AgPart 925 - Trust Digest

CASE DIGESTS TRUSTS 4.

LOPEZ v CA .................... ................... .................... .................... ................... ............. 23

Contents

5.

SALAO v SALAO................. .................... .................... ................... .................... ...... 24

I.

NATURE AND CLASSIFICATION ................... .................... .................... .................2

6.

MUNICIPALITY OF VICTORIAS v CA........................ .................... ................ 25

1.

MORALES v CA.................. ................... .................... .................... ................... ...........2

7.

PNB v CA .................. .................... .................... ................... ................... .................... 26

2.

PENALBER v CA .................. ................... .................... .................... ................... ........3

8.

PARUNGIT v BAJIT .................... ................... .................... .................... ................ 27

EXPRESS TRUSTS .................... ................... .................... .................... ................... ........4

9.

HEIRS OF EMILIO v ROMERO .................. ................... .................... ................ 28

II. 1.

TORBELA v ROSARIO.................... ................... .................... .................... ..............4

10.

ADAZA v CA .................... .................... .................... ................... ................... ....... 29

2.

JULIO v DALANDAN .................... ................... .................... .................... .................5

11.

SING JUCO AND SING BENGCO v SUNYANTONG .................... ......... 30

3.

CANEZO v ROJAS........................... ................... .................... .................... .................6

12.

LEOVERAS v VALDEZ .................... ................... .................... ................... ....... 31

4.

PNB v AZNAR........................... .................... ................... .................... ................... .....7

13.

PASINO v MONTERROYO................... ................... .................... ................... 32

5.

HEIRS OF TRANQUILINO LABISTE v HEIRS OF JOSE LABISTE........9

14.

GAYONDATO v TREASURER.......................... ................... ................... ....... 33

6.

CANEZO v ROJAS........................... ................... .................... .................... .............. 10

15.

ESCOBAR v LOCSIN ................. .................... .................... ................... ............. 33

7.

PACHECO v ARRO ................. .................... .................... ................... .................... .11

16.

ESTATE OF MARGARITA v LAIGO .................... .................... ................... 34

8.

GAMBOA.................. ................... .................... ................... .................... .................... .12

17.

CAVILE v LITANIA-HONG .................. ................... .................... ................... 36

9.

TY v TY................. .................... .................... ................... .................... .................... .... 13

18.

TIONGCO YARED v TIONGCO.................... .................... .................... ......... 37

10.

TAN SENGUAN v PHILTRUST .................. ................... .................... ........... 14

19.

PNB v JUMANOY .................... ................... .................... .................... ................ 38

11.

GOVERNMENT v ABADILLA ................. .................... .................... .............. 15

20.

BRITO v DIANALA.................... .................... .................... ................... ............. 39

12.

CRISTOBAL v GOMEZ.................. .................... .................... ................... ........ 16

21.

HEIRS OF DOMINGO v RAMA....................... .................... .................... ...... 40

13.

DBP v COA .................. .................... .................... ................... ................... ............ 17

III.

IMPLIED TRUSTS.......................... ................... .................... .................... .............. 18

1.

RAMOS v RAMOS ................... .................... .................... ................... ................... ..18

2.

DIAZ v GORRICHO AND AGUADO.................. ................... .................... ........ 21

3.

VDA DE OUANO v REPUBLIC .................... .................... .................... .............. 22 1

TRUSTS CASE DIGESTS by: Alojado, Atienza, Balderama, Camarao, Carandang, Cruz, Estilles, Garcia, Gonzaga, Hui, Lazaro, Senajon

CASE DIGESTS TRUSTS I.

NATURE AND CLASSIFICATION 1. MORALES v CA

Morales v CA

G.R. No. 117228 June 19, 1997 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, Officer, and, l ater 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 2

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 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 documentary evidence (Deed of Conveyance, tax declarations transferred to the wife-buyer, etc.), as a gainst 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 further ruled that their claim of implied trust is untenable, 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. ISSUE

WON the Seller was a mere trustee for his parents and siblings RATIO 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. 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) i t is a relationship; (b) it is a relationship of fiduciary character; (c) It is a relationship with respect to


CASE DIGESTS TRUSTS 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 i s an implied trust when prope rty 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 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 d id 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.

2. PENALBER v CA FACTS:

Lina Penalber is the mother of Leticia and the mother-in-law of Quirino Ramos, husband of Leticia. The mother claimed that for many years, she operated a hardware store in a building she owned. However, the lot upon which the building stood is owned by Maria Mendoza. 3

The mother allowed the spouses to manage the hardware store. When Mendoza put the property up for sale, the mother did not have cash to buy the property. She allegedly entered into a verbal agreement with the spouses wherein the lot would be bought by the spouses for and in behalf of the mother, and since the spouses have the better credit standing, they would be made to appear as the buyers so that the title to be issued in their names could be used by the spouses to secure a loan with which to build a bigger building and expand the business of the mother. Pursuant to agreement, the spouses Ramos allegedly entered into a contract of sale with Mendoza. Later, the spouses returned the management of the hardware. On the bases of r eceipts and disbursements, the mother mother asserted that the land was fully paid out of the funds of the store and if the spouses had given any amount for the purchase price of the said land, they had already sufficiently reimbursed themselves from the funds of the store. The mother demanded from the spouses the reconveyance of the title to the land but the spouses refused. The Mother’s Arguments: The spouses were, in reality, mere trustees of the land, thus, they were under a moral and legal obligation to reconvey title over the said property to her. She calls attention to the fact that the spouses could not account for the P116,946.15 difference in the beginning inventory and the second inventory of the stocks of the hardware store. As the spouses never denied the existence of the said amount, the mother contends that they have the burden of proving where this amount had gone, and their failure to discharge such burden, the only conclusion would be that they did use the amount to purchase the pr operty – making such property held merely in trust by the spouses for the mother. The mother also alleges that based on the verbal agreement between her and the spouses, a valid and enforceable trust agreement was created, and such was clearly intended by the parties. The Spouses’Arguments The spouses contended that they were given not only the management, but also the full ownership of the hardware store by the the mother, on the condition that the stocks and merchandise of the store will be inventoried, and out of the proceeds of the sales, the spouses shall pay the mother’s outstanding outstanding liabilities. According to the spouses, they bought the property from Mendoza out of their own funds. The spouses also said that given that the alleged trust concerns an immovable property, it is unenforceable unenforceable since the agreement was made verbally


CASE DIGESTS TRUSTS and no parol evidence may be admitted to prove the existence of an express trust concerning an immovable property or any interest therein. ISSUE:

(1) whether the existence of a trust agreement between her and respondent spouses Ramos was clearly established. (2) whether such trust agreement was valid and enforceable. HELD: (1) No. (2) No.

mother), by itself, is not conclusive proof that the said amount was used to pay the purchase price of the property, such as would make it the property of the mother held merely in trust by respondent spouses Ramos. The fact that the spouses never denied the P116,946.15 difference, difference, or that they failed to present proof that they indeed used the said amount to pay the other obligations of the mother is not sufficient to discharge the mother’s burden to prove the existence of the alleged e xpress trust agreement.

II.

EXPRESS TRUSTS 1. TORBELA v ROSARIO

RATIO:

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. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law. Express trusts are those which are created by the direct and positive acts of the parties, by some wr iting or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. No particular words are required for the creation of an express trust, it being sufficient sufficient that a trust is clearly intended. However, in accordance with Article 1443 of the Civil Code, when an express trust concerns an immovable property or any interest therein, the same may not be proved by parol or oral evidence. From the allegations of the the mother, the alleged verbal trust agreement is in the nature of an express trust as the mother explicitly agreed to allow the spouses to acquire title to the property in their names, but to hold the same property for the mother’s benefit. The mother’s allegations as to the existence of an express trust agreement with the spouses, supported only by her testimonies, do not hold water. The resulting difference of P116,946.15 in the beginning inventory of the stocks of the hardware store (before management was transferred to the spouses) and the second inventory (after management was returned to the 4

FACTS

The controversy began with a parcel of land (Lot No. 356-A) in Pangasinan which was originally a part of a larger piece of land in the name of Valeriano Semilla, married to Potenciano Acosta. Lot No. 356-A was given by Valeriano to his sister Marta, married to Eugenio Torbela. Upon the death of the Spouses Torbela, Lot No. 356-A was adjudicated in equal shares among their children, the Torbela siblings, by virtue of a Deed of Extrajudicial Partition. Then the Torbela siblings executed a Deed of Absolute Quitclaim over Lot No. 356-A in favor of Dr. Rosario. Another Deed of Absolute Quitclaim was subsequently executed, this time by Dr. Rosario, acknowledging that he only borrowed Lot No. 356-A from the Torbela siblings and was already returning the same. Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from DBP secured by a mortgage constituted on Lot No. 356-A. Dr. Rosario used the proceeds of the loan for the construction of improvements on Lot No. 356-A. Dr. Rosario was able to fully pay his loan from DBP. Dr. Rosario acquired another loan from the Philippine National Bank (PNB) sometime in 1979-1981. On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario), acquired a third loan in the amount of P1,200,000.00 from Banco Filipino. To secure said loan, the spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. Because Banco Filipino paid the balance of Dr. Rosario’s loan from PNB, the mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No. 533478.


CASE DIGESTS TRUSTS A Complaint was then filed for the recovery of ownership and possession of said land. Also since the spouses failed to pay their loan (3rd) with Banco Filipino, the property was foreclosed. ISSUE(S):

Whether or not a trust existed between the parties. Whether or not the trust was validly repudiated by Dr. Rosario. RATIO:

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their parents. 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 D r. 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, the proceeds of which would be used for building a hospital on Lot No. 356-A —a claim supported by testimonial and documentary evidence, and borne out by the sequence of events immediately following following the execution by the Torbela siblings of said D eed. Trust is the right to the bene ficial 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.61Express trusts are created by direct and positive acts of the parties, by some wr iting 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.

5

When Dr. Rosario was able to re gister Lot No. 356-A in his n ame under TCT No. 52751 on D ecember 16, 1964, an implied trust was initially established between him and the Torbela siblings. Dr. Rosario’s execution of the Deed of Absolute Quitclaim on December 28, 1964, containing his express admission that he only borrowed borrowed Lot No. 356 -A from the Torbela siblings, eventually transformed the nature of the trust to an express one. The express trust continued continued despite Dr. Rosario stating in his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained register ed in Dr. Rosario’s name under TCT No. 52751 and Dr. Rosario kept possession of said property, together with the improvements thereon. Dr. Rosario argues that he is deemed to have repudiated the trust on December 16, 1964, when he registered Lot No. 356-A in his name under TCT No. 5275, so he claims that the action for the recovery has already prescribed. The court rejected this argument and said that “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. (Ringor v. Ringor). However, the Supreme Court agreed with the Court of Appeals when it held that Dr. Rosario repudiated the express trust when he acquired another loan from PNB and constituted a second mortgage on Lot No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965, was without the knowledge and/or consent of the Torbela siblings. But the Torbela siblings were able to institute Civil Case No. U-4359 well before the lapse of the 10-year prescriptive period for the enforcement of their express trust with Dr. Rosario.

2. JULIO v DALANDAN FACTS

An affidavit was subscribed and sworn to by Clemente Dalandan. By the terms of this writing, 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. The key provisions of said document are: “3. That this riceland owned by VICTORIANA DALANDAN whose sole heir is VICTORIA JULIO was posted posted as security for an obligation assumed by me


CASE DIGESTS TRUSTS even before the outbreak of the last war and because I failed to fulfill the obligation secured secured by her said farm the same was foreclosed; foreclosed; 4. That because of this, and as agreed upon between us, I accordingly held myself liable to Victoria Julio for the foreclosure of her said land, and I promised her that I would replace her aforesaid land which was foreclosed because of my obligation with another farm of more than four; (4) hectares, that is, one planted to four cavanes of seedlings, more or less;] 5. That my children (EMILIANO AND MARIA DALANDAN) may not be forced to give up the harvest of the farm herein above mentioned; 6.That neither may the land — which was exchanged for the farm with four cavanes of seedlings — be demanded immediately;” After the death of Clemente Dalandan, plaintiff requested from defendants to deliver the land to her, but they refused. ISSUE

W/N Emiliano and Maria Dalandan are trustees trustees of Victoria Julio.

3. CANEZO v ROJAS SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO a nd VICTORIANO CAÑEZO Petitioners, vs CONCEPCION ROJAS, Respondent.

GR No. 148788 November 23, 2007

HELD / RATIO

YES. Emiliano and Maria Dalandan are usufructuaries for an undetermined length of time. For so long as that period has not been fixed and has not elapsed, they hold the property. Theirs is to enjoy the fruits of the land and to hold the same as trustees of Victoria Julio. And this because, because, by the deed, Clemente Dalandan divested himself of the ownership — qualified solely by withholding enjoyment of the fruits and physical possession. In consequence, Clemente Dalandan cannot transmit to his heirs, the present defendants, such ownership. Nemo dat quod non habet. And then, the document is a declaration by Clemente Dalandan, now deceased, against his own proprietary interests. Such document is binding upon his heirs. While it is true that said deed 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. Not that this view is without statutory support. 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." In reality, the development of the trust as a method of disposition of property, so jurisprudence teaches, "seems in large part due to its freedom from formal requirements." This principle perhaps accounts for the provisions in Article 1444 just quoted. For, "technical or particular 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 6

"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."7 Here, that trust is effective as against defendants and in favor of the beneficiary thereof, plaintiff Victoria Julio, who accepted it in the document itself.

FACTS:

Soledad Cañezo (Cañezo) claims that she bought a parcel of land in 1939 from Crisogono Limpiado (Limpiado) but the transaction was n ot reduced into writing. She immediately took possession of the property. When she and her husband left for Mindanao in 1948, she entrusted the land to her father, Cripulo Rojas (Crispulo), who took possession of and cultivated the land. However, in 1980, she discovered that her stepmother, Concepcion Rojas (Rojas), took possession of the land and that the tax declaration was already transferred in Crispulo’s name. Thus, Cañezo filed a complaint for the recovery of the land plus damages against Rojas. Rojas, on the other hand, claims that it Crispulo who bought the property from Limpiado in 1948. From then on until his death in 1978, Crispulo was on possession of the land ISSUE:

WON a trust, express or implied, was constituted between Cañezo and Crispulo RULING:

There was no trust, express or implied, between Cañezo and Crispulo.


