rule regarding co-owners
found in the last paragraph of article 494, Civil Code; Casanas vs.
Rosello, 50 Phil. 97; Gerona vs. De Guzman, L- 19060, May 29,
1964, 11 SCRA 153,157). With respect to constructive trusts, the
rule is different. The prescriptibility of an action for
reconveyance based on constructive trust is now settled.
Prescription may supervene in an implied trust. And whether the
trust is resulting or constructive, its enforcement may be barred
by laches.
Note: Cestui Que Trust - He who has a right to a beneficial
interest in and out of an estate the legal title to which is vested
in another. The person who possesses the equitable right to
property and receives the rents, issues, and profits thereof, the
legal estate of which is vested in a trustee. It has been proposed
to substitute for this uncouth term the English word
“beneficiary,” and the latter, though still far from universally
adopted, has come to be quite frequently used. It is equal in
precision to the antiquated and unwieldy Norman phrase, and
far better adapted to the genius of our language.
111. Torbela v. Rosario
SEE #103
112. Chu, Jr. v. Caparas
RICARDO CHU, JR. AND DY KOK ENG, PETITIONERS,
VS. MELANIA CAPARAS AND SPOUSES RUEL AND HERMENEGILDA
PEREZ, RESPONDENTS.
FACTS: At the root of the case is a parcel of land located at
Maguyam, Silang, Cavite, originally owned and registered in the
name of Miguela Reyes. The petitioners filed a complaint to
recover possession of the subject property against the
respondents, with a prayer to annul the sale of the subject
property executed between the respondents. In the complaint,
the petitioners alleged that they are the successors-in-interest of
Miguela over the subject property, which Caparas held in trust
for Miguela. The petitioners also averred that the subject
property was erroneously included in the sale of land between
the respondents.
The petitioners’ evidence showed that the subject property was
previously part of the tract of land owned by Miguela at
Maguyam, Silang, Cavite. Miguela sold to Caparas the eastern
portion of the land. Miguela retained for herself the rest of the
subject property, located at the western portion of the original
property. Further, the deed of conveyance executed between
Miguela and Caparas described the boundaries of the parcel of
land purchased by Caparas as: "sa ibaba ay Faustino Amparo, sa
silangan ay Silang at Carmona boundary, sa ilaya ay Aquilino
Ligaya, at sa kanluran ay ang natitirang lupa ni Miguela Reyes."
The petitioners asserted that more than fourteen years later,
Caparas caused the preparation of a consolidated survey plan
(Caparas survey plan) under her name for several parcels of land
(consolidated parcels of land) located at Silang-Carmona, Cavite,
with a total land area of 40,697 square meters. Under the
Caparas survey plan, the parcel of land supposedly retained by
Miguela was erroneously transferred to the eastern portion of
the original land and now allegedly owned by Caparas.
The petitioners also alleged that Caparas sold to the spouses
Perez the consolidated parcels of land in a deed. Considering the
alleged error in the Caparas survey plan, the petitioners
demanded the reconveyance of the subject property from
Caparas and the spouses Perez, who refused to reconvey the
subject property.
After an ex parte hearing, the RTC ruled in the petitioners’ favor.
The RTC, however, refused to approve, for lack of authority, the
new survey plan for the subject property that the petitioners
submitted.
The spouses Perez averred that the parcel of land sold to the
petitioners was not the subject property whose title had been
confirmed in their (spouses Perez’s) names. In the alternative,
the spouses Perez claimed that they bought the subject property
in good faith and for value and had been in open, continuous,
public and adverse possession of it since 1991.
RTC – Dismissed. The RTC found that Chu admitted during cross-
examination that the parcel of land sold to them was different
from the subject property. The petitioners were presumed to
have knowledge of the spouses Perez's registered title over the
subject property.
CA – RTC affirmed.
ISSUE: Whether or not the parcel of land sold to the petitioners
is the subject property included in the consolidated parcels of
land sold to the spouses Perez.
RULING: NO.
RATIO: The petitioners’ action against Caparas and the spouses
Perez for reconveyance, based on trust, must fail for lack of basis.
An action for reconveyance is a legal and equitable remedy that
seeks to transfer or reconvey property, wrongfully registered in
another person’s name, to its rightful owner. To warrant
reconveyance of the land, the plaintiff must allege and prove,
among others, ownership of the land in dispute and the
defendant’s erroneous, fraudulent or wrongful registration of
the property.
In the present petition, the petitioners failed to prove that the
parcel of land they owned was the subject property. Logically,
there is nothing to reconvey as what the spouses Perez
registered in their names did not include the parcel of land which
the petitioners, by their evidence, own.
We also see no trust, express or implied, created between the
petitioners and the spouses Perez over the subject property. A
trust by operation of law is the right to the beneficial enjoyment
of a property whose legal title is vested in another. A trust
presumes the existence of a conflict involving one and the same
property between two parties, one having the rightful ownership
and the other holding the legal title. There is no trust created
when the property owned by one party is separate and distinct
from that which has been registered in another’s name.
In this case, the Caparas survey plan and the deed of sale
between the petitioners and Miguela showed that the parcel of
land sold to the petitioners is distinct from the consolidated
parcels of land sold by Caparas to the spouses Perez.
Even granting that the Caparas survey plan did erroneously
switch the positions of the petitioners’ and the spouses Perez’s
respective landholdings, we agree with the RTC that
reconveyance was still an inappropriate remedy. The petitioners’
recourse should have been to file the proper action before the
Department of Environment and Natural Resources-Land
Management Bureau for the cancellation of the Caparas survey
plan and for the approval of a new survey plan that correctly
reflects the position of their respective landholdings. For until
the Caparas survey plan has been cancelled, the petitioners’
claim of encroachment has no basis.
Another perspective, too, that must be considered is Miguela’s
act in selling to the petitioners Lot No. 3 using the Caparas survey
plan, which can be regarded as a ratification of any perceived
error under the circumstances.
III. Express Trusts
113. Pacheco v. Arro
PETITIONERS: Dolores Pacheco, in her capacity as guardian
of the minors Concepcion, Alicia, and Herminia Yulo
(SUCCESSORS-IN-INTEREST)

RESPONDENTS: Santiago Arro et al. (CLAIMANTS)
***Jose Yulo y Regalado (PREDECESSOR IN INTEREST)
FACTS:
● Arro et al filed answers in a cadastral case, claiming
lots as their property and began to present
evidence before a referee. Dr. Mariano Yulo, who
represented the late Jose Yulo y Regalado in the
cadastral case, assured and promised that after the
change of the street names from Zamora and
Quennon streets to T. Yulo and G. Regalado
streets, Jose Yulo y Regalado would convey and
assign the lots to the claimants (Arro et al).
● Because of this, Arro et al withdrew their claims
and the cadastral court confirmed the title to the
lost and decreed their registration in the name of
Jose Yulo y Regalado.
● The representative of Jose Yulo complied with the
promise by executing deeds of donation or
assignment to some of the claimants.
***2/3 of this case is in Spanish; I’m guessing that
the part where the CLAIMANTS filed a complaint
was explained there.
CFI ordered the PREDECESSOR-IN-INTEREST to execute
deeds of assigned in favour of the CLAIMANTS for each and
every lot claimed by them.
CA affirmed.
● Pacheco contend that since a trustee does not
have title to the property which is the subject of
the trust, because title to such property is vested
in the cestui que trust, if the PREDECESSOR-IN-
INTEREST of the SUCCESSORS-IN-INTEREST was a
trustee, he or his successors-in-interest could not
and cannot be compelled in an action for specific
performance to convey or assign the property –
the subject of the trust – because in an action for
specific performance the party to be compelled to
perform is the owner of has title to the property
sought to be conveyed or assigned.
ISSUE:
● Whether or not the SUCCESSORS-IN-INTEREST may
be compelled in an action for specific performance
to convey or assign the property.
RULING:
YES. Judgment affirmed.
The juridical concept of a trust, which in a broad sense
involves, arises from, or is the result of, a fiduciary relation
between the trustee and the cestui que trust as regards
certain property – real, personal, funds or money, or
choses in action – must not be confused with an action for
specific performance.
When the claim to the lots in the cadastral case was
withdrawn by the CLAIMANTS relying upon the assurance
and promise made in open court by Dr. Mariano Yulo in
behalf of the PREDECESSOR-IN-INTEREST, a trust or a
fiduciary relation between them arose, or resulted
therefrom, or was created thereby.
The trustee cannot invoke the statute of limitations to bar
the action and defeat the right of the cestui que trust. If the
pretense of counsel for the SUCCESSORS-IN-INTEREST that
the promise above adverted to cannot prevail over the
final decree of the cadastral court holding the
PREDECESSOR-IN-INTEREST of the SUCCESSORS-IN-
INTEREST to be the owner of the lots claimed by the
CLAIMANTS were to be sustained and upheld, then actions
to compel a party to assign or convey the undivided share
in a parcel of land registered in his name to his co-owner
or co-heir could no longer be brought and could no longer
succeed and prosper.
114. Guy v. CA 165849
Parties: Gilbert Guy v CA (NORTHERN ISLANDS CO.,
INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GLADYS G.
YAO, and EMILIA TABUGADIR)
NATURE:
The petition composed five (5) consolidated cases
which stemmed from Civil Case No. 04-109444 filed with the Regional Trial
Court. But the focus of the case with respect to trust is GR 176650. The
petition filed by Gilbert Guy (Gilbert) and Lincoln Continental Development
Corporation, Inc. (Lincoln Continental) questioning the decision of the
Court of Appeals (CA) in affirming the Regional Trial Court (RTC) in
dismissing their complaint against the respondents.
FACTS:
Gilbert, petitioner, is the son of
Francisco and Simny Guy. Respondents, Geraldine,
Gladys and Grace are his sisters. The family feud
involves the ownership and control of 20,160 shares
of stock of Northern Islands Co., Inc. (Northern
Islands).
Northern Islands is a family-owned
corporation. In November 1986, they incorporated
Lincoln Continental as a holding company of the 50%
shares of stock of Northern Islands in trust for their
daughters, respondents. In December 1986, upon
instruction of spouses Guy, Atty. Andres Gatmaitan,
president of Lincoln Continental, indorsed in blank
Stock Certificate No. 132 (covering 8,400 shares) and
Stock Certificate No. 133 (covering 11,760 shares)
and delivered them to Simny.
In 1984, spouses Guy found that their
son Gilbert has been disposing of the assets of their
corporations without authority. In order to protect the
assets of Northern Islands, the 20,160 shares
covered by the two Stock Certificates were then
registered in the names of respondent sisters, thus
enabling them to assume an active role in the
management of Northern Islands.
Thereafter, Simny was elected
President; Grace as Vice-President for Finance;
Geraldine as Corporate Treasurer; and Gladys as
Corporate Secretary. Gilbert retained his position as
Executive Vice President. This development started
the warfare between Gilbert and his sisters. Lincoln
Continental filed a Complaint for Annulment of the
Transfer of Shares of Stock against respondents.
The complaint basically alleges that: Lincoln
Continental owns 20,160 shares of stock of Northern
Islands; and that respondents, in order to oust Gilbert
from the management of Northern Islands, falsely
transferred the said shares of stock in respondent
sisters’ names and that respondents, in order to oust
Gilbert from the management of Northern Islands,
falsely transferred the said shares of stock in
respondent sisters’ names. Lincoln Continental then
prayed for an award of damages and that the
management of Northern Islands be restored to
Gilbert. Lincoln also prayed for the issuance of a
temporary restraining order (TRO) and a writ of
preliminary mandatory injunction to prohibit
respondents from exercising any right of ownership
over the shares.
Note: Petitioners filed a writ of preliminary
injunction against private respondents. It was
granted then was set aside later on.
RTC- The trial court held that the complaint was
baseless and an unwarranted suit among family
members. That based on the evidence, Gilbert was
only entrusted to hold the disputed shares of
stock in his name for the benefit of the other family
members; and that it was only when Gilbert started to
dispose of the assets of the family’s corporations
without their knowledge that respondent sisters
caused the registration of the shares in their
respective names.
CA- On appeal, the Court of Appeals affirmed the Trial
Court. Hence this petition.
Thus, on October 10, 2005, Gilbert, filed with this Court a
Supplemental Petition for Certiorari, Prohibition, and Mandamus
with Urgent Application for a Writ of Preliminary Mandatory
Injunction challenging the Decision of the Court of Appeals in CA-
G.R. SP No. 87104. This Decision set aside the Order dated
October 13, 2004 of the RTC, Branch 46 granting the writ of
preliminary injunction in favor of Lincoln Continental .
ISSUES:
Whether or not Gilbert was merely trust for the Guy
sisters
Held:
Yes.
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
this 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, this 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. We, agree with
the Court of Appeals that respondent sisters own the
shares of stocks, Gilbert being their mere trustee.
Verily, we find no reversible error in the challenged
Decision of the Court of Appeals (Special Second
Division) in CA-G.R. CV No. 85937.
WHEREFORE, we DISMISS the
petitions in G.R. Nos. 165849, 170185, 170186 and
176650; and DENY the petitions in G.R. Nos. 171066
and 176650. The Resolutions of the Court of Appeals guarantee the vendor's absolute title over the land
(Eighth Division), dated October 28, 2004 and sold.
November 4, 2004, as well as the Decision dated 5. Ang Bansing sold other lots to Juan Cruz and some
October 10, 2005 of the Court of Appeals (Seventh other buyers. All the lots sold, were transferred to
Division) in CA-G.R. SP No. 87104 are AFFIRMED. respective buyer’s name except lot 1846-C, which
We likewise AFFIRM IN TOTO the Decision of the was sold to Juan Cruz before the survey of lot and
Court of Appeals (Special Second Division), dated which remained in the possession of Ang Bansing.
November 27, 2006 in CA-G.R. CV No. 85937. Costs
6. On February 25, 1965, the President of the
against petitioners.
Philippines issued Proclamation No. 459,
transferring ownership of certain parcels of land
situated in Sasa Davao City, to the Mindanao
115. Goyanko v. UCPB
Development Authority, now the Southern
Philippines Development Administration, subject
See case #106 to private rights, if any. Lot 1846-C, the disputed
parcel of land, was among the parcels of land
116. Mindanao Dev. Authority v. CA transferred to the Mindanao Development
Authority in said proclamation.
Parties (of Express Trust):
7. On March 31, 1969, Atty. Hector L. Bisnar counsel
for the Mindanao Development Authority, wrote
Petitioner - Minadanao dev authority - alleged beneficiary
Ang Bansing requesting the latter to surrender the
Private respondent - Francisco Ang Bansing (Ang Bansing)
Owner's duplicate copy of TCT No. 2601 so that Lot
is the purported trustee
1846-C could be formally transferred to his client
Juan Cruz Yap Chuy (Juan Cruz) - trustor for lot 1846-C.
but Ang Bansing refused.
8. Thus Mindanao Development Authority filed a
Purported Express Deed of Trust is the Deed of Sale
complaint against Ang Bansing before CFI of Davao
executed between Ang Bansing and Juan Cruz over the sale
City for the reconveyance of the title over Lot
of lot 1846-C which contained proviosion: “That I hereby
1846-C.
agree to work for the titling of the entire area of my land
9. After trial, the Court of First Instance found that an
under my own expenses and the expenses for the titling of
express trust had been established and ordered
the portion sold to me shall be under the expenses of said
the reconveyance of the title to Lot 1846-C of the
Juan Cruz Yap Chuy”
Davao Cadastre to Mindanao Development
Authority.
FACTS
10. On appeal, the Court of Appeals ruled that no
express trust has been created and, accordingly, k
1. Ang Bansing is the owner of a 30-hectare/300,000
the judgment and dismissed the complaint.
sqm. land in Barrio Panacan Davao City.
11. Hence this petition for certiorari.
2. On February 25, 1939, Ang Bansing sold a portion
12. SC - petition denied. Affirmed CA decision.
of the land, about 5 hectares to Juan Cruz, the
contract provided among others: “That I hereby
ISSUE
agree to work for the titling of the entire area of
my land under my own expenses and the expenses
WON an express trust was created between Ang Bansing
for the titling of the portion sold to me shall be
and Juan Cruz over the lot 1846-C.
under the expenses of the said Juan Cruz Yap
Chuy.”
HELD
3. After sale, the land of Ang Bansing was surveyed
wherein lot sold to Juan Cruz was designated as Lot
No. There was no express trust created between Ang
1846-C of Davao cadastre.
Bansing and Juan Cruz over Lot 1846-C of the Davao
4. On December 23, 1939, Juan Cruz sold Lot 1846-C
Cadastre.
to the Commonwealth of the Philippines for the
amount of P6,347.50. On that same day, Juan Cruz,
"Trusts are either express or implied. Express trusts are
as vendor, and C.B. Cam and Miguel N. Lansona as
created by the intention of the trustor or of the parties.
sureties, executed a surety bond in favor of the
Implied trusts come into being by operation of law."
vendee (Commonwealth of the Philippines) to

It is fundamental in the law of trusts that certain
requirements must exist before an express trust will be
recognized. If any one of them is missing, it is fatal to the
trusts. Basically, these elements include:
a. competent trustor and trustee;
b. an ascertainable trust res;
c. and sufficiently certain beneficiaries.
Furthermore, there must be
a. a present and complete disposition of the trust
property, notwithstanding that the enjoyment in
the beneficiary will take place in the future. It is
essential to the creation of an express trust that
the settlor presently and unequivocally make a
disposition of property and make himself the
trustee of the property for the benefit of another;
b. the purpose be an active one to prevent trust from
being executed into a legal estate or interest, and
one that is not in contravention of some
prohibition of statute or rule of public policy.
c. There must also be some power of administration
other than a mere duty to perform a contract
although the contract is for a third-party
beneficiary.
d. A declaration of terms is essential, and these must
be stated with reasonable certainty in order that
the trustee may administer, and that the court, if
called upon so to do, may enforce, the trust. The
intent to create a trust must be definite and
particular. It must show a desire to pass benefits
through the medium of a trust, and not through
some related or similar device.
The stipulation in the contract of sale (see above) is nothing
but a condition that Ang Bansing shall pay the expenses for
the registration of his land and for Juan Cruz to shoulder
the expenses for the registration of the land sold to him.
The stipulation does not categorically create an obligation
on the part of Ang Bansing to hold the property in trust for
Juan Cruz. Hence, no express trust.
While Ang Bansing had agreed in the deed of sale that he
will work for the titling of "the entire area of my land under
my own expenses," it is not clear therefrom whether said
statement refers to the 30-hectare parcel of land or to that
portion left to him after the sale. A failure on the part of
the settlor definitely to describe the subject-matter of the
supposed trust or the beneficiaries or object thereof is
strong evidence that he intended no trust.
Nor will the affidavit executed by Ang Banging be
construed as having established an express trust. As
counsel for the herein petitioner has stated, "the only
purpose of the Affidavit was to clarify that the area of the
land sold by Ang Bansing to Juan Cruz Yap Chuy is not only
5 hectares but 61,107 square meters or a little over six (6)
hectares."
***Supplementary
(constructive trust;prescription;laches)***
But, even granting, arguendo, that an express trust had
been established, it would appear that the trustee (Ang
Bansing) had repudiated the trust and the petitioner herein
(Minadanao Dev), the alleged beneficiary to the trust, did
not take any action therein until after the lapse of 23 years
(prescriptive period is for 10 years).
Only an implied trust may have been impressed upon the
title of Ang Banging over Lot 1846-C of the Davao Cadastre
since the land in question was registered in his name
although the land belonged to another. In implied trusts,
there is neither promise nor fiduciary relations, the so-
called trustee does not recognize any trust and has no
intent to hold the property for the beneficiary." It does not
arise by agreement or intention, but by operation of law.
Thus, if property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee
of an implied trust for the benefit of the person from whom
the property comes.
If a person obtains legal title to property by fraud or
concealment, courts of equity will impress upon the title a
so-called constructive trust in favor of the defrauded party.
There is also a constructive trust if a person sells a parcel
of land and thereafter obtains title to it through fraudulent
misrepresentation.
Such a constructive trust is not a trust in the technical
sense and is prescriptible; it prescribes in 10 years.
Here, the 10-year prescriptive period began on March 31,
1941, upon the issuance of Original Certificate of Title No.
26. From that date up to April 11, 1969, when the
complaint for reconveyance was filed, more than 28 years
had passed. Clearly, the action for reconveyance had
prescribed.
Besides, the enforcement of the constructive trust that
may have been impressed upon the title of Ang Bansing
over Lot 1846-C of the Davao Cadastre is barred by laches.
It appears that the deed of sale in favor of the
Commonwealth Government was executed by Juan Cruz
on December 23, 1939, during the cadastral proceedings,
and even before the cadastral survey plan was approved by
the Director of Lands on July 10, 1940. But, the vendee
therein did not file an answer, much less an opposition to
the answer of Ang Bansing in the said Cadastral
proceedings. The judgment rendered in the said cadastral
proceeding, awarding the lot in question to Ang Bansing is
already final. After an inexcusable delay of more than 28
years and acquiescence to existing conditions, it is now too
late for the petitioner to complain.
117. Development Bank of the Phils. V. COA
FACTS: On February 20, 1980, the Development Bank of
the Philippines (DBP) Board of Governors adopted
Resolution No. 794 creating the DBP Gratuity Plan and
authorizing the setting up of a retirement fund to cover
the benefits due to DBP retiring officials and employees.
On February 26, 1980, a Trust Indenture was entered into
by and between the DBP and the Board of Trustees of the
Gratuity Plan Fund, vesting in the latter the control and
administration of the Fund. The trustee, subsequently,
appointed the DBP Trust Services Department (DBP-TSD)
as the investment manager thru an Investment
Management Agreement, with the end in view of making
the income and principal of the Fund sufficient to meet
the liabilities of DBP under the Gratuity Plan.
In 1983, the Bank established a Special Loan Program
where a prospective retiree is allowed the option to
utilize in the form of a loan a portion of his outstanding
equity in the gratuity fund and to invest it in a profitable
investment or undertaking. The earnings of the
investment shall then be applied to pay for the interest
due on the gratuity loan. The excess or balance of the
interest earnings shall then be distributed to the investor-
members.
Pursuant to the investment scheme, DBP-TSD paid to the
investor-members a total of P11,626,414.25 representing
the net earnings of the investments for the years 1991
and 1992. The payments were disallowed by the Auditor
under Audit Observation Memorandum No. 93-2 dated
March 1, 1993, on the ground that the distribution of
income of the Gratuity Plan Fund (GPF) to future retirees
of DBP is irregular and constituted the use of public funds
for private purposes which is specifically proscribed under
Section 4 of P.D. 1445.
AOM No. 93-2 did not question the authority of the Bank
to set-up the Gratuity Plan Fund and have it invested in
the Trust Services Department of the Bank. Apart from
requiring the recipients of the P11,626,414.25 to refund
their dividends, the Auditor recommended that the DBP
record in its books as miscellaneous income the income of
the Gratuity Plan Fund (Fund). The Auditor reasoned that
the Fund is still owned by the Bank, the Board of Trustees
is a mere administrator of the Fund in the same way that
the Trust Services Department where the fund was
invested was a mere investor and neither can the
employees, who have still an inchoate interest in the Fund
be considered as rightful owner of the Fund.
COA: affirmed AOM No. 93-2
The Gratuity Plan Fund is supposed to be accorded
separate personality under the administration of the
Board of Trustees but that concept has been effectively
eliminated when the Special Loan Program was adopted.
Retirement benefits may only be availed of upon
retirement. During employment, the prospective retiree
shall only have an inchoate right over the benefits. There
can be no partial payment or enjoyment of the benefits,
in whatever guise, before actual retirement.
ISSUE: whether the income of the Fund is income of DBP
RULING: COA Decision AFFIRMED with MODIFICATION.
The income of the Gratuity Plan Fund, held in trust for the
benefit of DBP employees eligible to retire under RA 1616,
should not be recorded in the books of account of DBP as
the income of the latter.
RATIO: A trust is a fiduciary relationship with respect to
property which involves the existence of equitable duties
imposed upon the holder of the title to the property to
deal with it for the benefit of another. A trust is either
express or implied. Express trusts are those which the
direct and positive acts of the parties create, by some
writing or deed, or will, or by words evincing an intention
to create a trust.
In the present case, the DBP Board of Governors (now
Board of Directors) Resolution No. 794 and the
Agreement executed by former DBP Chairman Rafael
Sison and the trustees of the Plan created an express
trust, specifically, an employees trust. An employees trust
is a trust maintained by an employer to provide
retirement, pension or other benefits to its employees. It
is a separate taxable entity established for the exclusive
benefit of the employees.
Resolution No. 794 shows that DBP intended to establish
a trust fund to cover the retirement benefits of certain
employees under RA 1616. The principal and income of
the Fund would be separate and distinct from the funds of
DBP.
DBP, as the trustor, vested in the trustees of the Fund
legal title over the Fund as well as control over the
investment of the money and assets of the Fund. The
powers and duties granted to the trustees of the Fund
under the Agreement were plainly more than just
administrative.
The trustees received and collected any income and profit
derived from the Fund, and they maintained separate
books of account for this purpose. The principal and
income of the Fund will not revert to DBP even if the trust
is subsequently modified or terminated. The Agreement
states that the principal and income must be used to
satisfy all of the liabilities to the beneficiary officials and
employees under the Gratuity Plan.
The Agreement indisputably transferred legal title over
the income and properties of the Fund to the Funds
trustees. Thus, COAs directive to record the income of the
Fund in DBPs books of account as the miscellaneous
income of DBP constitutes grave abuse of discretion. The
income of the Fund does not form part of the revenues or
profits of DBP, and DBP may not use such income for its
own benefit. The principal and income of the Fund
together constitute the res or subject matter of the trust.
118. Peñalber v. Ramos
FACTS:
Petitioner is the mother of respondent Leticia and the mother-
in-law of respondent Quirino, husband of Leticia. Respondent
Bartex, Inc., on the other hand, is a domestic corporation which
bought from respondent spouses Ramos one of the two
properties involved in this case.
On 18 February 1987, petitioner filed before the RTC a Complaint
for Declaration of Nullity of Deeds and Titles, Reconveyance,
Damages, with Application for a Writ of Preliminary Prohibitory
Injunction against the respondents.
First cause of action:
Petitioner alleged on her complaint that she was the
owner of a parcel of land referred to as Ugac properties. She
averred that in the middle part of 1986, she discovered her title
to the said parcel of land was cancelled because a new transfer
of certificate of title was issued in its stead in the name of
respondent spouses Ramos. The basis of cancellation of her title
was a Deed of Donation which petitioner purportedly executed
in favor of respondent spouses Ramos on April 27, 1983.
Petitioner insisted that her signature on the said Deed of
Donation was a forgery When petitioner confronted the
respondent spouses Ramos about the false donation, the latter
pleaded that they would just pay for the Ugac properties in the
amount of P1 Million. Petitioner agreed.
Petitioner found out around January 10 1987 that
respondent Sps. Ramos were selling the Ugac properties to
respondent Bartex Inc. Petitioner then sent her son Johnson
Paredes to caution reapondent Bartex Inc that Sps. Ramos were
not the owners. Petitioner also warned respondent Sps. Ramos
not to sell said properties or otherwise she will file the necessary
action against them. Petitioner executed an Affidavit of Adverse
Claim over the Ugac Properties on January 19, 1987 and caused
the same to be annotated on TCT No. T-58043 (TCT issued in the
name of Sps. Ramos) on the same day. Respondent Sps. Ramos
still executed a deed of absolute sale for a total price of
P150,000.00 to Bartex, Inc and a new transfer certificate of title
was issued in favor of Bartex Inc.
Second cause of action:
Petitioner claimed that for many years prior to 1984,
she operated a hardware store in a building she owned along
Bonifacio St., Tuguegarao, Cagayan. The commercial lot
(Bonifacio property) is owned by and registered in the name of
Maria Mendoza (Mendoza), from whom petitioner rented the
same.
March 22, 1982 – petitioner allowed respondent spouses Ramos
to manage the hardware store.
1984 – Mendoza put the Bonifacio property up for sale. As
petitioner did not have available cash to buy the property, she
allegedly entered into a verbal agreement with respondent
spouses Ramos with the following terms:
[1.] The lot would be bought [by herein
respondent spouses Ramos] for and in behalf
of [herein petitioner];
[2.] The consideration of P80,000.00 for said lot
would be paid by [respondent spouses
Ramos] from the accumulated earnings of the
store;
[3.] Since [respondent spouses Ramos] have the
better credit standing, they would be made to
appear in the Deed of Sale as the vendees so
that the title to be issued in their names could
be used by [them] to secure a loan with which
to build a bigger building and expand the
business of [petitioner].
In accordance with the above agreement, respondent spouses
Ramos allegedly entered into a contract of sale with Mendoza
over the Bonifacio property, and on October 24 1984, a transfer
certificate of title was issued in the names of respondent spouses
Ramos.
On September 20 1984, the management of the hardware store
was returned to petitioner. On the bases of receipts and
disbursements, petitioner asserted that the Bonifacio property
was fully paid out of the funds of the store and if respondent
spouses Ramos had given any amount for the purchase price of
the said property, they had already sufficiently reimbursed
themselves from the funds of the store. Consequently, petitioner
demanded from respondent spouses Ramos the reconveyance of
the title to the Bonifacio property to her but the latter
unjustifiably refused.
Petitioner insisted that respondent spouses Ramos were, in
reality, mere trustees of the Bonifacio property, thus, they were
under a moral and legal obligation to reconvey title over the said
property to her. Petitioner, therefore, prayed that she be
declared the owner of the Bonifacio property; TCT No. T-62769,
in the name of respondent spouses, be declared null and void;
and the Register of Deeds for the Province of Cagayan be
directed to issue another title in her name.
On the first cause of action, respondent Sps. Ramos
alleged that petitioner, together with her son mortgaged the
Ugac properties to DBP for the amount of P150,000.00 on August
19 , 1990. When the mortgage was about to foreclose, petitioner
asked respondents to redeem the mortgaged property or pay her
mortgage debt to DBP. In return, petitioner promised to cede,
convey and transfer full ownership of the Ugac properties to
them. Respondents paid the debt and in compliance with her
promise, petitioner transferred the Ugac properties to
respondents by way of Deed of Donation. After accepting the
donation and having the Deed of Donation registered, TCT No. T-
58043 was issued to respondent spouses Ramos and they then
took actual and physical possession of the Ugac properties.
With regard to the second cause of action, respondent
spouses Ramos contended that they were given not only the
management, but also the full ownership of the hardware store
by the petitioner, on the condition that the stocks and
merchandise of the store will be inventoried, and out of the
proceeds of the sales thereof, respondent spouses Ramos shall
pay petitioners outstanding obligations and liabilities. After
settling and paying the obligations and liabilities of petitioner,
respondent spouses Ramos bought the Bonifacio property from
Mendoza out of their own funds.
RTC – dismissed first cause of action and ruled in favor of
petitioner on the second cause of action
CA – in so far as second cause of action is concerned, reversed
the decision of RTC.
According to the Court of Appeals:
It appears that before management of the store was transferred to [herein
respondent spouses Ramos], a beginning inventory of the stocks of the
hardware store was made by [herein petitioners] other children showing
stocks amounting to Php226,951.05. After management of the hardware
store was returned to [petitioner], a second inventory was made with stocks
amounting to Php110,004.88 showing a difference of Php116,946.15.
Contrary, however, to the finding of the trial court, We find that said
inventory showing such difference is not conclusive proof to show that the
said amount was used to pay the purchase price of the subject lot. In fact,
as testified by Johnson Paredes, son of [petitioner] who made the
computation on the alleged inventories, it is not known if the goods,
representing the amount of Php116,946.17, were actually sold or not. It may
have been taken without actually being sold.
However, an inference of the intention to create a trust, made from
language, conduct or circumstances, must be made with reasonable
certainty. It cannot rest on vague, uncertain or indefinite declarations. An
inference of intention to create a trust, predicated only on circumstances,
can be made only where they admit of no other interpretation. Here,
[petitioner] failed to establish with reasonable certainty her claim that the
purchase of the subject lot was pursuant to a verbal trust agreement with
respondent spouses Ramos.
ISSUE: WON the existence of a trust agreement between her and
respondent spouses Ramos was clearly established, and such
trust agreement was valid and enforceable.
RULING: NO.
In its technical legal sense, a trust is defined as the right,
enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another, but the
word trust is frequently employed to indicate duties, relations,
and responsibilities which are not strictly technical trusts. A
person who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the
beneficiary. There is a fiduciary relation between the trustee and
the beneficiary (cestui que trust) as regards certain property,
real, personal, money or choses in action.
From the allegations of the petitioners Complaint, the alleged
verbal trust agreement between petitioner and respondent
spouses Ramos is in the nature of an express trust as petitioner
explicitly agreed therein to allow the respondent spouses Ramos
to acquire title to the Bonifacio property in their names, but to
hold the same property for petitioners benefit. Given that the
alleged trust concerns an immovable property, however,
respondent spouses Ramos counter that the same is
unenforceable since the agreement was made verbally and no
parol evidence may be admitted to prove the existence of an
express trust concerning an immovable property or any interest
therein.
On this score, we subscribe to the ruling of the RTC in its Order
dated July 17, 2000 that said spouses were deemed to have
waived their objection to the parol evidence as they failed to
timely object when petitioner testified on the said verbal
agreement. The requirement in Article 1443 that the express
trust concerning an immovable or an interest therein be in
writing is merely for purposes of proof, not for the validity of the
trust agreement. Therefore, the said article is in the nature of a
statute of frauds. The term statute of frauds is descriptive of
statutes which require certain classes of contracts to be in
writing. The statute does not deprive the parties of the right to
contract with respect to the matters therein involved, but merely
regulates the formalities of the contract necessary to render it
enforceable. The effect of non-compliance is simply that no
action can be proved unless the requirement is complied with.
Oral evidence of the contract will be excluded upon timely
objection. But if the parties to the action, during the trial, make
no objection to the admissibility of the oral evidence to support
the contract covered by the statute, and thereby permit such
contract to be proved orally, it will be just as binding upon the
parties as if it had been reduced to writing.
Per petitioners testimony, the Bonifacio property was offered for
sale by its owner Mendoza. Petitioner told respondent spouses
Ramos that she was going to buy the lot, but the title to the same
will be in the latters names. The money from the hardware store
managed by respondent spouses Ramos shall be used to buy the
Bonifacio property, which shall then be mortgaged by the
respondent spouses Ramos so that they could obtain a loan for
building a bigger store. The purchase price of P80,000.00 was
paid for the Bonifacio property. On September 20 1984, the
respondent spouses Ramos returned the management of the
store to petitioner. Thereafter, petitioner allowed her son
Johnson to inventory the stocks of the store. Johnson found out
that the purchase price of P80,000.00 for the Bonifacio property
was already fully paid. When petitioner told the respondent
spouses Ramos to transfer the title to the Bonifacio property in
her name, the respondent spouses Ramos refused, thus,
prompting petitioner to file a complaint against them.
Similarly, Johnson testified that on March 22 1982, petitioner
turned over the management of the hardware store to
respondent spouses Ramos. During that time, an inventory of the
stocks of the store was made and the total value of the said
stocks were determined to be P226,951.05. When respondent
spouses Ramos returned the management of the store to
petitioner on 20 September 1984, another inventory of the
stocks was made, with the total value of the stocks falling to
P110,004.88. The difference of P116,946.16 was attributed to
the purchase of the Bonifacio property by the respondent
spouses Ramos using the profits from the sales of the store.
A careful perusal of the records of the case reveals that
respondent spouses Ramos did indeed fail to interpose their
objections regarding the admissibility of the afore-mentioned
testimonies when the same were offered to prove the alleged
verbal trust agreement between them and petitioner.
Consequently, these testimonies were rendered admissible in
evidence. Nevertheless, while admissibility of evidence is an
affair of logic and law, determined as it is by its relevance and
competence, the weight to be given to such evidence, once
admitted, still depends on judicial evaluation. Thus, despite the
admissibility of the said testimonies, the Court holds that the
same carried little weight in proving the alleged verbal trust
agreement between petitioner and respondent spouses.
119. Tan Senguan and Co. v. Phil. Trust Co.
FACTS:
Note: The Philippine Trust Company, as trustee held
the legal title of the properties of Mindoro Sugar
Company(trustor) to protect the bondholders of the
latter as stipulated in the Deed of Trust.
Tan Sen Guan and Co. (plaintiff) secured a
judgement for the sum of P 21,426 against Mindoro
Sugar Co. The Philippine Trust (defendant) is the
trustee of the latter. Subsequently, petitioner signed
an AGREEMENT with Phil. Trust on June 27, 1924.
In said agreement, petitioner conveyed the sum it
had won and with all its rights thereto, to Phil. Trust
for the amount of P 5,000. Among others, it was also
agreed that Phil Trust will pay an additional P 10,000
should Mindoro Sugar Co be sold or assigned or its
ownership transferred in any manner whatsoever to
any person or entity.
