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June 2, 2014
The "mistakes" or "fraud" that results in an implied trust being impressed upon
the property involved, may be the mistake or fraud of a third person, and need
not be a mistake or fraud committed directly by the trustee himself under the
implied trust. (Accordingly, in the instant case, an implied trust was established upon the
land acquired by Atty. Pascua even though the operative mistake was a mistake of
respondent trial judge. Respondent Judge may be seen to have intended to convey only onehalf (1/2) of the land involved as attorney's fees to Atty. Pascua. Atty. Pascua, however, took
advantage of the Judge's mistake in order to acquire all the 21.3445 hectares for himself.
Atty. Pascua obviously knew that under his contract with his clients, he was entitled to ask
only for one-half (1/2) of the land. When he purchased the entire land at public auction for
P110, 000.00 (leaving his clients still owing him P1,500.00), the amount and character of his
attorney's fees became unreasonable and unconscionable and constituted unjust
enrichment at the expense of his clients.)
The consequences of an implied trust are, principally, that the implied trustee
shall deliver the possession and reconvey title to the property to the beneficiary
of the trust, and to pay to the latter the fruits and other net profit received from
such property during the period of wrongful or unconscionable holding, and
otherwise to adjust the equities between the trustee holding the legal title and
the beneficiaries of the trust.
Banco De Oro vs. Bayuga
G.R. No. L-49568 October 17, 1979
The bank has the right to terminate the loan and demand immediate payment if it
finds that the borrower has not used the funds borrowed for the agreed
purpose. The unfairness and inequity of this posture to the banking business is
too evident to require elaboration. Funds of a bank are, in a sense, held in trust.
Facts: Bayuga and Zaballero executed a Real Estate Mortgage in favour of Acme savings.
He used Tolentino and Zaballeros land as a security for a loan which purpose was for the
acquisition of real estate property in Tagaytay that was bought from Algue. Tolentino
purchased a managers check. The bank claimed that the borrowers did not intend to pay
the obligation to Algue which was a violation of Section 77 of RA 337 that made the bank
stopped payment of the managers check. With that, Respondents filed an action for specific
performance with the court granted but the bank appealed to CA and while pending appeal,
the lower court issued a rit of execution of its judgement. CA affirmed the lower court
decision.
Tolentino contended that he is not a party to the mortgage contract which was executed
only between the BANK and Bayuga; that he became a party only because he was injured
and damaged by the bad faith of the BANK; that he is not willing to co-sign a promissory
note in the BANKs favor for the amount of P389,000.00, alleging that Bayuga had already
signed a promissory note in November, 1976 in the sum of P200,000.00; and that neither he
nor Bayuga had obligated himself to put up any additional collateral. Bayuga, for his part,
during the hearing, assumed a very passive role admitting that he was but an employee of
TOLENTINO who was the prime mover in the entire transaction.
Issue: Whether or not the Bank has the right to terminate the loan and demand immediate
payment.
Held: The lack of good faith and of a sense of fair play on the part of private respondents
was all too evident. They were treating the release of the amount of P389,000.00 in their
favor more as a money judgment, which it is not, rather than as a loan which it is. They want
to avail of the full benefits of the loan without assumption of the corresponding obligations,
or very minimally at, that. Since receipt of the aforestated amount, they have even refused
to make any monthly amortizations even upon demand by the BANK, contending that no
amount of the said loan is due. It will only be paid ten (10) years after the execution of the
mortgage contract as interpreted by our Courts.
18
The unfairness and inequity of this posture to the banking business is too evident to require
elaboration. Funds of a bank are, in a sense, held in trust. There are the interests of
depositors to be protected. The collateral the BANK has in its favor, with a loan value of only
P157,889.76, is far from adequate to answer for the amount of P389,000.00 that is now in
the hands of private respondents. The manner of repayment by private respondents of that
amount remains nebulous. Of course, the BANK is not without fault for this sorry state of
affairs.