CASE DIGESTS TRUSTS RATIO:

A trust is the legal r elationship between 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. As a rule, however, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily 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 Cañezo to prove the existence of the trust relationship, but she failed to discharge that burden. The existence of express trusts concerning real property may not be established by parol evidence. It must be proven by some writing or deed. In this case, the only evidence to support the claim that an express trust existed between the petitioner and her father was the self-serving testimony of the petitioner. Bare allegations do not constitute evidence adequate to support a conclusion. They are not equivalent to pr oof under the Rules of Court. Although no particular words are required for the creation of an express trust, a clear intention to create a trust must be shown; and the proof of fiduciary relationship must be clear and convincing. 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. interpretations. In the case at bench, an intention to create a trust cannot be inferred from Cañezo’s testimony and the attendant facts and circumstances. Neither can it be deduced from the circumstances of the case that a resulting trust was created. A resulting trust is a species of implied trust that is presumed always to have been contemplated by the parties, the intention as to which can be found in the nature of their transaction although not expressed expressed in a deed or instrument of conveyance. A resulting trust is based on the equitable equitable doctrine that it is the more valuable consideration than the legal title that determines the equitable interest in property. 7

Assuming that such a relation existed, it terminated upon Crispulo’s death in 1978. A trust terminates upon the death of the trustee where the trust is personal to the trustee in the sense that the trustor trustor intended no other person to administer it. Hence, after Crispulo’s death, Rojas had no right to retain possession of the property. At s uch point, a constructive constructive trust would be created over the property by operation of law. Where one mistakenly retains property which rightfully belongs to another, a constructive constructive trust is the proper r emedial device to correct the situation. A constructive trust is one created not by any word or phrase, either expressly or impliedly, evincing a direct intention to create a trust, but one which arises in order to satisfy the demands of justice. It does not come about by agreement or intention but in the main by operation of law, construed 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. As previously stated, the rule that a trustee cannot, by prescription, acquire 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 re lationship. lationship. Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period. A constructive constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. relation. While in an express trust, a beneficiary beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary. The relation of trustee and cestui que trust does not in fact exist, and the holding of a constructive trust is for the trustee himself, and therefore, at all times adverse.

4. PNB v AZNAR G.R. No. 171805, May 30, 2011 PHILIPPINE NATIONAL BANK, PETITIONER MERELO B. AZNAR; MATIAS B. AZNAR III; JOSE L. AZNAR (DECEASED), REPRESENTED BY HIS HEIRS; RAMON A. BARCENILLA; ROSARIO T. B ARCENILLA; JOSE B. ENAD (DECEASED), (DECEASED), REPRESENTED BY HIS HEIRS; AND RICARDO GABUYA (DECEASED), REPRESENTED BY HIS HEIR S, RESPONDENTS.


CASE DIGESTS TRUSTS G.R. NO. 172021 MERELO B. AZNAR AND MATIAS B. AZNAR III, PETITIONERS, PHILIPPINE NATIONAL B ANK, RESPONDENT FACTS:

In 1958, RISCO ceased operation due to business re verses. In plaintiffs' desire to rehabilitate RISCO, they contributed P212,720.00 which was used in the purchase of the 3 parcels of land 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 aforementioned 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 , pertinent portion of which states: xxxx 3. That in a special meeting of the stockholders called called for the purpose of putting up certain amount for the rehabilitation of the Company, the following stockholders contributed the amounts indicated opposite their names: Melero Aznar, Matias Aznar, Jose Aznar, Ramon Barcenilla, Rosario Barcenilla, Jose Enad, and Ricardo Gabuya. The respective contributions above-mentioned shall constitute as their lien or interest on the property, if and when said property are titled in the name of RISCO., subject to registration as their adverse claim in pursuance of the Provisions of Land Registration Act, until such time their respective contributions contributions are refunded to them completely. xxxx Thereafter, various subsequent annotations were made on the titles, including the Notice of Attachment and Writ of Execution. As a result, a Certificate of Sale was issued in favor of PNB, being the lone and highest bidder of the 3 parcels. Thereafter, a Final Deed of Sale in fav or of the Philippine National Bank was also issued and a new TCT was issued in the name of PNB on August 26, 1991. Plaintiffs filed a complaint seeking the quieting of their supposed title, cancellation of TCT and reconveyance with TRO and PI. Plaintiffs alleged that the annotations on the titles are subject to the prior annotation of their liens and encumbrances. Plaintiffs further contended that the subsequent writs and processes annotated are all null and void for want of valid service upon RISCO and on them, as stockholders. They argued that the Final Deed of Sale and TCT are null and void a s these were issued only after 28 years. The 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 8

the stockholders, Aznar, et al., were the beneficiaries or the cestui que trust. The CA set aside the judgment of the trial court. Although the Court of Appeals agreed with the trial court that a judgment on the pleadings was proper, the appellate court opined that the monetary contributions made by Aznar, et al., to RISCO can only be characterized as a loan secured by a lien on the subject lots, rather than an express trust. trust. Thus, it directed PNB to to pay Aznar, et al., the amount of their contributions plus legal interest from the time of acquisition of the property until finality of judgment. ISSUE:

The relevant one: Were the contributions of the stockholders AN EXPRESS TRUST? HELD: No they are not an express trust. 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 the property for the benefit of the beneficiary. Trust relations between parties parties may either be express or implied. An express trust is created by the intention of the the trustor or of the parties. An implied trust comes into being by operation of law.[21] Express trusts, sometimes referred to as direct 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.[22] This is in consonance with Article 1444 of the Civil Code, which states that "[n]o particular words are required for the creation of an express trust, it being sufficient sufficient that a trust is clearly intended." In other words, 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.[23] No such reasonable certitude in the creation of an express trust obtains in the case at bar. In fact, a careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not offer any indication that the parties thereto intended that Aznar,et al., become beneficiaries under an express trust and that RISCO serve a s trustor.


CASE DIGESTS TRUSTS WHEREFORE, the petition of Aznar, et al., in G.R. No. 172021 is D ENIED for lack of merit. The petition of of PNB in G.R. G.R. No. 171805 171805 is GRANTED. The Complaint, docketed as Civil Case No. CEB -21511, filed by Aznar, et al., is hereby DISMISSED. No costs.

5. HEIRS OF TRANQUILINO LABISTE v HEIRS OF JOSE LABISTE 587 SCRA 417 (2009) 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.

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 J ose 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 prescribed or barred by laches. ISSUE a) WON Lino’s heirs had long prescribed or barred by laches.

b) How Express Trusts are created.

FACTS

HELD / RATIO

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 a fter 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

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. 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 p roperty 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.

9

a)No. The rules on prescription and the principle of laches cannot be applied here because of the existence of a trust relationship. relationship.


CASE DIGESTS TRUSTS 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 registered in the name of another. However with respect to the other half covered by the private Caligonan 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. heirs.

6. CANEZO v ROJAS FACTS

Soledad Canezo filed a complaint for the recovery of real property plus damages against Conception Rojas (2nd wife of her father). Canezo alleged that she bought the said land from Crisogono Limpiado although the transaction was not in writing. Then she entrusted it to her father when she and her husband had to go mindanao. The father took possession of the said land and then one day canezo found out that Rojas was in possession of the said land and the tax declarations were under his father’s name. Rojas contends that her husband (father of canezo) bought the land from the same seller. The father took possession and cultivated it. Canezo has knowledge of it because it was included in the estate of the father (father died) and canezo did not protest meaning she abandoned her right assuming canezo’s contentions were true. Canezo is barred by laches and estoppel. MTC was in favor of canezo. Rojas appealed to RTC, decision was reversed because action has not yet prescribed because it is a trust. Canezo filed a motion for reconsideration, RTC reversed again the decision (in favor of canezo). Rojas filed a motion to reconsider the decision but denied by RTC. Rojas then filed a petition for review with CA – reversed the decision of RTC (ground is laches and prescription). prescription). Hence, this petition. ISSUE

W/N there was a trust HELD

No trust! 10

RATIO

Procedural issue: Canezo contends that the court should not have granted the motion for extension of time to file. The court said, the grant or denial of a motion fro extension of time is addressed to the sound discretion of the court and there was a reasonable basis for the said extension. Second issue: W/N there was a trust. Trust is a legal 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 exercise of certain powers by the latter. Trusts are either express or implied. Express trust 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 and intention to create a trust. Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or, independently, of the particular intention of the parties, as being superinduced ont eh transaction by operation of law basically by reason of equity. It can be either resulting trust or constructive trust. Resulting trust is presumed always to have been contemplated. The intention as to which can be found in the nature of their transaction altough not expressed in a d eed or instrument. Based on the equitable doctrine that that it is the more valuable consideration than the legal title that determines the equitable interest in property. Trustworthy evidence is required in here. Express trust and resulting trust – trustee cannot acquire by prescription a property entrusted to him unless he repudiates a trust. This is because, in an express trust, the possession of a trustee is not adverse, therefore, he does not acquire by prescription the property. The burden of proving the existence of trust is on the party asserting it. In this case, canezo failed to provide clear and satisfactorily satisfactorily proof of its existence. Elements: (1) trustor trustor who e xecutes 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 property; and (4) beneficiaries whose identity must be clear. -serving testimony of the Canezo’s only evidence was her her self self -serving petitioner. Express trust may not be established by parol evidence. One exception – when there was a clear intention of such. However, it cannot be inferred from cane zo’s testimoney and the attendant facts and circumstances. What they agreed is to give canezo a share of the copra in land.


CASE DIGESTS TRUSTS What distinguishes a trust from other relations is the separation of legal title and equitable ownership of the property. Legal title is vested in the fiduciary and equitable ownership to cestui que trust and this is not true in the case. In addition, the father’s uninterrupted possession for 49 years coupled with the acts of ownership, such payment of real estate taxes, ripened ownership. Tax declarations are not conclusive evidence but if coupled with actual possession, then it will have great weight. On the other hand, Constructive trust is one created not by any word, either expressly or impliedly, evincing a direct intention to create trust, but one which arises in order to satisfy the demands of justice. There is neither a promise nor any fiduciary relation to speak of, no one accepts any trust nor tends holding the property for a beneficiary. In here, after the death of the father, rojas has no right to retain possession of the property. At such point, a constructive trust would be created over the property by operation of law. Constructive trust may be supervened by prescription if the trustee does not repudiate the relationship. In addition, canezo is estopped because of her failure to protest its inclusion in the estate of the father. She was also barred by laches because

when she discovered it, it took her 17 years to file an action about it. Finally, the complaint must be dismissed because the indispensable parties (other heirs) were not included. It is to recover ownership thus it was in the nature of an action for reconveyance, therefore, owners of property over which reconveyance is assert asserted ed are indispensable parties.

7. PACHECO v ARRO G.R. No. L-48090 Feb ruary 16, 1950 PETITIONERS: Dolores Pacheco, in her capacity as guardian of the minors Concepcion, Alicia, and Herminia Yulo (SUCCESSORS-IN-INTEREST) RESPONDENTS: RESPONDENTS: Santiago Arro et al. (CLAIMANTS) ***Jose Yulo y Regalado (PREDECESSOR IN INTEREST) FACTS

The CLAIMANTS 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 PREDECESSOR-IN-INTEREST in the cadastral case, a ssured and promised that after the change of the street names from Zamora and

11

Quennon streets to T. Yulo and G. Regalado streets, the PREDECESSOR-ININTEREST would convey and assign the lots to the claimants. Because of this, the CLAIMANTS withdrew their claims and the cadastral court confirmed the title to the lost and decreed their registration in the name of the PREDECESSOR-IN-INTEREST. The representative of the PREDECESSOR-IN-INTEREST 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. The CA a ffirmed. The SUCCESSORS-IN-INTEREST 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 a ssign the property. RULING

YES. Judgment affirmed. RATIO

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 rega rds certain property – real, personal, funds or money, or choses in action – must not be confused with an action for specific performance. 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 re sulted therefrom, 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


CASE DIGESTS TRUSTS SUCCESSORS-IN-INTEREST that the promise above adverted to cannot prevail over the final decree of the cadastral court holding the PREDECESSOR-ININTEREST 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.