On November 4, 1929, the properties of Mindanao
Sugar Company was sold to the Roman Catholic
Archbishop of Manila through a public auction
(Exhibits C and D).
Petitioner then brought a suit in the CFI of Manila for
the sum of P 10,000 against defendant. CFI
dismissed such action, holding Phil Trust as not
personally liable as the same executed the
agreement in its capacity as a trustee.
Hence the appeal.
ISSUE: Whether or not Phil Trust is personally liable
for the AGREEMENT.
HELD: Yes, Phil Trust is personally liable for the
AGREEMENT.
RATIO:
Generally, the trustee does not assume personal
liability on the trust. However, the same will not be
true of he acts outside the scope of the trust.
In the present case, the Philippine Trust Company
held the legal title of the properties of Mindoro Sugar
Company to protect the bondholders of the latter as
stipulated in the Deed of Trust (Exhibit A). Nowhere
in said deed gave Phil Trust the authority to manage
the affairs of its trustor nor enter into contracts in its
behalf. But even if the contract had been authorized
by the trust indenture, the Philippine Trust Company
in its individual capacity would still be responsible for
the contract as there was no express stipulation that
the true estate and not the true trustee should be
held liable on the contract in question
120. Rizal Surety & Insurance v. CA
Facts:
3/13/1980 – Rizal Insurance issued Insurance Policy
NO. 45727 in favor of Transworld Knitting Mills, Inc,
initially for P1,000,000 and eventually inscreased to
P1,500,000 covering the period of Aug 14, 1980 to
Mar 13, 1981. Pertinent portions of subject policy on
the buildings insured, and location thereof, read:
"On stocks of finished and/or unfinished
products, raw materials and supplies of every
kind and description, the properties of the
Insured and/or held by them in trust, on
 commission or on joint account with others
and/or for which they (sic) responsible in case
of loss whilst contained and/or stored during
the currency of this Policy in the premises
occupied by them forming part of the
buildings situate (sic) within own Compound
at MAGDALO STREET, BARRIO UGONG,
PASIG, METRO MANILA, PHILIPPINES,
BLOCK NO. 601.
The same pieces of property insured with Rizal
Insurance were also insured with New India
Assurance Company.
1/12/1981 – fire broke out in the comound of
Transworld, razing the middle portion of its four-span
building and partly gutting the left and right sections
thereof. A two-storey building behind where fun and
amusement machines and spare parts were stores,
was also destroyed by the fire.
Transworld filed its insurance claims with Rizal
Insurance and New India Insurance but to no avail.
5/26/1982, Transworld brought against the insurance
companies action for collection of sum of money and
damages.
CFI of Rizal dismissed case against New India
Assurance Co; ordered Rizal Insurance to pay
Transworld P826,600 representing actual value of
losses suffered plus cost of suit.
CA modified the decision in 1993 – requiring New
India to pay P1,818,604 and Rizal to pay
P470,328.67 (totaling P2,790,376).
8/20/1993, New India appealed the judgment stating
that Transworld could not be compensated for the
loss of the fun and amusement machines and spare
parts stored at the two-storey building because it had
no insurable interest in said goods or items. This
was, however, denied with finality by the SC.
Rizal Insurance later appealed to the SC
(separately).
Issue: W/N the annex building where the bulk of the
burned properties stored (containing the amusement
machines and spare parts), was included in the
coverage of the insurance policy.
Held:
Yes.
Rizal insurance submits that the fire insurance policy
litigated upon protected only the contents of the main
building and did not include those stored in the 2-
storey annex building. Respondent theorized that the
so called annex was not an annex but was actually
an integral part of the four-span building and
therefore, the goods and items stored therein were
covered.
Resolution of the issue hinges on the proper
interpretation of the stipulation quoted in the facts.
Thereforom, it can be gleaned unerringly that the fire
insurance policy in question did not limit its coverage
to what were stored in the four-span building.
Both the trial court and the CA found that the so
called annex was not an annex building but an
integral and inseparable part of the four-span building
described in the policy and consequently, the
machines and spare parts stored therein were
covered by the fire insurance in dispute.
Also, it stands to reason that the doubt should be
resolved against the petitioner whose lawyer or
managers drafted the fire insurance policy contract
under scrutiny (Art. 1377).
121. Lorenzo v. Posadas
Facts:
On 27 May 1922, Thomas Hanley died in
Zamboanga, leaving a will and considerable amount
of real and personal properties.
Hanley’s will provides the following: his money will be
given to his nephew, Matthew Hanley, as well as the
real estate owned by him. It further provided that the
property will only be given ten years after Thomas
Hanley’s death.
Thus, in the testamentary proceedings, the Court of
First Instance of Zamboanga appointed P.J.M. Moore
as trustee of the estate. Moore took oath of office on
March 10, 1924, and resigned on Feb. 29, 1932.
Pablo Lorenzo was appointed in his stead.
Juan Posadas, Collector of Internal Revenue,
assessed inheritance tax against the estate
amounting to P2,057.74 which includes penalty and
surcharge.
He filed a motion in the testamentary proceedings so
that Lorenzo will be ordered to pay the amount due.
Lorenzo paid the amount in protest after CFI granted
Posadas’ motion. He claimed that the inheritance tax
should have been assessed after 10 years. He asked
for a refund but Posadas declined to do so.
The latter counterclaimed for the additional amount
of P1,191.27 which represents interest due on the tax
and which was not included in the original
assessment. However, CFI dismissed this
counterclaim. It also denied Lorenzo’s claim for
refund against Posadas.
Hence, both appealed.
Issue:
(1) Whether or not the compensation for the services
of the trustee can be deducted in arriving at the net
value of the estate?
(2) Has there been delinquency in the payment of the
inheritance tax?
(3)Whether or not the word “trust” being mentioned is
necessary to create one?
Held: (1)No. A trustee, no doubt, is entitled to receive
a fair compensation for his services. But from this it
does not follow that the compensation due him may
be lawfully be deducted in arriving at the net value of
the estate subject to tax. There is no statue in the
Philippines which requires trustees' commissions to
be deducted in determining the net value of the
estate subject to inheritance tax.
(2)Yes. It is delinquent because according to Sec.
1544 (b) of the Revised Administrative Code,
payment of the inheritance tax shall be made before
delivering to each beneficiary his share. This
payment should have been made before March 10,
1924, the date when P.J.M. Moore formally assumed
the function of trustee.
Although the property was only to be given after 10
years from the death of Hanley, the court considered
that delivery to the trustee is delivery to cestui que
trust, the beneficiary within the meaning of Sec. 1544
(b).
(3) No. Even though there was no express mention of
the word “trust” in the will, the court of first instance
was correct in appointing a trustee because no
particular or technical words are required to create a
testamentary trust (69 C.J.,p. 711). The requisites of
a valid testamentary trust are: 1) sufficient words to
raise a trust, 2) a definite subject, 3) a certain or
ascertained object. There is no doubt that Hanley
intended to create a trust since he ordered in his will
that certain of his properties be kept together
undisposed during a fixed period or for a stated
purpose.
122. GOVERNMENT vs. ABADILLA
Facts:
● On January 25, 1892, Luis Palad executed a
holographic will granting his wife, Dorothea Lopez,
the right of exclusive use and possession of several
parcels of lands in the Province of Tayabas during
her lifetime or until she remarries. The lands shall
be donated to the secondary school in Tayabas
upon Dorothea’s death or second marriage.
● On December 3, 1896, the testator died.
● Sometime in 1900, Dorothea married one Calixto
Dolendo.
● On April 20, 1903, the testator’s collateral heirs
brought an action for the partition of the lands on
the ground that Dorothea lost her right over the
lands by reason of her second marriage.
● During the pendency of the action, the parties
arrived at an agreement delivering the lands with lot
nos. 3464 and 3469 to the Municipality of Tayabas
as trustee while lot no. 3470 was left in the
possession of Dorothea.
● The testator’s collateral heirs filed a claim over the
lands contending that the trust instituted in the will
was ineffective.
● The testator's collateral heirs argued there's no
trustee since there is no ayuntamiento, no
Gobernador Civil of the province, and that there's
no beneficiary since there's no secondary school in
the town of Tayabas.
● They further argued that argues the collateral heirs
of the deceased would nevertheless be entitled to
the income of the land until the cestui que trust is
actually in esse.
Issue:
Whether or not the collateral heirs are entitled to the income
of the land until the beneficiary is already identified.
Ruling:
● No. In order that a trust may be effective, there must
be a trustee and a cestui que trust or beneficiary.
● The essential requisites of a Trust is found under
Art. 1440 which states, "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."
● Although it was not expressly provided for in the
law, it is said that a trust is not void for
indefiniteness if by its terms the whole property will
go to the beneficiary or beneficiaries who is/are
undetermined but will be determined at the
termination of the trust, at the latest. It is not
necessary to the creation of a trust that the cestui
que trust be named or identified or even be in
existence at the time of its creation; and this is
especially so in regard to charitable trust.
● In this case, a liberal interpretation of the will
revealed that the testator intended to create a trust
for the benefit of the secondary school, naming the
ayuntamiento of the town or the Civil Governor of
the Province as trustee.
● If the trustee holds the legal title and the devise
(type of will involving real properties) is valid, the
natural heirs of the deceased testator have no
remaining interest in the land except their right to
 the reversion in the event the devise for some
reason should fail, an event which has not yet taken
place. The intention of the testator was to have the
income of the property accumulate for the benefit of
the proposed school until the same should be
established.
● The lands with lot nos. 3464 and 3469 shall hereby
remain in the possession of the Municipality of
Tayabas as trustee until the secondary school is
erected. However, the ownership of lot no. 3470
has lawfully passed to Dorothea by prescription,
having held possession of the land, adverse to all
claimants, since 1904.
NOTE: It is a charitable trust. It is one designed for the
benefit of a segment of the public or of the public in general.
It is one created for charitable, educational, social, religious,
or scientific purposes, or for the general benefit of humanity.
123. SEC v. Liago
“Assets in the trust fund shall at all times remain for the
sole benefit of the planholders. The trust fund assets
cannot be used to satisfy claims of other creditors of the
pre-need company.”
FACTS:
Legacy Consolidated Plans, Inc. (Legacy), being a pre-need
provider, complied with the trust fund requirement of the
petitioner, Securities and Exchange Commission (SEC),
and entered into a trust agreement with the Land Bank of
the Philippines (LBP). The industry collapsed and Legacy
was unable to pay its obligation to the planholders.. Private
respondents, as planholders, filed a petition for involuntary
insolvency against Legacy before the the Regional Trial
Court (RTC). Accordingly, Legacy was declared insolvent
and was ordered to submit an inventory of its assets and
liabilities pursuant to the Insolvency Law. The RTC ordered
the SEC to submit the documents pertaining to Legacy's
assets and liabilities. The SEC opposed the inclusion of the
trust fund in the inventory of corporate assets on the
guround that to do so would contravene the New Rules on
Registration and Sale of Pre-Need Plans which treated trust
funds as principally established for the exclusive purpose of
guaranteeing the delivery of benefits due to the planholders.
It was added that the inclusion of the trust fund in the
insolvent's estate and its being opened to claims by non-
planholders would contravene the purpose for its
establishment. Despite the opposition of the SEC,
respondent Judge Reynaldo M. Laigo (Judge Laigo)
ordered the insolvency Assignee to take possession of the
trust fund. Judge Laigo viewed the trust fund as Legacy's
corporate assets and included it in the insolvent's estate.
The SEC contended that Judge Laigo gravely abused his
discretion in treating the trust fund as part of the insolvency
estate of Legacy. It argued that the trust fund should
redound exclusively to the benefit of the planholders, who
are the ultimate beneficial owners.
RTC: ordered the insolvency Assignee to take possession
of the trust fund.
ISSUE:
WON the trust fund can be used to satisfy the claims of
other creditors of Legacy?
RULING:
No. The contention of SEC finds support under Section 30
of the Pre-Need Code where in it clearly provides that the
proceeds of trust funds shall redound solely to the
planholders. In no case shall the trust fund assets be used
to satisfy claims of other creditors of the pre-need company.
It must be stressed that a person is considered as a
beneficiary of a trust if there is a manifest intention to give
such a person the beneficial interest over the trust
properties. This categorical declaration doubtless indicates
that the intention of the trustor is to make the planholders
the beneficiaries of the trust properties, and not Legacy. It
is clear that because the beneficial ownership is vested in
the planholders and the legal ownership in the trustee, LBP,
Legacy, as trustor, is left without any iota of interest in the
trust fund.
Legacy is out of the picture and exists only as a
representative of the trustee, LBP, with the limited role of
facilitating the delivery of the benefits of the trust fund to the
beneficiaries -the planholders. The trust fund should not
revert to Legacy, which has no beneficial interest over it. Not
being an asset of Legacy, the trust fund is immune from its
reach and cannot be included by the RTC in the insolvency
estate.
124. Miguel J. Ossorio Pension Foundation, Inc v. CA
Facts:
- Petitioner MJOPFI, a non-stock and non-profit
corporation, was organized for the purpose of holding title
to and administering the employees’ trust or retirement
funds (Employees’ Trust Fund) established for the benefit
of the employees of Victorias Milling Company, Inc.
(VMC).
- Petitioner, as trustee, claims that the income earned by
the Employees’ Trust Fund is tax exempt under Section
53(b) of the National Internal Revenue Code (Tax Code).
- Petitioner bought the Madrigal Business Park (MBP lot)
through VMC. Petitioner alleges that its investment in the
MBP lot came about upon the invitation of VMC and that
its share in the lot is 49.59%. Petitioner’s investment
manager, the Citytrust Banking Corporation (Citytrust), in
submitting its Portfolio Mix Analysis, regularly reported
the Employees’ Trust Fund’s share in the MBP lot.
- On 26 March 1997, VMC eventually sold the MBP lot to
Metrobank.
- Petitioner claims that it is a co-owner of the MBP lot as
trustee of the Employees’ Trust Fund, based on the
notarized Memorandum of Agreement. Petitioner
maintains that its ownership of the MBP lot is supported
by the excerpts of the minutes and the resolutions of
petitioner’s Board Meetings.
Petitioner further contends that there is no dispute that
the Employees’ Trust Fund is exempt from income tax.
Since petitioner, as trustee, purchased 49.59% of the MBP
lot using funds of the Employees’ Trust Fund, petitioner
asserts that the Employees’ Trust Fund's 49.59% share in
the income tax paid (or P3,037,697.40 rounded off to
P3,037,500) should be refunded.
Petitioner filed a Petition for tax refund before the CTA.
CTA: denied petitioner's claim for refund of withheld
creditable tax of P3,037,500 arising from the sale of real
property of which petitioner claims to be a co-owner as
trustee of the employees' trust or retirement funds.
CA: agreed with the CTA that pieces of documentary
evidence submitted by petitioner are largely self-serving
and can be contrived easily. The CA ruled that these
documents failed to show that the funds used to purchase
the
MBP lot came from the Employees’ Trust Fund.
ISSUE:
Whether or not petitioner, as trustee of the Employee’s
Trust Fund, is the beneficial owner of 49.59% of the MBP
lot
RULING:
Yes.
- SC ruled that petitioner, as trustee of the Employees’
Trust Fund, has more than sufficiently established that it
has an agreement with VMC and VFC to purchase jointly
the MBP lot and to register the MBP lot solely in the name
of VMC for the benefit of petitioner, VMC and VFC.
- Art. 1452. If two or more persons agree to purchase a
property and by common consent the legal title is taken
in the name of one of them for the benefit of all, a trust is
created by force of law in favor of the others in proportion
to the interest of each. For Article 1452 to apply, all that
a co-owner needs to show is that there is “common
consent” among the purchasing co-owners to put the legal
title to the purchased property in the name of one co-
owner for the benefit of all. Once this “common consent”
is shown, “ a trust is created by force of law.”
- The BIR has no option but to recognize such legal trust
as well as the beneficial ownership of the real owners
because the trust is created by force of law. The fact that
the title is registered solely in the name of one person is
not conclusive that he alone owns the property. Thus, this
case turns on whether petitioner can sufficiently establish
that petitioner, as trustee of the Employees’ Trust Fund,
has a common agreement with VMC and VFC that
petitioner, VMC and VFC shall jointly purchase the MBP lot
and put the title to the MBP lot in the name of VMC for the
benefit petitioner, VMC and VFC.
- The CTA ruled that the documents presented by
petitioner cannot prove its co-ownership over the MBP lot
especially that the TCT, Deed of Absolute Sale and the
Remittance Return disclosed that VMC is the sole owner
and taxpayer. However, the appellate courts failed to
consider the genuineness and due execution of the
notarized Memorandum of Agreement acknowledging
petitioner’s ownership of the MBP lot. The BIR failed to
present any clear and convincing evidence to prove that
the notarized Memorandum of Agreement is fictitious or
has no legal effect. Likewise, VMC, the registered owner,
did not repudiate petitioner’s share in the MBP lot.
Further, Citytrust, a reputable banking institution, has
prepared a Portfolio Mix Analysis for the years 1994 to
1997 showing that petitioner invested P5,504,748.25 in
the MBP lot. Absent any proof that the Citytrust bank
records have been tampered or falsified, and the BIR has
presented none, the Portfolio Mix Analysis should be given
probative value.
125. CIR v. CA
FACTS:
Private Respondent, GCL Retirement Plan (GCL) is an
employees' trust maintained by the employer, GCL Inc.,
to provide retirement, pension, disability and death
benefits to its employees. The Plan as submitted was
approved and qualified as exempt from income tax by
Petitioner Commissioner of Internal Revenue in
accordance with Rep. Act No. 4917.1
Respondent GCL made investments and earned therefrom
interest income from which was witheld the fifteen per
centum (15%) final witholding tax imposed by Pres.
Decree No. 1959,2 which took effect on 15 October 1984.
The refund requested having been denied, Respondent
GCL elevated the matter to respondent Court of Tax
Appeals (CTA).
CTA ruled in favor of GCL, holding that employees' trusts
are exempt from the 15% final withholding tax on interest
income and ordering a refund of the tax withheld.
Court of Appeals upheld the CTA Decision.
Petitioner submits that the deletion of the exempting and
preferential tax treatment provisions under the old law is
a clear manifestation that the single 15% (now 20%) rate
is impossible on all interest incomes from deposits,
deposit substitutes, trust funds and similar arrangements,
regardless of the tax status or character of the recipients
thereof. In short, petitioner's position is that from 15
October 1984 when Pres. Decree No. 1959 was
promulgated, employees' trusts ceased to be exempt and
thereafter became subject to the final withholding tax.
GCL contends that the tax exempt status of the
employees' trusts applies to all kinds of taxes, including
the final withholding tax on interest income. That
exemption, according to GCL, is derived from Section
56(b) and not from Section 21 (d) or 24 (cc) of the Tax
Code, as argued by Petitioner.
ISSUE: WON employees’ trust (GCL Plan) is exempt from
the 15% final withholding tax on interest income
HELD: Yes. In so far as employees' trusts are concerned,
the foregoing provision should be taken in relation to then
Section 56(b) (now 53[b]) of the Tax Code, as amended
by Rep. Act No. 1983, supra, which took effect on 22 June
1957. This provision specifically exempted employee's
trusts from income tax and is repeated hereunder for
emphasis:
Sec. 56. Imposition of Tax. — (a) Application of
tax. — The taxes imposed by this Title upon
individuals shall apply to the income of estates or
of any kind of property held in trust.
xxx xxx xxx
(b) Exception. — The tax imposed by this Title
shall not apply to employee's trust which forms
part of a pension, stock bonus or profit-sharing
plan of an employer for the benefit of some or all
of his employees . . .
The tax-exemption privilege of employees' trusts, as
distinguished from any other kind of property held in trust,
springs from the foregoing provision. It is unambiguous.
Manifest therefrom is that the tax law has singled out
employees' trusts for tax exemption.
And rightly so, by virtue of the raison de'etre behind the
creation of employees' trusts. Employees' trusts or benefit
plans normally provide economic assistance to employees
upon the occurrence of certain contingencies, particularly,
old age retirement, death, sickness, or disability. It
provides security against certain hazards to which
members of the Plan may be exposed. It is an
independent and additional source of protection for the
working group. What is more, it is established for their
exclusive benefit and for no other purpose.
It is evident that tax exemption is likewise to be enjoyed
by the income of the pension trust. Otherwise, taxation of
those earnings would result in a diminution of
accumulated income and reduce whatever the trust
beneficiaries would receive out of the trust fund. This
would run afoul of the very intendment of the law.
126. Morales v. CA
See #107
127. Pascual v. Meneses
FACTS: The parties are descendants of Celedonio Meneses and
his wife, Ana Asuncion. The couple had four (4) children, namely,
Alejandro, Anacleto, Fernando and Cirila, all of whom, with the
exception of Alejandro, who pre-deceased his mother, survived
their parents. All of them are now deceased. To avoid
unnecessary repetition, the parties herein will hereafter be
referred to by their Christian names only, except when the
surname of the person concerned is not Meneses.
Plaintiffs are descendants of Alejandro, Fernando and Cirila
while...
...defendants are descendants of Anacleto and some alleged
descendants of Celedonio and Ana...
...intervenors are the descendants of Valentin de los Reyes (by
second marriage of Ana)...
Plaintiff - Celedonio and Ana passed on five immovable
properties to their children by operation of law. The said set of
properties continued to be owned by the children as co-owners,
the management of which was left entrusted to Anacleto. More
properties were acquired over time through the investment of
the income of the first set of properties. When Anacleto died, his
children continued to manage the properties and claimed
exclusive title thereof. Despite repeated demands from the
plaintiff for the defendant to account for the income and deliver
the plaintiff's share there in.
Upon the other hand, Asuncion Meneses admitted that the
properties referred to in said Paragraph 10 originally belonged to
Celedonio Meneses and Ana Asuncion, and later passed, by
succession, to their children. She denied, however, that said
properties had been held pro indiviso, in trust and or the benefit
of all of the parties herein.
Cross-claimant Leonicia Geronimo and childred, Asuncion
alleged that they are indebted to her in the sum of P52,928, to
guarantee the payment of which these cross-defendants had
constituted in her favor a first mortgage and a second mortgage
on the fishpond "Kay Gogue" which might be adversely affected
if plaintiffs' complaint should prosper, for which reason she set
up a counter-claim for damages against said plaintiffs.
Lower Court - in favor of plaintiffs.
ISSUE: Whether or not the properties were held by Anacleto in
truest.
RULING:
Cross- claim dismissed. Decision appealed from is affirmed.
RATIO: It appears that, early in 1955, Maria was borrowing P875
from Tinong Meneses and Delfin Carreon, who were seemingly
reluctant to deliver any sum of money to her, until a deed of
mortgage, as security thereof, on a property 16 of the
"Komunidad ng mga Meneses" (Community of the Meneses),
shall have been executed. On January 27, 1955, Ramon wrote to
Tinong Meneses and Delfin Carreon the letter Exhibit D urging
them to meanwhile entrust P300.00 to Maria, assuring the
addressees that he (Ramon) would answer, if necessary, for the
payment of said debt. On the back of the corresponding deed of
mortgage, Ramon, likewise, signed a memorandum in Tagalog,
dated September 13, 1955, stating that he authorized the
mortgage of so much of the aforementioned property as
represented Hermenegildo's share therein by inheritance.
On February 22, 1956, Ramon wrote to Enrica the letter Exhibit
F, stating that the same was due to the residential lot in which
Maria had her house; that Alfredo wanted to buy their interest
in said lot, representing one-fourth (1/4) thereof, the proceeds
of which should be divided among Enrica, Ramon, Asuncion,
Benito and Candelaria; that he (Ramon) was agreeable to the
sale, under the terms indicated in the letter, and to signing the
corresponding deed; and that the same could already be
prepared.
Plaintiffs lay special emphasis upon the phrase "Komunidad ng
mga Meneses," in Exhibit D, as establishing that the sixty-five
(65) parcels of land described in the amended complaint
constituted an undivided community of property, belonging to
the descendants of Celedonio Meneses and Ana Asuncion. It
should be noted, however, that said communication refers only
to the residential lot in which Maria Meneses had her house.
Maria is a daughter of Fernando, one of the four (4) children of
said spouses. It is obvious, however, that the co-ownership over
this single lot does not establish condominion over the sixty-five
(65) other properties in litigation.
As regards plaintiffs' testimonial evidence in support of the
theory that the properties enumerated in Paragraph 10 of the
amended complaint were held by Anacleto for his benefit and
that of the other children of Celedonio Meneses and Ana
Asuncion, by virtue of an express trust established by said
children as alleged co-owners thereof pro indiviso; that the lands
described in paragraph 12 (a) of the amended complaint and
acquired with the income derived from the former estate of
Celedonio Meneses and Ana Asuncion, were, likewise, covered
by said express trust and formed part of the Meneses
community; that said express trust and community were
maintained when, upon Anacleto's death, the administration of
the properties covered by said Paragraphs 10 and 12 (a) passed
to his son, Ramon; that the fifty (50) lots and one (1) "camarin"
described in Paragraph 13 (a) of the amended complaint were
thereafter purchased by Ramon with funds derived from the
income of said two (2) sets of properties; and that, accordingly,
said fifty (50) lots and one (1) "camarin" are, similarly,
encompassed by the aforementioned express trust and form
part of the Meneses community, suffice it to note that, "no
express trust concerning an immovable or any interest therein
may be proved by parol evidence"
Upon the other hand, there is sufficient evidence that the estate
of Celedonio Meneses and Ana Asuncion had already been
partitioned among and delivered to their heirs.
128. Cuaycong v. Cuaycong
FACTS:
Eduardo Cuaycong, married to Clotilde de Leon, died
without issue but with three brothers and a sister
surviving him: Lino, Justo, Meliton and Basilisa.
Upon his death, his properties were distributed to
his heirs as he willed except two haciendas the
Haciendas Sta. Cruz and Pusod both known as
Hacienda Bacayan.
Lino Cuaycong died and was survived by his
children.
Praxedes Cuaycong, married to Jose Betia, is
already deceased and is survived by her children, all
surnamed Betia.
Anastacio Cuaycong, also deceased, is survived by
his children, all surnamed Cuaycong.
Meliton and Basilisa died without any issue.
On October 3, 1961, the surviving children of Lino
Cuaycong; the surviving children of Anastacio; as
well as children of deceased Praxedes Cuaycong
Betia, filed as pauper litigants, a suit against Justo,
Luis and Benjamin Cuaycong for conveyance of
inheritance and accounting, before the Court of First
Instance of Negros Occidental alleging among others
that Luis, thru clever strategy, fraud,
misrepresentation and in disregard of Eduardo’s
wishes by causing the issuance in his name of
certificates of title covering Hacienda Bacayan’s
properties. They also claimed that Eduardo had an
arrangement with Justo and Luis that the latter will
hold in trust what might belong to his brothers and
sister as a result of the arrangements and deliver them
their share when time comes. The plaintiff repeatedly
demanded for their share in the property after Eduardo
and Clotilde’s death.
Luis D. Cuaycong moved to dismiss the complaint.
On December 16, 1961, the Court of First Instance
ruled that the trust alleged, particularly in paragraph
8 of the complaint, refers to an immovable which
under Article 1443 of the Civil Code may not be
proved by parole evidence.
Later, the court decreed that since there was no
amended complaint filed, it was useless to declare
Benjamin Cuaycong in default.
Plaintiff thereafter manifested that the claim is
based on an implied trust as shown by paragraph 8
of the complaint. They added that there being no
written instrument of trust, they could not amend
the complaint to include such instrument.
Paragraph 8 of the complaint state:
That as the said two haciendas were then the
subject of certain transactions between the spouses
Eduardo Cuaycong and Clotilde de Leon on one
hand, and Justo and Luis D. Cuaycong on the other,
Eduardo Cuaycong told his brother Justo and his
nephew, defendant Luis D. Cuaycong, to hold in
trust what might belong to his brothers and sister as
a result of the arrangements and to deliver to them
their shares when the proper time comes, to which
Justo and Luis D. Cuaycong agreed.
ISSUE: Whether the trust is express or implied.
RULING:
It is an express trust.
Our Civil Code defines an express trust as one
created by the intention of the trustor or of the
parties, and an implied trust as one that comes into
being by operation of law. Express trusts are those
created by the direct and positive acts of the parties,
by some writing or deed or will or by words evidencing
an intention to create a trust. On the other hand,
implied trusts are those which, without being
expressed, are deducible from the nature of the
transaction by operation of law as matters of equity, in
dependently of the particular intention of the parties.
Thus, if the intention to establish a trust is clear, the
trust is express; if the intent to establish a trust is to be
taken from circumstances or other matters indicative
of such intent, then the trust is implied.
From these and from the provisions of paragraph 8
of the complaint itself, we find it clear that the
plaintiffs alleged an express trust over an
immovable, especially since it is alleged that the
trustor expressly told the defendants of his intention to
establish the trust. Such a situation definitely falls
under Article 1443 of the Civil Code.
Article 1453, one of the cases of an implied trust
would apply if the person conveying the property did
not expressly state that he was establishing the
trust, unlike the case at bar where he was alleged to
have expressed such intent.
129. Julio v. Dalandan
FACTS:
Clemente Dalandan, deceased father of defendants
Emiliano and Maria Dalandan, acknowledged that a
four-hectare piece of riceland in Las Piñas, Rizal
belonging to Victoriana Dalandan, whose only child
and heir is plaintiff Victoria Julio, was posted as
security for an obligation which he, Clemente
Dalandan, assumed but, however, failed to fulfill. The
result was that Victoriana's said land was foreclosed.
So Clemente promised to Victoria a farm of about four
hectares to replace the aforesaid foreclosed property.
An affidavit was executed by Clemente which herein
petitioner accepted. Part of the agreement was that his
heirs (Emiliano and Maria) may not be forced to give
up the harvest of the farm and neither may the land be
demanded immediately.
After the death of Clemente Dalandan, plaintiff
requested from defendants who succeeded in the
possession of the land, to deliver the same to her.
However defendants "insisted that according to the
agreement", neither delivery of the land nor the fruits
thereof could immediately be demanded. Plaintiff
acceded to this contention of defendants and allowed
them to continue to remain in possession. Plaintiff also
demanded to fix the period within which they would
deliver the above-described parcels of land but
defendants have refused and until now still refuse to
fix a specific time within which they would deliver it.
Defendants also aver that recognition of the trust may
not be proved by evidence aliunde or parol evidence.
LC: Ruled in favor of the defendants.
ISSUE: WON there was an expressed trust.
HELD:
Yes, Article 1444 of the Civil Code states that: "No
particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly
intended."
Technical or particular forms of words or phrases are
not essential to the manifestation of intention to create
a trust or to the establishment thereof. Nor would the
use of some such words as "trust" or "trustee"
essential to the constitution of a trust. Conversely, the
mere fact that the word "trust" or "trustee" was
employed would not necessarily prove an intention to
create a trust. What is important is whether the trustor
manifested an intention to create the kind of
relationship which in law is known as a trust. It is
unimportant that the trustor should know that the
relationship "which he intends to create is called a
trust, and whether or not he knows the precise
characteristics of the relationship which is called a
trust."
In the given case, while it is true that said deed or
agreement did not in definitive words institute
defendants as trustees, a duty is therein imposed
upon them — when the proper time comes — to turn
over both the fruits and the possession of the property
to Victoria Julio. The trust is effective as against
defendants and in favor of the beneficiary thereof,
plaintiff Victoria Julio, who accepted it in the document
itself.
130. Heirs of Tranquilino Labiste v. Heirs of Jose Labiste
FACTS: On Sept. 29, 1919, Epifanio Labiste, in his and his siblings'
behalf, who were heirs of Jose, purchased a 13,308 sqm lot with
Lot No. 1054 in Cebu. To which a deed of conveyance was
executed to the Epifanio and his siblings.
After full payment of the price but prior to the issuance of the
deed of conveyance, Epifanio executed an affidavit affirming that
he, as an heir of Jose, and his uncle, petitioner's predecessor-in-
interest of Tranquilino, then co-owned the lot. Since the money
paid for the purchase came from the two of them. Tranquilino
and the heirs of Jose continued to hold the property jointly. The
lots were then subdivided into two lots of an area of 6,664 sqm
Lot No. 1054-A for Tranquilino and Lot No. 1054-B to Epifanio.
On Oct. 18, 1939, heirs of Tranquilino purchased the 1/2 interest
of Jose for P300 as evidenced by the Calig-onan sa Panagpalit.
When WWII broke out, the heirs of Tranquilino fled Cebu, though
they came back subsequently.
Asuncion filed for a petition for reconstitution of title over Lot
No. 1054, which petitioner opposed. The Register of Deeds of
Cebu City issued the reconstituted title in the name of Epifanio
and his siblings, heirs of Jose. Petitioners filed a complaint for
annulment of title seeking the reconveyance of property and
damages. Respondents claiming that the affidavit and Calig-onan
sa Panagpalit were forgeries and petitioners' actions had long
prescribed.
RTC - In favor of petitioners. Action has not prescribed as te
complaint was filed about a year after the reconstitution of the
title by respondents.
CA - Reversed RTC. though affirming petitioner's right to the
property. Reversed on the ground of prescription and laches.
ISSUE: Whether or not what is involved in the case is an express
trust.
RULING: Yes. Reversed and Set Aside CA Ruling. RTC ruling
reinstated with modification. Petitioners declared absolute
owners of 1/2 of lot #1054 and #1054-A
RATIO: Trust is the right to the beneficial enjoyment of property,
the legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the property for
the benefit of the beneficiary. Trust relations between 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.
Express trusts are created by direct and positive acts of the
parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a trust.
Under Article 1444 of the Civil Code, "[n]o particular words are
required for the creation of an express trust, it being sufficient
that a trust is clearly intended." The Affidavit of Epifanio is in the
nature of a trust agreement. Epifanio affirmed that the lot
brought in his name was co-owned by him, as one of the heirs of
Jose, and his uncle Tranquilino. And by agreement, each of them
has been in possession of half of the property. Their arrangement
was corroborated by the subdivision plan prepared by Engr.
Bunagan and approved by Jose P. Dans, Acting Director of Lands.
As such, prescription and laches will run only from the time the
express trust is repudiated. The Court has held that for
acquisitive prescription to bar the action of the beneficiary
against the trustee in an express trust for the recovery of the
property held in trust it must be shown that: (a) the trustee has
performed unequivocal acts of repudiation amounting to an
ouster of the cestui que trust; (b) such positive acts of
repudiation have been made known to the cestui que trust, and
(c) the evidence thereon is clear and conclusive. Respondents
cannot rely on the fact that the Torrens title was issued in the
name of Epifanio and the other heirs of Jose. It has been held
that a trustee who obtains a Torrens title over property held in
trust by him for another cannot repudiate the trust by relying on
the registration. The rule requires a clear repudiation of the trust
duly communicated to the beneficiary. The only act that can be
construed as repudiation was when respondents filed the
petition for reconstitution in October 1993. And since petitioners
filed their complaint in January 1995, their cause of action has
not yet prescribed, laches cannot be attributed to them.
131. Gamboa v. Gamboa
PETRONA GAMBOA, ET AL - plaintiffs-appellees,
MODESTA GAMBOA, ET AL - defendants-
appellants.
FACTS:
An action was instituted at the Court of First
Instance of the Province of Pampanga, for the
purpose of enforcing partition of some ten parcels
of real property located in the municipality of Santa
Ana, in the province of Pampanga. It asserted that
the plaintiffs are co owners with the defendants
Modesta, Pedro and Rafael. At the same time the
plaintiffs seek to obtain an accounting from
Modesta Gamboa of the plaintiffs' shares in the
procedure taken from the land in the past.
To this complaint Modesta Gamboa answered with
a general denial, supplemented by an admission
that the single parcel constituting the last item
specified in the complaint and identified as tax No.
6247, is in fact common property of herself and the
plaintiffs who are her coheirs, and asserting, as to
the rest, that she is the owner of the same and has
been in adverse possession thereof for more than
ten years. The defendant Rafael and Pedro Gamboa
answered with a formal general denial, but at the
trial they admitted the claim to Modesta Gamboa
as owner of the contested properties.
All of the properties that are the subject of this
action once belonged to the parents of the first set
of Gamboa plaintiffs of the three defendants of the
same name.
Juan Gamboa and wife sold all of the properties
which are the subject of this action, except the
parcel identified by the tax assessment No. 6247,
under contract of sale with pacto de retro for two
years to one Felipe Javier, the vendors, however,
remaining in possession in the character of lessees.
The period of redemption having been effected,
and the property consolidated in Javier. But Juan
Gamboa, and after his death, his family, continued
in possession as tenants under Javier. This
arrangement continued until the death of Ana
Manag, widow of Juan Gamboa.
Javier then absolute owner of the properties which
he had purchased as above stated, conveyed the
same to the sisters Feliciana and Modesta Gamboa
for the price less than the price for which he had
originally purchased them. To secure these
deferred payments the parties declared that a
mortgage was created upon the property which
was the subject of conveyance.