The special reason cited by the trial Court and upheld by the Court of Appeals, i.e., the
substantial injustice wrought on private respondents whose land had been mortgaged
without any centavo paid for the loan, does not exist in law. As pointed out by the BANK, the
Calamba property need not have remained subject to the mortgage, the mortgage being but
an accessory contract to the contract of loan which is the principal obligation and which has
been cancelled. The consideration of the mortgage is the same consideration of the principal
contract without which it cannot exist as an independent contract.
19
considered by the Court of Appeals that the loan is intended to buy real estate property,
the price of which varies as days go by was disproved by the fact that TOLENTINO utilized
the amount initially released to purchase a certificate of time deposit and to open bank
accounts in his name rather than pay for the Algue property.
Art. 1443. No express trusts concerning an immovable or any interest therein may be
proved by parol evidence.
Art. 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.
Art. 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes
no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no
proof to the contrary.
i. Requisites
categorically create an obligation on the part of Ang Bansing to hold the property in trust for
Juan Cruz. Hence, there is no express trust. Thus, the petition is denied.
Doctrine:
Implied trusts come into being by operation of law." 14 It is fundamental in the law of trusts
that certain requirements must exist before an express trust will be recognized. Basically,
these elements include a competent trustor and trustee, an ascertainable
trust res, and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but
nevertheless each of the above elements is required to be established, and, if any one of
them is missing, it is fatal to the trusts. Furthermore, there must be a present and complete
disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will
take place in the future. It is essential, too, that the purpose be an active one to prevent
trust from being executed into a legal estate or interest, and one that is not in contravention
of some prohibition of statute or rule of public policy. There must also be some power of
administration other than a mere duty to perform a contract although the contract is for a
third-party beneficiary. A declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and that the court, if called
upon so to do, may enforce, the trust."
In implied trusts, there is neither promise nor fiduciary relations, the so-called trustee does
not recognize any trust and has no intent to hold the property for the beneficiary." 24 It does
not arise by agreement or intention, but by operation of law. Thus, if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property comes. 25
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. 26
There is also a constructive trust if a person sells a parcel of land and thereafter obtains title
to it through fraudulent misrepresentation. 27
Such a constructive trust is not a trust in the technical sense and is prescriptible; it
prescribes in 10 years.
ii. Proof
a. Immovable Property Art. 1443 - Writing is necessary
Art. 1443. No express trusts concerning an immovable or any interest therein may be
proved by parol evidence.
Our Civil Code defines an express trust as one created by the intention of the trustor or of
the parties, and an implied trust as one that comes into being by operation of law. 2 Express
trusts are those created by the direct and positive acts of the parties, by some writing or
deed or will or by words evidencing an intention to create a trust. On the other hand, implied
trusts are those which, without being expressed, are deducible from the nature of the
transaction by operation of law as matters of equity, in dependently of the particular
intention of the parties.3Thus, if the intention to establish a trust is clear, the trust is express;
if the intent to establish a trust is to be taken from circumstances or other matters indicative
of such intent, then the trust is implied. From these and from the provisions of paragraph 8
of the complaint itself, we find it clear that the plaintiffs alleged an express trust over an
immovable, especially since it is alleged that the trustor expressly told the defendants of his
intention to establish the trust.il Such a situation definitely falls under Article 1443 of the
Civil Code.
"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 writing or deed, or will, or by
words either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 72).
"Implied trusts are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation of law
as matter of equity, independently of the particular intention of the parties" (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 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 articles 1448 to 1455 of the Civil Code. (See
Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs. Grao
42 Phil. 35).
On the other hand, a constructive trust is -a trust "raised by construction of law, or arising by
operation of law". In a more restricted sense and as contra-distinguished from a resulting trust,
a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a
direct intension to create a trust, but by the construction of equity in order to satisfy the demands of
justice." It does not arise "by agreement or intention, but by operation of law." (89 C.J.S. 726-727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes" (Art. 1456, Civil Code).
Or "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". Such a
constructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the P. I., 49
Phil. 244).
The foregoing rulings are good under article 1457 of the Civil Code which, as already noted,
allows an implied trust to be proven by oral evidence. Trustworthy oral evidence is required to
prove an implied trust because, oral evidence can be easily fabricated.
iii. Creation Art. 1444
ART. 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
Creation of an express trust.