8. GAMBOA G.R. No. L-29556 FACTS:

This action was instituted in the Court of Fir st Instance of the Province of Pampanga by various plaintiffs of the surname or connection of Gamboa, 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, of which, it is asserted, the plaintiffs are coowners with the defendants Modesta, Pedro and Rafael, of the same name. 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. It is not disupted that all of the properties that are the subject of this action once belonged to Juan Gamboa and Ana Manago, the parents of the first set of Gamboa plaintiffs of the three defendants of the same name. There is no controversy over the further fact that on August 27, 1987, 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 consolidated in Javier. But Juan Gamboa, and after his death, his family, continued in possession as tenants under Javier. 12

On June 18, 1910, Javier then sold the properties to Feliciana and Modesta Gamboa. The proof shows that ever since the property in question was conveyed by Javier to the Gamboa sisters in 1910, the same has been continuously in the possession of Modesta, except for the two years 1912 and 1913 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 re purchase 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 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


CASE DIGESTS TRUSTS 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.

estate, for she was well aware that Alexander was simply holding the said properties in trust for his siblings. ISSUE:

Whether or not a trust, express or implied, was established by Alejandro in favor of his late son and name-sake Alexander

9. TY v TY ALEJANDRO B. TY, petitioner, petitioner, vs. SYLVIA S. TY, TY, in her capacity as Administratrix of the Intestate Estate of Alexander Ty, respondent. G.R. No. 165696 April 30, 2008 FACTS:

Alexander Ty died and was succeeded by his wife Sylvia and his daughter Krizia. A few months after his death, a petition for the settlement of his intestate estate was filed. Sylvia, as administratrix, was ordered by the California court to distribute his property in the United States. In the Philippines, Sylvia submitted submitted to the intestate Court in Quezon City an inventory of the ass ets of Alexander’s estate, consisting of shares of stocks and various properties (EDSA Property, Meridien, and Wack-Wack). She asked the court to permit her to sell/mortgage the properties of the estate in order to pay additional estate tax as assessed by the BIR. Apparently, this action did not sit well with her father-in-law, Alejandro, who later filed a complaint for recovery of properties with prayer for preliminary injunction and/or temporary restraining order. In her opposition, Sylvia claimed that plaintiff Alejandro had no actual or existing right, which entitles him to the writ of preliminary injunction, for the reason that no express trust concerning an immovable maybe proved by parole evidence under the law. In addition, Sylvia Ty argued that the claim is barred by laches, and more than that, that irreparable injury will be suffered by the estate of Alexander Ty should the injunction be issued. As to the complaint for recovery of properties, it is asserted by Alejandro that he owns the three properties mentioned above. He said he bought all three properties at different times, and registered them under his son’s name with the understanding that they will be held in trust for his brothers and sisters in the event of his sudden demise. Plaintiff further alleged that at the time the properties were purchased, his son was financially incapable of purchasing said properties. He presented Alexander’s and Sylvia’s income tax returns to bolster his claim. Alejandro added that defendant acted in bad faith in including the subject properties in the inventory of Alexander Ty’s 13

RULING/RATIO:

No, there was neither express nor implied trust created concerning concerning the subject properties. An express trust over real property cannot be constituted when nothing in writing was presented to prove it. As for implied trust, since Alejandro has erected his case upon Art. 1448 of the Civil Code, a prime example of an implied trust, viz.: that it was he who allegedly paid for the p urchase price of some of the realties subject of this case, legal title or estate over which he allegedly granted or conveyed unto his son, Alexander, for the latter to hold these realties in trust for his siblings in case of his demise, Alejandro is charged with the burden of establishing the existence of an implied trust by evidence described or categorized as "sufficiently strong," "clear and satisfactory," or "trustworthy." "trustworthy." He has miserably failed to discharge that burden. If only to emphasize and reiterate what the Supreme Court has in the past declared about implied trusts, these case law rulings are worth mentioning – 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 sa tisfactorily tisfactorily 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. Trustworthy Trustworthy evidence is required because oral evidence can easily be fabricated. fabricated. The EDSA Property Property Article 1448 of the Civil Code is clear. If the person to whom the title is conveyed is the child of the one paying the price of the sale, and in this case this is undisputed, NO TRUST IS IMPLIED BY LAW. The law, instead, disputably presumes a donation in favor of the child. On the question of whether or not petitioner intended a donation, the CA found that petitioner failed to prove the contrary. This is a factual finding which this Court sees no reason the record to reverse. The net effect of all the foregoing is that Sylvia is obliged to collate into the mass of the estate of Alejandro, in the event of his death, the EDSA property as an advance of


CASE DIGESTS TRUSTS Alexander’s share in the estate of his father, to the extent that petitioner provided a part of its purchase price.

The Meridien Condominium and the W ack-Wack property. Among the facts cited by the CA are the sources of income of Alexander Ty who had been working for nine years when he purchased these two properties, who 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. There was no implied trust created because there was no showing that part of the purchase price was paid by petitioner and, on the contrary, the evidence showed that Alexander Ty had the means to pay for the same.

10. TAN SENGUAN v PHILTRUST FACTS:

Plaintiff Tan Sen Guan & Co. brought suit in the CFI of Manila for the sum of P10,000 based on an a greement entered into it with the Philippine Trust Company which says that Tan Sen Guan & Co., a mercantile partnership secured a judgment for the sum of P21,426.00 against the Mindoro Sugar Co., of which the Philippine Trust is the Trustee. That accordingly, Tan Sen Guan & Co., assigns, conveys, transfers and sells to said Philippine Trust Company the full amount of said judgment and in connection for the stipulations that, the Philippine Trust Company, upon signing the agreement, shall pay to Tan Sen Guan & Co., the sum of five thousand (P5,000) pesos and should the Mindoro Sugar Co., be sold, assigned or its ownership transferred in any manner whatsoever to any person or entity including the Philippine Trust Company, itself, it shall pay to Tan Sen Guan & Co., an additional sum of ten thousand (10,000) pesos. After trial on an agreed statement of facts facts which had been entered into by the respective attorneys, the court absolved the defendant on two grounds: first, that in the contract it was bound only as a trustee and not as an individual and second, that it had not been proved that all the properties of the Mindoro Sugar Company had been sold. Defendant claims that the omission of a comma between the words "Mindoro Sugar Company" and the words "which appear described" shows that only a portion of the Mindoro Sugar Company's properties were sold. The stipulation of facts relative to the second point reads: (9) That, pursuant to the attached copy of notice of sale, Modesto Manahan, Justice of the peace of the Municipality of San Jose, Province of 14

Mindoro, sold at public auction to the Roman Catholic Archbishop of Manila, a corporation sole, all the properties belonging to the Mindoro sugar Company which appears described in the certificate of sale executed by the said justice of the peace Modesto Manahan in favor of the said the Roman Catholic Archbishop of Manila. ISSUE:

W/N defendant is personally liable for the claim of the pl aintiff HELD:

While the legal title of the properties of the Mindoro Sugar Company were in the Philippine Trust Company as trustee, Tan Sen Co. secured a judgment against the Mindoro Sugar Company and sold, transferred, and assigned that judgment to its trustee by their contract. Whether all the properties of the Mindoro Sugar Company were sold by the justice of the peace as recited in paragraph 9 of the stipulation of facts, is not controlled by the insertion or omission of a comma in the stipulation of facts. An examination of any of the standard dictionaries will show that the relative pronoun "which" is descriptive and not restricted. If a re strictive relative pronoun pronoun were desired, the word "that" should have been used. While in the contract in question the Philippine Trust Company was usually referred to as trustee, it must be noted that nowhere in the deed of trust from the Mindoro Sugar Company to the Philippine Trust Company, was any authority given to enter into a contract such as is here presented. The Philippine Trust Company held the legal title to the properties of the Mindoro Sugar Company to protect the bond holders. So far as the Philippine Trust Company was concerned, it was not authorized to manage the affairs of the Mindoro Sugar Company or to 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. question. Not only is there no express stipulation that the trustee should not be held responsible but in the "Wherefore" clause of the contract, the judgment was expressly assigned in favor of the Philippine Trust Company, not the Philippine Trust Company. If therefore follows that appellant had a right to proceed directly against the Philippine Trust Company on its contract and has no claim against either the Mindoro Sugar Company or the trust estate.


CASE DIGESTS TRUSTS

11. GOVERNMENT v ABADILLA G.R. No. L-21334 December 10, 1924 THE GOVERNMENT OF THE PHILIPPINE ISLANDS, petitioner, vs. ANASTASIA ANASTASIA ABADILLA, ET AL., claimants. THE MUNICIPALITY OF TAYABAS, 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 t hat 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 c ivil 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 re mained 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 a greement 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

15

the secondary school to be established. The widow and the collateral heirs appealed. ISSUE

WON the property should be given to the collateral heirs HELD: 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 i f 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 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 g ood 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


CASE DIGESTS TRUSTS 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. prescription. CONCURRING & DISSENTING OPINION (MALCOLM, ( 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 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.

12. CRISTOBAL v GOMEZ G.R. No. L-27014 October 5, 1927 PAULINA CRISTOBAL, CRISTOBAL, ET AL., plaintiffs-appellees defendant-appellant.

vs. MARCELINO MARCELINO GOMEZ,

FACTS:

Epifanio Gomez sold this property with pacto de retro to Yangco, redeemable in 5 years. The period expired without redemption. Yangco, however still allowed Epifanio to repurchase. Epifanio borrowed money from Bañas. Bañas told Epifanio that he would let Epifanio have the money if Epifanio’s siblings Marcelino and Telesfora would make themselves responsible for the loan. Marcelino and Telesfora agreed, so all four of them (Epifanio, Marcelino, Telesfora, and Bañas) met and agreed that Bañas should advance the sum of P7,000, upon the personal credit of Marcelino and Telesfora, and that this money should be used to repurchase the property in the name of Telesfora and Marcelino. Telesfora and Marcelino would hold and administer the property until the capital advanced by Bañas should be paid off, after which the property would be returned to Epifanio. Marcelino and Telesfora entered into a "private partnership in participation" to redeem the property from Yangco. It was agreed that the capital of this partnership should consist of P7,000, of which Marcelino was to 16

supply the amount of P1,500, and Telesfora the sum of P5,550. The important provisions in this agreement are: 1. That all the income, rent, and produce of the aforesaid property of Epifanio shall be applied exclusively to the amortization of the capital employed by the Marcelino and Telesfora. 2. As soon as the capital employed, interest and other expenses are covered, said properties shall be returned to Epifanio Gomez or to his legitimate children 3. In order that the property may be returned, it is made essential that Epifanio shall manifest good behavior in the opinion of Marcelino and Telesfora. Epifanio later died, leaving a widow, Paulina Cristobal, and 4children. Marcelino meanwhile entered into possession of the property, — a possession which he subsequently maintained for 20 yrs. During this period, Marcelino improved the larger parcel by extending the salt beds constructed constructed upon it. Later, Telesfora conveyed to Marcelino her interest and share in the property previously redeemed from Yangco. Marcelino Gomez eventually paid to Bañas the sum of P7,575.92 in full satisfaction of the entire claim and received from Bañas a reconveyance of the property. Paulina and children filed action to recover property from Marcelino. They claimed that the capital had been covered by the property’s income, hence, the same should be returned to them. ISSUE:

W/N a trust agreement was created. created. YES. W/N the property should be returned to Cristobal and her children. YES. HELD: The so-called partnership agreement (Exhibit A) between Marcelino Gomez and his sister created a trust for the express purpose of rescuing the property of Epifanio Gomez; and now that the purpose has been accomplished, the property should be returned to his legitimate children, as provided in paragraph (i) of the agreement.

This bilateral contract was fully binding on both the contracting parties; and the trial court did not err in declaring that, under the second trial paragraph of article 1257 of the Civil Code, the successors of Epifanio Gomez are entitled to demand fulfillment of the trust. In Martinez vs. Graño (42 Phil., 35), we held that 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 encumbrance thereon


CASE DIGESTS TRUSTS shall be paid, after which the property shall be turned back to the original owner, 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. The same rule is a pplicable pplicable in the case before us. It is claimed that the trust agreement was kept secret from Epifanio Gomez and that, having no k nowledge of it, he could not have accepted it before the stipulation was revoked. This contention is contradicted in act by the testimony of Bibiano Bañas, who says that Epifanio Gomez was present when the arrangement for the repurchase of the property from Yangco was discussed and that he assented thereto. Moreover, Bañas states that after the agreement had been executed, he told Epifanio Gomez in the presence of his brother and sister that he should be well pleased as the object he had in view had been accomplished, meaning, that the property was recorded. But even supposing that Epifanio Gomez may never have seen the said agreement, we have no doubt that he understood the nature of the arrangement and his assent thereto was a sufficient sufficient acceptance. JOHNS, J., with whom concurs VILLA-REAL, VILLA-REAL, J., dissenting:

The record shows that Marcelino was a thrifty, prudent, business man, and that under his management and by close personal attention to the business, he eventually paid for the property, and that a portion of the purchase price was paid out of his own money. There is no evidence that the defendant acted as trustee or that he ever recognized a trust, or that during the whole period of twenty years he ever rendered any accounting or that any one ever requested him to make an accounting. The evidence is conclusive that at all times he acted, dealt with and treated the property as his own, upon which he spent his own time, his own money, and improved the property, so as to give it a commercial value. Because he did that and the property now has increased in value, it is taken away from him without any compensation for his services, and he is denied the fruits of twenty years of his l abor in giving it a commercial commercial value. The very fact that during the whole period of twenty years, Marcelino was never called upon to make an accounting and that at all times he considered, dealt with, and treated the property as his own, is conclusive evidence that he never held the title in trust for any one.

FACTS:

DBP 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 under Commonwealth Commonwealth Act No. 186 , as a mended. 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 Bank e stablished stablished a Special Loan Program availed thru the facilities of the DBP Provident Fund and funded by placements from the Gratuity Plan Fund as “part of the benefit program of the Bank to provide financial assistance to qualified members to enhance and protect the value of their gratuity benefits”. Under it, 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. The payments were disallowed by the Auditor under Audit Observation Memorandum No. 93-2 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. Apart from requiring the recipients 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 [i]n the Fund be considered as rightful owner of the Fund. Former DBP Chairman Alfredo C. Antonio requested then COA Chairman Celso D. Gangan to reconsider AOM No. 93-2. It was denied by the COA. Hence, this petition. ISSUE:

13. DBP v COA

17

Whether or not the trustees of the Fund administrators./Whether administrators./Whether or not the fund is the subject of a trust.

are


merely

CASE DIGESTS TRUSTS HELD:

The DBP counters that the Fund is the subject of a trust, and that the Agreement transferred legal title over the Fund to the trustees. The income of the Fund does not accrue to DBP. Thus, such income should not be recorded in DBP’s books of account. 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 en tity. Employees’ trusts are also exempted from certain taxes under Section 60 (B) of the National Internal Revenue Code, as amended. 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 Republic Act No. 1616. The principal and income of the Fund would be separate and distinct from the funds of DBP. In a trust, one person has an e quitable quitable ownership in the property while another person owns the legal title to such property, the equitable ownership of the former entitling him to the performance of certain d uties and the exercise of certain powers by the latter. A p erson who establishes a trust is the trustor. One in whom confidence is reposed as regards property for the benefit of another is the trustee. The person for whose benefit the trust is created is the beneficiary. In the present case, 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 Clearly, 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. 18

Also as COA correctly observed, the right of the employees to claim their gratuities from the Fund is still inchoate. RA 1616, does not allow employees to receive their gratuities until they retire. However, this does not invalidate the trust created by DBP or the concomitant transfer of legal title to the trustees.

III.