Subsequently, Modesta Gamboa and her sister
Feliciana entered into a written partition of the
parcels of property which had been purchased by
them from Javier. In this partition Feliciana was
content with a much smaller portion than Modesta.
The proof shows that ever since the property in
question was conveyed by Javier to the Gamboa
sisters, the same has been continuously in the
possession of Modesta, except for the two years
when, by some arrangement or other, one of her
brothers had charge as manager. During this
period Modesta exercised all the rights of
ownership, accounting of course to Feliciana for the
latter's share of the produce during the term of
their ownership.
For the petitioners, this buying of the land was in
effect a repurchase by Feliciana and Modesta of the
land in behalf of their ancestors.
ISSUE: Whether the purchase of the land by the
Gamboa sisters was in fact, in trust only for the
Juan Gamboa and in effect, be only co-owners as
co-heirs with the petitioners?
HELD: NO.
This theory of the case, in our opinion, is
untenable.
The sale of the property by Javier to the two sisters
in 1910 was an unconditional transfer of title to
them, inasmuch as Javier had been undisputed
owner of the property for fully eleven years. Of
course if it had really been agreed that the sisters
were purchasing the property in a trust character,
that agreement might have been enforced, but the
nature of the title held by the sisters and the
inconclusive character of the proof of trusteeship
refute this theory.
We attribute little importance to the form in which
the property was assessed for taxation, in view of
the explanation which Modesta gives of the
obstructions which she encountered in
straightening that matter out. The situation, as we
see it, is that Modesta Gamboa, during the period
in which she has been part owner of the property
and during the later period in which she has held
title in her own name, has been surrounded by
kinsfolk who were anxious to insinuate themselves
into a coownership of the property, and this
litigation was undoubtedly promoted chiefly by her
brother Serapion Gamboa. But it is noteworthy that
at least two brothers have admitted her title.
The trial judge seems to have entertained the idea
that the case must turn upon the character of the
possession exercised by Modesta Gamboa during
the period allowed by law for prescription; and he
assumed that it was necessary for her to show
adverse possession during that period. This idea is
not of correct application, because Modesta
Gamboa, either cojointly with her sister Feliciana or
exclusively in her own right, has held the legal title
since 1910; and the fact that her brother and
sisters may have questioned her right during the
ten years next preceding the institution of this
action does not have the effect of impairing her
right.
Clearly, the sisters bought the land as their own
and not in trust for their relatives.
132. Cañezo v. Rojas
Alleged Trustor: Soledad Canezo
Alleged Trustee: Crispulo Rojas
Second Wife of Trustee: Concepcion Rojas
FACTS:
Soledad Canezo filed a Complaint for the recovery of real
property plus damages with the MTC of Naval, Biliran
against her father’s second wife, respondent Concepcion
Rojas. The subject property is an unregistered land.
Canezo claims that she bought the parcel of land in 1939
from Crisogono Limpiado, although the transaction was
not reduced in writing. She immediately took possession
of the property. When she and her husband left for
Mindanao in 1948, she entrusted the said land to her
father, Crispulo Rojas, who took possession of, and
cultivated, the property. In 1980, she found out that the
respondent, her stepmother, was in possession of the
property and was cultivating the same. She also
discovered that the tax declaration over the property was
already in the name of Crispulo Rojas.
Respondent asserted that, contrary to the petitioners
claim, it was her husband, Crispulo Rojas, who bought the
property from Crisogono Limpiado in 1948, which
accounts for the tax declaration being in Crispulos name.
From then on, until his death in 1978, Crispulo possessed
and cultivated the property. Upon his death, the property
was included in his estate, which was administered by a
special administrator, Bienvenido Ricafort. The petitioner,
as heir, even received her share in the produce of the
estate. The respondent further contended that the
petitioner ought to have impleaded all of the heirs as
defendants. She also argued that the fact that petitioner
filed the complaint only in 1997 means that she had
already abandoned her right over the property.
MTC rendered decision in favour of the petitioner.
RTC reversed the MTC decision on the ground that the
action had already prescribed and acquisitive prescription
had set in.
Petitioner filed an MR and RTC amended its original
decision and held that the action has not yet prescribed
considering that the petitioner merely entrusted the
property to her father.
CA reversed the Amended Decision of the RTC
ISSUE: WON there was a trust relationship between
Soledad Canezo and Crispulo Rojas.
HELD: No. As a rule the burden of proving the existence
of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence
of the trust and its elements. The presence of the following
elements must be proved: (1) a trustor or settlor who
executes the instrument creating the trust; (2) a trustee,
who is the person expressly designated to carry out the
trust; (3) the trust res, consisting of duly identified and
definite real properties; and (4) the cestui que trust, or
beneficiaries whose identity must be clear. Accordingly, it
was incumbent upon petitioner to prove the existence of
the trust relationship. And petitioner sadly failed to
discharge that burden.
133. Go v. Estate of Felisa Tamio de Buenaventura
Facts: Felisa Buenaventura, the mother of the Petitioner
Bella and respondents Resurreccion, Rhea and Regina,
owned a parcel of land with a three-storey building. In
1960, Felisa transferred the same to her daughter Bella,
married to Delfin, Sr., and Felimon, Sr., the common-law
husband of Felisa, to assist them in procuring a loan from
the GSIS. In view thereof, her title over the property, TCT
No. 45951/T-233, was cancelled and a new one, TCT No.
49869, was issued in the names of Bella, married to
Delfin, Sr., and Felimon, Sr.
Upon Felisa's death in 1994, the Bihis Family, Felisa's
other heirs who have long been occupying the subject
property, caused the annotation of their adverse claim
over the property. However, the annotation was
cancelled, and thereafter a new TCT over the property was
issued in the names of Bella, et al. Finally, by virtue of a
Deed of Sale dated January 23, 1997, the subject
property was sold to Wilson and Peter, in whose names
TCT No. 170475 currently exists. A complaint for
reconveyance was then filed.
RTC: there was an implied trust between Felisa, on the
one hand, and Bella and Felimon, Sr., on the other,
created by operation of law. However, the RTC held that
reconveyance can no longer be effected since the subject
property had already been transferred to Wilson and
Peter, whom it found to be purchasers in good. Also, Bella,
Delfin, Sr., and Felimon, Sr. were unjustly enriched at the
expense of the respondents who, as compulsory heirs,
were also entitled to their share in the subject property,
the RTC directed Bella, et al. to pay plaintiffs, jointly and
severally.
CA: upheld the RTC's finding that an implied trust was
constituted between Felisa, during her lifetime, and Bella,
Delfin, Sr., and Felimon, Sr. when the former sold the
subject property to the latter, and that the present action
for reconveyance has not prescribe. However, Wilson and
Peter were found to not be purchasers im good faith due
to their knowledge of the adverse claim.
Issues: 1. Whether or not a trust was established between
Felisa and Bella, Delfin,Sr., and Felimon, Sr.
2. Whether or not the action for reconveyance
has prescribed.
3. Whether or not Wilson and Peter are
purchasers in good faith.
HELD:
1. An express trust was created.
Trust is the right to the beneficial enjoyment of property,
the legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the
property for the benefit of the beneficiary. Trust relations
between parties may either be express or implied. An
express trust is created by the intention of the trustor or
of the parties, while an implied trust comes into being by
operation of law.
Express trusts are created by direct and positive acts of
the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to
create a trust
From the letter executed by Felisa, it unequivocally and
absolutely declared her intention of transferring the title
over the subject property to Bella, Delfin, Sr., and
Felimon, Sr. in order to merely accommodate them in
securing a loan from the GSIS. She likewise stated clearly
that she was retaining her ownership over the subject
property and articulated her wish to have her heirs share
equally therein. Hence, while in the beginning, an implied
trust was merely created between Felisa, as trustor, and
Bella, Delfin, Sr., and Felimon, Sr., as both trustees and
beneficiaries, the execution of the September 21, 1970
letter settled, once and for all, the nature of the trust
established between them as an express one, their true
intention irrefutably extant thereon.
2. Anent the issue of prescription, the Court finds that the
action for reconveyance instituted by respondents has not
yet prescribed, following the jurisprudential rule that
express trusts prescribe in ten (10) years from the time
the trust is repudiated.
In this case, there was a repudiation of the express trust
when Bella, as the remaining trustee, sold the subject
property to Wilson and Peter on January 23, 1997. As the
complaint for reconveyance and damages was filed by
respondents on October 17, 1997, or only a few months
after the sale of the subject property to Wilson and Peter,
it cannot be said that the same has prescribed.
3. Wilson and Peter are not purchasers in good faith.
A purchaser in good faith is one who buys the property of
another without notice that some other person has a
right to, or an interest in, such property and pays a
full and fair price for the same at the time of such
purchase, or before he has notice of some other person
's claim or interest i n the property. The existence of an
annotation on the title covering the subject property and
of the occupation thereof by individuals other than the
sellers negates any presumption of good faith on the part
of Wilson and Peter when they purchased the subject
property.
IV. Implied Trusts
134. Juan v. Yap, Sr.
FACTS:
● The spouses Maximo and Dulcisima Cañeda
mortgaged to petitioner Richard Juan (petitioner),
employee and nephew of respondent Gabriel Yap,
Sr. (respondent), two parcels of land in Talisay,
Cebu to secure a loan of P1.68 million, payable
within one year.
 ● Petitioner, represented by Atty. Solon, sought the
extrajudicial foreclosure of the mortgage.
Although petitioner and respondent participated in
the auction sale, the properties were sold to
petitioner for tendering the highest bid of P2.2
million. No certificate of sale was issued to
petitioner, however, for his failure to pay the
sale’s commission.
● Respondent and the Cañeda spouses executed a
memorandum of agreement (MOA) where (1) the
Cañeda spouses acknowledged respondent as
their "real mortgagee-creditor x x x while Richard
Juan [petitioner] is merely a trustee" of
respondent; (2) respondent agreed to allow the
Cañeda spouses to redeem the foreclosed
properties for P1.2 million; and (3) the Cañeda
spouses and respondent agreed to initiate judicial
action "either to annul or reform the [Contract] or
to compel Richard Juan to reconvey the
mortgagee’s rights" to respondent as trustor.
● Three days later, the Cañeda spouses and
respondent sued petitioner in the Regional Trial
Court of Cebu City (trial court) to declare
respondent as trustee of petitioner vis a vis the
Contract, annul petitioner’s bid for the foreclosed
properties, declare the Contract "superseded or
novated" by the MOA, and require petitioner to
pay damages, attorney’s fees and the costs. The
Cañeda spouses consigned with the trial court the
amount of P1.68 million as redemption payment.
Petitioner insisted on his rights over the
mortgaged properties. Petitioner also
counterclaimed for damages and attorney’s fees
and the turn-over of the owner’s copy of the titles
for the mortgaged properties.
RTC: ruled against respondent and his co-plaintiffs and
granted reliefs to petitioner by declaring petitioner the
"true and real" mortgagee, ordering respondent to pay
moral damages and attorney’s fees, and requiring
respondent to deliver the titles in question to petitioner.
The trial court, however, granted the Cañeda spouses’
prayer to redeem the property and accordingly ordered
the release of the redemption payment to petitioner. In
arriving at its ruling, the trial court gave primacy to the
terms of the Contract, rejecting respondent’s theory in
light of his failure to assert beneficial interest over the
mortgaged properties for nearly four years.
Respondent appealed to CA
CA: granted the petition, set aside the trial court’s
ruling, declared respondent the Contract’s mortgagee,
directed the trial court to release the redemption payment
to respondent, and ordered petitioner to pay damages and
attorney’s fees. The CA found the following circumstances
crucial in its concurrence with respondent’s theory,
notwithstanding the terms of the Contract: (1) Solon
testified that he drew up the Contract naming petitioner
as mortgagee upon instructions of respondent; (2)
Dulcisima Cañeda acknowledged respondent as the
creditor from whom she and her husband obtained the
loan the Contract secured; and (3) respondent shouldered
the payment of the foreclosure expenses. Instead,
however, of annulling the Contract, the CA held that
reformation was the proper remedy, with the MOA
"serv[ing] as the correction done by the parties to reveal
their true intent."
ISSUE:
Whether an implied trust arose between petitioner and
respondent, binding petitioner to hold the beneficial title
over the mortgaged properties in trust for respondent
RULING:
Yes, there is an implied trust between the petitioner and
the respondent.
An implied trust arising from mortgage contracts is not
among the trust relationships the Civil Code enumerates.
The Code itself provides, however, that such listing "does
not exclude others established by the general law on trust
x x x." Under the general principles on trust, equity
converts the holder of property right as trustee for the
benefit of another if the circumstances of its acquisition
makes the holder ineligible "in x x x good conscience [to]
hold and enjoy [it]." As implied trusts are remedies
against unjust enrichment, the "only problem of great
importance in the field of constructive trusts is whether in
the numerous and varying factual situations presented x
x x there is a wrongful holding of property and hence, a
threatened unjust enrichment of the defendant."
Applying these principles, this Court recognized
unconventional implied trusts in contracts involving the
purchase of housing units by officers of tenants’
associations in breach of their obligations, the partitioning
of realty contrary to the terms of a compromise
agreement, and the execution of a sales contract
indicating a buyer distinct from the provider of the
purchase money. In all these cases, the formal holders of
title were deemed trustees obliged to transfer title to the
beneficiaries in whose favor the trusts were deemed
created. We see no reason to bar the recognition of the
same obligation in a mortgage contract meeting the
standards for the creation of an implied trust.
135. Heirs of Narvasa, Sr. v. Imbornal
Facts:
Basilia owned a parcel of land situated at
Sabangan, Pangasinan which she conveyed to her
three (3) daughters Balbina, Alejandra, and Catalina
(Imbornal sisters) sometime in 1920. Meanwhile,
Catalina’s husband, Ciriaco Abrio (Ciriaco), applied for
and was granted a homestead patent over a 31,367-
sq. m. riparian land(Motherland) adjacent to the
Cayanga River in San Fabian,Pangasinan. He
was eventually awarded Homestead Patent
No.2499115 therefor, and, on December 5, 1933,
OCT No. 1462 was issued in his name.
Later, or on May 10, 1973, OCT No. 1462 was
cancelled, and Transfer Certificate of Title (TCT) No.
10149516 was issued in the name of Ciriaco’s
heirs, namely: Margarita Mejia; Rodrigo Abrio,
married to Rosita Corpuz; Antonio Abrio, married to
Crisenta Corpuz;Remedios Abrio, married to Leopoldo
Corpuz; Pepito Abrio; Dominador Abrio; Francisca
Abrio; Violeta Abrio; and Perla Abrio (Heirs of
Ciriaco).Ciriaco and his heirs had since occupied the
northern portion of the Motherland, while respondents
occupied the southern portion.Sometime in 1949, the
First Accretion, approximately 59,772 sq. m. in area,
adjoined the southern portion of the Motherland. On
August 15, 1952, OCT No. P-318 was issued in the
name of respondent Victoriano, married to Esperanza
Narvarte, covering the First Accretion.Decades later,
or in 1971, the Second Accretion, which had an area
of 32,307 sq. m., more or less, abutted the First
Accretion on its southern portion.
On November 10, 1978, OCT No. 21481 was
issued in the names of all the respondents covering
the Second Accretion. Claiming rights over the entire
Motherland, Francisco, et al., as the children of
Alejandra and Balbina, filed on February 27,1984 an
Amended Complaint for reconveyance, partition,
and/or damages against respondents, docketed as
Civil Case No. D-6978. They anchored their claim on
the allegation that Ciriaco, with the help of his wife
Catalina, urged Balbina and Alejandra to sell the
Sabangan property. Likewise, Francisco, et al. alleged
that through deceit, fraud, falsehood, and
misrepresentation, respondent Victoriano, with
respect to the First Accretion, and the respondents
collectively, with regard to the Second Accretion, had
illegally registered the said accretions in their names,
notwithstanding the fact that they were not the riparian
owners (as they did not own the Motherland to
which the accretions merely formed adjacent to).
In this relation, Francisco, et al. explained that they did
not assert their inheritance claims over the Motherland
and the two (2) accretions because they respected
respondents’ rights, until they discovered in 1983 that
respondents have repudiated their(Francisco, et al.’s)
shares thereon.22Thus, bewailing that respondent
shave refused them their rights not only with respect
to the Motherland, but also to the subsequent
accretions, Francisco, et al. prayed for their
conveyance of said properties, or, in the alternative,
the payment of their value, as well as the award of
moral damages in the amount of P100,000.00, actual
damages in the amount of P150,000.00,including
attorney’s fees and other costs.23On
RTC: rendered a Decision in favor of Francisco,
et al. and thereby directed respondents to: (a)
reconvey to Francisco, et al. their respective portions
in the Motherland and in the accretions thereon, or
their pecuniary equivalent; and (b) pay actual
damages in the amount of P100,000.00, moral
damages in the amountofP100,000.00, and attorney’s
fees in the sum ofP10,000.00, as well as costs of suit.
CA: reversed and set aside the RTC Decision and
entering a new one declaring: (a)the descendants of
Ciriaco as the exclusive owners of the Motherland;(b)
the descendants of respondent Victoriano as the
exclusive owners of the First Accretion; and (c) the
descendants of Pablo (i.e., respondents collectively)
as the exclusive owners of the Second Accretion. At
odds with the CA’s disposition, Francisco et al. filed a
motion for reconsideration which was, however
denied by the CA in a Resolution dated May
7, 2008, hence, this petition taken by the latter’s
heirs as their successors-in-interest.
Issue:
Whether there an implied trust between the Imbornal
sisters and Ciriaco.
Held: No
The main thrust of Francisco, et al.’s Amended
Complaint is that an implied trust had arisen between
the Imbornal sisters, on the one hand, and Ciriaco, on
the other, with respect to the Motherland. This implied
trust is anchored on their allegation that the proceeds
from the sale of the Sabangan property – an
inheritance of their predecessors, the Imbornal sisters
– were used for the then-pending homestead
application filed by Ciriaco over the Motherland. As
such, Francisco, et al. claim that they are, effectively,
co-owners of the Motherland together with Ciriaco’s
heirs.
An implied trust arises, not from any
presumed intention of the parties, but by
operation of law in order to satisfy the demands of
justice and equity and to protect against unfair
dealing or downright fraud.44 To reiterate, Article
1456 of the Civil Code states that "[i]f property is
acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the
person from whom the property comes."
The burden of proving the existence of a trust
is on the party asserting its existence, and such proof
must be clear and satisfactorily show the existence of
the trust and its elements.45 While implied trusts may
be proven by oral evidence, the evidence must be
trustworthy and received by the courts with extreme
caution, and should not be made to rest on loose,
equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily
be fabricated.46
In this case, it cannot be said, merely on the
basis of the oral evidence offered by Francisco, et al.,
that the Motherland had been either mistakenly or
fraudulently registered in favor of Ciriaco. Accordingly,
it cannot be said either that he was merely a trustee of
an implied trust holding the Motherland for the benefit
of the Imbornal sisters or their heirs.
As the CA had aptly pointed out, a homestead
patent award requires proof that the applicant meets
the stringent conditions set forth under
Commonwealth Act No. 141, as amended, which
includes actual possession, cultivation, and
improvement of the homestead. It must be presumed,
therefore, that Ciriaco underwent the rigid process
and duly satisfied the strict conditions necessary
for the grant of his homestead patent application.
As such, it is highly implausible that the Motherland
had been acquired and registered by mistake or
through fraud as would create an implied trust
between the Imbornal sisters and Ciriaco, especially
considering the dearth of evidence showing that the
Imbornal sisters entered into the possession of the
Motherland, or a portion thereof, or asserted any right
over the same at any point during their lifetime. Hence,
when OCT No. 1462 covering the Motherland was
issued in his name pursuant to Homestead Patent No.
24991 on December 15, 1933, Ciriaco’s title to the
Motherland had become indefeasible. It bears to
stress that the proceedings for land registration that
led to the issuance of Homestead Patent No. 24991
and eventually, OCT No. 1462 in Ciriaco’s name are
presumptively regular and proper,49 which
presumption has not been overcome by the evidence
presented by Francisco, et al.
In this light, the Court cannot fully accept and
accord evidentiary value to the oral testimony offered
by Francisco, et al. on the alleged verbal agreement
between their predecessors, the Imbornal sisters, and
Ciriaco with respect to the Motherland. Weighed
against the presumed regularity of the award of the
homestead patent to Ciriaco and the lack of evidence
showing that the same was acquired and registered by
mistake or through fraud, the oral evidence of
Francisco, et al.would not effectively establish their
claims of ownership. It has been held that oral
testimony as to a certain fact, depending as it does
exclusively on human memory, is not as reliable as
written or documentary evidence, especially since the
purported agreement transpired decades ago, or in
the 1920s. Hence, with respect to the Motherland, the
CA did not err in holding that Ciriaco and his heirs are
the owners thereof, without prejudice to the rights of
any subsequent purchasers for value of the said
property.
136. Salao v. Salao
Facts:
The spouses Manuel Salao and Valentina Ignacio of Barrio
Dampalit, Malabon, Rizal begot four children named
Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel
Salao died in 1885. His eldest son, Patricio, died in 1886
survived by his only child. Valentin Salao.
After Valentina’s death, her estate was administered by her
daughter Ambrosia.
The documentary evidence proves that in 1911 or prior to
the death of Valentina Ignacio her two children, Juan Y.
Salao, Sr. and Ambrosia Salao, secured a Torrens title,
OCT No. 185 of the Registry of Deeds of Pampanga, in their
names
The property in question is the forty-seven-hectare fishpond
located at Sitio Calunuran, Lubao, Pampanga, wherein
Benita Salao-Marcelo daughter of Valentin Salao claimed
1/3 interest on the said fishpond.
The defendant Juan Y. Salao Jr. inherited from his father
Juan Y. Salao, Sr. ½ of the fishpond and the other half from
the donation of his auntie Ambrosia Salao.
It was alleged in the said case that Juan Y. Salao, Sr and
Ambrosia Salao had engaged in the fishpond business.
Where they obtained the capital and that Valentin Salao and
Alejandra Salao were included in that joint venture, that the
funds used were the earnings of the properties supposedly
inherited from Manuel Salao, and that those earnings were
used in the acquisition of the Calunuran fishpond. There is
no documentary evidence to support that theory.
The lawyer of Benita Salao and the Children of Victorina
Salao in a letter dated January 26, 1951 informed Juan S.
Salao, Jr. that his clients had a one-third share in the two
fishponds and that when Juani took possession thereof in
1945, in which he refused to give Benita and Victorina’s
children their one-third share of the net fruits which allegedly
amounted to P200,000. However, there was no mention on
the deeds as to the share of Valentin and Alejandra.
Juan S. Salao, Jr. in his answer dated February 6, 1951
categorically stated that Valentin Salao did not have any
interest in the two fishponds and that the sole owners
thereof his father Banli and his aunt Ambrosia, as shown in
the Torrens titles issued in 1911 and 1917, and that he Juani
was the donee of Ambrosia’s one-half share.
Benita Salao and her nephews and niece asked for the
annulment of the donation to Juan S. Salao, Jr. and for the
reconveyance to them of the Calunuran fishpond as
Valentin Salao’s supposed one-third share in the 145
hectares of fishpond registered in the names of Juan Y.
Salao, Sr. and Ambrosia Salao.
RTC: dismissed complaint and counter-claim
CA: elevated the case to SC for amount has exceeded
P200,000.
ISSUE: Is plaintiffs' massive oral evidence sufficient to
prove an implied trust, resulting or constructive, regarding
the two fishponds?
HELD: There was no resulting trust in this case
because there never was any intention on the part of
Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao
to create any trust. There was no constructive trust
because the registration of the two fishponds in the
names of Juan and Ambrosia was not vitiated by fraud
or mistake. This is not a case where to satisfy the
demands of justice it is necessary to consider the
Calunuran fishpond "being held in trust by the heirs of
Juan Y. Salao, Sr. for the heirs of Valentin Salao. And
even assuming that there was an implied trust,
plaintiffs' action is clearly barred by prescription or
laches
Trusts; Nature of: "In its technical legal sense, a trust is
defined as the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to which is
vested in another, but the word 'trust' is frequently employed
to indicate duties, relations, and responsibilities which are
not strictly technical trust”
Trust; Juridical Concept: 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" (Art.
1440, Civil Code). There is a fiduciary relation between the
trustee and the cestui que trust as regards certain property,
real, personal, money or choses in action.
Trust; Express Trusts: Express trusts are created by the
intention of the trustor or of the parties. "No particular words
are required for the creation of an express trust, it being
sufficient that a trust is clearly intended. 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
either expressly or impliedly evincing an intention to create
a trust.
Trust; Implied Trust: Implied trusts come into being by
operation of law. Implied trusts are those which, without
being expressed, are deducible from the nature of the
transaction as matters of intent, or which are superinduced
on the transaction by operation of law as matter of equity,
independently of the particular intention of the parties.
Trust; Implied Trust; Resulting Trust: A resulting trust. is
broadly defined as a trust which is raised or created by the
act or construction of law, but in its more restricted sense it
is a trust raised by implication of law and presumed to have
been contemplated by the parties, the intention as to which
is to be found in the nature of their transaction, but not
expressed in the deed or instrument of conveyance.
Trust; Trust may be proven by clear satisfactory and
convincing evidence: A constructive trust is -a trust "raised
by construction of law, or arising by operation of law". In a
more restricted sense and as contra-distinguished from a
resulting trust, a constructive trust is "a trust not created by
any words, either expressly or impliedly evincing a direct
intension to create a trust, but by the construction of equity
in order to satisfy the demands of justice." It does not arise
"by agreement or intention, but by operation of law." Thus,
"if property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the
property comes"
Trust; Trust may be proven by clear satisfactory and
convincing evidence; Express and Implied Trust; Whn
Parol Evidence Available; reasons: "No express trusts
concerning an immovable or any interest therein may be
proven by parol evidence. An implied trust may be proven
by oral evidence" (Ibid, Arts. 1443 and 1457).
137. Municipality of Victorias v. CA
Parties (of Implied Trust):
Trustor: Simeona Jinco Vda. De Ditching
Trustee: Norma Leuenberger
Beneficiary / cestui que trust: Municipality of Victoria
FACTS
1. Norma Leuenberger (Norma) inherited the whole of Lot
No. 140 from her grandmother, Simeona J. Vda. de
Ditching.
2. In 1952, she donated a portion of Lot No. 140, about 3
ha., to the municipality for the ground of a certain high
school and had 4 ha. converted into a subdivision.
3. In 1963, she had the remaining 21 ha. relocated by a
surveyor upon request of lessee Ramon Jover who
complained of being prohibited by municipal officials
from cultivating the land. It was then that she
discovered that the parcel of land, more or less 4 ha. is
used by Municipality of Victorias, as a cemetery, since
1934, is within her property, identified as Lot 76.
4. On May 20, 1963, Norma wrote the Mayor of Victorias
regarding her discovery, demanding payment of past
rentals and requesting delivery of the area allegedly
illegally occupied by the Municipality. When the Mayor
replied that the land was bought, she asked to be shown
the papers concerning the sale but was referred by the
Mayor to the municipal treasurer who refused to show
the same.
5. Norma then, who after her death was substitued by
husband Francisco Soliva, filed a complaint in the Court
of First Instance of Negros Occidental for recovery of
possession of the parcel of land occupied by the
municipal cemetery.
6. In answer, Victoria Municipality, by way of special
defense, alleged ownership of the lot having bought it
from Simeona Jingco Vda. de Ditching sometime in
1934.
 7. CFI of Negros Occidental dismissed complaint for
recovery of possession and declared the cemetery site
on Lot No. 76 as property of the municipality of
Victorias.
8. CA set aside CFI decision, ordered municipality officials
to return/deliver possession of the portion of Lot 76
used as cemetery or burial site, and pay damages.
9. Hence this petition for certiorari
10. SC set aside CA decision, reinstated decision of CFI.
ISSUE
WON the possession of Norma Leuenberger of Lot 76 is that of a
trustee to an implied trust by her grandmother Simeona for the
benefit of the municipality of Victoria.
HELD
Yes, the possession of Lot 76 by Norma is that of a trustee.
In lieu of a Deed of Sale, petitioner Municipality of Victoria
presented a certificate issued by the Archives Division of the
Bureau of Records Management in Manila containing entries in
the notarial register that clearly show: (a) the nature of the
instrument. — a deed of sale; (b) the subject of the sale — two
parcels of land, Lot Nos. 140-A and 140-B; (c) the parties of the
contract — the vendor Simeona J. Vda. de Ditching in her
capacity as Administrator and the vendee, Vicente B. Ananosa,
Municipal Mayor of Victorias; (d) the consideration P750.00; (e)
the names of the witnesses Esteban Jalandoni and Gregoria
Elizado; and the date of the sale on July 9, 1934.
At the back, the sale of a portion of the lot to the Municipality of
Victorias was clearly explained as follows: “Note: The whole Lot
No. 140, belongs to Norma Leuenberger as evidenced by a
Transfer of Cert. of Title No. 18672. Portion of this Lot, (30,000
sq.m. was sold to Municipality of Victories for Cemetery Site as
evidenced by a Deed of Sale executed by Simeona Jingco Vda. de
Ditching in favor of the aforesaid Municipality and ratified by
Notary Public Mr. Vicente Aragon.”
At the lowest portion under Memoranda, it was explained that
an area under the declaration is donated by Mrs. Simeona Jinco
Vda de Ditching and used as road leading to the cemetery.
The evidence establishes without debate that the property was
originally registered in 1916. Plaintiff was born only in 1928 and
cannot possibly be the registered owner of the original lot 140 at
the time. Indeed, according to her own evidence, she became the
registered owner only in 1963. Likewise, it is undisputed that in
the intestate estate of Gonzalo Ditching, the grandfather of
private respondent Norma Leunberger, it was her grandmother,
Simeona, the surviving spouse of Gonzalo who was named
judicial administratrix. According to Norma's own testimony,
Isabel her mother, died in 1928 while Simeona the grandmother
died in 1942. Therefore, as of 1934 when a document of sale was
executed by Simeona in favor of the municipality of Victories as
indubitably shown in the notarial register in question, Simeona
was still the administratrix of the properties left by her husband,
Gonzalo and of their conjugal partnership. Consequently, she is
the only person who could legally dispose of by sale this
particular four- hectare portion of Lot 140. And so it is, that in
1934, Simeona Ditching in her capacity as judicial administratrix
made and executed the document described in the Report as
Lots 140-A and 140-B, showing clearly that they are portions of
the original big Lot 140. As this conveyance was executed by the
judicial administratrix, unquestionably the party authorized to
dispose of the same, the presumption must be that she did so
upon proper authority of the Court of First Instance.
Unfortunately, the Municipality failed to register the Deed of
Sale such that when Simeona died, Norma inherited and
successfully registered the the property under the Torrens
System.
It is well-settled that under the Torrens System "Every person
receiving a certificate of title in pursuance of a decree of
registration, . . . shall hold the same free of all encumbrance
except those noted on said certificate …
While an inherently defective Torrens title may not ordinarily
be cancelled even after proof of its defect, the law nevertheless
safeguards the rightful party's interest in the titled land from
fraud and improper use of technicalities by showing such party,
in appropriate cases, to judicially seek reconveyance to him of
whatever he has been deprived of as long as the land has not
been transferred or conveyed to a purchaser in good faith.
The Civil Code provides:
Art. 1456. If the property is acquired through mistake
or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
Thus, it has been held that where the land is decreed in the name
of a person through fraud or mistake, such person is by operation
of law considered a trustee of an implied trust for the benefit of
the persons from whom the property comes. The beneficiary
shall have the right to enforce the trust, notwithstanding the
irrevocability of the Torrens title and the trustee and his
successors-in-interest are bound to execute the deed of
reconveyance.
As the land in dispute is held by private respondents in trust for
the Municipality of Victorias, it is logical to conclude that the
latter can neither be deprived of its possession nor be made to
pay rentals thereof. Private respondent is in equity bound to
reconvey the subject land to the cestui que trust the
Municipality of Victorias. The Torrens system was never
calculated to foment betrayal in the performance of a trust.
138. Booc v. Five Start Marketing Co., Inc.
FACTS: On August 17, 1999, Five Star Marketing Co., Inc.
(respondent) filed with the Municipal Trial Court in Cities
(MTCC) of Iligan City a Complaint for unlawful detainer
against the spouses Sheikding and Bily Booc (petitioners),
pertinent portions of which read as follows:
· Respondent is the owner of the land and building
situated in Quezon Avenue, Iligan City;
· Petitioners are the present occupants of the 3rd
floor premises of the building, who were allowed to
live temporarily in the premises for free;
· That on March 15, 1999 the respondent notified
all building occupants that it had withdrawn the
privilege granted (rental free) to them coupled with a
notice of rental rates in each premises concerned, and
further required to any interested occupants to
negotiate and sign a lease agreement with the
respondent;
Petitioners contended that Five Star has no cause of action
against them as they are actually the owners of the
portion of the building that they are occupying; that the
said property is owned in common by petitioner Sheikding
and his brother, Rufino Booc; that the complaint for
unlawful detainer is a mere offshoot of two complaints
earlier filed before the Securities and Exchange
Commission (SEC) in Cagayan de Oro City by Sheikding
and his son James, the first of which is against the board
of directors of Five Star, questioning, among others, the
validity of the election of the members of the said board;
and second, a criminal complaint for falsification of public
documents against Salvador Booc, in his capacity as the
President of Five Star. The spouses Booc filed a
counterclaim for damages.
MTCC: In favor of the defendants [herein petitioners] and
against the plaintiff [herein respondent], dismissing the
above-entitled case and ordering the plaintiff to pay the
defendants the following sum of money:
Decision dated April 6, 2001, the RTC of Lanao del Norte,
Branch 5 affirmed with modification the assailed Decision
of the MTCC. The dispositive portion of the RTC Decision
reads:
RTC: Affirmed
CA: ANNULLED and SET ASIDE
ISSUE: Whether there was an implied trust between the
parties
HELD: No. In claiming that the subject lot and building
were bought and constructed with the money of petitioner
Sheikding and Rufino, petitioners, in effect, aver that
respondent is merely holding the property in trust for
them.
As a rule, the burden of proving the existence of a trust is
on the party asserting its existence and such proof must
be clear and satisfactorily show the existence of the trust
and its elements.
To prove that they are co-owners of the disputed lot,
petitioners presented the Joint Affidavit of Teodora and
Preciosa, wherein they assert that petitioner Sheikding
and Rufino paid for the subject lot. However, aside from
the Joint Affidavit, no other competent evidence was
presented to support petitioners' allegation of ownership
of the lot in question.
Neither do the Official Receiptsevidencing petitioner Bily's
payment of electric bills prove that petitioners are co-
owners of the subject building. At best, these official
receipts only show that petitioners are in possession of the
subject property, which in this case, is undisputed.
Further, petitioners failed to present any tax declaration
or payment of taxes due on the subject premises.
On the other hand, documents, some of which were
presented in evidence by petitioners themselves, prove
respondent's ownership of the disputed properties, to wit:
Deed of Sale dated December 12, 1979[29], Transfer
Certificate and Tax Declaration over the subject lot, Tax
Declaration over the subject building, and Official Receipt
for the payment of real property tax, all of which are in
respondent's name.
On the basis of the foregoing, the Court found no error in
the ruling of the CA that the preponderance of evidence
lies in favor of respondent's claim of ownership.
139. Cañezo v. Rojas
140. PNB v.CA
FACTS:
Private respondent Mata is a private corporation
engaged in providing goods and services to shipping
companies including Star Kist Foods, Inc. USA. For
the latter, Mata makes advances for the crew's
medical expenses and other fees. Subsequently,
Mata sends monthly billing to Star Kist, which in turn
reimburses Mata by sending a telegraphic transfer
through banks for credit to latter's account.
On February 21, 1975 Security National Bank
(SEPAC) transmitted a cable message to PNB to pay
US$ 14,000 to Mata per order of Star Kist. PNB
noticed an error and was later notified by SEPAC that
the amount should be US$ 1,400. The same was
sent. However, PNB subsequently effected another
payment another payment in the amount of US$
14,000.
Six years later, PNB requested Mata for the refund of
US$ 14,000 after discovering its error. On Feb. 4,
1982, PNB filed a civil case for collection and refund
of said account arguing that based on constructive
trust under Article 1456 of the Civil Code, it has the
right to recover the same.
RTC dismissed the complaint, ruling that the case
falls under Article 2154 on solutio indebiti. CA
affirmed holding out that under solutio indebiti, it is
the one making the payment that commits the error.
Furthermore, such action has already prescribed as
the same must be commenced within 6 years.
Hence the petition.
ISSUES:
1. Whether or not the instant case falls under
constructive trust.
 2. Whether or not petitioner can claim refund
under constructive trust.
HELD:
1. Yes, the instant case may also fall under
constructive trust.
2. No, petitioner cannot claim refund under
constructive trust.
RATIO
1. The Civil Code does not confine itself
exclusively to the quasi-contracts enumerated
from Articles 2144 to 2175 but is open to the
possibility that, absent a pre-existing
relationship, there being neither crime nor
quasi-delict, a quasi-contractual relation may
be forced upon the parties to avoid a case of
unjust enrichment.