Express trusts are those trusts intentionally created by direct and positive act of the trustor, by
some writing, deed, will, or oral declaration evincing an intention to create the trust.
They are distinguishable from implied trusts, resulting and constructive, in that the latter are
respectively founded upon an intention of the parties to a transaction implied in law, or upon
fraud or wrong irrespective of the intention of the parties concerned. (54 Am. Jur. 36.)
No particular words are required or essential for the creation of an express trust, it being
sufficient that a trust is clearly intended. (Vda. de Esconde vs. Court of Appeals, 253 SCRA 66
[1996]; see Development Bank of the Phils. vs. Commission on Audit, 422 SCRA 459 [2004];
Canezo vs. Rojas, 538 SCRA 242 [2007].)
Terminology used not controlling.
Technical or particular forms of words or phrases are not essential to the manifestation of an
intention to create a trust. It is possible to create a trust without using the word trust or
trustee. Conversely, the mere fact that the word trust or trustee is employed does not
necessarily prove an intention to create a trust.
What is important is whether the trustor or the party manifested an intention to create the kind
of relationship which in law is known as a 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 characteristic of the relationship which is called a trust (Julio vs. Dalandan, 21 SCRA 543
[1967]; Tamayo vs. Callejo, 46 SCRA 27 [1972]; Lorenzo vs. Posadas, 64 Phil. 353 [1937].), it being
sufficient that a trust is clearly intended. (Ungab-Valeroso vs. Ungab-Grado, 524 SCRA 699
[2007].)
Kinds of express trusts.
Certain trusts are created for special purposes.1 Among them are:
(1) Charitable trust or one designed for the benefit of a segment of the public or of the public in
general. It is one created for charitable, educational, social, religious, or scientific purposes, or
for the general benefit of humanity. A private trust is not for the good of the public in general or
society as a whole;
(2) Accumulation trust or one that will accumulate income to be reinvested by the trustee in the
trust for the period of time specified;
(3) Spendthrift trust or one established when the beneficiary need to be protected, because of his
inexperience or immaturity from his imprudent spending habits or simply because the
beneficiary is spendrift. Income will be paid to the beneficiary only when actually necessary.
Under some circumstances, the trustee will pay directly the creditor for obligations of the
beneficiary; and
(4) Sprinkling trust or one that gives the trustee the right to determine the income beneficiaries
who should receive income each year and the amount thereof. Income that is not distributed in
any given year is added to the corpus, as in an accumulation trust. It is a discretionary trust if it
gives the trustee the discretion to pay or not to pay the income or principal.
When trustee may sue or be sued alone.
In order that a trustee may sue or be sued alone, it is essential that his trust be express, that is, a
trust created by the direct and positive acts of the parties, by some writing, deed, or will or by
proceedings in court. (Phil. Air Lines, Inc. vs. Heald Lumber Co., 101 Phil. 1031 [1957].)
If a property is insured and the owner received the indemnity from the insurer, it is provided in
Article 22072 of the Civil Code that the insurer is deemed subrogated to the rights of the
insured against the wrongdoer. It has been held that the payment of the indemnity does not
make the insured a trustee of the insurer as in the American law, with the right to bring the
action in the name of the latter and the duty to pay to him (insurer) so much of the recovery as
corresponds to the amount he (insured) had received. This matter being statutory, the same is
governed by our own law in this jurisdiction. (Ibid.)
- Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste, 587 SCRA 417 [2009]
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary. Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties. An implied trust comes
into being by operation of law.
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or
will, or by words either expressly or impliedly evincing an intention to create a trust.
As such, prescription and laches will run only from the time the express trust is repudiated. The
Court has held that for acquisitive prescription to bar the action of the beneficiary against the
trustee in an express trust for the recovery of the property held in trust it must be shown that:
(a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the
cestui que trust; (b) such positive acts of repudiation have been made known to the cestui que
trust, and (c) the evidence thereon is clear and conclusive. The rule requires a clear repudiation
of the trust duly communicated to the beneficiary.