IMPLIED TRUSTS 1. RAMOS v RAMOS

FACTS:

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 Atanacia, Timoteo, Modesto, Manuel, Emiliano, Maria and Federico. Martin Ramos left considerable real estate, the most valuable of which were the Hacienda Calaza and Hacienda Ylaya, both located in Himamaylay, Negros Occidental. Hacienda Calaza consists of sugar land, palay land and nipa groves with an area of 400 hectares and with a sugar quota allotment of 10,000 piculs, more or less, and having as its present actual value P500,000 more or less. All the children of Martin Ramos, whether legitimate or acknowledged natural, lived together in Hacienda Ylaya during his lifetime and were under his care. All said children continued to live in said house of their father for years even after his death. Upon their father's death, his properties were left under the administration of Rafael Ramos, the younger brother of their father and their uncle, Rafael Ramos continued to administer those properties of their father, giving plaintiffs money as their shares of the produce of said properties but plaintiffs not receiving any property or piece of land however, until 1913 when Rafael Ramos gathered all the heirs, including plaintiffs, in the house of their father, saying he would return the administration of the properties. He turned over Hacienda Ylaya to Agustin Ramos and Hacienda Calaza to Jose Ramos. All said children, defendants and plaintiffs plaintiffs alike, continued continued to l ive in the same house of their father in Hacienda Ylaya, now under the support of Agustin Ramos. Agustin Ramos supported plaintiffs, getting the money from the p roduce of Hacienda Ylaya, the only source of income of Agustin coming from said hacienda. Plaintiffs asked money from Agustin pertaining to their share in the


CASE DIGESTS TRUSTS produce of Hacienda Ylaya and received varied amounts, sometimes around P50 at a time, getting more when needed, and receiving P90 or P100 more or less a year. Jose Ramos gave plaintiffs also money as their shares from the pr oducts oducts of Hacienda Calaza. Upon the death of Jose Ramos his widow Gregoria Ramos, herself, his first cousin, their father and mother, respectively being brother and sister, continued to give plaintiffs money pertaining to their shares in the products of Hacienda Calaza. She however stopped doing so in 1951, telling them that the lessee Estanislao Lacson was not able to pay the lease rental. There was never any accounting made to plaintiffs by Jose Ramos, plaintiffs reposing confidence in their elder brother, nor was any accounting made by his widow, defendant Gregoria Ramos, upon his death, plaintiff Manuel Ramos moreover having confidence in her. Before the survey of these properties by the Cadastral Court, plaintiff Modesto Ramos was informed by the Surveying Department that they were going to survey these properties. Plaintiffs Plaintiffs then went to see their elder brother Jose to inform him that there was a card issued to them regarding the survey and gave him 'a free hand to d o something as an administrator'. They therefore did not intervene in the said cadastral proceedings because they were promised that they (defendants Jose and Agustin) would 'be the ones responsible to have it registered in the names of the heirs'. Plaintiffs did not file and cadastral answer because defendants Jose and Agustin told them 'not to worry about it as they have to answer for all the heirs'. Plaintiffs were 'assured' by defendants brothers. Plaintiffs did not know that intestate proceedings were instituted for the distribution of the estate of their father. Neither did plaintiffs Modesto, Manuel, Emiliano and Maria know that Timoteo Zayco, their uncle and brotherin-law of defendant widow Gregoria was appointed their guardian. They never received any sum of money in cash — the a lleged insignificant sum of P1,785.35 each — from said alleged guardian as their supposed share in the estate of their father under any a lleged project of partition. Neither did Atanacia Ramos nor her husband, Nestor Olmedo, sign any project of partition or any receipt of share inthe inheritance inheritance of Martin Ramos in cash. Nestor Olmedo did not sign an y receipt allegedly containing the signatures of Atanacia assisted by himself as husband, Timoteo Ramos, and Timoteo Zayco as guardian ad-litem of the minors Modesto, Manual, Federico, Emiliano and Maria. As a matter of fact, plaintiffs Modesto and Manuel were in 1913 no longer minors at the time of the alleged project of partition of the estate being 19

approved, both being of age at that time. No guardian could in law act on their behalf. Plaintiffs only discovered later on that the property administered by their elder brother Jose had a Torrens Title in the name of his widow, Gregoria, and daughter, Candida, when plaintiff Modesto's children insisted and inquired from the Register of Deeds sometime in 1956 or 1957. 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. Plaintiffs were thus constrained to bring the present suit before the Court of First Instance of Negros Occidental seeking for the reconveyance in their favor by defendants Gregoria and daughter Candida and husband Jose Bayot of their corresponding participations in said parcels of land in accordance with article 840 of the old Civil Code. ISSUE:

W/N plaintiffs' shares were held in trust by the defendants. HELD:

NO. 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 re ceipt 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 (De Leon vs. Peckson, 62 O. G. 994). As already noted, an express trust cannot be proven by parol evidence(Pascual vs. Meneses, L18838, May 25, 1967, 20 SCRA 219, 228; Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21 SCRA 1192). 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 constructive trust, its en forcement may be barred by laches. In the cada stral proceedings, which supervened after the closure of the intestate proceeding, the the eight lots involved herein were claimed by the spouses Jose Ramos and Gregoria T. Ramos to the exclusion of the plaintiffs. After the death of Jose Ramos, the sai d lots were a djudicated to his widow and daughter. In 1932 Gregoria T. Ramos and Candida Ramos leased the said lots to Felix Yulo. Yulo in 1934 transferred his lease rights over Hacienda Calazato Juan S. Bonin and Nestor Olmedo, the husband of plaintiff Atanacia Ramos. Bonin and Olmedo in 1935 sold their lease rights over Hacienda Calaza to Jesus S. Consing.


CASE DIGESTS TRUSTS Those transactions prove that the heirs of Jose Ramos had repudiated any trust which was supposedly constituted over Hacienda Calaza in favor of the plaintiffs. *DOCTRINES CITED "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 words 'trust' is frequently employed to indicate duties, relations, and responsibilities which are not strictly technical trusts." (89 C.J.S. 712). "A person who establishes a trust is called the trust or; 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" (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 inaction (Pacheco vs. Arro, 85 Phil. 505). "Trusts are either express or implied. Express trusts are created by the intention of the trust or of the parties. Implied trusts come into being by operation of law." (Art. 1144, Civil Code). "No express trusts concerning an immovable or any interest therein may be proven by oral evidence. An implied trust may be proven by oral evidence" (Ibid, Arts. 1443 and 1457). "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L -19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the parties, by some wr iting or deed, or will, or by words e ither expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 722). "Implied trust 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" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722). "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 always 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" (89 C.J.S. 725). Examples of resulting trusts are found in article 1448 to 1455 of the Civil Code. See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168,179). 20

On the other hand, a constructive constructive trust is a trust "raised by construction 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 in tention 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." (89 C.J.S. 7260727). "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." A constructive trust is not a trust in the technical sense(Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil Code). There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), 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 prescribed (Manalang vs. Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil. 810), 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(Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered by the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126 Juan vs. Zuniga, 62 O.g. 1351; 4 SCRA 1221; Jacinto, L-17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37). 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" (Diaz vs. Gorricho and Aguado, 103 Phil. 261,266; Laguna vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691). 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 (Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Grano, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849). The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs. Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil. 403, 407).


CASE DIGESTS 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 (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, L19060, May 29, 1964, 11 SCRA 153,157). 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 (Alzona vs. Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-19073, January 30, 1965, 13 SCRA 80; Bonaga vs. Soler, 112 Phil. 651; J. M. Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84). Prescription may supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371). And whether the trust is resulting or constructive, its enforcement may be barred by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra. Compare with Mejia vs. Gampona, 100 Phil. 277).

2. DIAZ v GORRICHO AND AGUADO MANUEL DIAZ, CONSTANCIA DIAZ and SOR P ETRA DIAZ, plaintiffs-appellants, vs. CARMEN GORRICHO and her husband FRANCISCO AGUADO, defendants-appellees. G.R. No. L-11229 March 29, 1958 FACTS:

Lots No. 1941 and 3073 belonged to the conjugal partnership of Francisco Diaz (Francisco) and Marial Sevilla (Maria). When Francisco died, he was survived by Maria and their three children, Manuel, Lolita and Constancia (petitioners). Sometime in 1935, Carmen Gorricho (Gorricho) filed an action against Maria, and as a result, a writ of attachment was issued against the share of Maria in Lots No. 1941 and 3073. Gorricho, being the highest bidder in the public auction, acquired the property and a final deed of sale was executed in her favor after Maria failed to redeem the property after the lapse of one year.

21

Pursuant to this deed, TCTs were issued in her name and she has been in possession of the land ever since. However, the sheriff erroneously conveyed to Gorricho the whole parcels of Lot Nos. 1941 and 3073, instead of only the half interest of Maria. Thus, petitioners filed an action against Gorricho to execute a deed of reconveyance over the half interest of the property (pertaining to the in terest of Francisco), which was illegally conveyed by the sheriff to Gorricho. Gorricho answered that the action has already prescribed. Petitioners contend that since Gorricho acquired their father’s half through an error of the sheriff, the land became subject to an implied trust; therefore, since the trust is continuing and subsisting, the appellants may compel reconveyance of the property despite the lapse of time ISSUE:

WON petitioners are barred by laches HELD:

Yes. Petitioners are in error in believing that like express trusts, such constructive 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 (Act 190) declared that the rules on adverse possession do not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. But in constructive trusts, 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. 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 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


CASE DIGESTS TRUSTS 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.

3. VDA DE OUANO v REPUBLIC

G.R. No. 168770 ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and CIELO OUANO MARTINEZ, Petitioners, THE REPUBLIC OF THEPHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, and THE R EGISTER OF DEEDS FOR THE CITY OF CEBU, Respondents. G.R. No. 168812 MACTAN-CEBUINTERNATIONAL MACTAN-CEBUINTERNATIONAL AIRPORT AUTHORITY AUTHORITY (MCIAA), Petitioner, RICARDO L. INOCIAN, in his personal capacity and as Attorney-in-Fact of OLYMPIA E. ESTEVES, EMILIA E. BACALLA, RESTITUTA E. MONTANA, and RAUL L. INOCIAN; and ALETHA SUICO MAGAT, in her personal capacity and as Attorneyin-Fact of PHILIP M. SUICO, DORIS S. DELA CRUZ, JAMES M. SUICO, EDWARD M. SUICO, ROSELYN SUICO-LAWSIN, REX M. SUICO, KHARLA SUICO-GUTIERREZ, ALBERT CHIONGBIAN, CHIONGBIAN, and JOHNNY CHAN, CHAN, Respondents. FACTS G.R. No. 168770 (the relevant case) In 1949, the National Airport Corporation (NAC), MCIAA’s predecessor

agency, pursued a program to expand the Lahug Airport in Cebu. NAC met and negotiated with the owners of the properties situated around the airport of the Banilad Estate. As the landowners would would later claim, claim, the government government negotiating team, assured them that they could repurchase their respective lands should the Lahug Airport expansion project not push through or once the Lahug Airport closes or its operations transferred to Mactan-Cebu Airport. Some of the landowners accepted the assurance and executed deeds of sale with a right of repurchase. Others, however, including the owners of the aforementioned lots, refused to sell because the purchase price offered was viewed as way below market, forcing the hand of the Republic, represented by the then Civil Aeronautics Administration (CAA), as successor agency of the NAC, to file a complaint for the expropriation. The CFI rendered judgment for the Republic declaring the expropriation of Lots included in the Lahug Airport, Cebu City, justified in and in 22

lawful exercise of the the right of eminent domain. domain. After the payment payment of the foregoing financial obligation to the landowners, directing the latter to deliver to the plaintiff the corresponding TCT; and upon the presentation of the said titles, ordering the RoD to cancel the same and to issue new TCTs in the name of the plaintiff. In view of the adverted buy-back assurance, the owners no longer appealed the decision of the the trial court. Following the finality of the the judgment of condemnation, certificates certificates of title for the covered parcels of land were issued in the name of the Republic which, were subsequently transferred to MCIAA. At the end of 1991, or soon after the transfer of the lots, Lahug Airport completely ceased operations, operations, Mactan Airport having opened to accommodate accommodate incoming and outgoing outgoing commercial flights. On the ground, the expropriated lots were never utilized utilized for the the purpose they they were taken. This development development prompted the former lot owners to formally demand from the government that they be allowed to exercise their promised right to repurchase. G.R. No. 168812 (MCIAA Petition)

Inocian and four others (all children of Isabel Limbaga who originally owned 6 of the lots expropriated); and Aletha Suico Magat and 7 others, successors-in-interest of Santiago Suico, the original owner of 2 of the condemned lots (collectively, the Inocians), filed before the RTC in Cebu City a complaint for reconveyance of real properties and damages against MCIAA. Albert Chiongbian (Chiongbian), alleging to be the owner of one of the lots, but which the Inocians were now claiming, moved and was later allowed to intervene. MCIAA admitted that the purpose of the expropriation was for the expansion of the old Lahug Airport; that the Lahug Airport was not expanded; that the old Lahug Airport was closed sometime in June 1992;and that some properties were reconveyed by the MCIAA because the previous owners were able to secure express waivers or riders wherein the government agreed to return the properties should the expansion of the Lahug Airport not materialize. ISSUE

Was the claim of the Ouanos meritorious HELD

The Republic and MCIAA’s petition in G.R. No. 168812 is bereft of merit, while the Ouano petition in G.R. No. 168770 is meritorious. meritorious. RATIO


CASE DIGESTS TRUSTS 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 expressed in Art. 1454 of the Civil Code,[37] the purpose of which is to preven t 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 consummated by the government. Since the government failed 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 equity ––the landowners in this instance, in establishing the trust ––must himself do equity in a manner as the court may deem just and rea sonable. sonable.

4. LOPEZ v CA 574 SCRA 26 (2008) FACTS

The decedent, Juliana, was married to Jose (Jose). Their union did not bear any children. Juliana was the owner of several properties, which are the subject of this dispute. On 1968, Juliana executed a notarial will, whereby she expressed that she wished to constitute a trust fund for her paraphernal properties, denominated as Fideicomiso de Juliana Lopez Manzano (Fideicomiso), to be administered by her husband Jose. If her husband were to die or renounce the obligation, her nephew, Enrique Lopez (Petioner's father), was to become administrator and executor of the Fideicomiso.