In this case, the Supreme Court held that
constructive "trust" is as much a misnomer as
a "quasi-contract," so far removed are they
from trusts and contracts proper, respectively.
In the case of a constructive trust, as in the
case of quasi-contract, a relationship is
"forced" by operation of law upon the parties,
not because of any intention on their part but
in order to prevent unjust enrichment, thus
giving rise to certain obligations not within the
contemplation of the parties. Applying this
,petitioner may indeed opt to avail of an action
to enforce a constructive trust or the quasi-
contract of solutio indebiti. However, he has
been deprived of a choice, for prescription
has effectively blocked quasi-contract as an
alternative, leaving only constructive trust as
the feasible option.
2. While prescription is concerned with the fact of
delay, laches deals with the effect of unreasonable
delay.
Although only seven (7) years lapsed after petitioner
erroneously credited private respondent with the said
amount and that under Article 1144, petitioner is well
within the prescriptive period for the enforcement of a
constructive or implied trust, the Supreme Court ruled
that petitioner's claim cannot prosper since it is
already barred by laches. It is a well-settled rule now
that an action to enforce an implied trust, whether
resulting or constructive, may be barred not only by
prescription but also by laches. It is unbelievable for
a bank, and a government bank at that, which
regularly publishes its balanced financial statements
annually or more frequently, by the quarter, to notice
its error only seven years later.
141. Aznar Brothers Realty Co. v. Aying
Facts:
- The disputed property is Lot No. 4399 locatd in Dapdap,
Lapu-Lapu City, owned by Crisanta Maloloy-on. After her
death in 1930, the Cadastral Court issued a decree in the
name of her 8 children all surnamed Aying. The certificate
of title was, however, lost during the war.
- Subsequently, all the heirs of the Aying siblings, except
Roberta, Emiliano, and Simeon, executed an Extra-
Judicial Partition of Real Estate with Deed of Absolute Sale
dated 3/3/1964, conveying the subject parcel of land to
petitioner Aznar Brothers Realty Company which was
registered with the Register of Deeds of Lapu-Lapu City
on 3/6/1964, and since then, petitioner had been
religiously paying real property taxes on said property.
- 1991, petitioner, claiming to be the rightful owner of the
subject property, sent out notices to vacate, addressed to
persons occupying the property. Unheeded, petitioner
filed a complaint for ejectment against the occupants
before the MTC of Lapu-Lapu.
- MTC promulgated a decision in favor of Aznar Brothers
in 2000
-Meanwhile, respondents, along with other persons
claiming to be descendants of the 8 Aying siblings, all in
all numbering around 220 persons, had filed a complaint
for cancellation of the Extra-Judicial Partition with
Absolute Sale, recovery of ownership, injunction, and
damages with RTC Lapu-Lapu City.
-RTC ruled that the Ayings failed to prove that the extra-
judicial partition with deed of absolute sale was totally
simulated or fictitious. It further held that respondents
action had prescribed in that the action is considered as
one for reconveyance based on implied or constructive
trust, it prescribed in 10 years from the registration of the
deed on March 6, 1964; and if the action is considered as
one for annulment of contract on the grond of fraud, it
should have been filed within 4 years from discovery of
the fraud.
- CA affirmed but modified the decision finding that the
heirs of Emiliano Aying, Simeon Aying and Roberta Aying
are lawful owners of the contested proper but equivalent
only to 3/8 since these siblings took no part in the extra-
judicial partition.
Issue:
W/N respondents’ cause of action is imprescriptible.
Held:
-The facts on record show that petitioner acquired the
entire parcel of land with the mistaken belief that all the
heirs have executed the subject document. Thus, the trial
court is correct that the provision of law applicable to this
case is Article 1456 of the Civil Code which states: ART.
1456. If property is acquired through mistake or fraud,
the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person
from whom the property comes. The rule that a trustee
cannot acquire by prescription ownership over property
entrusted to him until and unless he repudiates the trust,
applies to express trusts and resulting implied trusts.
However, in constructive implied trusts, prescription may
supervene even if the trustee does not repudiate the
relationship. Necessarily, repudiation of said trust is not a
condition precedent to the running of the prescriptive
period. An action for reconveyance based on an implied or
constructive trust must perforce prescribe in ten years
and not otherwise.
-A long line of decisions of this Court, and of very recent
vintage at that, illustrates this rule. Undoubtedly, it is now
well-settled that an action for reconveyance based on an
implied or constructive trust prescribes in ten years from
the issuance of the Torrens title over the property.
-With regard to petitioner’s argument that the provision
of Article 1104 of the Civil Code, stating that a partition
made with preterition of any of the compulsory heirs shall
not be rescinded, should be applied, suffice it to say that
the Extra-Judicial Partition of Real Estate with Deed of
Absolute Sale is not being rescinded. In fact, its validity
had been upheld but only as to the parties who
participated in the execution of the same. As discussed
above, what was conveyed to petitioner was ownership
over the shares of the heirs who executed the subject
document.
-Thus, the law, particularly, Article 1456 of the Civil Code,
imposed the obligation upon petitioner to act as a trustee
for the benefit of respondent heirs of Emiliano and Simeon
Aying who, having brought their action within the
prescriptive period, are now entitled to the reconveyance
of their share in the land in dispute.
-Evidence as to the date when the ten-year prescriptive
period began exists only as to the heirs of Roberta Aying,
as Wenceslao Sumalinog admitted that they learned of the
existence of the document of sale in the year 1967.
142. Miguel J. Ossorio Pension Foundation, Inc. v. CA
See #124
143. Rosario v. CA
CoA: Sps. Jose C. Rosario and Herminia L. Rosario filed an
action for legal redemption against the heirs of Paulina
and Emilio.
RTC: Rosario vs. Villahermosa; asked them to accept the
P380.00 as the purchase price of the lot and declaring
Herminia Rosario as the real and absolute owner.
CA: Villahermosa vs. Rosario; reversed the decision of the
RTC
SC: Rosario vs. Court of Appeals & the Villahermosas
Facts:
Family Tree :p
A. Maxima Lariosa - predeceased Filomena (grandmother
of the defendants, mother of Herminia)
(1) Filomena Lariosa
(2) Paulina Lariosa - predeceased Filomena m. Emilio
Villahermosa
Heirs (defendants in this case):
(a) Lourdes
(b) Aida
(c) Rodulfo
(d) Natividad
(e) Jesus
(3) Herminia Lariosa m. Jose Rosario (the plaintiffs in this
case)
No formal deed of sale was executed although a
consideration was received by the Villahermosas.
Subsequently, Filomena applied for a loan at GSIS for the
demolition of the old house and building of a new one.
Since the GSIS required that the land has to be mortgaged
as a guarantee of the loan, Filomena asked the heirs of
her sister Paulina to formalize the sale, but still
acknowledging the previous agreement that it will just be
held in trust by Filomena to be returned to the
Villahermosas. It was Emilio and his children who
executed the deed of sale over one-half of the lot. Because
of the further requirements imposed by the GSIS, the
other undivided portion of the land, which is owned by
Rodulfo Villahermosa, was transferred to Herminia by
executing a Simulated Deed of Sale. That 1/2 undivided
share of the land to Herminia was merely held in trust, for
the benefit of Filomena, to be returned to Villahermosa
before Filomena's death. When Filomena died, Herminia
paid the remaining balance of the loan fearing that the
land they co-owned will be foreclosed by the GSIS for non-
payment.
Issues: (1) Whether or not there is an implied trust that
existed between Emilio Villahermosa and Filomena Lariosa
over the subject property?
(2) Whether or not an implied trust also existed
between Filomena Lariosa and petitioner Herminia Rosario
for the benefit of the Villahermosas?
Held: Yes for both.
(1) A trust was, indeed created between Filomena,
Emilio Villahermosa and his children when lot 77-
A was transferred in the name of Filomena. Where
a lot was taken by a person under an agreement
to hold it for, or convey it to another or to the
grantor, a resulting or implied trust arises in favor
of the person for whose benefit the property was
intended. Legal basis is under Art. 1453.
ART. 1453. When property is conveyed to a person in
reliance upon his declared intention to hold it for, or
transfer it to another or the grantor, there is an implied
trust in favor of the person whose benefit is contemplated.
(2) The trust created in favor of Emilio and his heirs
(private respondents) is effective or binding even upon
petitioner Herminia Rosario who is the registered co-
owner of the subject Lot since the transfer was only for the
purpose of facilitating and expediting the approval of
Filomena's loan. But that was subject to a condition to
return it to the Villahermosas which was also the condition
set in the sale between Emilio and Filomena.
Trust is the legal relationship between one person
having an equitable ownership in property and another
person owning the legal title to such property, the
equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain
powers by the latter. Trust relations between parties may
either be express or implied. 8 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
evidencing an intention to create a trust. Implied trusts
are those which without being express, are deducible from
the nature of the transaction as matters of intent, or which
are superinduced on the transaction by operation of law
as a matter of equity, independently of the particular
intention of the parties. Implied trusts may either be
resulting or constructive trusts, both coming into being by
operation of law.
Resulting trusts are based on the equitable
doctrine that valuable consideration and not legal title
determines the equitable title or interest 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. On the other hand, constructive trusts are
created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by fraud,
duress or abuse of confidence, obtains or hold the legal
right to property which he ought not, in equity and good
conscience, to hold.
144. Paringit v. Bajit
FACTS:
This case is about the existence of an implied trust in a
transaction where a property was bought by one sibling
supposedly for the benefit of all. The other siblings now want
to recover their share in the property by reimbursing their
brother for their share in the purchase price.
During their lifetime, spouses Julian and Aurelia Paringit
leased a lot on Norma Street, Sampaloc, Manila (the lot)
from Terocel Realty, Inc. (Terocel Realty). For having
occupied the lot for years, Terocel Realty offered to sell it to
Julian but he did not have enough money at that time to
meet the payment deadline. Julian sought the help of his
children so he can buy the property but only his son Felipe
and wife Josefa had the financial resources he needed at
that time. To bring about the purchase, on January 16, 1984
Julian executed a deed of assignment of leasehold right in
favor of Felipe and his wife that would enable them to
acquire the lot. On January 30, 1984 the latter bought the
same from Terocel Realty for P55,500.00 to be paid in
installments. On April 12, 1984 Felipe and his wife paid the
last installment and the realty company executed a Deed of
Absolute Sale in their favor and turned over the title to them.
On February 25, 1985, due to issues among Julians
children regarding the ownership of the lot, Julian executed
an affidavit clarifying the nature of Felipe and his wifes
purchase of the lot. He claimed that it was bought for the
benefit of all his children.
Expressing their concurrence with what their father said in
his affidavit, Felipes siblings, namely, Marciana, Rosario,
and Adolio (collectively, Marciana, et al) signed the
same.Josefa, Felipes wife, also signed the affidavit for
Felipe who was in Saudi Arabia. Only Florencio, among the
siblings, did not sign. On January 23, 1987 Felipe and his
wife registered their purchase of the lot, resulting in the
issuance of Transfer Certificate of Title 172313 in their
names. Despite the title, however, the spouses moved to
another house on the same street in 1988. Marciana, et al,
on the other hand, continued to occupy the lot with their
families without paying rent.
On December 18, 1995 Felipe and his wife sent a demand
letter to Marciana, et al asking them to pay rental arrearages
for occupying the property. Marciana, et al refused to pay or
reply to the letter, believing that they had the right to occupy
the house and lot, it being their inheritance from their
parents. On March 11, 1996 Felipe and his wife filed an
ejectment suit against them. Marciana, et al filed the present
action against Felipe and his wife for annulment of title and
reconveyance of property before the Regional Trial Court
(RTC) of Manila, Branch 39. In his answer, Felipe denied
knowledge of the agreement among the siblings that the
property would devolve to them all.
RTC: rendered a decision, finding the evidence of Marciana,
et al insufficient to prove by preponderance of evidence that
Felipe and his wife bought the subject lot for all of the
siblings.
CA: rendered judgment reversing the decision of the RTC
and ordering Felipe and his wife to reconvey to Marciana,
et al their proportionate share in the lot upon reimbursement
of what the spouses paid to acquire it plus legal interest.
ISSUE: WON Felipe and his wife purchased the subject lot
under an implied trust for the benefit of all the children of
Julian.
RULING: YES.
The CA found that Felipe and his wife's purchase of the lot
falls under the rubric of the implied trust provided in Article
1450 of the Civil Code. Implied trust under Article 1450
presupposes a situation where a person, using his own
funds, buys property on behalf of another, who in the
meantime may not have the funds to purchase it. Title to the
property is for the time being placed in the name of the
trustee, the person who pays for it, until he is reimbursed by
the beneficiary, the person for whom the trustee bought the
land. It is only after the beneficiary reimburses the trustee
of the purchase price that the former can compel
conveyance of the property from the latter.
Although no express agreement covered Felipe and his
wifes purchase of the lot for the siblings and their father, it
came about by operation of law and is protected by it. The
nature of the transaction established the implied trust and
this in turn gave rise to the rights and obligations provided
by law. Implied trust is a rule of equity, independent of the
particular intention of the parties. In an implied trust, the
beneficiarys cause of action arises when the trustee
repudiates the trust, not when the trust was created as
Felipe and his wife would have it. The spouses of course
registered the lot in their names in January 1987 but they
could not be said to have repudiated the implied trust by that
registration. Their purchase of the land and registration of
its title in their names are not incompatible with implied trust.
It was understood that they did this for the benefit of Julian
and all the children.
145. Uy Aloc v. Cho Jan Jing
FACTS:
- A number of Chinese merchants raised a fund by
voluntary subscription with which they purchased a
valuable tract of land and erected a large building to be
used as a sort of club house for the mutual benefit of the
subscribers to the fund. The subscriber organized
themselves into an irregular association, which had no
regular articles in the commercial registry or elsewhere.
The association not having any existence as a legal entity,
it was agreed to have the title to the property placed in
the name of one of the members, the defendant, Cho Jan
Ling, who on his part accepted the trust, and agreed to
hold the property as the agent of the members of the
association.
- After the club building was completed with the funds of
the members of the association, Cho Jan Ling collected
some P25,000 in rents for which he failed and refused to
account, and upon proceedings being instituted to compel
him to do so, he set up title in himself to the club property
as well as to the rents accruing therefrom.
- Cho Jan Ling alleged that he had bought the real estate
and constructed the building with his own funds, and
denying the claims of the members of the association that
it was their funds which had been used for that purpose.
RTC: Ruled in favor of the members of the association,
ordering Cho Jan Ling to convey the club house and the
land on which it stands to the members of the association
and to account for the rents he received.
ISSUE:
W/N proof of the trust was sufficient to throw down the rights which
the plaintiff had by reason of the duly registered title deeds
RULING: Yes. RTC Affirmed.
RATIO:
This court held that the parole proof of the trust was sufficient to
throw down the rights which the plaintiff had by reason of the duly
registered title deeds, and decreed that a conveyance be made by
the defendant to the members of the association. The proper
procedure in such a case, so long as the rights of innocent third
persons have not intervened, is to compel a conveyance to the
rightful owner.
It is at most an attempt to substitute for the plain dictates of reason
and equity certain technical propositions of law laid down in those
cases which have no proper application to the facts proven in this
case. In Martinez vs. Martinez (1 Phil. 647), the case turned on the
lack of proof of the existence of the relationship of principal and
agent or of trustee and cestui que trust between the parties, in
addition to proof that the funds with which the property was
purchased had been furnished by another than him who secured
its registry in his own name. In that case at bar we think that the
evidence clearly discloses not only that the funds with which the
property in question was purchased were furnished by the
members of the association, but that Cho Jan Ling, in whose
name it was registered, received and holds the property as the
agent and trustee of the association; that on at least one occasion
he admitted the beneficial ownership to be in the association; and
that while the legal registered title is in his name the beneficial
ownership is in the association.
It is admitted that the members of the association voluntarily
obtained the inscription in the name of Cho Jan Ling and that they
have no right to have that inscription cancelled; they do not seek
such cancellation, and on the contrary they allege and prove that
the duly registered legal title to the property is in Cho Jan Ling, but
they maintain, and we think that they rightly maintain, that he holds
it under an obligation, both express and implied, to deal with it
exclusively for the benefit of the members of the association and
subject to their will.
146. Ty v. Ty
FACTS: Alexander Ty, son of Alejandro Ty and husband of Sylvia
Ty, dies of cancer at the age of 34. Sylvia files petition for the
settlement of Alexander’s intestate estate. She also asks court to
sell or mortgage properties in order to pay the estate tax
amounting to P4,714,560.02 assessed by the BIR. The properties
include a parcel of land in EDSA Greenhills (exclusive property of
Alexander), a residential land in Wack Wack, and the Meridien
condo unit in Annapolis, Greenhills (the latter two both conjugal
properties of Alexander and Sylvia).
Alejandro Ty opposed the move and filed for recovery of the
property with prayer for preliminary injunction and/or
temporary restraining order. Plaintiff Alejandro claims that he
owns the EDSA, Wack Wack and Meridien condo unit because he
paid for them. The property was supposedly registered in trust
for Alexander’s brothers and sisters in case plaintiff dies. Plaintiff
also claimed that Alex had no financial capacity to purchase the
disputed property, as the latter was only dependent on the
former.
Sylvia countered that Alexander had purchased the property
with his money. Alexander was financially capable of purchasing
it because he had been managing the family corporations since
he was 18 years old and was also engage in other profitable
businesses.
RTC - Granted the application for preliminary injunction and
decides in favor of plaintiff regarding the recovery of the
property.
CA – Reversed. There was no writing from which the existence of
an express trust could be proven with.
ISSUE: Whether or not there is an implied trust.
RULING: No. CA affirmed.
RATIO: There was no implied trust created in relation to the
EDSA property. If the person to whom the title is conveyed is the
child of the one paying the price of the sale, no trust is implied
by law under Art. 1448, the so-called purchase money resulting
trust. The said article provides an exception: “if the person to
whom the title is conveyed is a child, legitimate or illegitimate, of
the one paying the price of the sale, NO TRUST is IMPLIED by
LAW, it being disputable presumed that there is a gift in favor of
the child.” The Court also noted that plaintiff failed to prove that
he did not intend a donation.
Regarding the Meridien Condo and Wack Wack property, the
court said that plaintiff failed to prove that purchase money
came from him. They also said that Alexander was capable of
purchasing the property as he had been working for nine years,
had a car care business, and was actively engaged in the business
dealings of several family corporations from which he received
emoluments and other benefits. Hence, no implied trust created
because there was no proof that plaintiff had paid for said
properties.
147. Padilla v. CA
Ines Lorbes Padilla, Veronica Padilla, Abundio
Padilla, Salvador Padilla, Elena Padilla, Honorio
Padilla, Carmen Padilla, Fe Padilla, Piedad Padilla, v
CA, Hermino Mariano, presiding judge, Florencio
Nadera
Trustee: Padillas
Trustor: Nadera
Facts;
Vicente Padilla mortgaged his property to GSIS to
secure a loan of 25k, and was foreclosed and sold at
public auction for failure to pay.
With misrepresentation that they still have the right of
redemption, Padilla executed an Agreement to buy
and sell to Nadera the said property for 35k which
10k was paid by Nadera on the same day and the
balance is to be paid by to GSIS for the outstanding
balance of the loan.
GSIS contemplated to sell foreclosed property thru
sealed public bidding at which Vicente Padilla may
Participate.
Vicente Padilla being a pensioner of the GSIS, the
latter had applied the former’s pension to the credit of
Padilla on account of the loan afore-mentioned.
GSIS, instead of executing a deed of sale in favor of
Nadera, it made in favor of Padilla.
Padilla executed the deed of Confirmation of Sale
which the herein petitioners question. It partly
contained as:
….WHEREAS, the VENDORS had entered
into an Agreement of Purchase and Sale on
October 8, 1961, with the herein VENDEE which was
acknowledged before a Manila
Notary Public Felipe G. Lubaton on December 15, 1961,
registered in his Notarial Registry
as Doc. No. 138; Page No. 100; Book No. I; Series of 1961
…"WHEREAS, the herein VENDEE has fully paid the
account of the VENDOR to the G.S.I.S., the
Government Service System has re-conveyed the ownership
over the said property unto the
VENDORS by virtue of the Deed of Absolute Sale executed
on the 19th day of September, 1963, and
acknowledged on the same date by Modesto B. Atmosphera,
registered in his Notary Registry as Doc.
No. 74; Page No. 16; Book No. I; Series of 1963;
…"NOW, THEREFORE, for and in consideration of
the AGREEMENT OF PURCHASE AND SALE, which
we undersigned VENDORS still confirm and acknowledge, we
hereby CEDE, CONVEY, SELL and
TRANSFER, in favor of the herein VENDEE, his heirs,
administrator and assign, the above-mentioned
property fully described in the two (2) documents specified
above
By virtue of the registration of the of Deed absolute
sale, TCT 116474 was issued by the Registry of
Deeds in the name of Nadera.
Subsequently, Abundio Padilla, atty-in-fact of his
parents, filed with the registry of Deeds a Notice of
Adverse claim. He alleged that Nadera fraudulently
compelled Vicente to sign the confirmation of sale.
In turn, Nadera filed a petition for removal of adverse
claim on his certificate of title.
Two cases was heard, Cancellation of Certificate of
Title issued in favor of Nadera and writ of possession
and for cancellation of adverse claim.
CFI of Rizal- ordered the petitioner to turn over the
possession of the property to Nadera.
Nadera filed with the CFI a motion for correction of
typographical error in the decision and for the
immediate issuance of writ of execution. The court
ordered execution on a bond of 10k to be filed by the
respondent.
CA- affirmed
ISSUE:
Whether or not the confirmation of sale valid.
Rule:
-it was valid-
SC held that Vicente Padilla did not even need to
have executed the Confirmation of Sale since there
was already an Agreement of Purchase and Sale
executed by him and his wife, Ines Lorbes Padilla. it
was clearly ESTABLISHED that the plaintiff Ines
Lorbes Padilla together with her husband Vicente
Padilla, executed an Agreement of Purchase and
Sale over the parcel of land in question in favor of
defendant Florencio R. Nadera, Nadera paying
Padillia’s the amount of P10,000.00 and at the same
time ASSUMING the obligation with the GSIS arising
from a previous mortgage on the property in favor of
the GSIS. Said Agreement of Purchase and Sale was
done in writing and signed that the right of
respondent Nadera to the property arose not by
virtue of the said deed of confirmation but by virtue of
the original agreement of sale executed in his favor
by the Padilla spouses and by their daughter. The
resale by the GSIS upon payment of the price of
redemption by Nadera was made in favor of the
Padilla spouses, it was purely a matter of form since
they were the mortgage debtors, and the least that
can be said under the circumstances is that they
should be considered as TRUSTEES under an
implied or resulting trust for the benefit of the real
owner, namely, respondent Nadera. 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 concept of
implied trusts is that from the facts and
circumstances of a given case the existence of a
trust relationship is inferred in order to effect the
presumed (in this case it is even expressed) intention
of the parties or to satisfy the demands of justice or
to protect against fraud.
148. Gabutan v. Nacalaban
Gabutan v. Nacalaban
Facts:
· Godofredo purchase a property and a Transfer
Certificate of Title was issued in his name. He then
build a house on it
· Godofredo died, survived by his wife
Baldomera, and their 3 children
· Baldomera issued a certification, allowing her
mother Melecia to build and occupy a house on the
portion of the property, in the tax declaration it is
showed that Melencia owned the building on the land
owned by Godofredo
· Baldomera died, her children executed an
Extrajudicial settlement and sold the property to the
Cagayan capital college and a TCT was issued In the
name of the College
· Melecia died and was survived by her children
· The college demanded the heirs of Melecia
who were occupying the house on the property to
vacate the premises
· Gabutan et al. (the heirs of Melecia) filed for a
complaint for reconveyance of real property against
Nacalaban et al. and the college.
They alleged that: (1) Melecia bought the property
using her own money but Godofredo had the Deed of
Absolute Sale executed in his name instead of his
mother-in-law; (2) Godofredo and Baldomera were
only trustees of the property in favor of the real owner
and beneficiary, Melecia; (3) they only knew about
the Extrajudicial Settlement with Sale upon
verification with the Registry of Deeds; and (4) the
College was a buyer in bad faith, being aware they
were co-owners of the property.
· the College claimed that it is a buyer in good
faith and for value, having "made exhaustive
investigations and verifications from all reliable
sources" that Melecia and her heirs were staying in
the property by mere tolerance. It alleged that: (1) in
the tax declaration of the residential house, Melecia
admitted that the lot owner is Godofredo; (2) the
occupancy permit of Melecia was issued only after
Godofredo issued a certification to the effect that
Melecia was allowed to occupy a portion of the
property; and (3) the Extrajudicial Settlement with
Sale was published in three consecutive issues of
Mindanao Post, a newspaper of general circulation
· Nacalaban et al. denied the allegations They
claimed to have acquired the property by intestate
succession from their parents, who in their lifetime,
exercised unequivocal and absolute ownership over
the property
· The college then filed a complaint of unlawful
detainer against Gabutan et al.
· MTCC ruled in favour of the college
· Meanwhile, in the reconveyance case, the RTC
rendered a Decision in favor of Gabutan, et al
· The RTC found that the money of Melecia was
used in buying the property but the name of
Godofredo was used when the title was obtained
because Godofredo lived in Cagayan de Oro City
while Melecia lived in Bornay, Gitagum, Misamis
Oriental
· the RTC held that a trust was established by
operation of law pursuant to Article 1448 of the Civil
Code
RTC Declares that the Spouses Godofredo and
Baldomera Nacalaban held the land covered by
Transfer Certificate of Title No. T-2259 issued in the
name of Godofredo Nacalaban married to Baldomera
Dalondonan issued on January 13, 1959 in trust for
Melecia Vda. de Dalondonan with the Spouses as the
trustees and Melecia Vda. de Dalondonan as the
cestui que trust
· Declares that defendant Cagayan Capitol
College was a buyer in good faith and for value of the
land referred to above, and, accordingly, declares that
said defendant now owns the land
· Both parties appealed, The CA affirms the
RTC in toto
Issue: WON there is an implied trust created between
Melecia and Godofredo
Ruling: Yes
Article 1448 of the Civil Code provides in part that
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. The trust
created here, which is also referred to as a purchase
money resulting trust, occurs when there is (1) an
actual payment of money, property or services, or an
equivalent, constituting valuable consideration; (2)
and such consideration must be furnished by the
alleged beneficiary of a resulting trust.90 These two
elements are present here
Gabutan, et al., through the testimonies of Felisia,
Crisanta, and Trifonia, established that Melecia's
money was used in buying the property, but its title
was placed in Godofredo's name. She purchased the
property because Felisia wanted to build a pharmacy
on it. On one occasion in Melecia's house, and when
the entire family was present, Melecia gave
Godofredo the money to purchase the property.
Melecia entrusted the money to Godofredo because
he was in Cagayan de Oro, and per Melecia's
instruction, the deed of sale covering the property was
placed in his name. It was allegedly her practice to
buy properties and place them in her children's name,
but it was understood that she and her children co-
own the properties.chanrobleslaw
Melecia built a residential building on the property,
where her daughter Crisanta and some of her
grandchildren resided. Godofredo also thereafter built
a house on the property. Twice, he also mortgaged the
property to secure loans. Melecia allowed him to do
so because she trusted him. After Godofredo's death,
and when Baldomera fell ill, there were family
discussions to transfer the title in Melecia's name so
Melecia's children can divide it together with the rest
of Melecia's properties. The plans, however, always
fell through.chanrobleslaw
Both the RTC and CA found credence on these pieces
of testimonial evidence that an implied resulting trust
exists. Reliance on these testimonies will not violate
the parol evidence rule, as Nacalaban, et al. once
raised. In Tong v. Go Tiat Kun, we ruled that since an
implied trust is neither dependent upon an express
agreement nor required to be evidenced by writing,
Article 1457 of our Civil Code authorizes the
admission of parol evidence to prove their existence.
What is crucial is the intention to create a trust. We
cautioned, however, that the parol evidence that is
required to establish the existence of an implied trust
necessarily has to be trustworthy and it cannot rest on
loose, equivocal or indefinite declarations. The
testimonies of Felisia, Crisanta, and Trifonia satisfy
these requirements. They are consistent and agree in
all material points in reference to the circumstances
behind the arrangement between Melecia and
Godofredo. We agree with the RTC when it said that
this arrangement among family members is not
unusual, especially in the 1950s.chanrobleslaw
Nacalaban, et al., on the other hand, denied the
arrangement between Melecia and Godofredo, and
maintained that it was really the latter who purchased
the property from its original owners, as evidenced by
their possession of the Deed of Conditional Sale and
the title being in Godofredo's name. It is telling,
however, that Nacalaban, et al. failed to provide the
details of the sale, specifically with regard to how
Godofredo could have been able to afford the
purchase price himself, which would have directly
refuted the allegation that Melecia's money was used
in the purchase. As the RTC aptly observed, if
Godofredo really bought the property with his own
money, it was surprising that Baldomera did not
transfer the title of the property to her name when
Godofredo died in 1974. Baldomera did not do so
until her death in 1994 despite being pressed by her
siblings to partition the property. The RTC correctly
deduced that this only meant that Baldomera
acknowledged that the property belongs to
Melecia.chanrobleslaw
Having established the creation of an implied
resulting trust, the action for reconveyance filed by
Gabutan, et al., the heirs of Melecia in whose benefit
the trust was created, is proper. An action for
reconveyance is a legal and equitable remedy granted
to the rightful landowner, whose land was wrongfully
or erroneously registered in the name of another, to
compel the registered owner to transfer or reconvey
the land to him. It will not amount to a collateral
attack on the title, contrary to the allegation of
Nacalaban, et al. We explained in Hortiznela v.
Tagufa:chanrobleslaw
x x x As a matter of fact, an action for reconveyance
is a recognized remedy, an action in personam,
available to a person whose property has been
wrongfully registered under the Torrens system in
another's name. In an action for reconveyance, the
decree is not sought to be set aside. It does not seek to
set aside the decree but, respecting it as
incontrovertible and no longer open to review, seeks
to transfer or reconvey the land from the registered
owner to the rightful owner. Reconveyance is always
available as long as the property has not passed to an
innocent third person for value.
There is no quibble that a certificate of title, like in
the case at bench, can only be questioned through a
direct proceeding. The MCTC and the CA, however,
failed to take into account that in a complaint for
reconveyance, the decree of registration is respected
as incontrovertible and is not being questioned. What
is being sought is the transfer of the property
wrongfully or erroneously registered in another's
name to its rightful owner or to the one with a better
right. If the registration of the land is fraudulent, the
person in whose name the land is registered holds it
as a mere trustee, and the real owner is entitled to file
an action for reconveyance of the
property.chnroblesvirtuallawlibrary
The fact that the property was already titled in
Godofredo's name, and later transferred to the
College, is not a hindrance to an action for
reconveyance based on an implied trust. The title did
not operate to vest ownership upon the property in
favor of the College. As held in Naval v. Court of
Appeals:chanrobleslaw
xxx Registration of a piece of land under the Torrens
System does not create or vest title, because it is not a
mode of acquiring ownership. A certificate of title is
merely an evidence of ownership or title over the
particular property described therein. It cannot be
used to protect a usurper from the true owner; nor can
it be used as a shield for the commission of fraud;
neither does it permit one to enrich himself at the
expense of others. Its issuance in favor of a particular
person does not foreclose the possibility that the real
property may be co-owned with persons not named in
the certificate, or that it may be held in trust for
another person by the registered owner.
Moreover, the body of the Complaint filed by
Gabutan, et al. shows that it is not only for the
reconveyance of the property but also for the
annulment of TCT No. T-111846 issued in the name
of the College. Gabutan, et al. questioned the validity
of the sale to the College and claimed co-ownership
over the property. Thus, we can rule on the validity of
TCT No. T-111846 since the Complaint is a direct
attack on the title of the College.
149. PNB v. Aznar
150. Same Darby Pilipinas v. Mendoza
FACTS:
Petitioner Sime Darby Pilipinas, Inc. (Sime Darby)
employed Jesus B. Mendoza (Mendoza) as sales
manager. On 3 July 1987, Sime Darby bought a Class
A club share in Alabang Country Club (ACC) from
Margarita de Araneta. The share, however, was
placed under the name of Mendoza in trust for Sime
Darby since the By-Laws of ACC state that only
natural persons may own a club share. As part of the
arrangement, Mendoza endorsed the Club Share
Certificate in blank and executed a Deed of
Assignment, also in blank, and handed over the
documents to Sime Darby. From the time of purchase
in 1987, Sime Darby paid for the monthly dues and
other assessments on the club share.
Mendoza then retired on 1995 and Sime Darby paid
his separation pay amounting to more than
P3,000,000. Nine years later, or sometime in July
2004, Sime Darby found an interested buyer of the
club share for P1,101,363.64. The broker required
Sime Darby to secure an authorization to sell from
Mendoza since the club share was still registered in
Mendoza’s name. However, Mendoza refused to sign
the required authority to sell unless Sime Darby paid
him the amount of P300,000, his unpaid separation
benefits. As a result, the sale did not push through.
Sime Darby filed a complaint for damages with writ of
preliminary injunction against Mendoza with the
Regional Trial Court.
Mendoza filed an Answer alleging ownership of the
club share. He stated that Sime Darby purchased the
Class A club share and placed it under his name as
part of his employee benefits and bonus for past
exemplary service.
RTC: Rendered a Decision in favor of Sime Darby.
Mendoza filed an appeal with the Court of Appeals.
CA: Ruled that Sime Darby failed to prove that it has
a clear and unmistakable right over the club share of
ACC.
Sime Darby filed a Motion for Reconsideration which
the Court of Appeals denied
ISSUE: WON there was an implied trust.
HELD:
Yes, In Thomson v. Court of Appeals, the SC held that
a trust arises in favor of one who pays the purchase
price of a property in the name of another, because of
the presumption that he who pays for a thing intends
a beneficial interest for himself.
In the given case, Sime Darby paid for the purchase
price of the club share, Mendoza was given the legal
title. Mendoza’s title is only limited to the usufruct, or
the use and enjoyment of the clubs facilities and
privileges while employed with the company. Thus, a
resulting trust is presumed as a matter of law. The
burden then shifts to the transferee to show otherwise.
151. Paringit v. Bajit
See #144
152. De Ocampo v. Zaporteza
AGRIPINO DE OCAMPO, ET AL., plaintiffs-appellees,
JUAN ZAPORTEZA, ET AL., defendants-appellants.
FACTS:
The instant appeal seeks the reversal of the judgment
appealed from, holding that the contract Exhibit A is a
mortgage rather than a sale subject to repurchase.
The plaintiffs contend, by means of witnesses Agripino
and Gregorio de Ocampo, that the contract between the
parties is in reality a simple mortgage, but was made to
appear as if it were a sale, subject to repurchase, at the
suggestion of Nazario P. de Mesa the attorney for the
defendants, who told them that, as it was a question
between brothers, there was no objection to drawing up
the deed in that form; whereas, if the agreement were
evidenced as a loan, the defendants might appear in a
bad light if the transaction were not dissimulated, in view
of which, the plaintiffs gave a substantially correct
account of the conversations between the parties which
preceded the execution of the document in question, and
we are of the opinion that this is supported by the
evidence.
It is a fact duly proven in the proceedings that the
certificate of transfer in favor of the defendants includes
not only the two parcels described in the instrument
Exhibit A, planted with 700 coconut trees, but all of lot
No. 4210, which, according to the evidence, contains
2,000 coconut trees. Therefore, it is evident that the
certificate of transfer, Exhibit 1, in so far as it includes a
portion of land planted with 1,300 coconut trees, to
which the defendants are not at all entitled, should not
be given legal effect, especially when said certificate of
transfer has been obtained by the defendants during the
pendency of the present action wherein the value of the
instrument Exhibit A is precisely the matter in dispute.
TC: instrument Exhibit A is a mortgage deed, and not a
deed of sale subject to repurchase, contending that the
parties herein submitted an agreed statement of facts
wherein it appeared that the appellees executed the
instrument Exhibit A in favor of the appellants; and
alleging, moreover, that they received the price of the
sale, and that there was no fraud in the execution of the
instrument in question.
ISSUE: Whether or not the instrument Exhibit A
expresses the true agreement entered into by and
between the parties.
HELD: NO.
The deed in question apparently evidences an agreement
of a sale subject to repurchase; but as the plaintiffs-
appellees have put in issue a mistake of said writing, and
its failure to express the true intent and agreement
of the parties.
Plaintiffs' evidence shows: (1) That the portion of land
conveyed to the defendants by the plaintiffs, added to
that conveyed to them by the deceased Alejandro de
Ocampo, only comprises an area of land planted with
700 coconut trees; and (2) that the conveyance by
Alejandro de Ocampo, and that subsequently made by
the plaintiffs, were only to secure the amount of P1,000
received by the former, and the amount of P2,000
furnished by the same defendant to pay a debt of the
deceased to the National Bank (P1,604.44), and funeral
expenses, (P400).