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary.13 Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties. An implied trust comes
into being by operation of law.14
The present Agreement of Partition involves an express 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." That Maxima Caballero bound herself to give one third of Lot No. 5629
to Paciencia Sabellona upon the approval of the former's application is clear from the terms of the
Agreement. Likewise, it is evident that Paciencia acquiesced to the covenant and is thus bound to fulfill
her obligation therein.
The Repudiation of the Express Trust
While no time limit is imposed for the enforcement of rights under express trusts, prescription
may, however, bar a beneficiary's action for recovery, if a repudiation of the trust is proven by
clear and convincing evidence and made known to the beneficiary.18
There was a repudiation of the express trust when the heirs of Maxima Caballero failed to deliver or
transfer the property to Paciencia Sabellona, and instead sold the same to a third person not privy to the
Agreement. In the memorandum of incumbrances of TCT No. 308719 issued in the name of Maxima,
there was no notation of the Agreement between her and Paciencia. Equally important, the Agreement was
not registered; thus, it could not bind third persons. Neither was there any allegation that Silvestre Aro,
who purchased the property from Maxima's heirs, knew of it. Consequently, the subsequent sales
transactions involving the land in dispute and the titles covering it must be upheld, in the absence of proof
that the said transactions were fraudulent and irregular.
Trust is the legal relationship between one person having an equitable ownership in property
and another person owning the legal title to such property, the equitable ownership of the
former entitling him to the performance of certain duties and the exercise of certain powers by
the latter. Trusts are either express or implied. An express trust is created by the direct and
positive acts of the parties, by some writing or deed or will or by words evidencing an intention
to create a trust. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
On the other hand, implied trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent or which are superinduced on the transaction
by operation of law as matters of equity, independently of the particular intention of the parties.
In turn, implied trusts are either resulting or constructive trusts. These two are differentiated
from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have been contemplated by
the parties. They arise from the nature or circumstances of the consideration involved in a
transaction whereby one person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand, constructive trusts are created
by the construction of equity in order to satisfy the demands of justice and prevent unjust
enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in equity and good
conscience, to hold.
In Diaz, et al. v. Gorricho and Aguado, the Court categorically held that while it is not a retroactive
provision of the new Civil Code, Article 1456 merely expresses a rule already recognized by our
courts prior to the Codes promulgation. This article provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the property
comes.
Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the
Court stated:
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a
typical trust, confidence is reposed in one person who is named a trustee for the benefit of another
who is called the cestui que trust, respecting property which is held by the trustee for the benefit of
the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a 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 rule that a trustee cannot acquire by prescription ownership over property entrusted to him
until and unless he repudiates the trust, applies to express trusts and resulting implied trusts.
[ However, in constructive implied trusts, prescription may supervene[ even if the trustee does
not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition
precedent to the running of the prescriptive period.
susceptible of other interpretations (54 Am. Jur. 48-49). Nowhere in the record is there any evidence,
and the plaintiffs do not even raise the pretention, that the original owner of the property Pedro Medina,
father of plaintiff Margarita Medina, appointed, designated or constituted Sotero Medina (the husband of
defendant Restituta Zurbito Medina) as the trustee of the land in dispute. Plaintiffs' contention that there
was an express trust must, therefore, fail."
The appellate court thus likewise correctly held, absent the existence of an express trust, that "The
legal construction most favorable to (petitioners) that can be impressed upon the facts of the
case is that a constructive or implied trust was created by operation of law upon the property in
question,"
but petitioners' cause of action had prescribed upon the lapse of the ten-year
period of acquisitive prescription provided by the then applicable statute (section 41 of Act
190) 8 for unregistered lands such as the land herein involved.
The period of prescription commences to run from the day the action may be brought (Article
1150, Civil Code of the Philippines), and in an action based on fraud, as is the basis of the
present action, the period of prescription begins from the discovery of the fraud (IV Tolentino's
Civil Code of the Philippines 40, citing Anuran vs. Aquino, 38 Phil. 29 and Solatorio vs.