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Note: Fideicomiso- Arrangement by which the testator left his estate or part of it to the good faith of someone so that, in certain case and time, transmit it to another person or invest it in the way that was pointed out by the testator. Paraphernal properties- Exclusive properties of the wife. Jose died on 1980, leaving a holographic will disposing of the disputed properties to respondents. The will was allowed probate on 1983. Pursuant to Jose’s will, the RTC ordered the transfer of the disputed properties to the respondents as the heirs of Jose. Consequently, the certificates of title of the disputed properties were cancelled and new ones issued in the names of respondents. Enrique Lopez, also assumed the trusteeship of Juliana’s estate. On 1984, the RTC a ppointed petitioner Richard Lopez as trustee of Juliana’s estate. Thereafter, petitioner instituted an action for reconveyance of parcels of land with sum of money before the RTC against respondents. The complaint essentially alleged that Jose (the husband) was able to register in his name the disputed properties, which were the paraphernal properties of Juliana, either during their conjugal union or in the course of the performance of his duties as executor of the testate estate of Juliana and that upon the death of Jose, 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 e state of Juliana. The RTC rendered a summary judgment, dismissing the action on the ground of prescription of action. The Court of Appeals rendered the assailed decision denying the appeals filed by both petitioner and respondents. In addition, the CA held that the petitioner's action for reconveyance has prescribed and that the fiduciary relation assumed by the late Jose was an Implied Trust. ISSUE

a) WON an implied trust was constituted over the disputed properties when Jose, the trustee, registered them in his name. b) WON petitioner’s action for reconveyance has prescribed. HELD

The disputed properties were the paraphernal properties of Juliana which should have been included in the Fideicomiso, their registration in the name of Jose was erroneous and Jose’s possession is that of a trustee in an implied trust.


CASE DIGESTS TRUSTS 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 matters of equity, independently of the particular intention of the p arties. The Court differentiated two kinds of implied trusts. Implied trusts are either resulting or constructive trusts. These two are differentiated from each other as follows: DOCTRINE: 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 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. 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 the Fideicomiso.

However, the right to seek reconveyance based on an implied or constructive trust is not absolute. It is subject to extinctive prescripti on. An action for reconveyance based on implied or constructive constructive trust prescribes in 10 years. This period is reckoned from the date of the issuance of the original certificate of title or transfer certificate certificate of title. Since such issuance operates as a constructive notice to the whole world, the discovery of the fraud is deemed to have taken place at that time. The ten-year prescriptive period to recover the disputed property must be counted from its registration in the name of Jose on 15 September 1969, when petitioner was charged with constructive constructive notice that Jose adjudicated the disputed properties to himself as the sole heir of Juana and not as trustee of the Fideicomiso. Jose had indicated that the disputed properties were conjugal in nature and, thus, excluded from Juliana’s Fideicomiso. This act is clearly tantamount to repudiating the trust, at which point the period for prescription is reckoned. b) The petitioner's action for reconveyance has clearly already prescribed when he filed said actions on 1984 or fifteen (15) years later. Petition denied. 24

5. SALAO v SALAO FACTS:

Manuel Salao and Valentina Ignacio has four children – Patricio, Alejandra, Juan and Ambrosia. Manuel Salao and Patricio died. No documentary evidence as to what properties formed part of Manuel Salao’s estate. Valentina also died and her estate was administered by Ambrosia. Patricio died and being represented by Valentin (his son). Therefore, the estate will be divided to Valentin, Alejandra, Juan and Ambrosia. Ambrosia. Valentina left a lot of properties properties and the distributive share of each was P8,135 but Valentin got more than the said amount so he was forced forced to pay his coheirs the difference. Before Valentina died, Juan and Ambrosia secured a torrens title in their name 47ha of fishpond in Calunaran, Pampanga which is also known as Lot 540 of Hermosa cadastre and exercised dominical rights over it to the exclusion of Valentin. It was contended that Juan and Ambrosia used the commond fund to buy the said fishpond but was d enied by the other party. The said fishpond was sold under pacto de retro sale to two persons but was redeemed in due time. Juan and Ambrosia also bought a swampland in Lewa, Pampanga and registered registere d it under their names, it became cadastral lot no. 544 of Hermosa Cadastre – it adjoins the Calunuran fishpond. Juan and valentin died. Valentin has two daughters – Benita and Victorina. Valentin’s estate consisted of 2 fishponds inherited from Valentina. Ambrosia donated to Benita 3 lots and a deed of donation was signed. It was only after Abrosia’s death benita filed an action for reconveyance of the caluran fishpond which was allegedly held in trust and which had become the sole property of Juani (son of juan). Before ambrosia’s death, she donated ½ share of the fishpond to Juani. Benita and children of victorina contends that they had a 1/3 share in the 2 fishponds that Juani took possession. Juani refused to give Benita and children their respective shares. Juani then contends contends that the the fishponds were only owned by Juan and ambrosia - Valentin has no interest on the said fishpond. Benita and children filed for an annulment of the donation to Juani and reconveyance to them. But as a defense of juani, he pleaded the indefeasibility of the Torrens title secured by Juan and ambrosia and prescription and laches. Juani died and substituted substituted by his wife (pascual) and children. The court ruled


CASE DIGESTS TRUSTS that there was no co-ownership and the said fishpond was properly donated to Juani. In addition, the parties involved in the alleged trust were dead. ISSUE:

W/N the fishfpond was held in trust for Valentin by J uan and Ambrosia and W/N their action for reconveyance had already prescribed.

6. MUNICIPALITY OF VICTORIAS v CA G.R. No. L-31189 March 31, 1987 PETITIONER: Municipality of Victorias (MUNICIPALITY) RESPONDENTS: CA, Norma Leuenberger (GRANDAUGHTER) , Francisco Soliva (HUSBAND)

Simeona J. Vda. de Ditching – ( WIDOW) WIDOW) / ( GRANDMOTHER) GRANDMOTHER)

HELD: No! And if ever there was a trust, action has already prescribed. RATIO:

Trust is the right enforceable solely in equity, to the beneficial enjoymnet of the property – indicate duties, relations, and responsibilities. It can be either express or implied. No express trust concerning an immovable or any interest therin may be proven by parol evidence. It is created by writing or deed or will. Resulting trust is created by the act or construction of law. Constructive trust arise by operation of law. Trust must be proven by clear, satisfactory satisfactory and convincing e vidence. No documentary evidence was presented by benita and children to prove that there was an express trust over the calunuran fishpond in favor of valentin. Purely parol evidence was offered. There was also no resulting trust because there were never was any intention on the part of Juan, ambrosia and valentin to create any trust. No constructive trust because the consent of juan and ambrosia wan not vitiated by fraud or mistake. And assuming there is implied trust, it was already barred by prescription (10 yrs supposedly but filed after 40 yrs from the date of registration) and laches. The court said that there was no community of property during the lifetime of valentina (great grandmother) is substantiated by benita and children’s documentary documentary evidence. The fact that Valentin never bothered for 40 years to procure any documentary evidence to establish his supposed interest in the 2 fishponds is very suggestive of the absence of such interest. Torrens title is generally a conclusive evidence of the ownership of the land and in order to maintain an action for reconveyance, proof as to the fiduciary relation of the parties must be clear and convincing. In addition, benita cannot represent valentin because in the collateral line, representation takes place only in favor of the children of brothers and sisters whether full or half blood and this excludes grand niece like benita.

25

FACTS:

Lot No. 76, which forms part of Cadastral Lot No. 140, is in the name of the deceased Gonzalo Ditching under a tax declaration for the year 1941. He was survived by his widow and daughter. The latter died leaving a 6 month-old daughter, Norma Leuenberger. The GRANDDAUHTER, married to Soliva, inherited the whole Lot. No. 140 from her GRANDMOTHER. GRANDMOTHER. In 1952, she donated a portion of Lot No. 140 to the municipality for the ground of a certain high school, and had another portion converted into a subdivision. subdivision. In 1963, following a survey of the remaining area, it was discovered that a parcel of land within her property is used by the MUNICIPALITY as a cemetery from 1934 (identified as Lot No. 76). The GRANDDAUGHTER wrote to the Mayor regarding her discovery and demanded payment of past rentals and requesting delivery of the area allegedly illegally occupied by the MUNICIPALITY. The Mayor claimed that the MUNICPALITY bought the land from the GRANDMOTHER in 1934 but failed to show documents concerning the sale. In 1964, the GRANDDAUGHTER filed a complaint in the CFI for recovery of possession of the parcel of land occupied by the municipal cemetery. In lieu of a Deed of Sale, the MUNICIPALITY presented certificate issued by the Archives Division of the Bureau of Records Management which showed the nature of the instrument, the subject of the sale, the parties of the contract, the consideration, the name of the witnesses, and the dale of the sale. Several testimonies and tax declarations corroborated corroborated and supported the document. The CFI ruled in favour of the MUNICIPALITY, declaring the cemetery side as property of the MUNICIPALITY. The CA set aside the decision of the lower court. Hence, this petition.


CASE DIGESTS TRUSTS In 1972, the GRANDDUAGHTER died so her HUSBAND continued the appeal on behalf of her estate; the latter having been appointed as special administrator. It should be noted that the land is covered by a TCT in the name of the GRANDAUGTER issued by the Register of Deeds. ISSUE:

Whether or not the GRANDDAUGHTER and HUSBAND are bound to execute a deed of reconveyance in favour of the MUNICIPALITY. MUNICIPALITY. RULING: YES. The CFI decision is reinstated. reinstated. HELD:

Despite the failure of the MUNICIPALITY to register the Deed of Sale, i t is still binding upon the GRANDDAUGHTER because the latter admitted to inheriting the land from her GRANDMOTHER who had already sold the land to the MUNICIPALITY in 1934. Hence, the GRANDDAUGHTER merely stepped into the shoes of the GRANDMOTHER and she cannot claim a better right than her predecessor-in-interest. Although the land in now covered by a TCT in the name of the GRANDAUGHTER (which entitles her to protection afforded to a holder of a Torrens Title), Article 1456 of the NCC p rovides that “if the property is acquired through mistake or frau, 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 beneficiary shall have the right to enforce the trust, notwithstanding the irrevocability of the Torrens title and the trustee and his successor-in-interest successor-in-interest are bound to execute the deed of reconveyance. As the land in dispute is held by the GRANDDAUGHTER and her HUSBAND in trust for the MUNICIPALITY, it is logical to conclude that the latter can neither be deprived of its possession nor be made to pay rentals thereof. The GRANDDAUGHTER and her HUSBAND are bound to reconvey the subject land to the cestui que trust the MUNICIPALITY. The Torrens system never calculated to foment betrayal in the p erformance of a trust.

7. PNB v CA

Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation corporation engaged in providing goods and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crew's medical expenses, National Seaman's Board fees, Seaman's Welfare fund, and standby fees and for the crew's basic personal needs. Subsequently, Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through banks for credit to the latter's account. Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB to pay the amount of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's International Department noticed an error and sent a service message to SEPAC Bank. The la tter replied with instructions instructions that the amount of US$14,000 should only be for US$1,400. Based n this, PNB issued Check No. 269522 for $1,400(P9,772.95) for the account of Mata. 14 days after, PNB again issued another Cashier's Check No. 270271 for $14,000 (P97,878.60). (P97,878.60). Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it discovered its error in effecting the second payment. On February 4, 1982, PNB then filed a case for the collection of the $14,000 on the basis of a constructive trust but the RTC dismissed the case ruling that it falls under Solution indebiti and not Constructive trust. The CA affirmed this decision. Hence, the instant petition for certiorari proceeding seeking to annul the decision of the appellate court on the basis that Mata's obligation to return US$14,000 is governed, in the alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil Code on quasi-contract. Petitioner naturally opts for an interpretation under constructive trust as its action filed on February 4, 1982 can still prosper, as it is well within the prescriptive period of ten 10 years because if it would fall under solution indebiti, prescription period is only for 6 years and therefore, prescribed. prescribed. ISSUE:

Whether the case falls under trust of it falls under quasi-contracts?

FACTS: 26


CASE DIGESTS TRUSTS HELD

TRUST. This clearly is a constructive constructive trust but petitioner may no longer recover because he is barred by laches. In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely a constructive trust, for the benefit of the person from whom the property comes, in this case PNB, for reasons of justice and equity. In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's Check No. 269522 had already been made by PNB for the account of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to be another transmittal of reimbursement from Star Kist, p rivate respondent's foreign principal. 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 obligations not within the contemplation contemplation of the parties. Returning to the instant case, while petitioner may indeed opt to avail of an action to enforce a constructive trust or the quasi-contract of solutio indebiti, it has been deprived of a choice, for prescription has effectively blocked quasi-contract as an alternative, leaving only constructive trust as the feasible option. Petitioner argues that the lower and appellate courts cannot indulge in semantics by holding that in Article 1456 the recipient commits the mistake while in Article 2154, the recipient recipient commits no mistake. mistake. On the other hand, private respondent, invoking the appellate court's reasoning, would impress upon us that under Article 1456, there can be no mutual mistake. Consequently, private respondent contends that the case at bar is one of solutio indebiti and not a constructive trust. We agree with petitioner's stand that under Article 1456, the law does not make any distinction since mutual mistake is a possibility on either side — on the side of either the grantor grantor or the grantee. Thus, it was error to conclude conclude that in a constructive trust, only the person obtaining the property commits a mistake. This is because it is also possible that a grantor, like PNB in the case at hand, may commit the mistake. Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it erroneously paid private respondent under a constructive trust, we rule in the negative. Although we are aware that only seven (7) years lapsed after petitioner erroneously credited private respondent with the said 27

amount and that under Article 1144, petitioner is well within the prescriptive period for the enforcement of a constructive or implied trust, we rule that petitioner's claim cannot prosper since it is already barred by laches. It is a wellsettled rule now that an action to enforce an implied trust, whether resulting or constructive, constructive, may be barred not only by prescription prescription but also by laches.