If an absolute conveyance of property is made in
order to secure the performance of an obligation of
the grantor toward the grantee, a trust by virtue of
law is established. If the fulfillment of the
obligation is offered by the grantor when it
becomes due, he may demand the reconveyance of
the property to him.
I
In the case, when a deed of sale with right of repurchase
was really intended to cover a loan made by the
purported seller from the purported buyer, then the
doctrine of equitable mortgage applies. In the instant
case in the sense that the defendants only hold the
certificate of transfer in trust for the plaintiffs as to the
portion of the lot containing 1,300 coconut trees,and
therefore, said defendants are bound to execute a deed
in favor of the plaintiffs transferring said portion to them.
153. Miguel J. Ossorio Pension Foundation, Inc. v. CA
154. Heirs of Tanak Pangaaran Patiwayon v. Martinez
FACTS:
Tanak Pangawaran-Patiwayan filed a complaint against
private respondents for annulment of title, reconveyance
of successional shares, partition, accounting and
damages. The complaint, in substance, alleged that a
certain Pangawaran, during his lifetime married
legitimately three successive times; that complainant is
the daughter by the second marriage; that during the first
and second marriages, there were no liquidations of the
conjugal partnership after the death of Pangawaran’s
respective spouses; that respondent Tagwalan is the child
by the third marriage; and that since the latter was the
only son of Pangawaran, he was able to convince his co-
heirs that he should act as administrator of the properties
left by Pangawaran but instead, managed to obtain a
patent in his own name and later an original certificate of
title (O.C.T.) to the complainant’s prejudice.
Respondents filed an answer denying the marriage of
Pangawaran to complainant Tanak’s mother alleging that
Pangawaran married only twice, the offsprings of which
are the respondents themselves.
After Tanak died and was substituted by her heirs,
respondents filed a motion to dismiss on the following
grounds: (a) the trial court has no jurisdiction to annul the
Free Patent Application and the Original Certificate of Title
issued in favor of respondent Tagwalan since the
complaint did not join as plaintiffs the Director of Lands
and the Secretary of Agriculture and Natural Resources
and since the prerogative to file a complaint exclusively
belongs to the Solicitor General under Section 101 of the
Public Land Act; (b) there is non-exhaustion of
administrative remedies; and (c) the action has
prescribed.
CFI: dismissed the case because the Court no longer had
jurisdiction over it since the complaint alleges fraud BUT
was not brought within one (1) year from the time that
the original certificate of title was issued to the defendant
Tagwalan. Petitioners filed a Motion for Reconsideration
but was also denied.
ISSUE: 1. Whether or not defendant Tagwalan held the
property in trust for his co-heirs
2. Whether or not the action to recover property
has prescribed.
HELD:
1. Yes. The respondent court seems to be unmindful of
the fact that since respondent Tagwalan, through fraud
was able to secure a title in his own name to the exclusion
of his co-heirs who equally have the right to a share of the
land covered by the title, an implied trust was created in
favor of said co-heirs. Respondent Tagwalan is deemed to
merely hold the property for their and his benefit. As we
have ruled in the case of Gonzales v. Jimenez, Sr. (13
SCRA 73, 82): "We believe, however, that this case is
covered by Article 1456 of our new Civil Code which
provide: ‘If property is acquired though mistake of fraud,
the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person
from whom the property comes.’
2. No. Since it appears that the land in question was
obtained by defendants thru fraudulent representations
by means of which a patent and a title were issued in their
name, they are deemed to hold it in trust for the benefit
of the person prejudiced by it. Here this person is the
plaintiff. There being an implied trust in this transaction,
the action to recover the property prescribes after the
lapse of ten years. Here this period has not yet elapsed.
Therefore, it is clear that the prescriptive period which is
applicable in this case is ten (10) years. Consequently, the
action of petitioner was not yet barred since it was filed
on July 1, 1976 while the last day for filing such action
was on July 19, 1976, ten years after the issuance of the
original certificate of title.
155. Martinez v. Graño
SYLLABUS:
1. TRUSTS AND TRUSTEE; PURCHASE OF LAND
SOLD WITH "PACTO DE RETRO." — A person who, before
consolidation of property in the purchaser under a
contract of sale with pacto de retro, agrees with the
vendors to buy the property and administer it till all debts
constituting an incumbrance thereon shall be paid, after
which the property shall be turned back to the original
owners, is bound by such agreement; and upon buying in
the property under these circumstances such person
becomes in effect a trustee and is bound to administer the
property in this character.
2. ID.; RENUNCIATION OF TRUST; REMOVAL OF
TRUSTEE. — When a person administering property in the
character of trustee inconsistently assumes to be holding
in his own right, this operates as a renunciation of the
trust and the persons interested as beneficiaries in the
property are entitled to maintain an action to declare their
right and remove the unfaithful trustee.
3. ID.; REMOVAL OF TRUSTEE; APPOINTMENT OF
RECEIVER TO ADMINISTER TRUST PROPERTY. — In a case
where it became necessary to deprive a trustee of the
management of trust property, a receiver was directed to
be appointed to administer the property and apply the
proceeds to the satisfaction of a mortgage which had been
placed upon the property.
Martinez Heirs - successors
Clementia Graño - Trustee
FACTS:
● Juan Martinez and his wife, Macaria Ticson, both
now deceased, were owners of seven parcels of
land, located in the municipality of San Pablo,
which property, devolved by inheritance upon
their numerous living children (4 living) and the
descendants (9 grandchildren, all were minors
and were represented by guardians and/or
surviving parent) of such as were dead (4 dead).
In due time partition was effected, with the
approval of the CFI of Laguna, and appropriate
portions were assigned to the several heirs. To
this end it was necessary that the seven parcels
of which the property was composed should be
subdivided into numerous smaller parcels, as was
in fact done.
● The parcels of land of the sps. was encumbered
with indebtedness, and the parties in interest had
long since been compelled to resort to the
dangerous expedient of selling their inheritance
under a contract of sale with pacto de retro.
● One W. W. Robinson had acquired title to the
property under such a contract; and on October
11 of that year the property was again sold under
pacto de retro to Alfonso Tiaoqui, of Manila, for
 the sum of P12,000, apparently in order to get the
means to redeem the property from Robinson.
● The period for redemption specified in the sale to
Tiaoqui was three years, which expired in October,
1914. When this date arrived it was still found
impossible for the parties in interest to redeem
the property; and apparently by the indulgence of
Tiaquio, the time for redemption was extended to
September 28, 1916, and the period for
redemption was limited to one year, "extendible
to another with the consent of the parties."
● Finding that they would still be unable to redeem
the property, the Matinez heirs represented by
their guardians obtained a loan from El Hogar
Filipino. However, it was inconvenient for El Hogar
Filipino to handle the business since the parties-
in-interest were numerous and were all minors.
● In view of this difficulty, the adult parties in
interest (guardians) were advised, and decided, to
allow a single individual to effect the redemption
from Alfonso Tiaoqui, thus placing the
documentary title exclusively in this one person,
who, as was intended, could then deal directly
with the association. The person chosen as the
repository of this trust was Clemencia Graño, the
widow of Apolonio Martinez and mother and
guardian of Jose.
● In consideration of the responsibility to be
assumed by Clemencia, it was agreed that
Clemencia should have exclusive possession (title
was under her name) of all the land pertaining to
the Martinez estate and administer the same for
the purpose of raising the necessary revenue to
meet her obligations to "El Hogar Filipino." In this
Contract the heirs all agreed that Clemencia
Graño, as their attorney in fact, should be
respected by them in all matters relating to the
administration of the property and they obligated
themselves, one and all, to abstain from
interfering with her in the slightest degree in said
administration.
● There is another document, bearing the
signatures of Isidro Martinez, Julia Martinez,
Sebastiana Martinez, Rosario Ebron, and
Clemencia Graño, and acknowledged before a
notary public on December 17, 1917, which
defines in the fullest and most satisfactory way
the interests of all the parties in the property
derived from the Martinez estate.
● Clemencia now asserts that she is the sole and
absolute owner of all the property obtained by her
from Tiaoqui and denies that the Martinez heirs
have any interest whatever therein.
● Martinez heirs, who are named as plaintiffs herein,
instituted an action in CFI of Laguna against
Clemencia Graño, both in her own right and as
guardian of Jose Martinez, and against "El Hogar
Filipino."
RTC/CFI:
● In favor of Clemencia.
● Clemencia Graño was declared to be the sole and
exclusive owner of all the property in question,
subject to the mortgage to "El Hogar Filipino." As
a consequence she was ordered to be restored to
possession, the receivership was declared to be
dissolved, and all the defendants were absolved
entirely from the complaint.
ISSUE:
1.) Whether or not the title vested in Clemencia is
held by her in trust
2.) Whether or not trust may be rescinded for
trustee’s manifest failure to comply with the trust
RULING:
1.) YES.
A person who, before consolidation of property in
the purchaser under a contract of sale with pacto
de retro, agrees with the vendors to buy the
property and administer it till all debts constituting
an incumbrance thereon shall be paid, after which
the property shall be turned back to the original
owners, is bound by such agreement; and upon
buying in the property under these circumstances
such person becomes in effect a trustee and is
bound to administer the property in this
character.
2.) YES.
When a person administering property in the
character of trustee inconsistently assumes to be
holding in his own right, this operates as a
renunciation of the trust and the persons
interested as beneficiaries in the property are
entitled to maintain an action to declare their right
and remove the unfaithful trustee.
156. Heirs of Emilio Candelaria v. Romero
FACTS:
Appellants: Ester Candelaria filed a
complaint in her own behalf and in representation of
the other alleged heirs of Emilio Candelaria, alleging
in substance - that sometime prior to 1917 the latter
and his brother Lucas Candelaria bought each a lot in
the Solokan Subdivision on the installment basis; that
Lucas paid the first two installments corresponding to
his lot, but faced with the inability of meeting the
subsequent installments because of sickness which
caused him to be bedridden, he sold his interest
therein to his brother Emilio, who then reimbursed him
the amount he had already paid, and thereafter
continued payment of the remaining installments until
the whole purchase price had been fully satisfied; "that
although Lucas Candelaria had no more interest over
the lot, the subsequent payments made by Emilio
Candelaria until fully paid were made in the name of
Lucas Candelaria, with the understanding that the
necessary documents of transfer will be made later,
the reason that the transaction being from brother to
brother"; that in 1918 a transfer certificate of title for
said lot was issued by the register of deeds of Manila
in the name of "Lucas Candelaria married to Luisa
Romero"; that Lucas held the title to said lot merely in
trust for Emilio and that this fact was acknowledged
not only by him but also by the defendants (his heirs)
on several occasions; that Lucas' possession of the lot
was merely tolerated by Emilio and his heirs; that from
the time Emilio bought the lot from his brother, Lucas
had been collecting all its rents for his own use as
financial aid to him as a brother in view of the fact that
he was bedridden without any means of livelihood and
with several children to support, although from 1926,
when Emilio was confined at the Culion Leper Colony
up to his death on February 5, 1936, Lucas had been
giving part of the rents to Fortunata Bautista, the
second wife of Emilio, in accordance with the latter's
wishes; that Lucas died in August, 1942, survived by
the present defendants, who are his spouse Luisa
Romero and several children; and that said
defendants are still in possession of the lot, having
refused to reconvey it to plaintiff despite repeated
demands.
Appellees:
- Defendants filed a motion to dismiss, alleging that
plaintiff's cause of action is unenforceable under the
new Civil Code and that the action has already
prescribed.
-Lower court upheld the motion to dismiss thus this
case. The lower court held that an express and not an
implied trust was created as may be gleaned from the
facts alleged in the complaint, which is unenforceable
without any writing, and that since Transfer Certificate
of Title No. 9584 covering the land in question had
been issued to Lucas Candelaria way-back in 1918 or
38 years before the filing of the complaint, the action
has already prescribed.
SC: reversed CA
ISSUE: Whether there is an implied trust
where property is taken by a person
under an agreement to hold it for, or convey it to
another or the grantor, a resulting or implied trust
arises in favor of the person for whose benefit the
property was intended. This rule, which has been
incorporated in the new Civil Code in Art. 1453 thereof,
is founded upon equity. The rule is the same in the
United States, particularly where, on the faith of the
agreement or the understanding, the grantee is
enabled to gain an advantage in the purchase of the
property or where the consideration or part thereof has
been furnished by or for such other. Thus, it has been
held that where the grantee takes the property under
an agreement to convey another on certain conditions,
a trust results for the benefit of such other or his heirs,
which equity will enforce according to the agreement.
(89 C.J.S. 960.) It is also the rule there that an implied
trust arises where a person purchases land with his
own money and takes a conveyance thereof in the
name of another. In such a case, the property is held
on a resulting trust in favor of the one furnishing the
consideration for the transfer, unless a different
intention or understanding appears. The trust which
results under such circumstances does not arise from
contract or agreement of the parties, but from the facts
and circumstances, that is to say, it results because of
equity and arises by implication or operation of law.
In the present case, the complaint
expressly alleges that "although Lucas Candelaria had
no more interest over the lot, the subsequent
payments made by Emilio Candelaria until fully paid
were made in the name of Lucas Candelaria, with the
understanding that the necessary documents of
transfer will be made later, the reason that the
transaction being brother to brother." From this
allegation, it is apparent that Emilio Candelaria who
furnished the consideration intended to obtain a
beneficial interest in the property in question. Having
supplied the purchase money, it may naturally be
presumed that he intended the purchase for his own
benefit. Indeed, it is evident from the above-quoted
allegation in the complaint that the property in question
was acquired by Lucas Candelaria under
circumstances which show it was conveyed to him on
the faith of his intention to hold it for, or convey it to the
grantor, the plaintiff's predecessor in interest.
Constructive or implied trusts may, of
course, be barred by lapse of time. The rule in such
trusts is that laches constitutes a bar to actions to
enforce the trust, and repudiation is not required,
unless there is a concealment of the facts giving rise
to the trust. (Diaz, et al. vs. Gorricho, et al., 103 Phil.,
261; 54 Off. Gaz. [37] 8429.) Continuous recognition
of a resulting trust, however, precludes any defense of
laches in a suit to declare and enforce the trust. (See
581, 54 Am Jur. pp. 448-450.) The beneficiary of a
resulting trust may, therefore, without prejudice to his
right to enforce the trust, prefer the trust to persist and
demand no conveyance from the trustee. It being
alleged in the complaint that Lucas held the title to the
lot in question merely in trust for Emilio and that this
fact was acknowledged not only by him but also by his
heirs, herein defendants — which allegation is
hypothetically admitted — we are not prepared to rule
that plaintiff's action is already barred by lapse of time.
On the contrary, we think the interest of justice would
be better served if she and her alleged co-heirs were
to be given an opportunity to be heard and allowed to
present proof in support of their claim.
157. Cuaycong v. Cuaycong
See #128
158. Rosario v. CA
See #143
159. Adaza v. CA
G.R. No. 47354 March 21, 1989
HORACIO G. ADAZA and FELICIDAD MARUNDAN,
petitioners, vs.THE HONORABLE COURT OF APPEALS and
VIOLETA G. ADAZA, assisted by her husband LINO AMOR,
respondents.
Victor Adaza –Deceased/Father/Donor Violeta
Adaza –Donee/Daughter (RESPONDENT)
Horacio Adaza –1stBrother/Fiscal (PETITIONER)
FACTS: Before dying, the Father executed a Deed of
Donation covering a parcel of land to his daughter, then
single. (NOTE: a crossed out provision in the Deed of
Donation provided: “The donee shall share ½ of the entire
property with one of her brothers or sisters after the death
of the donor.” The Father had five other children.) The
Deed was notarized and accepted in the same instrument.
However, the property was then still part of the public
domain, but was held and cultivated by the Father. The
Daughter, aided by her Brother, filed a homestead
application for the land which eventually lead to the
registration of the property under her name. After the
Daughter married, she and her spouse mortgaged the
property to secure a loan with PNB. Meanwhile, the
Brother became a Provincial Fiscal of Davao Oriental and
moved to the said province. When the said Brother
returned for a family gathering, he asked his sister to sign
a Deed of Waiver over the property stating that the
property was co-owned by them, including all the
improvements thereon. The Deed also provided for the
waiver, transfer and conveyance of the said share from
Sister to Brother. A few months later, the Daughter, with
her husband, filed a complaint for annulment of the Deed
of Waiver against the Brother, together with the latter’s
wife, declaring that the Daughter signed the Deed because
of the Brother’s fraud, misrepresentation and undue
influence. Meanwhile, the Brother contended that they
were co-owners and that the Deed of Waiver was signed
by his sister freely and voluntarily. The trial court declared
the Deed of Waiver as valid and binding and that the
brother and sister was co-owners of the said property.
Upon the Daughter’s appeal, the CA reversed the trial
court’s decision, while agreeing that the Deed of Waiver
was signed voluntarily, was without cause or
consideration, because the land had been unconditionally
donated to the Daughter alone. CA further held that the
Deed of Waiver could not be regarded as a gratuitous
contract or a donation as it did not comply with the
requirements of Articles 749 and 1270 of the Civil Code.
In the brother’s petition for review with the SC, he argues
that the fact of co-ownership was sufficient consideration
to sustain the validity of the Deed of Waiver and testified
that the intention of the deceased father was to donate
the brother to him and his Sister. He further testified that
he himself crossed out the provision, with the Father’s
consent, to facilitate the issuance in his sister’s name.
ISSUE: Whether or not the property was co-owned by the
brother and sister.
RULING: The execution of the Deed of Donation by the
Father created an implied trust in favor of the brother in
respect of half of the property donated.
RATIO: Art. 1449 There is also an implied trust when a donation
is made to a person but it appears that although the legal estate
is transmitted to the donee, he nevertheless is either to have no
beneficial interest or only a part thereof.
The court notes that the donation was executed by the
father while the land was still public disposable land and
that the final issuance of title was still about 7 years later.
It, found that the crossing out of the said paragraph was
at least an ambiguous act and that CA took a too literal
view of the matter holding that the effect of the
crossing-out of that paragraph was to make the
unconditional donation, thus not requiring the daughter
not obliged to share the property with her brother. For the
SC, if the real intent of the father was to make the two
co-owners of the property, and such intent is sufficiently
shown, it must be respected and implemented.
For the court, the said intent was evidenced: firstly, by
the Deed of Waiver executed where the Daughter
acknowledged that she owned the land in common with
her brother although the certificate of title bore only her
name. While the Sister strove to convince that she had
signed by reason of fraud, misrepresentation and undue
influence, the trial court and CA both concluded that the
signature was voluntarily made. The Deed of Waiver had
been signed in the presence of their 3 other siblings.
Furthermore, the other siblings testified that the Deed of
Donation was executed with the understanding that the
same would be divided between the Brother and the
Sister. Also, at the same time the Deed of Waiver was
signed, another Deed of Waiver was signed between
another brother and another sister, who testified. The trial
court pointed out that four parcels of land were left to be
divided among the six children.
Evidently, their parents made it a practice, for reasons of
their own, to have lands acquired by them titled in the
name of one or another of their children. Three (3) of the
four (4) parcels acquired by the parents were each placed
in the name of one of the children. For the court, the
current case was not one where an older brother is
exploiting or cheating his younger sister. On the contrary,
the evidence showed that the Brother took care of the
sister and had been quite relaxed and unworried about the
title remaining in the name of his sister alone until the
latter had gotten married and her husband began to show
what Brother thought was undue and indelicate interest in ISSUE: WON the acts of GUiillermo Severino as
the land. administrator in registering the land in his name
valid?
160. Severino v. Severino RULING: No.
It may first be observed that this is not an action under section
FACTS: 38 of the Land Registration Act to reopen or set aside a decree;
Melecio Severino owned 428 hectares of land in Silay, Province
it is an action in personam against an agent to compel him to
of Occidental Negros. During the lifetime of Melecio Severino the
return, or retransfer, to the heirs or the estate of its principal, the
land was worked by the defendant, Guillermo Severino, his
property committed to his custody as such agent, to execute the
brother, as administrator for and on behalf of the said Melecio
necessary documents of conveyance to effect such retransfer or,
Severino; that after Melecio's death, the defendant Guillermo
in default thereof, to pay damages.
Severino continued to occupy the land; that in 1916 a parcel
The defendant came into the possession of the property here in
survey was made of the lands in the municipality of Silay and
question as the agent of the deceased Melecio Severino in the
cadastral proceedings were instituted for the registration of the
administration of the property, cannot be successfully disputed.
land titles within the surveyed area; that in the cadastral
His testimony in the case of Montelibano vs. Severino (civil case
proceedings the land here in question was described as four
No. 902 of the Court of First Instance of Occidental Negros and
separate lots numbered as above stated; that Roque Hofileña, as
which forms a part of the evidence in the present case) is, in fact,
lawyer for Guillermo Severino, filed answers in behalf of the
conclusive in this respect. He there stated under oath that from
latter in said proceedings claiming the lots mentioned as the
the year 1902 up to the time the testimony was given, in the year
property of his client; that no opposition was presented in the
1913, he had been continuously in charge and occupation of the
proceedings to the claims of Guillermo Severino and the court
land as the encargado or administrator of Melecio Severino; that
therefore decreed the title in his favor, in pursuance of which
he had always known the land as the property of Melecio
decree certificates of title were issued to him in the month of
Severino; and that the possession of the latter had been
March, 1917.
peaceful, continuous, and exclusive. In his answer filed in the
It may be further observed that at the time of the cadastral
same case, the same defendant, through his attorney, disclaimed
proceedings the plaintiff Fabiola Severino was a minor; that
all personal interest in the land and averred that it was wholly
Guillermo Severino did not appear personally in the proceedings
the property of his brother Melecio.
and did not there testify; that the only testimony in support of
The relations of an agent to his principal are fiduciary and it is an
his claim was that of his attorney Hofileña, who swore that he
elementary and very old rule that in regard to property forming
knew the land and that he also knew that Guillermo Severino
the subject-matter of the agency, he is estopped from acquiring
inherited the land from his father and that he, by himself, and
or asserting a title adverse to that of the principal. His position is
through his predecessors in interest, had possessed the land for
analogous to that of a trustee and he cannot consistently, with
thirty years.
the principles of good faith, be allowed to create in himself an
Plaintiff Fabiola Guillermo is the alleged natural interest in opposition to that of his principal or cestui que trust.
daughter and sole heir of Melecio Severino brought Upon this ground, and substantially in harmony with the
this action to compel the defendant Guillermo
principles of the Civil Law, the English Chancellors held that in
Severino to convey to her four parcels of land
general whatever a trustee does for the advantage of the trust
described in the complaint, or in default thereof to
estate inures to the benefit of the cestui que trust. The same
pay her the sum of P800,000 in damages for
principle has been consistently adhered to in so many American
wrongfully causing said land to be registered in his
cases. The principle is well stated in the case of Gilbert vs.
own name. Felicitas Villanueva, in her capacity as
Hewetson (79 Minn., 326):
administratrix of the estate of Melecio Severino, has
"A receiver, trustee, attorney, agent, or any other person
filed a complaint in intervention claiming the same
occupying fiduciary relations respecting property or persons, is
relief as the original plaintiff, except in so far as she
utterly disabled from acquiring for his own benefit the property
prays that the conveyance be made, or damages
committed to his custody for management. This rule is entirely
paid, to the estate instead of to the plaintiff Fabiola
independent of the fact whether any fraud has intervened. No
Severino. The defendant answered both complaints
fraud in fact need be shown, and no excuse will be heard from
with a general denial.
the trustee. It is to avoid the necessity of any such inquiry that
Lower court rendered a judgment recognizing the
the rule takes so general a form. The rule stands on the moral
plaintiff Fabiola Severino as the acknowledged
obligation to refrain from placing one's self in positions which
natural child of the said Melecio Severino and
ordinarily excite conflicts between self-interest and integrity. It
ordering the defendant to convey 428 hectares of
seeks to remove the temptation that might arise out of such a
the land in question to the intervenor as
relation to serve one's self-interest at the expense of one's
administratrix of the estate of the said Melecio
integrity and duty to another, by making it impossible to profit
Severino, to deliver to her the proceeds in his
by yielding to temptation. It applies universally to all who come
possession of a certain mortgage placed thereon by
within its principle."
him and to pay the costs. From this judgment only
the defendant appeals.
 161. Castro v. Castro
Note: This case was decided under the Old Civil
Code. The applicable provision in the New Civil Code
would be Article 1451 (When land passes by
succession to any person and he causes the legal
title to be put in the name of another, a trust is
established by implication of law for the benefit of the
true owner). The instant case would fall under
Resulting Trust if decided under the New Civil Code.
This case was instituted by the Castros against Jose
Castro, one of their own, with the CFI. They claim
ownership of an undivided one-sixth interest in a
parcel of land covered by a Torrens Title issued in
the name of the defendant.
The land in question which was originally owned by
one Mariano Tinio was inherited by his children. One
of which was Maximiana, the mother of the
defendant. Jose Castro, the defendant in question,
has five younger siblings. After his mother's death,
Jose assumed administration of the land.
On July 28, 1912, defendant applied for registration
of said land. He claims that he is the sole heir of his
mother. He never mentioned the fact that he has 5
younger siblings. While initially successful, an appeal
defeated his cause. Subsequently, on October 1919,
defendant began a second proceeding to have the
land in his sole name. Again, he suppressed the fact
that he had other siblings. He was successful this
time around.
As mentioned previously, plaintiffs filed a case with
the CFI against defendant. The CFI ruled in favor of
said the plaintiffs,hence the current petition.
ISSUES:
● Whether or not a trust was created.
● Whether or not prescription runs in favor of
the defendant.
HELD:
● Yes, a trust was created.
● No, prescription does not run in favor of the
defendant.
RATIO
● A trust is created when one acquires a
Torrens title in his own name to property
which he is administering for himself and his
brothers and sisters as heirs in common by
descent from a common ancestor.
The actions and facts of the case speak for
themselves. A conversation between the
defendant and Mariano Tinio, defendant’s
uncle and one time Director of Lands is
revealing:
“Catalina Tinio, was introduced as a witness in
court and he testified to the fact that he heard
a conversation between Manuel Tinio and
Jose Castro, in the course of which the latter
informed his uncle that the petition for
registration of the land in Jose’s name had
been denied, whereupon Manuel Tinio told him
that he ought to make application for the
registration of the land in "your name and the
names of your brothers and sisters’. Jose de
Castro then said that, although the property
should be registered in his (Jose’s) name, the
interests of his brothers and sisters would not
be prejudiced. Manuel Tinio assented to this
and told Jose to come to his office at the
Bureau of Lands for the execution of the
document desired by Jose Castro.”
The Supreme Court held that when the
defendant procured the registration of this land
in his own name, he was acting in a trust
capacity and as representative of all of his
brothers and sisters. This is in consonance
with the doctrine in the case of Severino v.
Severino.
● Prescription does not run in favor of one who
holds in trust for others when denial of the trust
made by the trustee is directed to beneficiaries
who was still a minor, at the time of such
repudiation.
Defendant claims that, granting arguendo that
trust relation did exist, he had repudiated the
same more than ten years before this action
was begun, and it is insisted that he had
acquired title by adverse possession. The
Supreme Court disagreed as the supposed
repudiation of the trust was directed to a minor.
The defendant is not entitled to the benefit of
prescription from his supposed repudiation of
the trust.
162. Ting Ho, Jr. v. Teng Gui
Facts:
- Plaintiffs and the defendant are all brothers and sisters,
the defendant Vincent Teng Gui being the oldest. Their
father was a Chinese citizen although their mother was
Filipino.
-Sometime in 1947, the father Felix Ting Ho occupied a
parcel of land situated in Afable St., East Bajac-Bajac,
Olongapo City by virtue of the permission granted him by
the then US Naval Reservation Office. The couple
thereafter introduced improvements such as a residential
house and a bakery.
-In 1958, Felix Ting Ho executed a Deed of Absolute Sale
and sold a building to Gregorio Fontela but spouses Felix
and Leonila Cabasal remained possession of the property.
Later, spouses Gregorio Fontela and Victoria Cabasal sold
to Vicente Ten Gui in 1961 the buildings which were
bought by them from Felix Ting Ho. In 1966, Felix Ting Ho
executed an Affidavit of Transfer, Relinquishment and
Renouncement of Rights and Interest including
Improvements on Land in favor of his eldest son the
defendant Vicente Teng Gui. On the basis of said
document he then filed a miscellaneous sales application
with the Bureau of Lands.
-RTC found that Felix Ting Ho, being a Chinese citizen and
the father of the petitioners and respondent, resorted to
a series of simulated transactions in order to preserve the
right to the lot and the properties thereon in the hands of
the family. The Court believes that the transaction was
one of implied trust executed by Felix Ting Ho for the
benefit of his family. RTC considered the Affidavit of
Transfer, Relinquisment and Renouncement of Rights and
Interests over the land as a donation which was accepted
by the done, the herein respondent. With respect to the
properties in the lot, the trial court held that although the
sales were simulated, pursuant to Art 1471 of the New
Civil Code, it can be assumed that the intention of Felix
Ting Ho in such transaction was to give and donate the
properties to his son. As a result, it awarded the entire
conjugal share of Felix Ting Ho in the subject lot and
properties to the respondent and divided only the conjugal
share of his wife among the siblings.
- CA reversed and set aside the decision of the RTC. The
appellae court held that the deceasesd Felix Ting Ho was
never the owner and never claimed ownership of the
subject lot since he is disqualified under Philippine laws
from owning public lands, and that respondent Vicente
Teng Gui was the rightful owner over said lot by virtue of
the Miscellaneous Sales Patent issued in his favor. The CA
found that defendant Vicente Teng Gui acquired the
subject land by sales patent or purchase from the
government and not from his father because on December
5, 1977 when the subject land was sold to him by the
government and on Jan 3, 1978 when Miscellaneous Sales
Patent No. 7457 was issued, the late Felix Ting ho was
already dead. However, since the sales executed were
fictitious, the CA awarded 4/5 shares of the subject
properties erected on the said lot to the petitioners.
Issue: Was there an implied trust between Felix Ting Ho
and son Vicente? If so, should all the properties be divided
equally among all the siblings?
Held:
NO.
- The father of the petitioners and respondent was a
Chinese citizen; therefore he was disqualified from
acquiring and owning real property in the Philippines. On
the other hand, the respondent became the owner of Lot
No. 418 when he was granted Miscellaneous Sales Patent
No 7457 by the Secretary of Natural Resources by
Authority of the President of the Philippines.
- The petitioners invoke equity considerations and claim
that the ruling of the RTC that an implied trust was created
between respondent and their father with respect to the
subject lot should be upheld. This contention must fail
because the prohibition against an alien from owning
lands of the public domain is absolute and not even an
implied trust can be permitted to arise on equity
considerations.
- decision of the CA was affirmed
163. Diaz v. Gorricho and Aguado
FACTS: 2 lots originally belonged to the conjugal
partnership of Francisco Diaz and Maria Sevilla, the
OCTs under their name. Francisco died and was
survived by wife and 3 children.
Appellee Gorricho filed an action against Maria in the
CFI of Manila, and a writ of attachment was issued
upon the shares of Maria in said lots.
Thereafter, said parcels were sold at public auction
and purchased by Gorricho. Maria failed to redeem
within one year, whereupon the acting provincial
sheriff executed a final deed of sale in favor of
Gorricho. In said final deed, however, the sheriff
conveyed to Gorricbo the whole of the 2 parcels
instead of only the half-interest of Maria therein.
Pursuant to said deed, Gorricho obtained a TCT in
her name and has been possessing said land is as
owner ever since.
Then, Maria died. Her 3 children filed the action in
CFI of Nueva Ecija against Gorricho and her
husband Aguado to compel them to execute in their
favor a deed of reconveyance over an undivided one-
half interest over the lots in question (the share
therein of their deceased father illegally conveyed by
the provincial sheriff to Gorricho), which defendants
were allegedly holding in trust for them.
Defendants answered denying the allegations of the
complaint and alleging, as a special defense, that
plaintiffs’ action has long prescribed.
After trial, the court below rendered judgment,
holding that while a constructive trust in plaintiffs’
favor arose when defendant Gorricho took advantage
of the error of the provincial sheriff in conveying to
her the whole of the parcels in question and obtained
title in herself, the action of plaintiffs was, however,
barred by laches and prescription. From this
judgment, plaintiffs appealed.
The principal contention of appellants is that their
father’s half of the disputed property was acquired by
Gorricho through an error of the provincial sheriff;
that having been acquired through error, it was
subject to an implied trust, as provided by Article
1456 of the new Civil Code; and therefore, since the
trust is continuing and subsisting, the appellants may
compel reconveyance of the property despite the
lapse of time, specially, because prescription does
not run against titles registered under Act 496
ISSUE: WON laches constitutes a bar to actions to
enforce a constructive trust
HELD: The judgment appealed from is affirmed
YES
Article 1456 of the new Civil Code, while not
retroactive in character, merely expresses a rule
already recognized by our courts prior to the Code’s
promulgation. Appellants are, however, in error in
believing that like express trusts, such constructive
trusts may not be barred by lapse of time. The
American law on trusts has always maintained a
distinction between express trusts created by
intention of the parties, and the implied or
constructive trusts that are exclusively created by
law, the latter not being trusts in their technical
sense.
The express trusts disable the trustee from acquiring
for his own benefit the property committed to his
management or custody, at least while he does not
openly repudiate the trust, and makes such
repudiation known to the beneficiary or cestui que
trust. For this reason, the old Code of Civil Procedure
declared that the rules on adverse possession do not
apply to “continuing and subsisting” (i.e.,
unrepudiated) trusts.
In constructive trusts, as pointed out by the court
below, the rule is that laches constitutes a bar to
actions to enforce the trust, and repudiation is not
required, unless there is concealment of the facts
giving rise to the trust
The reason for the difference in treatment is obvious.
In express trusts, the delay of the beneficiary is
directly attributable to the trustee who undertakes to
hold the property for the former, or who linked to the
beneficiary by confidential or fiduciary relations. The
trustee’s possession is, therefore, not adverse to the
beneficiary, until and unless the latter is made aware
that the trust has been repudiated. But in constructive
trusts (that are imposed by law), there is neither
promise nor fiduciary relation; the so-called trustee
does not recognize any trust and has no intent to
hold for the beneficiary; therefore, the latter is not
justified in delaying action to recover his property. It
is his fault if he delays; hence, he may be estopped
by his own laches.
Of course the equitable doctrine of estoppel by
laches requires that the one invoking it must show,
not only the unjustified inaction, but that some unfair
injury would result to him unless the action is held
barred. This requirement the appellees have not met,
and they are thereby bereft of the protection of this
rule.
We are of the opinion that the judgment of dismissal
should be upheld, because the appellants’ cause of
action to attack the sheriff’s deed and cancel the
TCTs issued to the appellees accrued from the year
of issuance and recording, 1937, and appellants
have, allowed fifteen (15) years to elapse before
taking remedial action, notwithstanding the appellees’
public assertion of title during this entire period, to
extinguish appellant’s action. Under the old Code of
Civil Procedure, in force at the time, the longest
period extinctive prescription was only ten years.
164. Sumaoang v. Judge, RTC
Topic: Acquisition of property through mistake or fraud.
ART. 1456. If property is acquired through mistake or
fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of
the person from whom the property comes.
Facts: Sebastian Sumaoang applied for a homestead over
a parcel of land located in Isabela. Due to his illness, he
transferred his residence to his native town in Tarlac. The
Domingos (Florencio and Regino) applied also for a
homestead patent over that parcel of land of which
Sebastian had also applied for a homestead patent.
Unfortunately, the Domingos were given the homestead
patent, not to Sebastian. Sumaoangs engaged the
services of Atty. Pascua to file a formal protest regarding
the legality of the issuance of homestead patent to the
Domingos. The CFI of Isabela (Sumaoang v. Domingos)
declared the patent as null and void. The CA and SC
affirmed the decision.
However, maybe because of the overwhelming joy they
felt they forgot to pay Atty. Pascua of the compensation
of professional services as counsel, the latter filed a
complaint for collection of attorney's fees against the
Sumaoangs. CFI stated that Atty. Pascua was only entitled
to 1/2 of the value of property in peso. Since the decision
of the CFI became final and executory, Atty. Pascua filed
a writ of execution against the Sumaoangs. The DP Sheriff
was successful in the execution since the entire land was
levied and sold in an auction to Atty. Pascua being the
highest bidder. Andres Sumaoang asked for the
nullification of the CFI's decision for the reason that the
attorney's fees became unreasonable and unconscionable.
Accordingly, in the instant case, an implied trust was
established upon the land acquired by Atty. Pascua even
though the operative mistake was a mistake of
respondent trial judge. Respondent Judge may be seen to
have intended to convey only one-half (1/2) of the land
involved as attorney's fees to Atty. Pascua.
Issue: Whether of not there is an implied trust that
existed between Atty. Pascua and Sumaoangs when the
latter obtained possession of the land in dispute.