Solatorio, 52 Phil. 444); the reasons a party might have had for not immediately taking judicial
action is immaterial and does not stop the running of the period (Lamko vs. Dioso No. L-6923,
October 31, 1955)." 9 Respondent court had referred to such non-action as "perhaps in deference
to the defendants who had raised and clothed her." 10
The similar case of Cuaycong vs. Cuaycong, 11 where the Court, after finding the non-existence of
an express trust applying Article 1443 of the Civil Code which bars parol evidence in proving
the alleged creation of an express trust over immovables, held that "even assuming the alleged
trust to be an implied one, the right alleged by plaintiffs would have already prescribed since
starting in 1936 when the trustor died, plaintiffs had already been allegedly refused by the
aforesaid defendants in their demands over the land, and the compliance filed only in 1961
more than the 1 year period of prescription for the enforcement of such rights under the trust. It
is settled that the right to enforce an implied trust in one's favor prescribes in. ten (10) years.
And even under the Code of Civil Procedure, action to recover real property such as lands
prescribes in ten years (Sec. 40, Act 190)," fully supports the correctness of the decision under
review.
iv. Effect if Trustee Declines Art. 1445
ART. 1445. No trust shall fail because the trustee ap- pointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.
Art. 1447. The enumeration of the following cases of implied trust does not
exclude others established by the general law of trust, but the limitation laid
down in Article 1442 shall be applicable.
Concept of implied trust.
Implied trusts are those which, without being express, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by operation
of law, as matters of equity, independently of the particular intention of the parties. (89
C.J.S. 724; Philippine National Bank vs. Court of Appeals, 217 SCRA 347 [1993].) Implied
trusts are not created voluntarily, but imposed by law or inferred from the conduct or
dealings of the parties. The concept of implied trusts is that from the facts and
circumstances of a given case, the existence of a trust relationship is inferred in order to
effect the presumed intention of the parties. Thus, there is no implied trust where a contrary
intention is proved. (Abellana vs. Ponce, 437 SCRA 531 [2004].)
favor of one already disqualifi ed from applying additional homestead under the Public Land
Act (Sec. 112, CA No. 141.) is null and void considering that it is in direct violation of the Act
as regards the acquisition of homestead patent. (Sollega de Romero vs. Court of Appeals,
319 SCRA 180 [1999].) A constructive trust is not a trust in a technical sense. (see Art. 1456;
Ramos vs. Ramos, 61 SCRA 284 [1974]; see Sinaon vs. Sorongon, 136 SCRA 407 [1985];
Salvatierra vs. Court of Appeals,
261 SCRA 45 [1996].) It is substantially an appropriate remedy against unjust enrichment.1
(see Sumaoang vs. Judge, RTC, 215 SCRA 136 [1992].)
While in an express trust, a beneficiary and a trustee are linked by a confidential or fiduciary
relation, 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 benefi ciary. (Phil. National Bank vs. Court of Appeals, 217 SCRA 347 [1993].)
Constructive trusts are illustrated in Articles 1450, 1454, 1455, and 1456.
Enumeration of cases of implied trust not exclusive.
The enumeration of cases of implied trust in Chapter 3 is not exclusive. (Art. 1447.) It is
intended to be illustrative of situations in which implied trust is needed in order to correct a
wrong or prevent an unjust enrichment.
(1) It has been held that the registration of a land under the
Torrens System in the name of another does not bar evidence to show that the property is
only being held in trust for the nonregistered owner. (Special Services Corporation vs. Centro
La Paz, 121 SCRA 748 [1983].)
(2) Similarly, although no specifi c provision can be cited to apply, an implied trust is
created when the certificate of registration of a vehicle is placed in the name of a person
although the price thereof was not paid by him but by another. (Chiao Liong
Tan vs. Court of Appeals, 228 SCRA 75 [1993].)
(3) Even though a mortgagee who exercises the power of sale contained in a
mortgage is not strictly considered a trustee in a purely equitable sense, he is deemed a
custodian as far as concerns the surplus of the proceeds of the foreclosure sale and
regarded a trustee thereof for the benefi t of the mortgagor or owner of the equity of
redemption. (Sulit vs. Court of Appeals, 268 SCRA 441 [1997].)