8. PARUNGIT v BAJIT SPS. FELIPE and JOSEFA PARINGIT, Petitioner, vs. MARCIANA PARINGIT BAJIT, ADOLIO PARINGIT and and ROSARIO PARINGIT PARINGIT ORDOÑO, Respondents. Respondents. G.R. No. 181844 September 29, 2010 FACTS:

During their lifetime, spouses Paringit leased a lot in Sampaloc, Manila from Terocel Realty. They built their home there and raised five children. 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, Julian executed a deed of assignment of leasehold right in favor of Felipe and his wife that would enable them to acquire the lot. The latter then bought the same from Terocel Realty and a TCT was subsequently issued in favor of spouses Felipe and Josefa. Later on, due to issues among Julian’s children regarding the ownership of the lot, Julian executed an affidavit clarifying the nature of Felipe and his wife’s purchase of the lot. He claimed that it was bought for the benefit of all his children. Despite the title being under their name, 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. This was the situation when their father died in 1994. A year later, Felipe and his wife sent a demand letter to his siblings who occupy the lot, asking them to pay rental arrearages for occupying the property. They 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. Because of this, Felipe and his wife filed an ejectment suit against them. The suit prospered, resulting in the ejectment of Marciana, et al and their families from the property.


CASE DIGESTS TRUSTS To vindicate what they regarded as their right to the lot and the house, the other children filed the present action against Felipe and his wife for annulment of title and r econveyance of property.

siblings to reside on the property. This is incompatible with their claim that they bought the house and lot for themselves back in 1984. Until they filed the suit, they did nothing to assert their supposed ownership of the house and lot.

ISSUE:

Whether or not Felipe and his wife purchased the subject lot under an implied trust for the benefit of all the children of Julian;

FACTS:

RULING/RATIO:

Yes, the Court ruled that the case at bar 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 n ame 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. The circumstances of this case are actually what implied trust is about. Although Although no express agreement covered Felipe and his wife’s 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 obligations provided by law. Implied trust is a rule of equity, independent of the particular intention intention of the parties. Here, the evidence shows that Felipe and his wife bought the lot for the benefit of Julian and his children, rather than for themselves. There is no question that the house originally belonged to Julian and Aurelia who built it. First, if Julian really intended to sell the entire house and assign the right to acquire the lot to Felipe and his wife, he would have arranged for Felipe’s other other siblings to give their conformity as co-owners to such sale. Second, Julian said in his affidavit that Felipe and his wife bought the lot from Terocel Realty on his behalf and on behalf of his other children. Felipe and his wife advanced the payment because Julian and his other children did not then have the money needed to meet the realty company’s deadline for the purchase. Notably, Felipe, acting through his wife, countersigned countersigned Julian’s affidavit the way his siblings did. Third, if Felipe and his wife really believed that they were the absolute owners of the lot, then their moving out of the house in 1988 and letting Marciana, et al continue to occupy the house did not make sense. Fourth, Felipe and his wife demanded rent from Marciana, et al only a year following Julia n’s death. This shows that for over 10 years, Felipe and his wife respected the right of the 28

9. HEIRS OF EMILIO v ROMERO Ester Candelaria, in her own behalf and in representation of the other alleged heirs of Emilio Candelaria, alleges 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 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 in terest over the lot, the subsequent payments made by Emilio Candelaria until fully paid were made in the name of Lucas Candelaria. 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". 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. Lucas died in August, August, 1942, survived by the pr esent defendants, who are his spouse Luisa Romero and several children. Said defendants are still in possession of the lot, having refused to reconvey it to pl aintiff despite repeated demands. ISSUE

W/N the trust which has been created is implied HELD

Yes. Where property is taken by a per son 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. 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 understanding appears. The trust which


CASE DIGESTS TRUSTS 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, the property in question was acquired by Lucas Candelaria under circumstances 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.

10. ADAZA 10. ADAZA v CA G.R. No. 47354 March 21, 1989 HORACIO G. ADAZA and FELICIDAD MARUNDAN, petitioners, petitioners, vs. THE HONORABLE COURT OF APPEALS and VIOLETA G. ADAZA, ass isted by her husband LINO AMOR, respondents.

Victor Adaza – Deceased/Father/Donor Violeta Adaza – Donee/Daughter (RESPONDENT) Horacio Adaza – 1st Brother/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 n otarized 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 29

Brother, filed a homestead application for the land which eventually lead to the registration of the the property under her name. After the Daughter 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

WON the property was co-owned by the brother and sister. HELD / RATIO YES. 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. Art. 1449 There is also an implied trust when a donation is made to a


CASE DIGESTS TRUSTS person but it appears that although although the legal estate is transmitted 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, donation, thus not re quiring the daughter not obliged to share the property with her brother. For the SC, if the real inten t 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. 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 divi ded 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 the land.

11. SING JUCO AND SING BENGCO v SUNYANTONG FACTS:

30

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 i nformed 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 e state in favor of Sunyantong. Sing Bengco and Sing Juco then filed a case against Sunyantong. The lower court ordering 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

W/N Sunyantong must be held liable HELD

Yes. Even supposing that Sing Bengco intended to waive all claims to the option when he said “bahala ka”, the action of the Sunyantong in intervening in the negotiations does not make him innocent of infidelity in view of the fact that he was an employee of the plaintiffs to whom he owed loyalty and faithfulnes. Despite the fact that when Sunyantong closed the contract of sale with Maria Gay, Sing Juco and Sing Bengco option had expired, it can’t be d enied that he was the cause of the option having precipitously come to such an end. His


CASE DIGESTS TRUSTS disloyalty to his employers was responsible for Maria Gay not accepting the terms proposed by Sing Juco and Sing Bengco, because of being certain of another less exigent buyer. Without such intervention on the part of the Sunyantong 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 Sing Juco and Sing Bengco, perhaps with such advantages to Sing Juco and Sing Bengco, as they expected to obtain by prolonging negotiations. negotiations. Such an act of infidelity committed by a trusted empl oyee calculated calculated to redound to his own benefit and to the detriment of his employers cannot pass without legal sanction. sanction. He shall be liable for the damage caused caused 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 de fendant Sunyantong? I do not think that it has, and indeed n o 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.

12. LEOVERAS v VALDEZ FACTS:

Maria Sta. Maria and Dominga Manangan were the registered owners (3/4 and ¼ re spectively), spectively), pro indiviso of a parcel of land. Maria sold her share to Benigna Llamas. When Benigna died in 1944, she willed her three-fourths (¾) share equally to her sisters Alejandra Llamas and Josefa Llamas. Thus, Alejandra and Josefa each owned one-half (½) of Benigna’s three fourths (¾) share. O n June 14, 1969, Alejandra’s heirs sold their predecessor’s one-half (½) share to the respondent.

31

Josefa sold her own one-half (½) share (subject property) to the respondent and the pe titioner. titioner. The respondent asked the Register of Deeds of Lin gayen, Pangasinan on the requirements for the transfer of title over the portion allotted to him on the subject property. To his surprise, the respondent learned that the petitioner had already obtained in his name two transfer certificates of title (TCTs): one, TCT No. 195812 —covering an area of 3,020 square meters; and two, TCT No. 195813—covering an area of 1,004 square meters (or a total of 4,024 square meters). The respondent filed a complaint for Annulment of Title, Reconveyance and Damages against the petitioner, seeking the reconveyance of the 1,004square meter portion (disputed property) covered by TCT No. 195813, on the ground that the petitioner is entitled only to the 3,020 square meters identified in the parties’ Agreement. ISSUE

Whether or not the order for reconveyance was valid. Whether or not there existed an implied trust between the petitioner and respondent. HELD

The CA correctly ordered the reconveyance of the disputed property, covered by TCT No. 195813, to the respondent An action for reconveyance is a legal and equitable remedy granted to the rightful landowner, whose land was wrongfully wrongfully or e rroneously rroneously registered in the name of another, to compel the registered owner to transfer or reconvey the land to him. The respondent adequately proved his ownership of the disputed property by virtue of the (i) Deed of Absolute Sale executed by Josefa in favor of the parties; (ii) the parties’ Affidavit of Adverse Claim; and (iii) the parties’ Agreement, which cover the subject property. By fraudulently causing the transfer of the registration of title over the disputed property in his name, the petitioner holds the title to this disputed p roperty in trust for the benefit of the respondent as the true owner; registration does not vest title but merely confirms or records title already existing and vested.

The Torrens system of registration registration cannot be used to protect a usurper from the true owner, nor can it be used as a shield for the commission of fraud, or to permit one to e nrich oneself at the expense of others.


CASE DIGESTS TRUSTS

13. PASINO v MONTERROYO FACTS:

Lot No. 2139, with an area of 19,979 square meters, located at Panuliran, Abuno, Iligan City, was part of a 24-hectare land occupied, cultivated and cleared by Laureano Pasiño. The 24-hectare land formed part of the public domain which was later declared alienable and disposable. Laureano filed a homestead application over the entire 24 -hectare land. The Bureau of Forestry wrote Laureano and informed him that the tract of land covered by his application was not needed for forest purposes. The Director of Lands issued an Order approving Laureano’s homestead application and stating that Homestead Entry No. 154651 was recorded in his name for the land applied for by him. After Laureano died, the Director of Lands issued an Order for the issuance of a homestead patent in favor of Laureano, married to Graciana Herbito. Laureano’s heirs did not receive the order and consequently, the land was not registered under Laureano’s name or under that of his heirs. The property was thereafter covered by a tax declaration in the name of Laureano with Graciana as administrator. A Cadastral Survey was conducted in Iligan City, and the surveyor found that a small creek divided the 24-hectare parcel of land into two portions, identified as Lot No. 2138 and Lot No. 2139. Petitioners (Rogelio, George, Lolita, Rosalinda and Josephine, all surnamed Pasiño) claimed that Laureano’s heirs, headed by his son Jose, continuously continuously possessed and cultivated both lots. Jose’s co -heirs executed a Deed of Quitclaim renouncing their rights and interest over the land in favor of Jose. Jose secured a title in his name for Lot No. 2138. Later, Jose alienated Lot No. 2139 in favor of his children (petitioners in this case) who 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. The DENR granted petitioners’ applications and issued Original Certificate of Titles in favor of them. Petitioners alleged that their possession of Lot N o. 2139 was interrupted interrupted when respondents forcibly took possession of the property. Responden ts (Dr. Teofilo Eduardo Eduardo F. Monterroyo, later substituted by his heirs Romualdo, Maria Teresa and Stephen, all surnamed Monterroyo) alleged that they had been in open, continuous, exclusive and notorious 32

possession of Lot No. 2139, by themselves and through their predecessors-ininterest. They alleged that Rufo Larumbe sold Lot No. 2139 to Petra Teves. Petr a thereafter executed a deed of sale over Lot No. 2139 in favor of Vicente Teves. Later, Vicente executed a pacto de retro sale over the land in favor of Arturo Teves. Arturo then sold Lot No. 2139 in favor of respondents’ father, Dr. Monterroyo, by virtue of an oral contract. He Arturo executed a Deed of Confirmation of Absolute Sale of Unregistered Land in favor of Dr. Monterroyo’s heirs. ISSUE

W/N petitioners are rightful owners and p ossessors of Lot No. 2139. HELD

NO. The preponderance of evidence favors respondents as the possessors of Lot No. 2139 for over 30 years, by themselves and through their predecessors-in-interest. predecessors-in-interest. Respondents Respondents were able to present the original Deed of Absolute Sale executed by Larumbe in favor of Petra. Respondents also presented the succeeding Deeds of Sale showing the transfer of Lot No. 2139 from Petra to Vicente and from Vicente to Arturo and the Deed of Confirmation of Absolute Sale of Unregistered Real Property executed by Arturo in favor of respondents. Respondents also presented a certification executed by P/Sr. Superintendent Julmunier Akbar Jubail, City Director of Iligan City Police Command and verified from the Log Book records by Senior Police Officer Betty Dalongenes Mab-Abo confirming that Andres Quinaquin made a report that Jose, Rogelio and Luciana Pasiño, Lucino Pelarion and Nando Avilo forcibly took his copra. This belied petitioners’ allegation that they were in possession of Lot No. 2139 and respondents forcibly took possession of the property. Considering that petitioners’ application for free patent titles was filed only when Lot No. 2139 had already become private land ipso jure, the Land Management Bureau had no jurisdiction to entertain petitioners’ application. 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 another’s 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.


CASE DIGESTS TRUSTS In the case before us, r espondents 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.

14. GAYONDATO v TREASURER ROSARIO GAYONDATO, GAYONDATO, plaintiff-appellant, vs. THE TREASURER OF THE PHILIPPINE ISLANDS, ET AL., defendants-appellant. G.R. No. L-24597 August 25, 1926 FACTS:

Three parcels of land (subject lots) were inherited by Domingo Gayondato from his mother. Domingo then married Adela Gasataya (Adela) and they had one child, Rosario Gayondato (Gayondato). (Gayondato). Domingo died in 1902 and six years later, Adela married Domingo Cuachon. The subject lots were included in a cadastral case where Domingo appeared on behalf of Adela and Rosario, who was then fifteen years old. Despite Domingo’s claims that the subject lots were owned by both Adela and Rosario, Court of First Instance erroneously decreed the registration of the aforesaid lots in the name of Adela Gasataya alone. Subsequently Adela, with the consent of her husband, mortgaged the property to the National Bank and in the year 1920, sold it to the Francisco Rodriguez (Francisco), (Francisco), the latter a ssuming the liability for the mortgage and for certain other debts. Rosario filed a complaint against Adela, Domingo, Francisco, and Insular Treasurer to recover damages for the erroneous registration of the subject lots in the name of Adela. Trial court ruled in favor of Rosario ordering Adela and Domingo to solidarily indemnify Rosario, but absolving In sular Treasurer and Francisco. ISSUE

As the plaintiff-appellant was a minor at the time of the registration of the land and consequently no negligence can be imputed to her, in the absence of special circumstances to the contrary, the assurance fund is secondarily liable for the damages suffered by her through the wrongful registration. HELD

The Attorney-General in his brief for the Insular Treasurer raises the point that Domingo and Adela prior to the registration must be considered to have held the p roperty in trust and for the bene fit of Rosario; thus, the relation of trustee and cestui que trust was created making this case fall under Section 106 of the Land Registration Act, Act, which provides that "the a ssurance fund shall not be liable to pay for any loss or damage or deprivation occasioned by a breach of trust, whether express, implied, or constructive, by any registered owner who is a trustee, or by the improper exercise of any sale in mortgageforeclosure foreclosure proceedings." proceedings." The use of the word "trust" in this sense is not technically accurate. As Perry says, such trusts "are not trusts at all in the strict and proper signification of the word "trust"; but as courts are agreed in administering the same remedy in a certain class of frauds as are administered in fraudulent breaches of trusts, and as courts and the profession have concurred in calling such frauds constructive trusts, there can be no misapprehension in continuing the same phraseology, while a change might lead to confusion and misunderstanding." misunderstanding." If this is the kin d of constructive trust referred to in Section 106, it must be conceded that Rosario cannot recover damages from the assurance fund. But that such is not the case, becomes quite apparent upon an examination of sections 101 and 102, of the same Act, in which the right of recovery from the assurance fund in cases of registration through fraud or wrongful acts is expressly recognized, then it clearly shows that the term trust as used in section 106 must be taken in its technical and more restricted sense. Indeed, if it were to be regarded in its broadest sense, the assurance fund would, under the conditions here prevailing, be of little or no value.