Held: Yes.
It is essential to note that the relationship between an
attorney and his client is a fiduciary one. Canon 17 of the
Code of Professional Responsibility stresses that "a lawyer
owes fidelity to the cause of his client and he shall be
mindful of the trust and confidence reposed in him."
Canon 16 requires a lawyer to "hold in trust all monies
and properties of his client that may come into his
possession.
The SC believe that respondent Atty. Pascua, under the
circumstances of this case, must be regarded as holding
the title of the property acquired by him at public sale
under an implied trust in favor of petitioner and his
brothers, to the extent of one-half (1/2) of that property.
Among the species of implied trusts recognized by our
Civil Code is that set forth in Article 1456. Under the
Article, the "mistake" or "fraud" that results in an implied
trust being impressed upon the property involved, may be
the mistake or fraud of a third person, and need not be a
mistake or fraud committed directly by the trustee himself
under the implied trust. Accordingly, in the instant case,
an implied trust was established upon the land acquired
by Atty. Pascua even though the operative mistake was a
mistake of respondent trial judge. Respondent Judge may
be seen to have intended to convey only one-half (1/2) of
the land involved as attorney's fees to Atty. Pascua. Atty.
Pascua, however, took advantage of the Judge's mistake
in order to acquire all the 21.3445 hectares for himself.
Atty. Pascua obviously knew that under his contract with
his clients, he was entitled to ask only for one-half (1/2)
of the land. When he purchased the entire land at public
auction for P110,000.00 (leaving his clients still owing him
P1,500.00), the amount and character of his attorney's
fees became unreasonable and unconscionable and
constituted unjust enrichment at the expense of his
clients.
165. Vda. de Ouano v. Republic
FACTS:
In 1949, the National Airport Corporation (NAC),
MCIAA’s predecessor agency pursued a program to expand
the Lahug Airport in Cebu City. As an assurance from the
government, there is a promise of reconveyance or
repurchase of said property so long as Lahug ceases its
operation or transfer its operation to Mactan – Cebu Airport.
Some owners refused to sell, and that the Civil Aeronautics
Administration filed a complaint for the expropriation of said
properties for the expansion of the Lahug Airport. The trial
court then declared said properties to be used upon the
expansion of said projects and order for just compensation
to the land owners, at the same time directed the latter to
transfer certificate or ownership or title in the name of the
plaintiff. At the end of 1991, Lahug Airport completely
ceased its operation while the Mactan-Cebu airport opened
to accommodate incoming and outgoing commercial flights.
This then prompted the land owners to demand for the
reconveynace of said properties being expropriated by the
trial court under the power of eminent domain. Hence these
two consolidated cases arise.
RTC : Ruled in favor of the petitioners Oaunos and against
the MCIAA for the reconveynace of their properties but was
appealed by the latter and the earlier decision was
reversed.
CA: affirmed the reversed decision of the RTC.
ISSUE: WON there was an implied trust.
RULING: YES.
Providing added support to the Ouanos and the Inocians
right to repurchase is what in Heirs of Moreno was referred
to as constructive trust, one that is akin to the implied trust
expressed in Art. 1454 of the Civil Code,[37] the purpose of
which is to prevent unjust enrichment.[38] In the case at
bench, the Ouanos and the Inocians parted with their
respective lots in favor of the MCIAA, the latter obliging itself
to use the realties for the expansion of Lahug Airport; failing
to keep its end of the bargain, MCIAA can be compelled by
the former landowners to reconvey the parcels of land to
them, otherwise, they would be denied the use of their
properties upon a state of affairs that was not conceived nor
contemplated when the expropriation was authorized. In
effect, the government merely held the properties
condemned in trust until the proposed public use or purpose
for which the lots were condemned was actually
consummated by the government. Since the government
failed to perform the obligation that is the basis of the
transfer of the property, then the lot owners Ouanos and
Inocians can demand the reconveyance of their old
properties after the payment of the condemnation price.
Constructive trusts are fictions of equity that courts use as
devices to remedy any situation in which the holder of the
legal title, MCIAA in this case, may not, in good conscience,
retain the beneficial interest. We add, however, as in Heirs
of Moreno, that the party seeking the aid of equitythe
landowners in this instance, in establishing the trustmust
himself do equity in a manner as the court may deem just
and reasonable.
166. Juan v. Yap, Sr.
SEE # 134
167. Sing Juco and Sing Bengco v. Sunyantong and Llorente
FACTS: Sing Juco and Sing Bengco obtained from Maria Gay a
written option to purchase an estate known as "San Antonio
Estate". The term of the option expired, but Sing Juco and Sing
Bengco had it extended verbally. Sunyantong was an employee
of Sing Juco and Sing Bengco, and the evidence shows that they
reposed confidence in him and did not mind disclosing to him
their plans of purchasing the San Antonio estate and the status
of their negotiations with Gay. In one of the meetings held by
Sing Juco and Sing Bengco, Sunyantong was present. At that
time, Sunyantong remarked that it would be advisable to let
some days elapse before accepting the terms of the transfer as
proposed by Maria Gay, in order that the Gay might not think
that they were desperate for the said property.
On the day that Sing Juco and Sing Bengco’s option to purchase
was to expire, Sunyantong called at the house of Gay and offered
to buy the estate on the terms she proposed, which were not yet
accepted by Sing Juco and Sing Bengco. Sunyantong offered to
buy not for the benefit of Sing Juco and Sing Bengco, but for the
benefit of his own wife. Maria Gay informed the broker of Sing
Juco and Sing Bengco that there was another interested buyer
and that she would like to know immediately Sing Juco and Sing
Bengco’s decision. Sing Bengco instructed Sotelo to inform her,
"siya ang bahala". Interpreting the phrase to mean that Sing Juco
and Sing Bengco waived their option to buy, Maria Gay closed
the sale of the estate in favor of Sunyantong. Sing Bengco and
Sing Juco then filed a case against Sunyantong.
Lower Court - ordered the Sunyantong to execute a deed of
conveyance to Sing Bengco and Sing Juco of the San Antonio
Estate for the same price and with the same conditions as those
of the purchase thereof from Maria Gay.
ISSUE: Whether or not Sunyantong must be held liable, by virtue
of an equitable trust.
RULING: Yes.
RATIO: Sunyantong owed loyalty and faithfulness to his
employers, furthermore, his disloyalty was responsible for Maria
Gay not accepting the terms proposed by the plaintiff. Without
such intervention on the part of the defendant it is presumed,
taking into account all the circumstances of the case, that the
sale of the estate in question would have been consummated
between Maria Gay and the plaintiffs, perhaps with such
advantages to the plaintiffs, as they expected to obtain by
prolonging negotiations. The same would be true even if the
plaintiffs were to have waived all claims to the option.
Such an act of infidelity committed by a trusted employee
calculated to redound to his own benefit and to the detriment of
his employers cannot pass without legal sanction. Nemo debet
aliena jactura locupletari; nemo ex suo delicto meliorem suam
conditionem facere potest. It is an illicit act committed with culpa
and, therefore, its agent is liable [Art. 1089, now Art. 1157(5)
Quasi-delict], for the damage caused (art. 1902, now Art. 2176).
Not identical, but similar, to this infidelity is the abuse of the
confidence sanctioned in our Penal Code as a generic
circumstance, nay as specific aggravating one, and even as an
essential element of certain crimes.
This reparation provided for in the Civil Code and applied to the
case at bar seems to be limited to the indemnification of
damages, as we are not aware of any express provision in said
Code which imposes upon the person thus held liable, any
obligation, such as that of transferring to plaintiffs the estate in
question.
Such principle, however, in case of this nature is generally
recognized in our laws, since the case of commercial agents
(factories) it is expressly established. Undoubtedly, formerly
under the circumstances then prevailing such sanction was not
necessary in the field of civil law, because is sphere of action is
the general relations of society; but even then it was deemed
necessary expressly to protect with such sanction the
commercial relations wherein the question of gain was involved,
which is sometimes so imperatives as to ignore everything, even
the very principles of loyalty, honesty, and fidelity.
This specific relief, however, has already come to be applied in
this jurisdiction in similar cases, among which can be cited that
of Camacho vs. Municipality of Baliuag (28 Phil., 466.)
And in the North American law such sanction is expressly recognized, and
the transaction of this nature might be regarded as an "equitable trust"
by virtue of which the things acquired by an employee is deemed not to
have been acquired for his own benefit or that of any other person but
for his principal, and held in trust for the latter (21 R. C. L., 825; 2 Corpus
Juris, 353).
DISSENTING OPINION BY VILLAMOR, J: Sunyantong is held civilly
liable for having purchased the land in question in behalf of his
wife, Vicenta Llorente, with knowledge of the fact that Sing
Bengco and Sing Juco, by whom he was employed, were
negotiating with the owner of the land for the purchase of the
same.
The liability of Sunyantong should consist in the reparation of the
damage caused to the Sing Bengco and Sing Juco. Has any
damage been proven to have arisen from the culpable act of the
defendant Sunyantong? I do not think that it has, and indeed no
damage could have been caused to the Sing Bengco. There is also
no proof of Sunyantong having acquired the land in question in
the name or in behalf of Sing Bengco and Sing Juco, or at the
request of the latter, or with funds furnished by them. Said
defendants had legal capacity to buy (art. 1457, Civil Code) and
are not within any of the cases prohibited by article 1459 of the
same Code.
168. Hernandez v. Hernandez
Facts:
Republic of the Philippines, through the Department of
Public Works and Highways (DPWH), offered to purchase
a portion of a parcel of land. The land is pro-indiviso
owned by Cornelia M. Hernandez (Cornelia), petitioner
herein, Atty. Jose M. Hernandez, deceased father of
respondent Cecilio F. Hernandez (Cecilio), represented by
Paciencia Hernandez (Paciencia) and Mena Hernandez
(Mena), also deceased and represented by her heirs.
Initial and last purchase price was P35 and P70 per square
meter, respectively. But still, Hernandez did not accept the
offer.
An expropriation case was filed by the Republic of the
Philippines, through the DPWH, before the Regional Trial
Court, Branch 83 (RTC Branch 83), which a judgment of
expropriation was given with a finding of just
compensation of P21,964,500 or P1,500 per square meter.
Owners of the Hernandez property executed a letter
indicating: (1) Cecilio as the
representative of the owners of the land; and (2) the
compensation he gets in doing such job.
Cecilio was appointed as one of the commissioners to
represent the defendants in the finding of just
compensation.
Cornelia, and her other co-owners who were also
signatories of the 11 November 1993 letter, executed an
irrevocable Special Power of Attorney (SPA) appointing
Cecilio Hernandez as their "true and lawful
attorney" with respect to the expropriation of the subject
property. The SPA stated that the authority shall be
irrevocable and continue to be binding all throughout the
negotiation.
Petitioner executed a Revocation of the SPA withdrawing
the authority earlier granted to Cecilio. After the
revocation, on 28 Cornelia, with a new lawyer, moved for
the withdrawal of her one-third (1/3) share of the just
compensation, which is equivalent to Seven Million Three
Hundred Twenty-One Thousand Five Hundred Pesos – the
amount a pro-indiviso owner is to receive.
The court granted the motion of petitioner, with the
condition that the money shall be released only to the
attorney-in-fact, Mr. Cecilio F. Hernandez.
Cecilio, therefore, was able to receive the entire sum of
₱21,964,500.00.
Cornelia received from Cecilio a Check amounting to
₱1,123,000.00, accompanied by a
Receipt and Quitclaim document in favor of Cecilio. It
states that: (1) the amount received will be the share of
Cornelia in the just compensation paid by the government
in the expropriated property; (2) in consideration of the
payment, it will release and forever discharge Cecilio from
any action, damages, claims or demands; and (3) Cornelia
will not institute any action and will not pursue her
complaint or opposition to the release to Cecilio or his
heirs or assigns, of the entire amount representing the total
just compensation of expropriated properties under the
aforementioned case.
Later she learned that she was entitled to receive
₱7,321,500.00. Cornelia demanded the accounting of the
proceeds. But there was no answer. Cornelia then filed a
complaint for the Annulment of Quitclaim and
Recovery of Sum of Money and Damages was filed
before the RTC, Makati.
RTC Makati ruled in favor of the plaintiff and against the
defendant, declaring the receipt and quitclaim signed by
the plaintiff dated February 7, 2000 as null and void and
ordering the defendant to pay the plaintiff.
CA- reversed and set aside the ruling of the RTC.
Petitioner Cornelia now submits that the Court of Appeals
erred in holding the validity of the receipt and quitclaim
document contrary to law and jurisprudence. She holds
that the distribution of award that transpired is unjust and
prays that the decision of the RTC Makati be reinstated.
Issue: WON Cecilio may validly create in himself an
interest in opposition to that of his principal or cetui que
trust.
Rule:
SC-- reinstated the decision of the RTC Makati.
No evidence on record would show that Cornelia agreed to
give Cecilio 83.07% of the proceeds of the sale of her
land. What is on record is that Cornelia asked for an
accounting of the just compensation from Cecilio several
times, but the request remained unheeded. Right at that
point, it can be already said that Cecilio violated the
fiduciary relationship of an agent and a principal. The
relation of an agent to his principal is fiduciary and it is
elementary that in regard to property subject matter of
the agency, an agent is estopped from acquiring or
asserting a title adverse to that of the principal. His
position is analogous to that of a trustee and he cannot,
consistently with the principles of good faith, be
allowed to create in himself an interest in opposition to
that of his principal or cestui que trust.
169. Gonzales v. Jimenez, Sr.
Facts:
· Jimenez Sr. sold a land to Gonzales
· On August 15, 1951, Felipe Jimenez, Sr. caused
his son to file a free patent application with the Bureau of
Lands covering the same land alleging certain fraudulent
statements in his application and by reason of which Free
Patent No. V-2706 was issued to his son on February 4,
1953, as well as Original Certificate of Title No. 11
· Plaintiff was totally unaware of the filing of
the application for patent as well as the issuance
of the patent and the certificate of title
abovementioned which he came to know only in
October, 1956 when, in the absence of his
caretaker, defendant Jimenez, Sr. caused the
fencing of the land and asserted proprietary rights
over the same.
· Homobono H. Gonzales filed on July 26, 1957
against Felipe Jimenez, Sr., et al. a complaint for the
reconveyance of a parcel of land
· Defendant filed a motion to dismiss, which was
denied, after which they filed their answer. After plaintiff
had closed his evidence, defendants submitted a second
motion to dismiss on the ground that the action, based
on fraud, should have been presented within four years
from the issuance of the patent, and not from the
discovery of the fraud
· The court dismiss the complaint, the court said
that from the issuance of the title on March 15, 1953 to
the filing of the complaint on July 26, 1957, more than
four years had already elapsed and so plaintiff's action
has already prescribed
· Appellant now contends that the court a
quo erred in dismissing the complaint by computing the
prescriptive period from the registration of the title in the
office of the register of deeds.
Issue: WON the cause of action of the plaintiff has
already prescribed
Ruling No
We believe, that this case is covered by Article 1456 of
our new Civil Code which provides: "If property is
acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property
comes."
Since it appears that the land in question was obtained
by defendants thru fraudulent representations by means
of which a patent and a title were issued in their name,
they are deemed to hold it in trust for the benefit of the
person prejudiced by it. Here this person is the plaintiff.
There being an implied trust in this transaction, the action
to recover the property prescribes after the lapse of ten
years. Here this period has not yet elapsed. . 1äwphï1.ñët
A person sells land and obtains title thru fraudulent
misrepresentation, he is deemed to hold it trust for the benefit of
the person prejudiced by it, and the action for reconveyance of the
property prescribes after the lapse of 10 years
WHEREFORE, the order appealed from is set aside.
This case is ordered remanded to the court a quo for
further proceedings. No costs
170. Lopez v. CA
FACTS:
Juliana Lopez executed a notarial will whereby she
wished to constitute a trust fund for her paraphernal
properties, denominated as Fideicomiso de Juliana
Lopez Manzano (Fideicomiso) to be administered by
his husband, Jose. If her husband were to die or
renounce the obligation, her nephew, Enrique Lopez
was to become the administrator and executor of
the Fideicomiso. Two-thirds (2/3) of the income of
her paraphernal properties were to answer for the
education of deserving but needy students as
beneficiaries while 1/3 was to shoulder the expenses
and fees of the administrator.
Juliana initiated the probate of her will but she died
before the petition for probate could be heard, so
her husband, Jose, pursued the petition as the
designated executor in the will. Jose then proposed
a partition in the proposal, he included properties
which he alleged were conjugal properties but this
includes six (6) disputed paraphernal properties of
Juliana in Batangas. The court approved the project
of partition, so they ordered new certificates be
issued in favor of Jose as trustee of the Fideicomiso
covering ½ of the properties listed under the project
of partition; and regarding the other half, to be
registered in the name of Jose as heir of Juliana. The
properties which Jose had alleged as registered in
his land and Juliana’s name, including the disputed
lots, were adjudicated to Jose as heir. These were
included from the trust (Fideicomiso). A complaint
for reconveyance was filed by the current
administrator. The complaint essentially alleged that
Jose was able to register in his name the disputed
properties, which were the paraphernal properties of
Juliana. The disputed properties were included in the
inventory as if they formed part of Jose’s estate
when in fact Jose was holding them only in trust for
the trust estate of Juliana.
The RTC dismissed the petition on the ground of
prescription.
The CA denied the appeals filed by both parties.
ISSUE: Whether an implied trust was constituted
over the disputed properties when Jose, the trustee,
registered them in his name.
RULING:
The disputed properties were excluded from the
Fideicomiso at the outset. Jose registered the
disputed properties in his name partly as his
conjugal share and partly as his inheritance from his
wife Juliana, which is the complete reverse of the
claim of the petitioner, as the new trustee, that the
properties are intended for the beneficiaries of the
Fideicomiso. Furthermore, the exclusion of the
disputed properties from the Fideicomiso was
approved by the probate court and subsequently, by
the trial court having jurisdiction over the
Fideicomiso. The registration of the disputed
properties in the name of Jose was actually pursuant
to a court order. The apparent mistake in the
adjudication of the disputed properties to Jose
created a mere implied trust of the constructive
variety in favor of the beneficiaries of Fideicomiso.
ART. 1456. If property is acquired through mistake
or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the
benefit of the person from whom the property
comes.
Implied trusts are either resulting or constructive
trusts. These two are differentiated from each other
as follows:
Resulting trust are based on equitable doctrine that
valuable consideration and not legal title determines
the equitable title or interest and are presumed
always to have been contemplated by the parties.
They arise from the nature of 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.
On the other hand, constructive trusts are created
by the construction of equity in order to satisfy the
demands of justice 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.
A resulting trust is presumed to have been
contemplated by the parties, the intention as to
which is to be found in the nature of their transaction
but not expressed in the deed itself. Specific
examples of resulting trust may be found in Civil
Code particularly Arts. 1448/49/51/52/53.
A constructive trust is created, not by any word
evidencing a direct intention to create a trust, but
by operation of law in order to satisfy the demands
of justice and to prevent unjust enrichment. It is
raised by equity in respect of property, which has
been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it
should be retained by the person holding it.
Constructive trusts are illustrated in Arts.
1450/54/55/56.
The right to seek reconveyance based on an implied
or constructive trust is not absolute. It is subject to
extinctive prescription. An action for reconveyance
based on implied or constructive trust prescribes in
10 years. The period is reckoned from the date of
the issuance of the original certificate of title or TCT.
Since such issuance operates as a constructive
notice of the whole world, the discovery of the fraud
is deemed to have taken place at that time.
The rule that the trustee cannot acquire by
prescription ownership over property entrusted to
him until and unless he repudiates the trust applies
only to express trusts and resulting implied trusts.
However, in constructive implied trusts, prescription
may supervene even if the trustee does not
repudiate the relationship. Necessarily, repudiation
of said trust is not a condition precedent to the
running of the prescriptive period. Thus for the
purpose of counting the ten year prescriptive period
for the action to enforce the constructive trust, the
reckoning point is deemed to be on 15 September
1969 when Jose registered the disputed properties
in his name.
171. Pasiño v. Monterroyo
FACTS:
Laureano Pasino filed an homestead application over
a 24 hectare land Lot no. 2139 located at Panuliran,
Albumo, Iligan City. He claimed to have occupied and
cultivated and cleared the land in 1933. After
Laureano died in April 1952, the Director of lands
issued an order for the issuance of a homestead
patent in favor of him. Laureano’s heirs did not receive
the order and consequently, the land was not
registered under Laureanos name or under that of his
heirs. In 1953, the property was covered by Tax
Declaration in the name of Laureano with Graciana
Herbito (wife of Laureano) as administrator.
On October 1962, Joses Pasino co-heirs executed a
Deed of Quitclaim renouncing their rights and interest
over the land in favor of Jose (son of Laureano). Later,
Jose alienated Lot No. 2139 in favor of his children
(petitioners in this case) who, on January 1994,
simultaneously filed applications for grant of Free
Patent Titles over their respective shares of Lot No.
2139 before the Land Management Bureau of the
Department of Environment and Natural Resources
(DENR). On August 1994, the DENR granted
petitioners applications and issued Original Certificate
of Title (OCT).
Petitioners alleged that their possession of Lot No.
2139 was interrupted on January 1993 when
respondents forcibly took possession of the property.
So the petitioners (heirs of Pasino) filed an action for
recovery of possession and damages.
Respondents Monterroyo alleged that they had been
in open, continuous, exclusive and notorious
possession of Lot No. 2139, by themselves and
through their predecessors-in-interest, since July
1949. They alleged that on July 1949, Rufo Larumbe
(Larumbe) sold Lot No. 2139 to Petra Teves (Petra).
Then, on February 1984, Petra executed a deed of
sale over Lot No. 2139 in favor of Vicente Teves
(Vicente). On February 1985, Vicente executed a
pacto de retro sale over the land in favor of Arturo
Teves (Arturo). In 1992, Arturo sold Lot No. 2139 in
favor of respondents father, Dr. Monterroyo, by virtue
of an oral contract. On January 1995, Arturo executed
a Deed of Confirmation of Absolute Sale of
Unregistered Land in favor of Dr. Monterroyos heirs.
So Jose was not the owner of Lot No. 2139 and as
such, he could not sell the land to his children. They
alleged that petitioners OCTs were null and void for
having been procured in violation of the Public Land
Act. They further alleged that the Land Management
Bureau had no authority to issue the free patent titles
because Lot No. 2139 was a private land.
RTC: rendered in favor of the respondents.
Petitioners appealed.
CA: affirmed RTC’s decision.
ISSUE: WON there was an Implied Constructive trust.
HELD:
YES, Under the principle of constructive trust,
registration of property by one person in his name,
whether by mistake or fraud, the real owner being
another person, impresses upon the title so acquired
the character of a constructive trust for the real owner,
which would justify an action for reconveyance. In the
action for reconveyance, the decree of registration is
respected as incontrovertible but what is sought
instead is the transfer of the property wrongfully or
erroneously registered in anothers name to its rightful
owner or to one with a better right. If the registration of
the land is fraudulent, the person in whose name the
land is registered holds it as a mere trustee, and the
real owner is entitled to file an action for reconveyance
of the property.
In the given case, respondents (Monterroyo) were
able to establish that they have a better right to Lot No.
2139 since they had long been in possession of the
property in the concept of owners, by themselves and
through their predecessors-in-interest. Hence, despite
the irrevocability of the Torrens titles issued in their
names and even if they are already the registered
owners under the Torrens system, petitioners may still
be compelled under the law to reconvey the property
to respondents.
172. Hortizuela v. Tagufa
FACTS: The property involved in this case is a parcel of land
located at District IV, Tumauini, Isabela containing an area of 539
square meters, more or less, and covered by OCT No. P-84609 of
the Registry of Deeds of Isabela. By virtue of the special power of
attorney xxx executed by Mariflor Tagufa Hortizuela, Jovier
Tagufa instituted this case against herein defendants praying for
the peaceful surrender of the above-described property unto
them and further ordering defendant Gregoria Tagufa to
reconvey in plaintiff’s favor the same property which was titled
under her name via fraud.
Before it was titled in the name of Defendant Tagufa, said
property was originally owned by plaintiff’s parents, Spouses
Epifanio Tagufa and Godofreda Jimenez. Although untitled, the
spouses mortgaged the property with the Development Bank of
the Philippines (DBP). For failure to redeem the property, DBP
foreclosed the same and sold it to Atty. Romulo Marquez xxx
who, in turn, sold it back to Runsted Tagufa, husband of
defendant Gregoria Tagufa, on April 4, 2002 xxx using the fund
sent by plaintiff Hortizuela who was in America and with the
agreement that Runsted will reconvey the said property to her
sister when demanded.
However, plaintiff discovered that the same unregistered
property was titled in the name of Gregoria Tagufa under OCT
No. P-84609 of the Registry of Deeds of Isabela xxx. Investigating
further, plaintiff discovered that Gregoria Tagufa was able to title
the said property by virtue of a free patent application before the
Department of Environment and Natural Resources (DENR) and
the execution of a Deed of Extrajudicial Settlement of the Estate
of the late Spouses Leandro Tagufa and Remedios Talosig dated
May 9, 2003 xxx. Plaintiff now seeks to recover possession of the
said property which is presently occupied by Gregoria Tagufa and
her co-defendants and have the same be reconveyed unto them.
MCTC – Dismissed for lack of merit.
RTC – Reversed and Set Aside. MR Denied.
CA – RTC Reversed and Set Aside. Collateral attack on Torrens
Title prohibited.
ISSUE: Whether or not the property was held in trust.
RULING: Petition is granted. CA Reversed and Set Aside. RTC
decision reinstated.
RATIO: What is being sought is the transfer of the property
wrongfully or erroneously registered in another's name to its
rightful owner or to the one with a better right. If the registration
of the land is fraudulent, the person in whose name the land is
registered holds it as a mere trustee, and the real owner is
entitled to file an action for reconveyance of the property. The
fact that Gregoria was able to secure a title in her name does not
operate to vest ownership upon her of the subject land. The fact
that Gregoria was able to secure a title in her name does not
operate to vest ownership upon her of the subject land. Its
issuance in favor of a particular person does not foreclose the
possibility that the real property may be co-owned with persons
not named in the certificate, or that it may be held in trust for
another person by the registered owner.
Furthermore, respondent’s argument that the overriding reason
why Hortizuela chose to file a complaint for reconveyance and
recovery of possession was that she failed to avail of the remedy
provided under Section 38 of Act 496 within the prescribed
period of one (1) year, counted from the issuance of the patent
by the government, is weak. As was similarly held in Cervantes v.
CA, with the land obtained by respondent Gregoria through
fraudulent machinations by means of which a free patent and a
title were issued in her name, she was deemed to have held it in
trust for the benefit of Hortizuela who was prejudiced by her
actions. Article 1456 provides:
ARTICLE 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property comes.
A fraudulently acquired free patent may only be assailed by the
government in an action for reversion pursuant to Section 101 of
the Public Land Act.
In Sherwill Development Corporation v. Sitio Sto. Niño Residents
Association, Inc., this Court pointed out that:
x x x It is to the public interest that one who succeeds in fraudulently
acquiring title to a public land should not be allowed to benefit
therefrom, and the State should, therefore, have an even existing
authority, thru its duly-authorized officers, to inquire into the
circumstances surrounding the issuance of any such title, to the end that
the Republic, thru the Solicitor General or any other officer who may be
authorized by law, may file the corresponding action for the reversion of
the land involved to the public domain, subject thereafter to disposal to
other qualified persons in accordance with law. In other words, the
indefeasibility of a title over land previously public is not a bar to an
investigation by the Director of Lands as to how such title has been
acquired, if the purpose of such investigation is to determine whether or
not fraud had been committed in securing such title in order that the
appropriate action for reversion may be filed by the Government.
The foregoing rule is, however, not without exception. A
recognized exception is that situation where plaintiff-claimant
seeks direct reconveyance from defendant of public land
unlawfully and in breach of trust titled by him, on the principle
of enforcement of a constructive trust. This was the ruling in
Larzano v. Tabayag, Jr., where it was written:
A private individual may bring an action for reconveyance of a parcel of
land even if the title thereof was issued through a free patent since such
action does not aim or purport to re-open the registration proceeding
and set aside the decree of registration, but only to show that the person
who secured the registration of the questioned property is not the real
owner thereof.
The fact that petitioner was able to secure a title in her name did
not operate to vest ownership upon her of the subject land.
Registration of a piece of land under the Torrens System does not
create or vest title, because it is not a mode of acquiring
ownership. A certificate of title is merely an evidence of
ownership or title over the particular property described therein.
It cannot be used to protect a usurper from the true owner; nor
can it be used as a shield for the commission of fraud; neither
does it permit one to enrich himself at the expense of others. Its
issuance in favor of a particular person does not foreclose the
possibility that the real property may be co-owned with persons
not named in the certificate, or that it may be held in trust for
another person by the registered owner. [RTC]
173. Home Guaranty Corp. v. La Savoje Dev. Corp.
HOME GUARANTY CORPORATION, Petitioner, v. LA
SAVOIE DEVELOPMENT CORPORATION, Respondent.
Trustor – La Savoie Trustee – Planters Development
Bank Beneficiaries – Holders of the LSDC certificates
FACTS:
La Savoie Development Corporation (La Savoie) is a
domestic corporation engaged in the business of real
estate development, subdivision and brokering. It had
subdivision and housing projects in several areas that
were collectively referred to as the “La Savoie Project”.
The development and implementation of the “Project”
was to be funded through the issuance and sale of asset
participation certificates known as La Savoie
Development Certificates. Planters Development Bank
was specified to be a nominal issuer only of all LSDCs
and perform the functions and responsibilities of a
trustee as what has been stated in the Trust Agreement.
The LSDC’s are backed and secured by the asset pool
consisting of said real estate properties and the products
and results of their planned development.
La Savoie has agreed to convey the real estate
properties of the “Project” to a trustee to form the La
Savoie Project Asset Pool which shall be held by the
trustee for the pro rata and pro indiviso benefit of the
holders of the LSDCs as defined in the trust agreement.
La Savoie also establishes a trust, for purposes of this
securitization and formation of the corresponding Asset
pool, out of the properties pertaining to the PROJECT
development and operation, and accordingly does hereby
convey, assign and deliver all its rights and interests in
the real estate properties identified and described
through their respective transfer certificates of title
(TCTs).
As per the trust agreement, Planters Development Bank
was named trustee of the Asset pool.
Apart from the Asset Pool, the LSDC certificates were
also secured by a guaranty. The guaranty was
referenced in the Trust Agreement.
Home Insurance and Guaranty Corporation is the
guarantor of the said certificates. It provides guaranty
coverage in accordance with its policies and as provided
for in its Contract of Guaranty executed by the parties.
The Trust Agreement provides that in the event that a
call is made on Home Guaranty Corporation for its
guaranty, Planters Development Bank shall convey to
the former the Asset Pool:
Section 3.4. Conveyance to HIGC. Express authority is
hereby granted by the LANDOWNER/DEVELOPER to the
TRUSTEE that in the event of call upon the HIGC
guaranty for unredeemed LSDCs and in order to effect
the redemption of the same by the latter, to make the
absolute conveyance to HIGC of the entire Asset Pool,
subject to the reservations regarding joint-venturers
[sic] interests as defined in Section 3.1, a and b above
and subject further to the provision of the
aforementioned Contract of Guaranty.
This conveyance shall be on the strength of the special
power of attorney executed by La Savoie in favor of
Planters Development Bank, in accordance with Section
2.1.6 of the Trust
Section 2.1. - The LANDOWNER/DEVELOPER shall:
2.1.6 Execute and deliver to the TRUSTEE an irrevocable
Special Power of Attorney a Secretary's Certificate per
enclosed Annex G giving the TRUSTEE the full power and
authority to make the absolute conveyance of the entire
LSP Asset Pool in favor of the HIGC in the event of call
upon the HIGC guaranty for unredeemed LSDCs and in
order to effect the redemption of the same by the HIGC
in accordance with the provisions of the Contract of
Guaranty.
On Home Guaranty Corporation's guaranty, Section 12 of
the Contract of Guaranty entered into by Home Guaranty
Corporation, La Savoie and Planters Development Bank
provided for the events in which Home Guaranty
Corporation may be called to pay for the LSDC
certificates.
Section 13 of the Contract of Guaranty provides for how
guaranty claims are to be processed and paid by Home
Guaranty Corporation. Likewise, it echoes Section 3.4 of
the Trust Agreement in providing for transfer of the
Asset Pool in the event of a call on the guaranty.
With the onset of the Asian financial crisis, La Savoie
found itself unable to pay its obligations to its creditors.
Thus, La Savoie filed before the Regional Trial Court,
Makati City6 a "petition for the declaration of state of
suspension of payments with approval of proposed
rehabilitation plan under the Interim Rules of Procedure
on Corporate.
It is not disputed that La Savoie defaulted in the
redemption and in the payment of interest on the LSDC
certificates. It is also settled that a call was made on
Home Guaranty Corporation to pay for the LSDC
certificates, pursuant to the provisions of the Trust
Agreement and the Contract of Guaranty. However, as
acknowledged by Home Guaranty Corporation, any
payment that it could have made was "overtaken"79by
the filing of La Savoie's Petition for Rehabilitation.
RTC: Issued a stay order saying "the enforcement of all
claims, whether for money or otherwise, and whether
such enforcement is by court action or otherwise, against
[La Savoie], its guarantors and sureties not solidarity
liable with it."80 It also "prohibited [La Savoie] from
making any payment of its liabilities outstanding as of
the date of the filing of the petition.
Issued another Order denying due course to La Savoie's
Petition for Rehabilitation and lifting the Stay Order. The
trial court reasoned that the "findings of sufficiency in
the form and substance of the petition for which a stay
order was issued has been flawed"and that "[i]t cannot
countenance a situation such as this where the petitioner
files a petition on the basis of inaccurate or unverifiable
allegations and false representations." It noted that per
the Rehabilitation Receiver's Report, there were "various
inaccuracies in the material allegations of the petition
and its annexes."33 Several documents "to verify other
material statements made therein" were also lacking. It
added that La Savoie "has not presented any concrete
and feasible plan on how it will be able to secure
additional funds to continue with the development of its
raw land and on-going joint-venture projects."
CA: Reversed the decision. Reinstated the Stay order,
gave due course to the petition for rehabilitation, and
remanded the case back to the trial court for further
proceedings.
La Savoie "convincingly showed that it could undertake
to market its projects through [the] Pag-Ibig Overseas
Program, sell the existing inventories of unsold
subdivision lots and use the un-remitted collections due
to HGC which will be converted as additional loan to fund
its on-going projects."45Regarding Home Guaranty
Corporation's payment of the guaranty call, the Court of
Appeals noted that it was made after the Petition for
Rehabilitation had been brought by La Savoie and after
the issuance of the Stay Order; thus, Home Guaranty
Corporation had no right to make such payment.
Home Guaranty Corporation filed before this court the
present Petition for Review on Certiorari under Rule 45 of
the 1997 Rules of Civil Procedure.
It asserts 'that the properties comprising the Asset Pool
should be excluded from the rehabilitation proceedings
as these have now been "removed from the oominion"47
of La Savoie and have been conveyed and assigned to it.
It underscores that the transfer made to it by Planters
Development Bank was made after the Stay Order had
been lifted, per the Regional Trial Court's October 1,
2003 Order.
La Savoie filed its Comment It claimed that the supposed
assignment and conveyance to Home Guaranty
Corporation was ineffectual considering that "at the time
of the guaranty call, the Stay Order dated 04 June 2003
was admittedly in effect. La Savoie faulted Home
Guaranty Corporation for supposedly not adducing proof
of the transfer effected to it by Planters Development
Bank on the strength of its payment on the guaranty. It
added that, even assuming there was full payment and
that the Deed of Assignment and Conveyance was
executed, "the Subject Properties remained within the
jurisdiction of the [Regional Trial Court] even after the
lifting of the Stay Order dated 04 June 2003"50 and that,
as a result, "any contract or document affecting title to
the Subject Properties is also subject to the rehabilitation
proceedings pending with the [trial court]."51 It also
asserted that by paying the guaranty, Home Guaranty
Corporation effectively became its creditor. Excluding the
properties comprising the Asset Pool from the
rehabilitation proceedings would then be tantamount to
giving preference to one creditor, something which is
prohibited in rehabilitation proceedings.
ISSUE: Whether the conveyance to Home Guaranty
Corporation of the properties comprising the Asset Pool
was valid and effectual.
HELD: NO.
During rehabilitation receivership, the assets are held in
trust for the equal benefit of all creditors to preclude one
from obtaining an advantage or preference over another
by the expediency of an attachment, execution or
otherwise. For what would prevent an alert creditor,
upon learning of the receivership, from rushing
posthaste to the courts to secure judgments for the
satisfaction of its claims to the prejudice of the less alert
creditors.