(4) An implied trust is created between the principal and the agent who willfully
violated the trust reposed in him by the principal by buying for himself the property he was
supposed to buy for the principal who designated and appointed him to negotiate with the
owner. The agent is duty-bound to execute a deed of conveyance of the property upon
payment by the principal of the purchase price without interest. (Policarpio vs.Court of
Appeals, 269 SCRA 344 [1997].) So, a constructive trust may also arise by abuse of confi
dence, in order to satisfy the demands of justice. (Arlegui vs. Court of Appeals, 378 SCRA
322 [2002].)
(5) In consonance with the trust fund doctrine in corporation law, the assets of the
corporation as represented by its capital stock are regarded as trust funds to be
maintained unimpaired for the payment of corporate creditors in the sense that there can be
no distribution of such assets among the stockholders without provision being first made for
the payment of corporate debts.
(6) Included in the regulatory responsibilities of the Insurance Commissioner under
Section 414 of the Insurance Code (Pres. Decree No. 1460, as amended.) is the duty to hold
the security deposits under Sections 191 and 203 of the Code, for the benefi t of all policy
holders. Section 192 thereof specifi cally confers custody over the securities upon the
Commissioner, with whom these investments are required to be deposited. An implied trust
(Art. 1441.) is created by law for the benefi t of all claimants under
subsisting insurance contracts issued by the insurance company. (Republic vs. Del Monte
Motors, Inc., 534 SCRA 53 [2006].)
Implied trust founded upon equity.
The doctrine of implied trusts is founded upon equity. The principle is applied in the
American legal system to numerous cases where an injustice would result if the legal estate
or title were to prevail over the equitable right of the benefi ciary. A number of instances of
implied trusts are enumerated in the [new] Civil Code, but this enumeration does not
exclude other cases established by the general law of trusts (Report of the
Code Commission, p. 60.) insofar as they are not in confl ict with the Civil Code, the Code of
Commerce, the Rules of Court, and special laws.
The consequences of an implied trust are, principally, that the implied trustee shall deliver
the possession and reconvey title to the property to the benefi ciary of the trust, and to pay
to the latter the fruits and other net profi ts received from such property during the period of
wrongful holding and otherwise, to adjust the equities between the trustee holding the legal
title and the benefi ciary of the trust. (Sumaoang vs. Judge, RTC, supra.)
While the principle of undue enrichment or quasi-contract is not new, having been
incorporated in the Spanish Civil Code, the provisions on trusts are fairly recent, having been
introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be
found in the Spanish Civil Code, the framers of our present Civil Code incorporated implied
trusts on top of quasi-contracts, both of which embody the principle of equity above strict
legalism.2 (Phil. National Bank vs. Court of Appeals,
217 SCRA 347 [1993].) The doctrine of implied trust if based on an illegal contract cannot be
invoked. (Homena vs. Casa, 157 SCRA 232 [1988].) Being founded in equity, trust can never
result from acts violative of the law. (Deluao vs. Casteel, 29 SCRA 350 [1969]; Art. 1442.)
are created by the direct and positive acts of the parties by some writing or deed or will or
by words evidencing an intention to create a trust.
On the other hand, implied trusts are those which, without being expressed, are
deducible from the nature of the transaction or imposed by operation of law, independently
of the particular intention of the parties. Thus, if the intention to establish a trust is clear, it
is express; if such intention is to be taken from the circumstances or other matters indicative
of such intent, then it is implied (Cuaycong vs. Cuaycong, 21 SCRA 1192 [1967].);
(2) Proof of trust. An express trust concerning an immovable or any interest therein
cannot be proved by parol evidence, while an implied trust concerning an immovable or any
interest therein may be proved by oral evidence (Art. 1457.); and
(3) Repudiation of trust. In order that laches or acquisitive prescription may bar an
action to enforce an express trust, an express repudiation made known to the beneficiary is
required, while laches constitutes a bar to actions to enforce an implied trust even where
there is no repudiation, unless there is concealment of the fact giving rise to the trust. (Diaz
vs. Gorricho and Aguado, 103 Phil. 261 [1958]; Heirs of Candelaria vs. Romero, 109 Phil. 500
[1960]; Fabian vs. Fabian, 22 SCRA 231 [1968].) An express trust does not prescribe except
when the trustee repudiates the trust.