15. ESCOBAR v LOCSIN G.R. No. L-48309

WON Insular Treasurer should be held secondarily liable RULING 33

January 30, 1943

EUSEBIA ESCOBAR, plaintiff-appellant, RAMON LOCSIN, in his capacity as special administrator of the intestate estate of Juana Ringor,defendant-appellee.


CASE DIGESTS TRUSTS FACTS

The complaint alleges that the plaintiff is the owner of the subject lot; and that in the course of the cadastral proceedings, plaintiff being illiterate, asked Sumangil to claim the same for her (plaintiff) but Sumangil committed a breach of trust by claiming the lot for himself, so it was adjudicated in favor of Sumangil. The defendant is the special administrator of the estate of Juana Ringor, to whom the parcel of land in question was assigned by partition in the intestate estate of Sumangil and Duque. The CFI found that the plaintiff is the real owner of the lot which she had acquired in 1914 by donation propter nuptias from Pablo Ringor; that plaintiff had since that year been in possession of the land; and that the same had been decreed in the cadastral proceedings in favor of Domingo Sumangil. The trial court, while recognizing that the plaintiff had the equitable title and the defendant the legal title, nevertheless dismissed the complaint because the period of one year provided for in section 38 of the Land Registration Registration Act for the review of a decree had elapsed, and the plaintiff had not availed herself of this remedy. ISSUE

Does the possession of legal title preclude the operation of a trust agreement?

contained in this Act shall in any way be construed to relieve registered land or the owners thereof from any rights incident to the relat ion of husband and wife, or from liability to attachment on mesne process or levy on execution, or from liability to any lien of any description established by law on land and the buildings thereon, or the interest of the owner in such land or buildings, or to change the laws of descent, or the rights of partition between coparceners, joint tenants and other cotenants, or the right to take the same by eminent domain, or to relieve such land from liability to be appropriated in any lawful manner for the payment of debts, or to change or affect in any other way any other rights or liabilities created by law and applicable to unregistered land, except as otherwise expressly provided in this Act Act or in the amendments amendments hereof. A trust — such as that which was created between the plaintiff and Domingo Sumangil — is sacred and inviolable. The Courts have therefore shielded fiduciary relations against every manner of chicanery or detestable design cloaked by legal technicalities. technicalities. The Torrens system was never calculated calculated to foment betrayal in the performance of a trust. The judgment appealed from is hereby reverse, and the defendant is ordered to convey that lot in question to the plaintiff within fifteen days from the entry of final judgment herein; and upon his failure or refusal to do so, this judgment shall constitute sufficient authorization for the Register of Deeds of Nueva Ecija, in lieu of a deed of conveyance, to transfer the certificate of title for said lot No. 692 to the plaintiff Eusebia Escobar. The defendant shall pay the costs of both instances.

HELD No

16. ESTATE OF MARGARITA v LAIGO

RATIO

The trial court plainly erred. The complaint did not seek the review of the decree or the re opening of the cadastral case, but the enforcement of a trust. Hence, section 38 of Act No. 496 does not apply. The estate of Juana Ringor as the successor in interest of the trustee, Domingo Sumangil, is in equity bound to execute a deed of conveyance of this lot to the plaintiff-appellant. The remedy herein prayed for has been upheld by this Court in previous cases, one of which is Severino vs. Severino (44 Phil., 343, year 1923). There is no indication there of an intention to cut off, through the issuance of a decree of registration, equitable rights or remedies such as those here in question. On the contrary, section 70 of the Act provides:

Registered lands and ownership therein, shall in all respects be subject to the same burdens and incidents attached by law to unregistered land. Nothing 34

FACTS:

Margarita Cabacungan owned three parcels of unregistered land covered by tax declaration all in her name in Bauang, La Union. In 1968, Margarita's son, Roberto Laigo, Jr., applied for a non-immigrant visa to the United States, and to support his application, he allegedly asked Margarita to transfer the tax declarations of the properties in his name. Margarita, unknown to her other children, executed an Affidavit of Transfer of Real Property whereby the subject properties were transferred by donation to Roberto and his visa was issued and able to travel to the U.S. as a tourist and returned in due time. Roberto adopted respondents respondents Pedro Laigo and Marilou Laigo and married re spondent Estella Balagot.


CASE DIGESTS TRUSTS Roberto sold one of the property to spouses Mario and Julia Campos, then he sold the other one to Marilou and to Pedro not known to Margarita and her other children. It was only in Roberto's wake, that Margarita came to know of the sales as told by Pedro himself. In 1996, Margarita, represented by her daughter, Luz, instituted the complaint for the annulment of said sales and for the recovery of ownership and possession of the subject properties as well as for the cancellation of Ricardo's tax declarations. The Spouses Campos, Marilou and Pedro advanced that they were innocent purchasers for value and in good faith, the cause of action was nevertheless barred by prescription. Margarita and the Spouses Campos entered into a settlement whereby they waived their respective claims against each other. Margarita died two days later and was forthwith substituted by her estate, the trial court rendered a decision approving the compromise agreement and dismissing the complaint against the Spouses Campos. Forthwith, trial on the merits ensued with respect to Pedro and Marilou. The trial court dismissed. Appeal was made. The Court of Appeals dismissed petitioner's claim that Roberto was merely a trustee of the subject properties as there was no evidence on record supportive of the allegation that Roberto merely borrowed the properties from Margarita upon his promise to return the same on his arrival from the United States. Further, it hypothesized that granting the existence of an implied trust, still Margarita's action thereunder had already been circumscribed by laches. ISSUE

a) Whether the complaint is barred by laches and/or prescription. b) WON Roberto held the property in trust only for Margarita. HELD

a) NO. Laches, being rooted in equity, is not always to be applied strictly in a way that would obliterate an otherwise valid claim especially between blood relatives. The existence of a confidential relationship based upon consanguinity is an important circumstance for consideration; hence, the doctrine is not to be applied mechanically as between near relatives. The relationship between the parties therein, who were a family, was sufficient to explain and excuse what would otherwise have been a long delay in enforcing the claim and the delay in such situation should not be as strictly construed as where the parties are complete complete strangers to another. It is clear that an action for reconveyance under a constructive constructive implied trust in accordance with Article 1456 does not prescribe unless and until the 35

land is registered or the instrument affecting the same is inscribed in accordance with law, inasmuch as it is what binds the land and operates constructive constructive notice to the the world. In the present case, however however , the lands involved are concededly unregistered lands; hence, there is no way by which Margarita, during her lifetime, could be notified of the furtive and fraudulent sales made in 1992 by Roberto in favor of respondents, except by actual notice from Pedro himself in August 1995. Hence, it is from that date that prescription began to toll. The filing of the complaint in February 1996 is well within the prescriptive period. Finally, such delay of only six (6) months in instituting the present action hardly suffices to justify a finding of inexcusable delay or to create an inference that Margarita has allowed her claim to stale by laches. Prescription and laches, in respect of this resulting trust relation, hardly can impair petitioner's cause of action. In this case, it was the 1992 sale of the properties to respondents that comprised the act of repudiation which, however, was made known to Margarita only in 1995 but nevertheless impelled her to institute the action in 1996 - still well within the prescriptive period. It is settled that an action for reconveyance based on a constructive implied trust prescribes in 10 years likewise in accorda nce with Article 1144 of the Civil Code. Yet not like in the case of a resulting implied trust and an express trust, prescription supervenes in a constructive implied trust even if the trustee does not repudiate the relationship. In other words, repudiation repudiation of said trust is not a condition precedent to the running of the prescriptive period.

b) Petitioners before the trial court, had actually adduced evidence to prove the intention of Margarita to transfer to Roberto only the legal title to the properties in question, with attendant expectation that Roberto would return the same to her on accomplishment of that specific purpose for which the transaction was entered into. The evidence of course is not documentary, but rather testimonial. It is deducible from the foregoing that the inscription of Roberto's name in the Affidavit of Transfer as Margarita's transferee is not for the purpose of transferring transferring ownership to him b ut only circumstances to enable him to h old the property in trust for Margarita. The circumstances

from which could be derived the unwritten understanding between Roberto and Margarita that by their act, no absolute transfer of ownership would be effected. Besides, it would be highly unlikely for for Margarita to institute institute the instant complaint if it were indeed her intention to vest in Roberto, by virtue of the Affidavit of Transfer, absolute ownership over the covered properties. Finally, petitioner states that that whether a buyer is in good or bad faith is a matter that attains relevance in sales of registered land, as corollary to the rule that a purchaser of unregistered land uninformed of the seller's defective


CASE DIGESTS TRUSTS title acquires no better right than such seller. Wherefore, the Petition is granted and judgment of the Regional Trial Court, is reversed and set aside and a new one is e ntered (a) directing the cancellation of the tax declarations covering the subject properties in the name of Roberto D. Laigo and his transferees; (b) nullifying the deeds of sale executed by Roberto D. Laigo in favor of respondents Pedro Roy Laigo and Marilou Laigo; and (c) directing said respondents to execute reconveyance in favor of petitioner.

document. It was susana who paid the taxes before. Perfecta Perfecta then filed a motion for reconsideration but was denied. Perfecta then filed this petition. ISSUE W/N Perfecta has a the better right to the subject lots HELD Yes!

17. CAVILE v LITANIA-HONG FACTS

A deed of partition was entered into by the heirs of spouses Bernardo Cavile and Tranquilina Galon. Subject of the deed of partition were several parcels of lant all under the name of Bernardo. Some of the legal heirs sold their shares to Castor (father of Perfecta – petitioner) making him sole owner of the properties. Castor and Susana (legal heir, sister of castor) executed a confirmation confirmation of extrajudicial partition, it was recognized and confirmed in the document that Susana has a just and lawful share on the said properties and she was in actual possession of the said pr operties. operties. 14 years after, heirs of susana filed a complaint for reconveyance and recovery of the said property with damages before RTC against Perfecta (daughter of castor). Heirs of susana contends that Perfecta intruded upon and excluded them from the subject lots – unlawful occupancy – Perfecta planted and harvested crops on the land. In addition, the land was registered under the name of Perfecta. (Perfecta was in possession of the land) Perfecta then contends that the land sold by castor’s heir to him and

castor has possession and lots covered by tax declaration. Then castor sold it to perfecta who took possession and filed with the Bureau of Lands an application application for the issuance of title over her name and it was granted. Furthermore, the Confirmation of Extrajudicial Partition was a nullity. The intention of such document was to accommodate susana who thenneeded security for the loan she was trying to obtain from the Rural bank. RTC was in favor of Per fecta because because her e vidence was more worthy of credence. Heirs of susana appealed before CA and it reversed the decision alleging that the confirmation of extrajudicial partition was not a simulated 36

RATIO

In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. It is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term “greater weight of the evidence or greater weight of the credible evidence”. It is the probability of truth. The heirs of susana was only able to provide as evidence the document of the Confirmation of Extrajudicial Partition and the tax declaration. Tax declarations are not conclusive evidence of ownership but it can be used to support such claim. In addition, susana failed to shed light on why or how the said properties wholly pertained to her when her parents Bernardo and Tranquilina clearly had other heirs who also had shares in the inheritance. No information was provided as to how said possession of the lots was actually excercised or demonstrated by Susana. On the side of perfecta, the land was registered under her name, a patent was legally issued by the the government in her name. Possession Possession of lots was established not just by the testimony of Perfecta but was corroborated by the testimony of Luciana Navarra, whose husband was a tenant working on the subject lots. Moreover, they planted coconuts, rice, and corn on which the heirs of susana were unable to refute. Therefore, the court was convinced that the evidence adduced by perfecta preponderated over that of the heirs of susanna. It is important to note that the heirs of susana brought the action for reconveyance of the subject lots before RTC only more than 12 years after the torrens titles were issued in favor of perfecta. The remedy then was already time-barred (implied or constructive trust – 10 years from the date of the issuance of certificate of title over the property provided not transferred to innocent purchaser for value). And even if it has not been barrred, still perfecta will win because of the preponderance of evidence.


CASE DIGESTS TRUSTS In addition, the heirs of susana alleged fraud and breach of trust in the part of perfecta. But the court said that mere allegation of fraud is not enough. Intentional acts to decive and deprive another party of his right must be proved.