As between creditors, the key phrase is "equality is
equity. When a corporation threatened by bankruptcy is
taken over by a receiver, all the creditors should stand
on an equal footing. Not anyone of them should be given
any preference by paying one or some of them ahead of
the others. This is precisely the reason for the
suspension of all pending claims against the corporation
under receivership. Instead of creditors vexing the courts
with suits against the distressed firm, they are directed
to file their claims with the receiver who is a duly
appointed officer of the SEC.
If, following this payment and while La Savoie remained
to be not under receivership, a valid transfer of the
properties comprising the Asset Pool was made in favor
of Home Guaranty Corporation, the properties would
then no longer be under the dominion of La Savoie. They
would thus be beyond the reach of rehabilitation
proceedings and no longer susceptible to the rule against
preference of creditors. However, we find that the
transfer made to Home Guaranty Corporation was
ineffectual.
Viewed solely through the lens of the Trust Agreement
and the Contract of Guaranty, the transfer made to
Home Guaranty Corporation on the strength of the Deed
of Conveyance appears valid and binding. However, we
find that its execution is in violation of a
fundamental principle in the law governing credit
transactions. We find the execution of a Deed of
Conveyance without resorting to foreclosure to be
indicative of pactum commissorium. Hence, it is
void and ineffectual and does not serve to vest
ownership in Home Guaranty Corporation.
Art. 2088. The creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose of them.
Any stipulation to the contrary is null and void.
Art. 2137. The creditor does not acquire the ownership
of the real estate for non-payment of the debt within the
period agreed upon.
Every stipulation to the contrary shall be void. But the
creditor may petition the court for the payment of the
debt or the sale of the real property.
In this case, Sections 13.1 and 13.2 of the Contract of
Guaranty call for the "prompt assignment and
conveyance to [Home Guaranty Corporation] of all the
corresponding properties in the Asset Pool" that are held
as security in favor of the guarantor. Moreover, Sections
13.1 and 13.2 dispense with the need of conducting
foreclosure proceedings, judicial or otherwise. Albeit
requiring the intervention of the trustee of the Asset
Pool, Sections 13.1 and 13.2 spell out what is, for all
intents and purposes, the automatic appropriation by the
paying guarantor of the properties held as security. This
is thus a clear case of pactum commissorium. It is null
and void. Accordingly, whatever conveyance was made
by Planters Development Bank to Home Guaranty
Corporation in view of this illicit stipulation is ineffectual.
It did not vest ownership in Home Guaranty Corporation.
This transfer engendered is a constructive trust in
which the properties comprising the Asset Pool are
held in trust by Home Guaranty Corporation, as
trustee, for the trustor, La Savoie.
Trust is the legal relationship between one person having
an equitable ownership in property and another person
owning the legal title to such property, the equitable
ownership of the former entitling him to the performance
of certain duties and the exercise of certain powers by
the latter. Trusts are either express or implied. An
express trust is created by the direct and positive acts of
the parties, by some writing or deed or will or by words
evidencing an intention to create a trust. No particular
words are required for the creation of an express trust, it
being sufficient that a trust is clearly intended.
On the other hand, implied trusts are those which,
without being expressed, are deducible from the nature
of the transaction as matters of intent or which are super
induced on the transaction by operation of law as
matters of equity, independently of the particular
intention of the parties. In turn, implied trusts are either
resulting or constructive trusts. These two are
differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that
valuable consideration and not legal title determines the
equitable title or interest 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. On
the other hand, constructive trusts are created by the
construction of equity in order to satisfy the demands of
justice 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.104 (Emphasis supplied)
Articles 1450, 1454, 1455, and 1456 of the Civil Code
provide examples of constructive trusts:
Art. 1450. If the price of a sale of property is loaned or
paid by one person for the benefit of another and the
conveyance is made to the lender or payor to secure the
payment of the debt, a trust arises by operation of law in
favor of the person to whom the money is loaned or for
whom it is paid. The latter may redeem the property and
compel a conveyance thereof to him.
Art. 1454. If an absolute conveyance of property is made
in order to secure the performance of an obligation of
the grantor toward the grantee, a trust by virtue of law
is established. If the fulfillment of the obligation is
offered by the grantor when it becomes due, he may
demand the reconveyance of the property to him.
Art. 1455. When any trustee, guardian or other person
holding a fiduciary relationship uses trust funds for the
purchase of property and causes the conveyance to be
made to him or to a third person, a trust is established
by operation Of law in favor of the person to whom the
funds belong.
Art. 1456. If property is acquired through mistake
or fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the
benefit of the person from whom the property
comes.
Home Guaranty Corporation acquired the
properties comprising the Asset Pool by mistake or
through the ineffectual transfer (i.e., for being
pactum commissorium) made by the original
trustee, Planters Development Bank.
Two key points are established from the preceding
discussions. First, the Court of Appeals' June 21, 2005
Decision restored La Savoie's status as a corporation
under receivership. Second, with all but a constructive
trust created between Home Guaranty Corporation and
La Savoie, the properties comprising the Asset Pool
remain within the dominion of La Savoie.
On the first point, the restoration of La Savoie's status as
a corporation under receivership brings into operation
the rule against preference of creditors. On the second
point, La Savoie's continuing ownership entails the
continuing competence of the court having jurisdiction
over the rehabilitation proceedings to rule on how the
properties comprising the Asset Pool shall be disposed,
managed, or administered in order to satisfy La Savoie's
obligations and/or effect its rehabilitation.
The cumulative effect of these is that Home Guaranty
Corporation must submit itself, like La Savoie's other
creditors, to how La Savoie's Petition for Rehabilitation
shall be resolved. As a paying guarantor, Home Guaranty
Corporation was subrogated into the rights of La Savoie's
creditors and now stands as the latter's own creditor. It
remains so pending the satisfaction of La Savoie's
obligation and as the void conveyance made to it by
Planters Development Bank failed to terminate in the
creditor-debtor relationship with La Savoie.
V. Rules of Prescription on Trusts
174. Ramos v. Ramos
FACTS: The spouses Martin Ramos and Candida Tanate
died and were survived by their three legitimate children
named Jose, Agustin, and Granada. Martin Ramos was
also survived by his seven natural children named
Anatacia, Timoteo, Modesto, Manuel, Emiliano, Maria, and
Federico.
A special proceeding was instituted in the Court of First
Instance of Negros Occidental for the settlement of the
intestate estate of the said spouses.
A project of partition was submitted. It was signed by the
three legitimate children, Jose, Agustin and Granada; by
the two natural children, Atanacia and Timoteo, and by
Timoteo Zayco in representation of the other five natural
children who were minors. It was sworn to before the
justice of the peace.
It was agreed in the project of partition that Jose Ramos
would pay the cash adjudications to Atanacia, Timoteo
and Manuel, while Agustin Ramos would pay the cash
adjudications to Modesto, Federico, Emiliano and Maria. It
was further agreed that Jose Ramos and Agustin Ramos
would pay their sister, Granada, the sums of P3,302.36
and P14,273.78, respectively.
Judge Richard Campbell, in his "decision" approved the
project of partition as well as the intervention of Timoteo
Zayco as guardian of the five heirs, who were minors. In
an order, Judge V. Nepomuceno asked the administrator
to submit a report, complete with the supporting
evidence, showing that the shared of the heirs had been
delivered to them as required in the decision. In a
manifestation, which was signed by Jose, Agustin,
Granada, Atanacia and Timoteo all surnamed Ramos, and
by Timoteo Zayco, the guardian, and which was sworn to
before the justice of the peace.
Upon their father’s death, his properties were left under
the administration of Rafael Ramos, the younger brother
of their father. Rafael then turned over Hacienda Ylaya to
Agustin Ramos and Hacienda Calaza to Jose Ramos.
Plaintiffs later discovered that the property administered
by their brother Jose had a Torrens Title in the name of
his Widow, Gregoria and daughter, Candida. Plaintiffs did
not intervene in the intestate proceedings for the
settlement of the estate of their brother Jose as they did
not know of it.
It is predicated on the theory that plaintiffs' shares were
held in trust by the defendants. No deed of trust was
alleged and proven.
The defendants denied the existence of a trust.
Plaintiffs brought the suit to CFI Negros Occidental
seeking for the reconveyance in their favor by defendants.
CFI dismissed the complaint on the ground of res judicata.
ISSUE: WON the dismissal on the ground of res judicata
correct.
HELD: Yes. The crucial issue is prescription. With it the
question of res judicata and the existence of a trust are
inextricably interwoven.
There is a rule that a trustee cannot acquire by
prescription the ownership of property entrusted to him,
or that an action to compel a trustee to convey property
registered in his name in trust for the benefit of the cestui
qui trust does not prescribe, or that the defense of
prescription cannot be set up in an action to recover
property held by a person in trust for the benefit of
another, or that property held in trust can be recovered
by the beneficiary regardless of the lapse of time. That
rule applies squarely to express trusts.
The rule of imprescriptibility of the action to recover
property held in trust may possibly apply to resulting
trusts as long as the trustee has not repudiated the trust.
The rule of imprescriptibility was misapplied to
constructive trusts.
Acquisitive prescription may bar the action of the
beneficiary against the trustee in an express trust for the
recovery of the property held in trust where (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
conclusive.
With respect to constructive trusts, the rule is different.
The prescriptibility of an action for reconveyance based on
constructive trust is now settled. Prescription may
supervene in an implied trust.
The plaintiffs did not prove any express trust in this case.
The expediente of the intestate proceeding, particularly
the project of partition, the decision and the manifestation
as to the receipt of shares negatives the existence of an
express trust. Those public documents prove that the
estate of Martin Ramos was settled in that proceeding and
that adjudications were made to his seven natural
children. A trust must be proven by clear, satisfactory,
and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite
declarations. As already noted, an express trust cannot be
proven by parol evidence. Neither have the plaintiffs
specified the kind of implied trust contemplated in their
action. We have stated that whether it is a resulting or
constructive trust, its enforcement may be barred by
laches.
175. Diaz v. Gorricho and Aguado
FACTS:
Spouses Francisco Diaz and Maria Sevilla
originally owned Lot Nos. 1941 and 3073. Francisco Diaz
died in 1919, survived by his widow Maria Sevilla and their
three children — Manuel, Lolita and Constancia. In 1935,
defendant Carmen J. Gorricho filed an action against
Sevilla, wherein a writ of attachment was issued upon the
shares of Sevilla in said lots, which were later on sold at a
public auction to Gorricho. Since Sevilla failed to redeem
the lots in one year, the acting provincial sheriff executed
a final deed of sale in favor of Gorricho; however, the
sheriff wrongfully conveyed to Gorricho the whole of the
two lots, instead of only the half-interest of Sevilla therein.
In 1951, Sevilla died. A year later, Sevilla’s
children, plaintiffs Manuel, Constancia and Lolita filed an
against defendants Gorricho and her husband Francisco
Aguado, compelling the latter to execute in their favor a
deed of reconveyance over an undivided one-half interest
over the two lots – the share of their deceased father,
Francisco Diaz, which was illegally conveyed by the
provincial sheriff to Gorricho.
The siblings Diaz contend that Gorricho acquired
their father’s half of the disputed property through an
error of the provincial sheriff, so it was subject to an
implied trust, under Article 1456 of the New Civil Code.
Furthermore, they allege that since the trust is continuing
and subsisting, the siblings Diaz may compel
reconveyance of the property despite the lapse of time,
because prescription does not run against titles registered
under Act 496.
Defendants denied and alleged that plaintiffs'
action had prescribed. The trial court held that while a
constructive trust in siblings Diaz’ favor arose when
defendant Gorricho took advantage of the error of the
provincial sheriff in conveying to her the whole of the lots
and obtained title in herself, the action of plaintiffs was,
however, barred by laches and prescription. So, the
plaintiffs appealed.
ISSUES:
1. Whether or not a constructive trust was created in favor
of the siblings Diaz.
2. Whether or not the action for reconveyance of the two
lots to siblings Diaz was barred by laches.
3. Whether or not the action for reconveyance of the two
lots to siblings Diaz was barred by prescription.
HELD:
1. YES. Art. 1456 of the NCC provides that “if property is
acquired through mistake or fraud, the person obtaining
it is, by force of law, considered a trustee of an implied
trust for the benefit of the person from whom the property
comes.” Since Gorricho acquired the whole of the disputed
lots through the error of the sheriff, when in fact Gorricho
was only entitled to the half of it, then a constructive trust
was created in favor of the siblings Diaz.
2. YES. The action for reconveyance of the two lots to
siblings Diaz was barred by laches.
Express trusts are created by intention of the
parties, while implied or constructive trusts are
exclusively created by law and are not trusts in their
technical sense. The express trusts disable the trustee
from acquiring for his own benefit the property committed
to his management or custody, at least while he does not
openly repudiate the trust, and makes such repudiation
known to the beneficiary. Thus, the old Code of Civil
Procedure (Act 190) declared that rules on adverse
possession do not apply to "continuing and subsisting"
(i.e., unrepudiated) trusts.
In the case of an express trust, a beneficiary is
entitled to rely upon the fidelity of the trustee. No laches
exists until a reasonable time after a beneficiary is notified
of a breach or other cause of suit against the trustee.
However, laches exists where suit is not commenced
within such reasonable time.
In constructive trusts, laches constitutes a bar to
actions to enforce the trust, and repudiation is not
required, unless there is concealment of the facts giving
rise to the trust. Time runs from the moment that the law
creates the trust, which is the time when the cause of
action arises. But laches does not exist while the trustee,
fraudulently and successfully conceals the facts giving rise
to the trust, although the concealment must be
adequately pleaded by the plaintiff in a suit to declare a
trust, where the delay is apparent on the face of his
pleading.
The reason for the difference in treatment is that
on one hand, in express trusts, the delay of the beneficiary
is directly attributable to the trustee who holds the
property for the former, thus creating a fiduciary relation
between them. The trustee's possession is, therefore, not
adverse to the beneficiary, until and unless the latter is
made aware that the trust has been repudiated.
On the other hand, in constructive trusts, there
is neither promise nor fiduciary relation; the trustee does
not recognize any trust and has no intent to hold for the
beneficiary; therefore, the beneficiary is not justified in
delaying action to recover his property. It is his fault if he
delays; hence, he may be estopped by his own laches.
Since the cause of action of siblings Diaz to attack
the sheriff's deed and cancel the transfer certificates of
title issued to spouses Gorricho and Aguado accrued since
its issuance and recording in 1937, and plaintiffs had
allowed fifteen (15) years to elapse before seeking
remedy in 1952, then the dismissal of the case must be
upheld. Even considering that Constancia only became of
age in 1939, more than sufficient time (thirteen years)
had been allowed to elapse to extinguish appellant's
action.
3. YES. Under the old Code of Civil Procedure in force at
the time, the longest period of extinctive prescription was
only ten years. Since 15 years lapsed from the time the
cause of action arose before plaintiffs sought for remedy,
then their action for reconveyance was barred by
prescription.
176. Heirs of Tranquilino Labiste v. Heirs of Jose Labiste
DOCTRINE:
If a trust relationship has been created between the
parties whether expressly or impliedly, prescription does
not run until the said trust is repudiated.
FACTS:
● The case involved a parcel of Friar Land with an
area of 13,308 square meters known at Cebu City
which was purchased from the Bureau of Lands
way back on 1919 by Emilio in his own behalf and
on behalf of his brothers and sisters who were the
heirs of Jose. (Collectively known as Heirs of Jose)
● The money that was used to purchase the land
came from both Emilio and their Uncle Lino so
after full payment of the purchase price but prior
to the issuance of the deed of conveyance by the
Bureau of Lands, Emilio executed an Affidavit in
Spanish dated on 1923 affirming that he, as one
of the heirs of Jose and his Uncle Lino then co-
owned the lot. Thereafter or on 1924 the Bureau
of Lands executed the Deed of Conveyance in
favor of Emilio and his siblings, or the heirs of Jose
by virtue of which a TCT was issued by the
Register of Deeds.
● On 1928, the lot was subdivided by Deputy Land
Surveyor, Engineer Bunag into two (2) equal parts
with an area of 6,664 square meters for Lino and
an area of 6,664 square meters for Emilio and the
other heirs of Jose. This was approved by the
Director of Lands on 1928.
● On 1939, the heirs of Lino purchased the share of
the lot of the heirs of Jose as evidenced by the
Calig-onan sa Panagpalit executed by the parties
in Visayan dialect. So the heirs of Lino
immediately took possession of the entire 13,308
sqm lot.
● When World War II broke out however, Lino’s
heirs fled the city. When they came back after the
war, they found their homes and possessions and
the records in the government offices burned and
destroyed with squatters occupying their entire
property.
● Lino’s heirs subsequently learned that one of the
heirs of Jose filed a petition for reconstitution of
title over the Lot on September 17, 1993. So in
October 1993 they opposed the said petition but
later on withdrew the same on the basis of a
compromise agreement they entered with the
heirs of Jose to expedite the reconstitution of title.
So on December 14, 1994, the Register of
Deed issued the reconstituted Title in the names
of the heirs of Jose.
● The heirs of Jose however did not honor the
compromise agreement. So on January 13, 1995,
the heirs of Lino filed a complaint for annulment
of title, re-conveyance of property with damages.
Jose’s heirs however said that the action of Lino’s
heirs had long prescribed or barred by laches.
RTC ruled in favor of petitioners.
After evaluating the documents presented by petitioners,
the RTC found that they are genuine and authentic as
ancient documents and that they are valid and
enforceable.
Moreover, it held that the action had not prescribed as the
complaint was filed about a year after the reconstitution
of the title by respondents. The judicial reconstitution was
even opposed by petitioners until a compromise
agreement was reached by the parties and approved by
the RTC which ordered the reconstitution.
The RTC further held that the reconstituted title did not
give any more right to respondents than what their
predecessors-in-interest actually had as it is limited to the
reconstitution of the certificate as it stood at the time of
its loss or destruction.
CA while affirming petitioners right to the property,
nevertheless reversed the RTCs decision on the ground
of prescription and laches. It affirmed the RTCs findings
that the Affidavit and the Calig-onan sa Panagpalit are
genuine and authentic, and that the same are valid and
enforceable documents. Citing Article 1144 of the Civil
Code, it held that petitioners cause of action had
prescribed for the action must be brought within ten (10)
years from the time the right of action accrues upon the
written contract which in this case was when petitioners
predecessors-in-interest lost possession over the property
after World War II. Also, the lapse of time to file the action
constitutes neglect on petitioners part so the principle of
laches is applicable.
ISSUE:
a) WON Lino’s heirs had long prescribed or barred by
laches.
b) How Express Trusts are created.
RULING:
a) No. The rules on prescription and the principle of
laches cannot be applied here because of the
existence of a trust relationship.
b) Trust is the right to the beneficial enjoyment of
property, the legal title to which is vested in
another. It may either be express or implied. An
express trust is created by direct and positive acts
of the parties, by some writing or deed or will. No
particular words are required for the creation of
an express trust it being sufficient that a trust is
clearly intended (Article 144, Civil Code). An
implied trust comes into being by operation of law.
The Affidavit of Emilio which is genuine and
authentic beyond cavil is in the nature of an
express trust. In said affidavit, Emilio confirmed
that Lot 1054 bought in his name was co-owned
by him as one of the heirs of Jose, and his uncle
Lino. And by agreement, each of them has been
in possession of half of the property as
corroborated by the subdivision plan prepared by
Engineer Bunag and approved by the Bureau of
Lands. As such prescription and laches will run
only if it is shown that: (a) the trustee has
performed unequivocal acts of repudiation
amounting to an ouster of the beneficiary; (b)
such positive acts of repudiation have been made
known to the beneficiary, and (c) the evidence
thereon is clear and conclusive.
Jose’s heirs cannot rely on the fact that the
Torrens title was issued in their names. Trustees
who obtain a Torrens title over a property held in
trust by them for another cannot repudiate the
trust by relying on the registration. The only act
that can be construed as repudiation was when
one of Jose’s heirs filed the petition for
reconstitution in October 1993. And since Lino’s
heirs filed their complaint in January 1995 their
cause of action has not yet prescribed.
Neither can laches be attributed to them. Laches
cannot be used to defeat justice or perpetuate
fraud and injustice. Neither should it be applied to
prevent rightful owners of a property from
recovering what has been fraudulently registered
in the name of another.
However with respect to the other half covered by
the private Calig-onan sa Pagpapalit, the heirs of
Lino should have filed an action to compel Jose’s
heirs to execute a public deed of sale. Since this
document was executed on October 18, 1939,
such action has already prescribed because
actions upon written contract must be filed within
10 years only. So only one-half can be recovered
by Lino’s heirs or 6,664 sqm shall be retained by
Jose’s heirs.
177. Escay v. CA
Escay v CA
Facts:
Emilio and Jose Escay, now both deceased, were
brothers. In his lifetime, Emilio mortgaged his
properties now in question, to the Philippine National
Bank. He died in 1924 before he could pay his
obligation with the bank which had mounted. The bank
then filed in 1930 a foreclosure suit against the estate
of Emilio represented by the administrator, Atty.
Eduardo Arboleda. Pending the said suit, on April 28,
1933, a contract hereafter referred to as original
contract was entered among the Philippine National
Bank, Jose Escay, Sr., and the administrator, Atty.
Arboleda, under which Jose assumed the mortgage
indebtedness of his deceased brother Emilio. This was
agreed to by Magdalena Vda. de Escay, widow of
Emilio, in her own behalf and as guardian ad litem of
their children. When it was discovered that the original
contract failed to state the transfer of the ownership of
the properties in question to Jose Escay, Sr., in
consideration of his assumption of the mortgage
indebtedness of Emilio (subject to the right of
repurchase of the heirs of Emilio within five (5) years
after the mortgage indebtedness had been fully paid),
a supplementary contract was entered into among the
Philippine National Bank, the administrator, Atty.
Arboleda and Jose Escay, Sr. This was approved by
the probate court taking cognizance of the estate of
the deceased Emilio Escay in its order of February 24,
1934. In 1941, Magdalena Vda. de Escay, Roberto
and the other children filed a complaint against Jose
Escay, Sr. and Atty. Arboleda (administrator of the
deceased Emilio), for the recovery of the ownership
and possession of the properties in question. This
case was provisionally dismissed after defendants
have answered, upon motion of the parties on July 24,
1944.
Issue:
Whether or not the Court erred in holding of the
properties in trust (implied) for the heirs of Emilio
Escay.
Held:
Petitioners contend that since the titles over the
properties in question were transferred to the name of
respondents' predecessor-in-interest, Jose Escay, Sr.,
by fraudulent means, an implied trust was created
between the testate estate of Emilio Escay and Jose
Escay, Sr. under which, by operation of law, Jose
Escay, Sr. became a trustee of the properties in
question in favor of the heirs of Emilio Escay as the
cestuique trust; consequently, the respondents are
duty bound to reconvey the properties in question to
the petitioners whose right to recover the properties
does not prescribe. Petitioners also argue that the
original contract, Exhibit "F" and the supplementary
contract, Exhibit "I", created in their favor an express
trust because the true intention of the parties was that
only the possession and administration of the
properties of petitioners in question should be
transferred to respondents, predecessor-in-interest
Jose Escay, Sr., which properties he was supposed to
hold in trust for the petitioners until such time as he
shall have fully liquidated the obligations of the testate
estate of Emilio Escay, and since an action based on
an express trust does not prescribe the right of
petitioners to recover the properties in question from
the respondents does not prescribe and therefore the
respondents can be ordered to reconvey the
properties in question to petitioners. The
prescriptibility of an action for reconveyance based on
implied or constructive trust, is now a settled question
in this jurisdiction. It prescribes in ten years.
178. Government v. Abadilla
See #122/108 for the facts of the case
Issue: WON Lopez has acquired the title through
prescription
Held: Yes. As to lot No. 3470 little need be said. It may
be noted that though the Statute of Limitation does not
run as between trustee and cestui que trust as long as
the trust relations subsist, it may run as between the
trust and third persons. Contending that the
Colongcolong land was community property of her
marriage with Luis Palad and that lot No. 3470
represented her share thereof, Dorotea Lopez has
held possession of said lot, adverse to all other
claimants, since the year 1904 and has now acquired
title by prescription.
179. Tong v. Go Tiat Kun
Parties (implied trust - resulting trust)
Trustor - Spouses Juan Tong (Juan Tong), single proprietor
of “Juan Tong Lumber”. Survived by children. 9/10 are
petitioners.
Trustee - Luis Juan Tong Sr. (Luis Sr.). child of Juan Tong.
Survived by spouse Go Tiat Kun and children as
respondents.
Beneficiary - Juan Tong Lumber, Inc.
FACTS
1. Sometime in 1957, Juan Tong had a meeting with
all his children to inform them of his intention to
purchase Lot 998 to be used for the family’s lumber
business called “Juan Tong Lumber.” However,
since he was a Chinese citizen and was disqualified
from acquiring the said lot, the title to the property
will be registered in the name of his eldest son, Luis,
Sr., who at that time was already of age and was
the only Filipino citizen among his children.
2. On May 11, 1957, Juan Tong bought Lot 998 and
accordingly a TCT was issued by the Register of
Deeds in the name of Luis, Sr.
3. December 8, 1978, the single proprietorship of
Juan Tong Lumber was incorporated to Juan Tong
Lumber, Inc.
4. Luis Sr. died in 1981, while his parents Juan Tong
and spouse on 1984 and 1990 respectively.
5. When Luis Sr. died, his surviving heirs (spouse and
children) claimed ownership of Lot 998. Executed
a Deed of Extrajudicial Settlement of Estate of Luis,
Sr., adjudicating unto themselves Lot 998 and
claiming that the said lot is the conjugal property of
Luis, Sr., and his wife. Subsequently they
subdivided the lot into lot 998-A and lot 998-B and
new titles were issued.
6. Lot 998-B which belonged to Luis Jr. was sold to
Fine Rock Development Corporation (FRDC),
which in turn sold the same to Visayas Goodwill
Credit Corporation (VGCC).
7. It was only after the petitioners received a letter
from VGCC, on August 31, 1995, that they
discovered about the breach of the trust agreement
committed by the respondents.
8. The 9 remaining children of Juan Tong (petitioners)
filed an action for Annulment of Sales, Titles,
Reconveyance and Damages of Lot 998-B
docketed as Civil Case No. 22730 against Luis, Jr.,
FRDC and VGCC. On March 6, 1997, the trial court
ruled in favor of the petitioners which were later
affirmed by the CA and SC thus lot 998-B was
reconvened and issued back to the name of Luis
Sr.
9. Then, on February 24, 2001, Go Tiat Kun executed
a Deed of Sale of Undivided Interest over Lot 998-
A in favor of her children resulting to an issuance of
a new TCT.
10. Petitioners, filed for Nullification of Titles, and
Deeds of Extrajudicial Settlement and Sale and
Damages claiming as owners of Lot 998-A.
11. RTC rendered its judgment in favor of the
petitioners Juan Tong.
1. Ruled that there was an implied resulting
trust between Juan Tong, Luis, Sr., the
petitioners and the respondents, over Lot
998. The trial court found that Luis Sr. was
 a mere trustee, and not the owner of Lot
998, and the beneficial interest over said
property remained in Juan Tong and
subsequently in the Juan Tong Lumber, Inc
12. CA reversed and set aside the trial court’s decision,
and dismissed the complaint for lack of merit.
1. Ruled that an express trust was created
because there was a direct and positive act
from Juan Tong to create a trust. And when
an express trust concerns an immovable
property or any interest therein, it may not
be proved by parol or oral evidence, but
must be proven by some writing or deed.
2. Also ruled that even granting that an
implied resulting trust was created; the
petitioners are still barred by prescription
because the said resulting trust was
terminated upon the death of Luis, Sr. and
was then converted into a constructive
trust. Since in an action for reconveyance
based on a constructive trust prescribes in
ten years from the issuance of the Torrens
title over the property, counting from the
death of Luis, Sr. in 1981, the action has
already prescribed.
13. Hence this petition for review on certiorari.
ISSUE
Whether or not
1. An implied resulting trust was constituted over Lot
998 when Juan Tong purchased the property and
registered it in the name of Luis, Sr.?
2. Parol evidence be used as proof of the
establishment of the trust?
3. The petitioners’ action barred by prescription,
estoppel and laches?
HELD
1. Yes an implied resulting trust was constituted over
Lot 998.
The principle of a resulting trust is based on the equitable
doctrine that valuable consideration and not legal title
determines the equitable title or interest 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.
The Supreme Court is in conformity with the finding of the
trial court that an implied resulting trust was created as
provided under the first sentence of Article 1448 which is
sometimes referred to as a purchase money resulting trust,
the elements of which are:
(a) an actual payment of money, property or
services, or an equivalent, constituting valuable
consideration; and
(b) such consideration must be furnished by the
alleged beneficiary of a resulting trust.
Here, the petitioners have shown that the two elements are
present in the instant case. Luis, Sr. was merely a trustee
of Juan Tong and the petitioners in relation to the subject
property, and it was Juan Tong who provided the money for
the purchase of Lot 998 but the corresponding transfer
certificate of title was placed in the name of Luis, Sr.
Note also that at the outset, the issues posited in this case
are not novel because in Civil Case involving Lot 998-B
which forms part of Lot 998, the trial court already found that
said lot was held in trust by Luis, Sr. in favor of his siblings
by virtue of an implied resulting trust. The trial court’s
decision was then affirmed by the CA and the SC. Thus, Lot
998-A, the subject of this instant case, and Lot 998-B, are
similarly situated as they comprise the subdivided Lot 998,
the property which in its entirety was held in trust by Luis,
Sr. in favor of his siblings.
(2) Yes parole evidence may be used as proof of the
establishment of the resulting implied trust.
An implied trust is neither dependent upon an express
agreement nor required to be evidenced by writing, Article
1457 of our Civil Code authorizes the admission of parol
evidence to prove their existence. Parol evidence that is
required to establish the existence of an implied trust
necessarily has to be trustworthy and it cannot rest on
loose, equivocal or indefinite declarations.”
“Intention — although only presumed, implied or supposed
by law from the nature of the transaction or from the facts
and circumstances accompanying the transaction,
particularly the source of the consideration — is always an
element of a resulting trust and may be inferred from the
acts or conduct of the parties rather than from direct
expression of conduct. Certainly, intent as an indispensable
element is a matter that necessarily lies in the evidence, that
is, by evidence, even circumstantial, of statements made by
the parties at or before the time title passes.
(3) No, petitioners action is not barred by prescription.
As a rule, implied resulting trusts do not prescribe except
when the trustee repudiates the trust. Further, the action to
reconvey does not prescribe so long as the property stands
in the name of the trustee. To allow prescription would be
tantamount to allowing a trustee to acquire title against his
principal and true owner.
180. Heirs of Candelaria v. Romero
FACTS: Ester Candelaria filed a complaint in her own
behalf and in representation of the other alleged heirs of
Emilio Candelaria, alleging in substance
- that sometime prior to 1917 Emilio and his
brother Lucas Candelaria bought each a lot in the
Solokan Subdivision on installment basis;
 - Lucas paid the first two installments
corresponding to his lot, but faced with the inability of
meeting the subsequent installments because of
sickness which caused him to be bedridden, he sold
his interest therein to his brother Emilio, who then
reimbursed him the amount he had already paid,
- Lucas thereafter continued payment of the
remaining installments until the whole purchase price
had been fully satisfied;
- although Lucas had no more interest over the
lot, the subsequent payments made by Emilio until
fully paid were made in the name of Lucas, with the
understanding that the necessary documents of
transfer will be made later, the reason that the
transaction being from brother to brother";
- in 1918 a TCT for said lot was issued by the
register of deeds of Manila in the name of "Lucas
Candelaria married to Luisa Romero";
- Ester further alleged that Lucas held the title
to said lot merely in trust for Emilio and that this fact
was acknowledged not only by him but also by the
defendants (his heirs) on several occasions;
- that Lucas' possession of the lot was merely
tolerated by Emilio and his heirs;
- from the time Emilio bought the lot from his
brother, Lucas had been collecting all its rents for his
own use as financial aid to him as a brother in view of
the fact that he was bedridden without any means of
livelihood and with several children to support,
although from 1926, when Emilio was confined at the
Culion Leper Colony up to his death, Lucas had been
giving part of the rents to Fortunata Bautista, the
second wife of Emilio, in accordance with the latter's
wishes;
Lucas died in August, 1942, survived by the present
defendants, who are his spouse Luisa Romero and several
children; and that said defendants are still in possession
of the lot, having refused to reconvey it to plaintiff despite
repeated demands.
The defendants filed a motion to dismiss, alleging that
plaintiff's cause of action is unenforceable under the new
Civil Code and that the action has already prescribed.
RTC: Dismissed the complaint.
ISSUE: HAS THE CAUSE OF ACTION BY PLAINTIFF-
APPELLANT ALREADY PRECSRIBED?
HELD: NO.
Constructive or implied trusts may be barred by lapse of
time. The rule in such trusts is that laches constitutes a
bar to actions to enforce the trust, and repudiation is not
required, unless there is a concealment of the facts giving
rise to the trust.
Continuous recognition of a resulting trust, however,
precludes any defense of laches in a suit to declare and
enforce the trust.
The beneficiary of a resulting trust may, therefore,
without prejudice to his right to enforce the trust, prefer
the trust to persist and demand no conveyance from the
trustee.
It being alleged in the complaint that Lucas held the title
to the lot in question merely in trust for Emilio and that
this fact was acknowledged not only by him but also by
his heirs, herein defendant (which allegation is
hypothetically admitted plaintiff's action) is NOT barred by
lapse of time. On the contrary, the interest of justice
would be better served if plaintiff -appellant and her
alleged co-heirs were to be given an opportunity to be
heard and allowed to present proof in support of their
claim.
181. Heirs of Feliciano Yambao v. Heirs of Hermogenes
Yambao
FACTS:
A parcel of land located in Barangay Bangan,
Botolan, Zambales, which is the subject of this case
was originally possessed by Macaria De Ocampo
(Macaria). Hermogenes Yambao , (Macaria's
nephew), acted as the administrator of the property
and paid realty taxes therefor. Hermogenes has
eight children, namely: Ulpiano, Dominic, Teofilo,
Feliciano, Asesclo, Delia, Amelia, and Melinda, all
surnamed Yambao.
After Hermogenes died, it was claimed that all of his
heirs were free to pick and harvest from the fruit-
bearing trees planted on the subject property.
Eleanor Yambao (Eleanor), Ulpiano's daughter, even
constructed a house on the subject property.
In 2005, the communal and mutual use of the
subject property by the heirs of Hermogenes ceased
when the heirs of Feliciano, herein petitioners,
prohibited them from entering the property. The
heirs of Feliciano even ejected Eleanor from the
subject property.
This prompted the heirs of Hermogenes, herein
respondents, to file with the RTC a complaint for
partition, declaration of nullity of title/documents,
and damages against the heirs of Feliciano. The
heirs of Hermogenes alleged that they and the heirs
of Feliciano are co-owners of the subject property,
having inherited the right thereto from Hermogenes.
The heirs of Feliciano denied the allegations of the
heirs of Hermogenes and claimed that their father,
Feliciano, was in possession of the subject property
in the concept of owner since time immemorial.
Accordingly, Feliciano was awarded a free patent
thereon for which Original Certificate of Title (OCT)
No. P-10737 was issued. They also averred that the
cause of action in the complaint filed by the heirs of
Hermogenes, which questioned the validity of OCT
No. P-10737, prescribed after the lapse of one year
from its issuance on November 29, 1989.
RTC – dismissed the case. The RTC opined that
the heirs of Hermogenes failed to show that the
subject property is owned by Macaria, stating that
tax declarations and receipts in Macaria's name are
not conclusive evidence of ownership. The RTC
further held that even if Macaria owned the subject
property, the heirs of Hermogenes failed to show
that Hermogenes had the right to succeed over the
estate of Macaria.
CA - reversed and set aside the RTC's Decision.
The CA found that the RTC, in hastily dismissing the
complaint for partition, failed to determine first
whether the subject property is indeed co-owned by
the heirs of Hermogenes and the heirs of Feliciano.
The CA pointed out that:
A review of the records of the case shows that in
Feliciano's application for free patent, he
acknowledged that the source of his claim of
possession over the subject property was
Hermogenes's possession of the real property in
peaceful, open, continuous, and adverse manner
and more importantly, in the concept of an owner,
since 1944. Feliciano's claim of sole possession in
his application for free patent did not therefore
extinguish the fact of co-ownership as claimed by
the children of Hermogenes.
Accordingly, the CA, considering that the parties are
co-owners of the subject property, ruled that the
RTC should have conducted the appropriate
proceedings for partition. Hence, this petition.
ISSUE:
WON there was co-ownership between the heirs of
Feliciano and the heirs of Hermogenes
RULING: YES.
As pointed out by the CA, the RTC overlooked the
fact that the subject property is co-owned by the
parties herein, having inherited the same from
Hermogenes. Feliciano's free patent application
indicated that he merely tacked his possession of
the subject property from Hermogenes, his father,
who held the property in peaceful, open, continuous,
and adverse manner in the concept of an owner
since 1944. This is an implicit recognition of the fact
that Feliciano merely co-owns the subject property
with the other heirs of Hermogenes. Indeed, the
heirs of Feliciano have not presented any evidence
that would show that Hermogenes bequeathed the
subject property solely to Feliciano.