While no time limit is imposed for the enforcement of rights under an express trust,
prescription may, however, bar a beneficiarys action for recovery, if a repudiation of the
trust is proven by clear and convincing evidence and made known to the beneficiary.
(Secuya vs. Vda. de Selma, 326 SCRA 244 [2000].)
Implied trust converted to express trust.
An implied trust may be converted to an express trust by the recognition by the implied
trustee of the right to the property of the owner.
(1) Trustee acknowledged in a public instrument sale of land by his parents to beneficiary.
In a case, where the plaintiff sought a reconveyance of a parcel of land he bought from
defendants parents but which was inadvertently included in the certificate of title covering
defendants land, more than ten years from the issuance of said title, the Supreme Court
took the stand that if such erroneous inclusion initially created an implied trust, the trust
was converted into an express trust when subsequently the defendant explicitly
acknowledged in a public instrument the sale of said land by his parents and bound himself
further, to defend plaintiffs title against any claims whatsoever; it having been created by
the will of the parties, no particular words being required for the creation of an express trust,
it being sufficient that a trust is clearly intended and hence, was no longer subject to the
statute of limitations until and unless repudiated. (Tamayo vs. Callejo, 46 SCRA 27 [1972].)
(2) Trustee directed his tenant to pay rentals to beneficiary and allowed latter to take
possession. In a decision that had become final and executory, the trial court declared
that the defendant had the right to redeem the property in question and ordered the plaintiff
to make the resale of the property in favor of the defendant. It was held that such
declaration created an implied trust for the defendant to redeem, subject to the payment of
the redemption price. Where pursuant to the decision, the plaintiff directed the tenant to pay
his rentals to the defendant instead of to him, meaning the defendant had a right to said
rentals, and allowed the latter to take possession of the property when the tenant left the
same, such acts should be construed as a recognition by the plaintiff of the fact that the
property though still in his name, was to be held in trust for the defendant, to be conveyed
to the latter upon payment of the purchase price. The trust became an express one. (see
Geronimo and Isidro vs. Nava and Aquino, 105 Phil. 145 [1959].)
(b) such positive acts of repudiation have been made known to the cestui que trust
or the other co-owners;
(c) the evidence thereon should be clear and conclusive or convincing (Ramos vs.
Ramos, 61 SCRA 284 [1974]; Valdez vs. Olorga, 51 SCRA 71 [1973]; Lagura vs. Levantino, 71
Phil. 566 [1941]; Salinas vs. Tuazon and Roman, 55 Phil. 729 [1931];
Salvador vs. Court of Appeals, 243 SCRA 239 [1995]; Sta. Ana vs. Panlasegue, 500 SCRA 476
[2006].); and
(d) the period fixed by law has prescribed. (See Arts. 1132, 1134, 1137.) The period
will commence to run from and after said repudiation and the knowledge thereof by the
cestui que trust. (Salinas vs. Tuazon and Roman, supra.)
(2) By third persons. Though the statute of limitations does not run between
trustee and cestui que trust as long as the trust relation subsists, it does run between the
trust and third persons. Thus, a third person who holds actual, open, public, and continuous
possession of a land, adversely to the trust, acquires title to the land by prescription as
against such trust. (Government vs. Abadilla, 46 Phil. 642 [1924].)
Acts amounting to repudiation of trust.
Acts which may be adverse to strangers may not be sufficiently adverse to the cestui que
trust. A mere silent possession of the trustee unaccompanied with acts amounting to an
ouster of the cestui que trust cannot be construed as an adverse possession. (Lagura vs.
Levantino, supra.) His mere receipts of rents and profi ts from the property, the erection of
fences and buildings adapted for the cultivation of the land held in trust, and the payment of
land taxes, do not by themselves serve as proof of exclusive ownership. (Huang vs. Court of
Appeals, 236 SCRA 420 [1994]; Salvador vs. Court of Appeals, 243 SCRA 239 [1995].)
An action to compel the trustee to convey property registered in his name for the benefit of
the cestui que trust does not prescribe unless the trustee repudiates the trust. (Viloria vs.