18. TIONGCO YARED v TIONGCO G.R. No. 161360 October 19, 19, 2011 PETITIONERS: Estrella Tiongco Yared (Deceased) substituted by Carmen Matilde B. Tiongco RESPONDENTS: RESPONDENTS: Jose B. Tiongco (NEPHEW) and Antonio G. Doronila, Jr. SUBJECT P ROPERTY: Lots 3244 , 3246 , and 1404 , all a ll located in Iloilo. Lots 3244 and 1404 are covered by Original Certificated of Title (OCTs) in the names of Matilde, Jose, Vicente and Felipe; Lot 3246 covered by an OCT in the name of HEIRS OF MARIA LUIS DE TIONGCO. FACTS:

Matilde, Jose, Vicente, Felipe are the HEIRS OF MARIA LUIS DE TIONGCO. Although the HEIRS OF MARIA LUIS DE TIONGCO have all died, there were survived by their children and descendants. Among them are the legitimate children of Jose, Estrella Tiongco Yared and Carmelo Tiongco, father of the respondent Jose. In 1965, Estrella built a house on Lot 1404 and sustained herself by collecting rentals from the tenants of Lots 3244 and 3246. In 1968, Estrella, as one of the heirs of Jose, filed an adverse claim affecting all the rights, interest and participation of her deceased father on the disputed lots, but the adverse claim was only annotated on the OCTs covering Lots 3244 and 1404. In 1983, the NEPHEW prohibited Estrella from collecting rentals from the tenants of Lots 3244 and 3246. The NEPHEW filed a suit for recovery of possession against several tenants of Lots 324 and 3246 wherein he obtained a judgment in his favour. The NEPHEW also filed a case for unlawful detainer against Estrella as she was staying on Lot 1404. The RTC ruled in favour of the NEPHEW. The CA revered and ruled in favour of Estrella. As such, the NEPHEW never took possession of the pr operties. In 1988, when Estrella inquired at the Office of the RD, she discovered that, sometime in 1974, the NEPHEW had already executed an Affidavit of Adjudication declaring that he is the only surviving heir of the registered 37

owners and adjudicating unto himself Lots 3244, 3246, and 1404. The OCTs were cancelled and new TCTs were issued i n respondent Jose’s name. Based on the records of the RD, the NEPHEW sold Lots 3244 and 1404 to Catalino Torre. Lot 3246 was sold to Antonio Doronila. Torre sold the Lots 3244 and 1404 to Doronila. Doronila sold back to Jose Lots 1404, 3244, and 3246. In 1990, Estrella filed a complaint against the NEPHEW and Doronila. RTC ruled in favour of Jose for prescription has set since the complaint was filed in 1990 or some 16 years after the NEPHEW caused to be registered the affidavit of adjudication. The CA AFFIRMED. ISSUE

Who has a better right to the properties. RULING

Estrella Tiongco Yared. The CA decision is reversed and set aside. The RD is ordered to restore the OCTs under the name/s of the registered original owners. HELD

Generally, an action for reconveyance can barred by prescription. An action for reconveyance based on implied or constructive trust must perforce prescribe in 10 years from the issuance of the Torrens title over the property. However, there is an exception to this rule: when the plaintiff is in possession of the land to be reconveyed, prescription cannot be invoke in an action for reconveyance. The action is imprescriptible so long as the land has not passed to an innocent buyer for value. This is based on the theory that registration proceedings cannot be used as a shield for fraud or enriching a person at the expense of another. In this case, Estrella’s possession was disturbed in 1983 when the NEPHEW filed a case for recovery of possession. The RTC ruled in favour of Estrella. Estrella never lost possession of the properties, as such, she is in a position to file the complaint to protect her rights and clear whatever doubts had been cast on her title by the issuance of the TCTs in the NEPHEW’s name. The circuitous sale transaction of the properties from the NEPHEW to Torre to Doronilla, and back again to the NEPHEW were unusual. However, these successive transfers of title from one hand to another could not cleanse the illegality of the NEPHEW’s act of adjudicating to himself all the disputed properties so as to entitle him the protection of the law as a buyer in good faith . The NEPHEW cannot claim lack of knowledge of the


CASE DIGESTS TRUSTS defects surrounding the cancellation cancellation of the OCTs over the properties and benefit from his fraudulent actions. The subsequent sales will not cure the nullity of the certificates of title obtained by the NEPHEW on the basis of the false and fraudulent Affidavit of Adjudication.

19. PNB v JUMANOY FACTS:

On December 27, 1989, the RTC, Branch 19, of Digos City, Davao del Sur, rendered a Decision5 in Civil Case No. 2514 (a case for Reconveyance and Damages), ordering the exclusion of 2.5002 hectares from Lot 13521. The trial court found that said 2.5002 hectares which is part of Lot 13521, a 13,752square meter parcel of land covered by Original Certificate of Title (OCT) No. P 49526 registered in the name of Antonio Go Pace (Antonio) on July 19, 1971 actually pertains to Sesinando Jumamoy Jumamoy (Sesinando), Ciriaco’s predecessor-ininterest. The RTC found that said 2.5002-hectare lot was erroneously included in Antonio’s free patent application which became the basis for the issuance of his OCT. It then ordered the heirs of Antonio (the Paces [represented by Rosalia Pace (Rosalia)]) to reconvey said portion to Ciriaco. In so ruling, the RTC acknowledged Ciriaco’s actual and exclusive possession, cultivation, and claim of ownership over the subject lot which he acquired from his father Sesinando, who occupied and improved the lot way back in the e arly 1950s.7 The December 27, 1989 ruling then became final but could not be annotated since the OCT was already cancelld. cancelld. Apparently, Antonio and his wife Rosalia mortgaged Lot 13521 to PNB as security for a series of loans which Antonio defaulted and PNB foreclosed the mortgage on July 14, 198610 and the title was transferred to PNB. Thus, in Fe bruary 1996, Ciriaco filed the instant complaint against PNB and the Paces for Declaration of Nullity of Mortgage, Foreclosure Sale, Reconveyance and Damages,11 docketed as Civil Case No. 3313 and raffled to Branch 18 of RTC, Digos City, Davao del Sur. In his complaint, Ciriaco averred that Antonio could not validly mortgage the entire Lot 13521 to PNB as a portion thereof consisting of 2.5002 hectares belongs to him (Ciriaco), as already held in Civil Case No. 2514. He claimed that PNB is not an innocent mortgagee/purchaser for value because prior to the execution and registration of PNB’s deed of sale with the Register of Deeds, the bank had pr ior notice that the disputed lot is subject of a litigation. litigation. It would appear that during the pendency of Civil Case No. 2514, a notice of lis 38

pendens was annotated at the back of OCT No. P-4952 as Entry No. 16554712 on November 28, 1988. The RTC and CA ruled that Ciriaco is correct and that PNB must reconvey the land to Ciriaco. Thus PNB filed this case to question the ruling of the RTC and CA. ISSUE

Whether or not PNB must reconvey the land to Ciriaco? HELD

Yes. PNB is not an innocent purchaser/ mortgagee for value. PNB In this case is considered a trustee in a constructive trust holding the land in trust for Ciriaco. Also, since Ciriaco is in possession of the land, the action based on constructive trust is imprecriptible. Undoubtedly, our land registration statute extends its protection to an innocent purchaser for value, defined as "one who buys the property of another, without notice that some other person has a right or interest in such property and pays the full price for the same, at the time of such purchase or before he has notice of the claims or interest of some other person in the property."25 property."25 An "innocent purchaser for value" includes an innocent lessee, mortgagee, mortgagee, or other encumbrancer for value .26 Here, we agree with the disposition of the RTC and the CA that PNB is not an innocent purchaser for value. As we have already declared: A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as security for a loan must be a standard and indispensable part of its operations.27 (Emphasis ours.) PNB’s contention that Ciriaco failed to allege in his complaint that PNB failed to take the necessary precautions before accepting the mortgage is of no moment. It is undisputed that the 2.5002-hectare portion of the mortgaged property has been adjudged in favor of Ciriaco’s predecessor -in-interest in Civil Case No. 2514. Hence, PNB has the burden of evidence that it acted in good faith from the time the l and was offered a s collateral. However, PNB miserably failed to overcome this burden. There was no showing at all that it conducted an investigation; that it observed due diligence and prudence by checking for flaws in the title; that it verified the identity of the true owner and possessor of the land; and, that it visited subject premises to determine its actual condition before accepting the same as collateral. collateral. Both the CA and the trial court correctly observed that PNB could not validly raise the defense that it relied on Antonio’s clean title. title. The land, when it


CASE DIGESTS TRUSTS was first mortgaged, was then unregistered under our Torrens system. The first mortgage was on February 25, 197128 while OCT No. P -4952 was issued on July 19, 1971. Since the Paces offered as collateral an unregistered land, with more reason PNB should have proven before the RTC that it had verified the status of the property by conducting an ocular inspection before granting Antonio his first loan. Good faith which is a question of fact could have been proven in the proceedings before before the RTC, but PNB d ispensed with the trial proper and let its opportunity to dispute factual allegations pass. Had PNB really taken the necessary precautions, it would have discovered that a large portion of Lot 13521 is occupied occupied by Ciriaco. Ciriaco’s action for reconveyance is inprescriptible. If a person claiming to be the owner thereof is in actual possession of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The r eason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.34 possession.34 In Ciriaco’s case, as it has been judicially established that he is in actual possession of the property he claims as his and that he has a better right to the disputed portion, his suit for reconveyance is in effect an action for quieting of le. Hence, petitioner’s defense of prescription against Ciriaco does tit le.

20. BRITO v DIANALA Ramon Brito, petitioner, vs. Severino Dianala, Violeta Dianala Sales, Jovita Dianala Dequinto, Rosita Dianala, Conchita Dianala, and Joel Dequinto, respondents. G.R. No. 171717 December 15, 15, 2010 FACTS:

Subject of the present petition is a parcel of land in Negros Occidental. The said tract of land is a portion of Lot No. 1536-B, originally owned by a certain Esteban Dichimo and his wife, Eufemia Dianala, both of whom are already deceased. On September 27, 1976, Margarita Dichimo, assisted by her husband, Ramon Brito, Sr., et al filed a Complaint Complaint for Recovery of Possession Possession and Damages 39

against a certain Jose Maria Golez. Petitioner's wife, Margarita and the others, alleged that they are the heirs the descendants of Esteban and Eufemia and that the subject lot is part of their inheritance. inheritance. On July 29, 1983, herein respondents filed an Answer-in-Intervention claiming that prior to his marriage to Eufemia, Esteban was married to a certain Francisca; that Esteban and Francisca bore five children, all of whom are already deceased; that herein respondents are the heirs of Esteban and Francisca's children; that they are in open, actual, public and uninterrupted possession of a portion of Lot No. 1536-B for more than 30 years; that their legal interests over the subject lot prevails over those of petitioner and his coheirs; that, in fact, petitioner and his co-heirs have already disposed of their shares in the said property a long time ago. Subsequently, the parties in Civil Case No. 12887 agreed to enter into a Compromise Agreement wherein Lot No. 1536-B was divided between Jose Maria Golez, on one hand, and the heirs of Vicente, namely: Margarita, Bienvenido, and Francisco, Francisco, on the other. other. It was stated stated in the said agreement agreement that the heirs of Eusebio had sold their share in the said lot to the mother of Golez. Thus, on September 9, 1998, the RTC trying the case rendered a decision approving the said Compromise Compromise Agreement. Thereafter, a new TCT was issued by the Register of Deeds in the name of Margarita, Bienvenido and Francisco. In 1999, Brito and his co-heirs co-heir s filed another another Complaint for Recovery of Possession and Damages, this time against herein respondents Dianalas. The Dianalas, on the other hand, filed with the same court, a Complaint for Reconveyance and Damages against petitioner and his co-heirs. One of the defenses raised by Brito was that the Dianalas are a guilty of laches and are already estopped from questioning the decision of the RTC in Civil Case No. 12887 on the ground that they slept on their rights and allowed the said decision to become final. ISSUE

Whether or not the respondents are barred by laches HELD

No, they are not barred by laches. In the first place, respondents cannot be faulted for not appealing the decision of the RTC in Civil Case No. 12887 simply because they are no longer parties to the case and, as such, have no personality to assail the said judgment. Secondly, respondents' act of filing their action for reconveyance within the ten-year prescriptive period does not constitute an unreasonable delay in


CASE DIGESTS TRUSTS asserting their right. The Court has ruled that, unless reasons of inequitable proportions are adduced, a delay within the prescriptive period is sanctioned by law and is not considered considered to be a delay that would bar relief. Moreover, the prescriptive prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession thereof. Otherwise, if the plaintiff is in p ossession ossession of the property, prescription does not commence to run against him. Thus, when an action for reconveyance is nonetheless filed, it would be in the nature of a suit for quieting of title, an action that is imprescriptible. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the rationale for the rule being, that his undisturbed possession provides him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by the one who is in possession. In the present case, there is no dispute that respondents are in possession of the subject property as evidenced by the fact that petitioner and his co-heirs filed a separate action against respondents for recovery of possession thereof. Thus, owing to respondents' possession of the disputed property, it follows that their complaint for reconveyance is, in fact, imprescriptible. As such, with more reason should respondents not be held guilty of laches as the said doctrine, which is one in equity, cannot be set up to resist the enforcement of an imprescriptible imprescriptible legal right.

21. HEIRS OF DOMINGO v RAMA

Valientes, had their Affidavit of Adverse Claim duly entered in the Memorandum of Encumbrances at the back of TCT No. T -5, 427. Upon the death of the spouses Belen, their surviving heirs Brigida Sescon Belen and Maria Lina Belen executed an extra-judicial settlement with partition and sale in favor of private respondent Vilma Valencia-Minor, the present possessor of the subject property. On 1979, herein private respondent Minor filed with the courts a "PETITION FOR CANCELLATION OF MEMORANDUM OF ENCUMBRANCE”. Private respondent Minor filed an Omnibus Motion to Dismiss Civil Case No. 98-021 on the grounds of forum shopping and litis pendentia. ISSUE

W/N action for reconveyance based on an implied or constructive constructive trust is imprescriptible imprescriptible HELD

No. We have allowed actions for reconveyance based on implied trusts even beyond such one-year period, for such actions respect the decree of registration as incontrovertible. The right to seek reconveyance based on an implied or constructive trust is not absolute nor is it imprescriptible. An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years from the issuance of the T orrens title over the property. As discussed above, Civil Case No. 98-021 was filed more than 28 years from the issuance of TCT No. T-5,427. This period is unreasonably long for a party seeking to enforce its r ight to file the appropriate case. Thus, petitioners' claim that they had not slept on their rights is patently unconvincing. unconvincing.

FACTS

Petitioners claim that they are the heirs of Domingo Valientes who, before his death, was the the owner of a parcel of land in Zamboanga Zamboanga del Sur. In 1939, Domingo Valientes mortgaged the subject property to secure his loan to the spouses Leon Belen and Brigida Brigida Sescon (spouses Belen). 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 Domingo Valientes and the spouses Belen, the latter obtained Transfer Certificate of Title (TCT) No. T-5, 427 in their name. On 1970, Maria Valientes Bucoy and Vicente Valientes, legitimate children of the late Domingo 40


AgPart 925 - Trust Digest

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