A co-ownership is a form of trust, with each
owner being a trustee for each other. Mere actual
possession by one will not give rise to the
inference that the possession was adverse
because a co-owner is, after all, entitled to
possession of the property. Thus, as a rule,
prescription does not run in favor of a co-heir
or co-owner as long as he expressly or
impliedly recognizes the co-ownership; and he
cannot acquire by prescription the share of the
other co-owners, absent a clear repudiation of
the co-ownership. An action to demand partition
among co-owners is imprescriptible, and each co-
owner may demand at any time the partition of the
common property.
Prescription may nevertheless run against a co-
owner if there is adverse, open, continuous and
exclusive possession of the co-owned property by
the other co-owner/s. In order that a co-owners
possession may be deemed adverse to the cestui
que trust or other co-owners, the following
requisites must concur: (1) that he has performed
unequivocal acts of repudiation amounting to an
ouster of the cestui que trust or other co-owners;
(2) that such positive acts of repudiation have been
made known to the cestui que trust or other co-
owners; and (3) that the evidence thereon must be
clear and convincing.
The issuance of the certificate of title would
constitute an open and clear repudiation of any
trust. In such a case, an action to demand partition
among co-owners prescribes in 10 years, the point
of reference being the date of the issuance of
certificate of title over the property. But this rule
applies only when the plaintiff is not in possession
of the property, since if a person claiming to be the
owner thereof is in actual possession of the
property, the right to demand partition does not
prescribe.
Although OCT No. P-10737 was registered in the
name of Feliciano on November 29, 1989, the
prescriptive period within which to demand partition
of the subject property, contrary to the claim of the
heirs of Feliciano, did not begin to run. At that time,
the heirs of Hermogenes were still in possession of
the property. It was only in 2005 that the heirs of
Feliciano expressly prohibited the heirs of
Hermogenes from entering the property. Thus, as
aptly ruled by the CA, the right of the heirs of
Hermogenes to demand the partition of the property
had not yet prescribed. Accordingly, the RTC
committed a reversible error when it dismissed the
complaint for partition that was filed by the heirs of
Hermogenes.
Moreover, when Feliciano registered the subject
property in his name, to the exclusion of the other
heirs of Hermogenes, an implied trust was
created by force of law and he was considered a
trustee of the undivided shares of the other heirs of
Hermogenes in the property. As trustees, the heirs
of Feliciano cannot be permitted to repudiate the
trust by relying on the registration. "A trustee who
obtains a Torrens title over a property held in
trust for him by another cannot repudiate the
trust by relying on the registration”.
182. Varsity Hills v. Navarro
FACTS:
The present controversy revolves around the
ownership of a parcel of land in Loyola Heights,
Quezon City. Present respondents alleged that
Quintin Mejia, their predecessor-in-interest, obtained
ba Spanish Title over said land and that Mejia and
his successors-in-interest occupied the same without
interruption until 1934 when a writ of execution
vested said land to the Tuason Estate through fraud
by inserting fake and false technical descriptions
expanding said estate. That the present petitioners
are the successors-in-interest of the same estate.
As such, a petition was filed by present respondents
to regain said land. It was filed on December 29,
1965. They argued, among others, that a
constructive trust has been created. Subsequently,
present petitioners filed a motion to dismiss. One of
their grounds was extinctive prescription as over 51
years has elapsed since the Decree of Registration
was issued. They also claimed that the present
action is barred by laches as 32 years has elapsed
since Quintin Mejia has been driven away from said
property.
The CFI dismissed the motion to dismiss and ruled in
favor of the present respondents.
ISSUE:
Whether or not present respondents’ action has
prescribed and is barred by laches.
HELD:
Yes, present respondents’ action has prescribed and
is barred by laches.
RATIO:
Actions based on implied and constructive trust
prescribe in 10 years. It is also susceptible to laches.
In the present case, it is very clear that more than 10
years has elapsed since the purported trust was
created. That 51 years have elapsed since the
Decree of Registration was issued in favor of the
petitioners. Likewise, it is also very clear that there
has been unreasonable delay on the part of the
defendants in instituting said action. The same is
then barred by laches.
183. Cañezo v. Rojas
184. Figuracion v. Figuracion-Gerilla
facts:
Involved in the controversy is Lot. No. 707 of
Cadastral Survey of Urdanate, Pangasinan, orginally
owned by Eulalio Adviento. Eulalio begot Agripina
Adviento with his first wife Marcela, Whom Eulalio
survived. When he remarried, Eulalio had another
daughter, herein petitioner Carolina, with his second
wife Faustina.
On November 28,1961, Agripina executed a Deed of
Quitclaim over the eastern half of Lot. 707 in favor of
her niece, herein respondent Emilia.
Soon thereafter or on December 11, 1962, petitioner
Carolina executed an Affidavit of Self-adjudication,
adjudicating unto herself the entire Lot. No 707 as
the sole and exclusive heir of her deceased parents
Eulalio and Faustina.
On the same date, Carolina also executed a Deed of
Absolute Sale over Lot. No. 707 in favor of petitioner
s Hillaria and Felipa.
1971 Emilia went to the US and returned to
Philippines only on 1981. Upon her return and relying
on the Deed of Quitclaim, she built a house on the
eastern half of Lot No. 707.
However, on 1994 Hilaria and her agents threatened
to the demolish the house of Emilia who, in
retaliation, was prompted to seek the partition of Lot
707 thus filed a complaint.
Hillaria and Felipa averred that respondent's (Emilia)
cause of action had long prescribed and she is guilty
of laches. That an action for partition and is no longer
tenable because they (Felipa and Hilaria) have
already acquired rights to adverse to that claimed by
respondent Emilia and the same amount to
repudiation of the alleged co-ownership.
RTC: Decided in favor of Emilia. Held that Carolina
transferred only her ½ share to Felipa and Hilaria and
any conveyance of the other half is void. But refused
to adjudicate the ownership in favor of Emilia since a
settlement of the estate of Eulalio is yet to be
undertaken.
CA: Ruled that RTC erred in refusing to partition lot
707. There is no necessity placing Lot No. 707 undee
judicial administration since Carolina had long sold
her ½ pro indiviso share to Felipa and Hilaria. Thus,
when carolina sold the entire Lot on December as
her own, the sale affected only her share and not that
belonging to her co-owner, Agripina.

ISSUE:(1) WON Emilia can compel the partition of
Lot No. 707?
(2) WON Emilia’s right to demand for partition is
barred by acquisitive prescription or laches?
RULING:
(1) YES.
Here, the respondent traces her ownership over the
eastern half of Lot No. 707 from the Deed of
Quitclaim executed by Agripina, who in turn, was the
co-owner thereof being one of the legitimate heirs of
Eulalio. It is well to recall that the petitioners failed to
categorically dispute the existence of the Deed of
Quitclaim. Instead, they averred that it has been
rendered ineffective by TCT No. 42244 in the name
of Felipa and Hilaria this contention is, of course,
flawed.
Mere issuance of a certificate of title in the name of
any person does not foreclose the possibility that the
real property may be under co- ownership with
persons not named in the certificate, or that the
registrant may only be a trustee, or that other parties
may have acquired... interest over the property
subsequent to the issuance of the certificate of title.
Stated differently, placing a parcel of land under the
mantle of the Torrens system does not mean that
ownership thereof can no longer be disputed. The
certificate cannot... always be considered as
conclusive evidence of ownership. In this case, co-
ownership of Lot No. 707 was precisely what
respondent Emilia was able to successfully establish,
as correctly found by the RTC and affirmed by the
CA.
The status of Agripina and Carolina as the legitimate
heirs of Eulalio is an undisputed fact. As such heirs,
they became co-owners of Lot No. 707 upon the
death of Eulalio on July 20, 1930. Since Faustina
was predeceased by Eulalio, she likewise became a
co-owner of the lot upon
Eulalio's death. Faustina's share, however, passed
on to her daughter Carolina when the former died on
October 18, 1949. The Affidavit of Self-Adjudication
executed by Carolina did not prejudice the share of
Agripina because it is not legally possible for one to
adjudicate unto himself an entire property he was not
the sole owner of. A co-owner cannot alienate the
shares of her other co-owners nemo dat qui non
habet.[38]
Hence, Lot No. 707 was a co-owned property of
Agripina and Carolina.
(2) No.
Co-heirs or co-owners cannot acquire by acquisitive
prescription the share of the other co-heirs or co-
owners absent a clear repudiation of the co
ownership.[43] The act of repudiation, as a mode of
terminating co-ownership, is subject to certain...
conditions, to wit: (1) a co-owner repudiates the co-
ownership; (2) such an act of repudiation is clearly
made known to the other co-owners; (3) the evidence
thereon is clear and conclusive; and (4) he has been
in possession through open, continuous, exclusive,
and notorious... possession of the property for the
period required by law.[44]
The petitioners failed to comply with these conditions.
The act of Hilaria and Felipa in effecting the
registration of the entire Lot No. 707 in their names
thru TCT No. 42244 did not serve to effectively
repudiate the co-ownership. The respondent built her
house on the eastern... portion of the lot in 1981
without any opposition from the petitioners. Hilaria
also paid realty taxes on the lot, in behalf of the
respondent, for the years 1983-1987.[45]
These events indubitably show that Hilaria and Felipa
failed to assert exclusive title in themselves adversely
to Emilia. Their acts clearly manifest that they
recognized the subsistence of their co-ownership
with respondent Emilia despite the issuance of TCT
No. 42244 in 1962.
Their acts constitute an implied recognition of the co-
ownership which in turn negates the presence of a
clear notice of repudiation to the respondent.
(AGENCY PART)
In addition, when Hilaria and Felipa registered the lot
in their names to the exclusion of Emilia, an implied
trust was created by force of law and the two of them
were considered a trustee of the respondent's
undivided share.As trustees, they cannot... be
permitted to repudiate the trust by relying on the
registration.
records do not reflect conclusive evidence showing
the manner of occupation and possession exercised
by Hilaria and Felipa over the lot from the time it was
registered in their names. The only evidence of
possession extant in the records dates back only to
1985 when

Hilaria and Felipa declared the lot in their names for
taxation purposes. Prescription can only produce all
its effects when acts of ownership, or in this case,
possession, do not evince any doubt as to the ouster
of the rights of the other co-owners.
Hence, prescription among co-owners cannot take
place when acts of ownership exercised are vague or
uncertain.
The express disavowal of the co-ownership did not
happen on December 11, 1962 when TCT No. 42244
was issued but in 1994 when Hilaria attempted to
demolish Emilia's house thus explicitly excluding her
from the co-ownership. It was the only time that
Hilaria and Felipa made known... their denial of the
co-ownership. On the same year, the respondent
instituted the present complaint for partition; hence,
the period required by law for acquisitive period to set
in was not met.
Anent laches, the Court finds it unavailing in this case
in view of the proximity of the period when the co-
ownership was expressly repudiated and when the
herein complaint was filed.
185. Cavile v. Litania-Hong
Facts:
RTC: Litania-Hong vs. Cavile, Dismissed the complaint.
- Cavile has a better title to the land in dispute.
- The CEP was only a simulated contract as between
Susana and Castor.
CA: Litania-Hong vs. Cavile, reversed the decision of the
RTC
SC: Cavile vs. Litania-Hong reversed the decision of the
CA
The heirs of Bernardo Cavile and Tranquilla Galon,
Susana. Castor, Benidicta, and the children of Bernardo
from his previous marriages, Simplicia, Fortunato and
Vevencia, entered into a Deed of Partition, the subject of
which are parcels of land situated in the Municipality of
Tolong, Negros Oriental. Pursuant to the Deed of Partition,
the conjugal property of Sps. Caville was divided into two
parts. The first part, that of Bernardo, was subdivided into
6 equal shares and distributed among his 6 heirs. The
second part, that of Tranquilla, was subdivided into 3
shares and distributed to her children with Bernardo. The
shares of the legal heirs were sold to their co-heir Castor
who is now the sole owner of the parcels of land in dispute.
A Confirmation of Extrajudicial Partition was subsequently
executed by Castor in favor of Susana covering a porting
of the land. The partition was merely to accommodate
Susana with her application for loan from Rural Bank.
Susana obtained a loan from the Rural Bank and
mortgaged the subject lots as security. Justina and
Genova inherited the two parcels of land from their
mother Susana. After 14 years, a complaint for
Reconveyance and Recovery of Property was filed against
Perfecta, the daughter of Castor, Jose dela Cruz, her
husband (the petitioners in this case), and the Rural Bank
of Bayawan, Inc. Castor, Perfecta and Jose occupied the
subject lots. When Castor died, Perfecta applied for free
patents from the Bureau of Lands for the land in dispute.
Despite the efforts to settle the matter, Perfecta and Jose
stubbornly refused to accede. Petitioner spouses asserted
that the Confirmation of Extrajudicial Partition was a
nullity since the said properties were never owned not
adjudicated in favor of Susana.
The defendants argued that they are the real owners of
the parcels of land and the granting of the free patents to
Perfecta should be invalidated since the CEP was the proof
that the land was actually conveyed by Castor to Susana.
Issue: Whether or not the defendants is correct in
instituting an action for reconveyance based on implied or
constructive trust?
Held: No. The action for reconveyance can only be made
within 10 years from the time the land was registered
under the name of the petitioners and thereby issued with
Torrens title. Since the defendants only filed an action
after 12 years, the remedy is already barred. But even if
they could file on time, the SC would still rule in favor of
the petitioner spouses since the defendants could not
present any evidence to show that they have better title
over the disputed land.
Moreover, the land was only held in trust by Susana since
the purpose was only to secure a loan from the Rural
Bank.
186. Heirs of Domingo Valientes v. Ramas
FACTS:
Petitioners claim that they are the heirs of Valientes who,
before his death, was the owner of a parcel of land in
Zamboanga delSur.
· In 1939, Valientes mortgaged the subject property
to secure his loan to the spouses Belen
· In the 1950s, the Valientes family purportedly
attempted, but failed, to retrieve the subject property
from the spouses Belen. Through an allegedly forged
document captioned VENTA DEFINITIVA purporting to
be a deed of sale of the subject property between
Valientes and the spouses Belen, the latter obtained
title over the land.
· On February 28, 1970, the legitimate children of
the late Valientes, had their Affidavit of Adverse Claim.
Upon the death of the spouses Belen, their surviving
heirs executed an extra-judicial settlement with partition
and sale in favor of private respondent Minor, the
present possessor of the subject property.
· On June 20, 1979, Minor filed with the then CFI
a "PETITION FOR CANCELLATION OF
MEMORANDUM OF ENCUMBRANCE APPEARING
IN THE TITLE IN HER POSSESSION" which the RTC
granted.
· On the other hand, petitioners filed a complaint
for the cancellation of the title in Minors possession and
its reconveyance to them. On this complaint, Minor filed
an Omnibus Motion to Dismiss on the ground of forum
shopping and litis pendentia, which the RTC dismissed.
· Undeterred, Minor filed a Motion for
Reconsideration which was granted.
· Petitioners filed a Motion for Reconsideration
based on this decision which was denied.
RTC: *refer to facts
CA: in favor of Petitioners on whether civil case is already
barred by forum shopping; affirmed dismissal order on the
grounds of prescription and laches.
ISSUE: WON prescription or laches has already set in to
bar the filing of the civil case (cancellation of transfer
certificate of title no. t-5,427, reconveyance, with
accounting, receivership and application for a writ of
preliminary prohibitory injunction plus damages.)
HELD:
The cause of action of petitioners in Civil Case No.
98-021, wherein they claim that private respondent Minors
predecessor-in-interest acquired the subject property by
forgery, can indeed be considered as that of enforcing an
implied trust. In particular, Article 1456 of the Civil Code
provides:
Art. 1456. If property is acquired
through mistake or fraud, the person
obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of
the person from whom the property comes.
However, the Court made a clear distinction in Olviga: when
the plaintiff in such action is not in possession of the
subject property, the action prescribes in ten years from
the date of registration of the deed or the date of the
issuance of the certificate of title over the property. When
the plaintiff is in possession of the subject property, the
action, being in effect that of quieting of title to the property,
does not prescribe. In the case at bar, petitioners (who are
the plaintiffs in Civil Case No. 98-021) are not in possession
of the subject property. Civil Case No. 98-021, if it were to
be considered as that of enforcing an implied trust, should
have therefore been filed within ten years from the issuance
of TCT No. T-5,427 on December 22, 1969. Civil Case No.
98-021 was, however, filed on August 20, 1998, which was
way beyond the prescriptive period.
187. Geronimo and Isidro v. Nava and Aquino
FACTS: On October 19, 1935, Jose Nava and his wife, Felisa
Aquino, were owners of our lots, Nos. 2820, 2821, 2819 and 1729
of the Cabanatuan Cadastre, forming a single mass, with a total
area of 3,549 square meters, with a house of strong materials
erected thereon, with a total assessed value of P8,820.00. On
that date, they mortgaged said four lots to La Urbana,
presumably a building and loan association, to secure the
payment of a loan of P3,047.76. For failure to live up to the terms
of the mortgage, the latter was foreclosed by La Urbana,
pursuant to Act 3135, and on March 9, 1939, the said property
was sold to La Urbana for the sum of P3,786.26. On April 26,
1938, La Urbana transferred and assigned all its rights and
interest in the said property to Agatona Geronimo, plaintiff in the
present case, for the sum of P6,000.00, subject, however, to the
right of redemption of Nava and his wife Felisa. Agatona paid
P600.00 on account of the purchase price and to secure the
payment of the balance of P5,400.00, mortgaged the same lots
to La Urbana, which duly notified Nava and his wife of the
assignment or transfer. Immediately after buying the lots from
the Sheriff in March, 1938, La Urbana took possession of the
same and collected the rentals thereon at the rate of P30.00 a
month. In May, 1938 shortly after purchasing the same lots from
La Urbana, Agatona also took possession of the property and
collected P62.50 representing the May and June rentals, and
since July of the same year, she had been collecting the rentals
at the rate of P35.00 a month. In the title there was notice of lis
pendens and other annotations.
Nava tried to redeem the property within the one year period
which La Urbana refused since it had already been transferred to
Agatona. Nava made the same offer but was ignored by Agatona.
Finally depositing the amount of P3,470 to Agatona's account in
the PNB and filed a civil case (#8071) against the plaintiffs to
permit him to redeem the property after rendering an account.
Lower COurt - In favor of plaintiffs.
CA - Affirmed
ISSUE: Whether or not the present action is barred by
prescription.
RULING: Affirmed
RATIO: Plaintiff herein maintain that they are still the owners of
the four lots in question and have the right to continue as such;
that the annotation of lis pendens as regards the institution of
Civil Case No. 8071 may be cancelled, for the reason that the
judgment in said case in favor of Nava et al. can no longer be
enforced because of the passage of time, namely, prescription. It
will be recalled, however, that in Civil Case No. 8071, the Court
of First Instance of Nueva Ecija found and held that Nava and his
wife had the right to redeem the property, and it ordered that
Agatona and her husband execute the necessary registerable
titles to the four lots in favor of Nava and wife, upon the payment
of the price to be ascertained after liquidation. The judgment
may not have been executed totally, but the defendants herein
maintain and evidently with reason, that it was at least partially
executed, for the reason that as stated in the motion to dismiss,
after Nava and his wife had asked for the execution of the
judgment rendered in Civil Case No. 8071, that is, in July 1944,
provincial auditor Francisco Alejo, who was occupying the house
erected on the four lots in question, began paying the house rent
to Nava, stating that Agatona had refused to accept said rentals,
for the reason that she lost in Civil Case No. 8071, and that when
Mr. Alejo vacated the house in May 1945, Nava took possession
of the whole property and has continued in possession up to the
date of filing the motion for dismissal on October 24, 1956. In
other words, by virtue of the decision in Civil Case No. 8071,
herein defendants Nava et al., not only were restored to the
possession of the property in question since 1945, but had been
receiving the rentals of the house on said property since 1944.
The only thing lacking is the formal execution of the deed of
transfer or the sale by Agatona and her husband to herein
defendants.
In the present case, we are inclined to brush aside technicalities
when they stand in the way of administering justice and giving to
parties in litigation their due, specially in case of redemption.
Moreover, the equities in the case are on the side of the
defendants-appellees herein. The four lots in question at the
time that they were mortgaged to Nava and his wife to La Urbana
were assessed in the amount of P8,820 and the Court may take
judicial notice of the fact that the assessed value oftentimes is
but a fraction of the real value of the property assessed. At the
present time, or rather, when the present action was instituted
in 1956, the property in question, according to plaintiffs
themselves because of the natural tendency of real estate to
increase in value, are assessed at P13,350.00 and must be worth
more than that; and yet, that same property was originally
mortgaged with La Urbana by Nava and his wife for all P3,047.76
and was sold at auction sale to La Urbana for P3,376.29, so that
the redemption price cannot be much more than that,
considering that from the same shall be deducted the rentals
received by Agatona and her husband at the rate of P30.00 a
month from March 1938 until the defendants herein began
receiving said rentals some time in July, 1944.
Moreover, there is another aspect of this case which is not only
important, but also decisive. Considering the circumstances
surrounding this case, as well as that of Civil Case No. 8071, we
find that when Agatona evidently acquiescing in the final
decision in Civil Case No. 8071, not only allowed but even
directed the tenant of the house on the property to pay his
rentals to Nava, instead of to herself; and when in 1945, she
allowed Nava to occupy the house when the tenant disoccuppied
it, and to take possession of the whole property, her acts should
be construed as a recognition of the fact that the property,
though still in her name, was to be held in trust for Nava, to be
conveyed to him on payment of the repurchase price. Such trust
is an express one, not subject to prescription. We may also hold
that when the trial court in that Civil Case No. 8071 declared in a
decision that had become final and executory, that Nava et al.
had the right to redeem the property, and ordered Agatona et al.
to make the resale, there was created what may be regarded as
a constructive trust, in the sense that although Agatona and her
husband had the naked title to the property by reason of the
certificates of title issued in their names, and which they
retained, nevertheless, they were to hold such property in trust
for Nava et al. to redeem, subject to the payment of redemption
price. Of course, it might be contended that in the latter instance
of a constructive trust, prescription may apply where the trustee
asserts a right adverse to that of the cestui que trust, such as,
asserting and exercising acts of ownership over a property being
held in trust. But even under this theory, such a claim of
prescription would not prosper in the present case. As already
stated, since 1944, after the decision in Civil Case No. 8071
became final and executory, Agatona evidently acquiesced in the
decision against her, so much so that thereafter, as already
stated, she suggested that the tenant of the house pay his rentals
to Nava instead of to her, meaning that Nava had a right to said
rentals. No only this, but since May, 1945, when the tenant left
the house, Nava took possession thereof as well as the land on
which it was built, and has been occupying the same up to the
present time, exercising acts of ownership over the same, and
Agatona evidently, all along, showing confirmity. It was only on
September 30, 1956 that she and her husband filed the present
case to cancel the notice of lis pendens of Civil Case No. 8071,
including naturally, the decision in said case against them, and to
recover the possession of the property. If such acts on her part
as trustee can be considered as an assertion of the right of
ownership against Nava, the cestui que trust, over the property,
then the prescription invoked by her, assuming it to be available,
falls far short of the period required by law to established title by
prescription. Agatona did not even have the possession of the
property in order to exercise acts of ownership over the same.

188. Adaza v. CA
See #159
ISSUE: Whether or not the action has prescribed.
RULING: No.
RATIO: Respondent Violeta and her husband also contended that
the long delay and inaction on the part of Horacio in taking any
steps for reconveyance of the one-half (1/2) share claimed by
him, indicates lack of any color of right over the said one-half
(1/2) share. It was also argued by the two (2) that considering
that twelve (12) years had passed since OCT No. P-11111 was
issued and more than nineteen (19) years since the Deed of
Donation was executed, the counterclaim for partition and
reconveyance of Horacio's alleged one-half share was barred by
laches, if not by prescription. Again, we rule for the petitioners.
In determining whether delay in seeking to enforce a right
constitutes laches, the existence of a confidential relationship
based upon, for instance, consanguinity, is an important
circumstance for consideration. Delay in a situation where such
circumstance exists, should not be as strictly construed as where
the parties are complete strangers vis-a-vis each other. The
doctrine of laches is not to be applied mechanically as between
near relatives; the fact that the parties in the instant case are
brother and sister tends to explain and excuse what would
otherwise appears as long delay. Moreover, continued
recognition of the existence of the trust precludes the defense of
laches. The two (2) letters noted above sent by respondent
Violeta to petitioner Horacio, one in 1969 and the other in 1971,
show that Violeta as late as 1971 had recognized the trust
imposed on her by law. Conversely, Horacio's reliance upon his
blood relationship with his sister and the trust and confidence
normally connoted in our culture by that relationship, should not
be taken against him. Petitioners' counter-claim in the trial court
for partition and reconveyance cannot be regarded as barred
whether by laches or by prescription.
189. Castro v. Castro
Facts:
Maximiana Tinio is the owner of the disputed land she
inherited from her father Mariano Tinio.
This land lies low and in its former natural state was under
water for a good part of the year. In the life of Mariano
Tinio part of it had been reduced to cultivation, and the
prospects for the fruitful development of the property were
then good. But as a result possibly of the destructive
ravages of rinderpest in this section of the country in the
eighties, followed in the nineties by the revolution against
Spain and the later insurrection against the sovereignty of
the United States, the property appears to have reverted to
a wild state and came to be covered almost entirely b such
growth as is commonly found in low ground.
After civil order had been restored Maximiana began
bringing portions of the property back into a state of
cultivation and was aided by her son, Jose Castro. After
his mother's death, Jose, as the oldest child and only
competent manager among the heirs, assumed the
administration of this land.
He now claims that he had taken possession of this
property in his own right, prior to his mother's death, by
virtue of an assignment of the property made to him by his
mother, acting in concert with her brothers and sisters.
Jose applied for the registration in his name but was
dismissed on the ground of technicalities.
Later, on second proceeding for registration, the court
therefore adjudicated the property to Jose Castro by virtue
ofhis proof of continued possession and heirship.
Now, case was instituted in the Court of First Instance of
the Province of Nueva Ecija by the brothers and sisters
Manuel Castro, Pedro Castro, Maria Castro, and
Consolacion Castro, with whom are joined, under
representation of a proper guardian ad litem, the four
minor children of Vicente Castro, deceased brother of the
four plaintiffs first named. Against Jose Castro, or Jose de
Castro to obtain a decree to the effect that the four adult
plaintiffs and the four
Minor children of Vicente Castro, are each owners of an
undivided one-sixth interest in a parcel of land in dispute,
covered by Torrens issued in the name of the defendant.
The complaint also asks for an order for the partition of
said land among the plaintiffs and defendant, as well as to
recover from the defendant the respective shares of the
plaintiffs in the produce of said land from the year 1909 till
the filing of complaint, or the value of the same in money.
Trial Court- ruled in favor of the plaintiff. Court also
ordered the defendant to deliver to each of the four adult
plaintiffs and to the minor heirs of Vicente Castro his or her
appropriate share in the produce of the land for a number
of years prior to the filing of the complaint. And that the
defendant should effect the corresponding operations of
subdivision for the purpose of segregation and delivery to
each of the parties plaintiff his or her appropriate share in
the land.
Both the plaintiffs and the defendant appealed.
Appeal of the plaintiffs is directed to the supposed
inadequacy of the portions awarded by the court to each of
the plaintiffs in both the land and the produce received
from it.
Defendant appeals from the action of the court in awarding
to the plaintiffs any part of their land or its produce.
ISSUE: WON the defendant is obliged to surrender to the
plaintiffs their share of the land under his administration,
which was registered under his name in Torrens Title.
Rule:
Yes, Upon the foregoing facts it is evident, and it
must be so declared, that, when the defendant procured
the registration of this land in his own name, he was acting
in a trust capacity and as representative of all of his
brothers and sisters. As a consequence he is now holding
the registered title thereto in a trust capacity, and it is
proper for the court to declare that the plaintiffs are entitled
to their several pro rata shares, notwithstanding the fact
that the certificate of registration is in the name of the
defendant alone.
One who acquires a Torrens Title in his own
name to property which he is administering for himself
and his brother and sisters as heirs in common by
descent from a common ancestor may be compelled
to surrender to each of his co-heirs his appropriate
remedy by which to enforce this right.
Additional Ruling regarding repudiation of the trust:
But it is strongly urged for the defendant that, even
supposing that the defendant in this case had procured the
title to be registered in his own name as representative of
himself and his younger brothers and sisters, yet he had
repudiated the trust more than ten years before this action
was begun, and it is insisted that he has acquired title by
adverse possession. In support of this contention, based
upon the repudiation of the trust and subsequent adverse
possession, the attorney for the defendant point to the
testimony of Manuel Castro who exercises the role of chief
promoter of this litigation on the part of the plaintiffs. This
witness testifies that back in 1916, 1918, and at other
times, he had besought his uncle to recognize the right of
his younger brothers and sisters in the property and to give
them their part of the produce. The defendant, Manuel
says, ignored the request and put aside the claim upon
one excuse or another. We note, however, that this
supposed repudiation of the trust first took place before
Manuel Castro had reached his majority, and we are
unable to see how a minor with whom another is in trust
relation can be prejudiced by repudiation of the trust
addressed to him by the person who is subject to the trust
obligation. The defendant in our opinion is not entitled to
the benefit of prescription from his supposed repudiation of
the trust.
Prescription does not run in favor of one who
holds in trust for others; and a denial of the trust made
by the trustee to one of the beneficiaries who, at the
time of such repudiation of the trust is a minor, does
not have the effect of abrogating the trust relation.
190. Gabutan v. Nacalaban
191. Macababbad v. Masirag
FACTS:
On April 28, 1999, respondents, the Masirags and
Goyagoy, filed with the RTC a complaint against the
petitioners, Macababbad, Chua and Say. The
respondents alleged that their complaint is an action
for quieting of title, nullity of title and reconveyance,
against the petitioners who thru fraud dishonesty,
deceit, misrepresentations, bad faith, under the
guise of purported instrument, nomenclature
extrajudicial settlement of estate and sale (Lot
4144), dated December 3, 1967.
Respondents, then, amended their complaint
alleging the following:
The deceased spouses Pedro Masirag and
Panteleona Talauan (Panteleona) were the original
registered owners of a parcel of land located in
Tuguegarao. They had eight (8) children, two (2) of
which are the parents of the respondents. The
respondents (children of Valeriano and Vicenta)
allegedly did not know of the demise of their
respective parents; they only learned of the
inheritance due from their parents in the first week
of March, 1999 when their relative, Pilar Quinto,
informed respondent Fernando and his wife Barbara
Balisi about it. They immediate hired a lawyer to
investigate the matter.
The investigation disclosed that the petitioners
falsified a document entitled “Extrajudicial
settlement of estate and sale”, so that the
respondents be deprived of their shares in land. The
document purportedly bore the respondents’
signature, making them appear to have participated
in the execution of the document when they did not;
they did not even know the petitioners.
Subsequently, Macababbad registered portions of
the land in his name and sold other portions to third
parties. Respondents then filed a complaint against
the petitioners.
The RTC dismissed the complaint on the grounds
that: 1. The action, which was filed 32 years after
the property was partitioned and after a portion was
sold to Macababbad had already prescribed; and 2.
There was failure to implead indispensable parties,
namely, the other heirs of Pedro and Pantaleona and
the persons who have already acquired title to
portions of the subject property in good faith.
On appeal, the CA reversed the ruling of RTC and
applied the Civil Code provisions on implied trust,
i.e., that a person who acquires a piece of property
through fraud is considered a trustee of an implied
trust for the benefit of the person from whom the
property came. Reconciling this legal provision with
Article 1409 (which defines void contracts) and Art.
1410 (which provides that an action to declare a
contract null and void is imprescriptible), the CA
ruled that the respondents’ cause of action had not
prescribed, because in assailing the extrajudicial
partition as void, the [respondents] have the right
to bring the action unfettered by a prescriptive
period.
ISSUE:
WON the action for nullity of the instrument was
barred by prescription.
No.
The Supreme Court believed and so holds that the
respondents’ amended complaint sufficiently
pleaded a cause to declare the NULLITY of the
extrajudicial settlement of estate and sale, as they
claimed in their amended complaint. Without
prejudging the issue of the merits of the
respondents’ claim and on the assumption that the
petitioners already hypothetically admitted the
allegations of the complaint when they filed a motion
to dismiss based on prescription, the transfer may
be null and void if indeed it is established that
respondents had not given their consent and that
the deed is a forgery or is absolutely fictitious. As
the nullity of the extrajudicial settlement of estate
and sale has been raised and is the primary issue,
the action to secure this result will not prescribe
pursuant to Article 1410 of the Civil Code.
Art. 1410. The action or defense for the declaration
of the inexistence of a contract does not prescribe.
192. Khoemani v. Heirs of Anastacio Trinidad
FACTS:
Khemani purchased Lot no. 107 from the heirs of Jose B.
Peña (the Peña Heirs) on February 1994.
Prior to such purchase, Lot Nos. 107, 108 and 109,
constitute Lot No. 355 which was part of the public
domain. On July 1950, Lot No. 355 with an was awarded
to Jesus M. Larrabaster by the National Land Settlement
Administration (NLSA) who subsequently sold his rights
and interests over the said property to Jose B. Peña
(Peña) on June 1956.
Thereafter, the original area of Lot No. 355 increased due
to accretion. Peña then requested the Bureau of Lands
(BOL) to adjust the area of the lot awarded to him but the
BOL denied the request on the ground that the accretion
belonged to the government.
Peña appealed to the Office of the President. The BOL
recommended that Lot No. 355 be subdivided into three
parts, Lot Nos. 107, 108 and 109, and that Lot No. 108 be
awarded to Peña instead. Meanwhile, Lot Nos. 107 and
109 would be allocated to Basilio Mendoza and Arturo
Roxas, respectively.
The Office of the President initially adopted the
recommendation. However, it modified its decision and
held that the entire area of Lot No. 355, including the
accretion, belonged to Peña and not to the government.
January 1970, Mendoza filed a special civil action for
certiorari (Assistant Executive Secretary case). Claiming
that he was denied due process, Mendoza assailed the
decision of the Office of the President. He asserted
ownership over Lot No. 107 on the strength of a
Miscellaneous Sales Application he allegedly filed with the
BOL on November 1962.
May 1985, the trial court rendered a decision dismissing
Mendoza’s petition for certiorari but the same was
reversed by the Court of Appeals on appeal. Hence,
Mendoza filed a petition for review on certiorari before the
Supreme Court.
The Supreme Court rejected Mendoza’s claim over Lot No.
107. Thus, Peña’s right of ownership was affirmed.
On September 1993, the Peña Heirs were awarded a
patent by the DENR and Original Certificate of Title was
issued in their name.
January 1994, respondents (heirs of Anastacio Trinidad)
filed with the RTC a complaint against the Peña Heirs, the
DENR and the BOL. They claimed that the Disputed
Property had long ceased to be public land by virtue of
their open, public, continuous, adverse and exclusive
possession in the concept of owner for more than 40
years.
Peña Heirs filed a Motion to Dismiss. They argue that
respondents’ predecessor-in-interest, Anastacio, was a
mere squatter who had been allowed by Mendoza to
occupy a portion of the lot sometime in 1960.
RTC: granted petitioner’s motion to dismiss and that
respondents are bound by the ruling of this Court in the
Assistant Executive Secretary case.
Respondents filed a motion for reconsideration. They
argued that neither they, nor Anastacio, were parties in
the said case and that their action for review of decree of
registration and/or reconveyance is not barred by the
Court’s ruling in Assistant Executive Secretary.
In 1998, Judge Soledad of the RTC died without resolving
the motion for reconsideration. Acting Judge Francisco S.
Ampig granted the motion for reconsideration.
Peña Heirs, together with herein petitioner (Khemani) as
the new owner of Lot No. 107, filed a petition for certiorari
before the Court of Appeals
CA: dismissed the petition of Peña and Khemani. It ruled
that petition for certiorari was not the proper remedy and
that there is no res judicata.
Petitioner filed a motion for reconsideration but was
denied.
ISSUE: WON the respondents are barred from filing an
action basing on implied or constructive trust.
HELD:
NO, An aggrieved party may file an action for
reconveyance based on implied or constructive trust,
which prescribes in ten years from the date of the issuance
of the certificate of title over the property provided that
the property has not been acquired by an innocent
purchaser for value.

In this case, the patent was issued in favor of the Peña

Heirs on September 20, 1993. Respondents filed the
action on January 27, 1994. Respondents clearly asserted
in their complaint that they and their predecessors-in-
interest have long been the owners of the Disputed
Property and that they were fraudulently deprived of
ownership thereof when the Peña Heirs obtained a patent
and certificate of title in their favor. These allegations
certainly measure up to the requisite statement of facts to
constitute an action for reconveyance.