Court of Appeals, 309 SCRA 529 [1999].) A denial of the trust made by a trustee to one who
at the time of such repudiation is a minor, does not have the effect of abrogating the trust
relation. (Castro vs. Castro, 57 Phil. 675 [1933].) In Pangan vs. Court of Appeals (166 SCRA
375 [1988].), the Supreme Court had occasion to lay down specific acts which areconsidered
as acts of repudiation:
(a) Filing by a trustee of an action in court against the trustor to quiet title to
property, or for recovery of ownership thereof, held in possession by the former, may
constitute an act of repudiation of the trust reposed on him by the latter.
(b) The issuance of the certifi cate of title would constitute an open and clear
repudiation of any trust, and in the lapse of more than 20 years, open and adverse
possession as owner would certainly suffi ce to vest title by prescription.
(c) An action for the reconveyance of land based on implied or constructive trust
prescribes within 10 years. And it is from the date of the issuance of such title that the
effective assertion of adverse title for purposes of the statute of limitations is counted.
(d) The prescriptive period may only be counted from the time petitioners repudiated
the trust relation in 1955 upon the fi ling of the complaint for recovery of possession against
private respondents so that the counterclaim of the private respondents contained in their
amended answer wherein they asserted absolute ownership of the disputed realty by reason
of the continuous and adverse possession of the same is well within the 10-year prescriptive
period.
(e) There is clear repudiation of a trust when one who is an apparent administrator of
property causes the cancellation of the title thereto in the name of the apparent benefi
ciaries and gets a new certifi cate of title in his own name.
(f) It is only when the defendants, alleged co-owners of the property in question,
executed a deed of partition and on the strength thereof obtained the cancellation of the
title in the name of their predecessor and the issuance of a new one wherein they appear as
the new owners of a defi nite area each, thereby in effect denying or repudiating the
ownership of one of the plaintiffs over his alleged share in the entire lot, that the statute of
limitations started to run for the purposes of the action instituted by the latter seeking a
declaration of the existence of the co-ownership and of their rights thereunder. (see
Salvador vs. Court of Appeals, supra.)
Prescriptibility of action for reconveyance based on implied trust.
(1) Period of prescription. An action for reconveyance is a legal remedy granted to a
rightful owner of land wrongfully or erroneously registered under the Torrens System in the
name of another to compel the latter to reconvey the land to him even after one (1) year
from the issuance of the decree of registration, for such action does not seek to set aside the
decree which is respected as incontrovertible and no longer open to review, but instead
seeks to transfer or reconvey the land wrongfully or erroneously registered in another
persons name from said registered owner to the rightful owner or to one with a better right.
(Esconde vs. Borlongay, 152 SCRA 603 [1987]; Tomas vs.
Court of Appeals, 185 SCRA 627 [1990]; Caro vs. Sucaldito, 458 SCRA 595 [2005].)
It is now well-settled that an action for reconveyance to enforce an implied trust in ones
favor prescribes in ten (10) years3 (Amerol vs. Bagumbaran, 154 SCRA 396 [1987];
Cuaycong vs. Cuaycong, 21 SCRA 1192 [1967]; Carantes vs. Court of Appeals, 76 SCRA 514
[1977]; Jaramil vs. Court of Appeals, 78 SCRA 420 [1977]; Vda. de Nacalaban vs. Court of
Appeals, 80 SCRA 428 [1977]; Armamento vs. Guerrero, 96 SCRA 178 [1980]; Amansec vs.
Melendez, 98 SCRA 639 [1980]; Heirs of Maria R. Vda. De Vega vs. Court of Appeals, 199
SCRA 168 [1991]; Tale vs. Court
Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the purpose of
having the beneficial interest of the property. The former is the trustee, while the
latter is the beneficiary. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the sale, no trust is
implied by law, it being disputably presumed that there is a gift in favor of the
child.
Art. 1450. If the price of a sale of property is loaned or paid by one person
for the benefit of another and the conveyance is made to the lender or payor to
secure the payment of the debt, a trust arises by operation of law in favor of the
person to whom the money is loaned or for whom its is paid. The latter may
redeem the property and compel a conveyance thereof to him.
Art. 1451. When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established by implication of
law for the benefit of the true owner.
Legal title to land inherited by heir placed in name of another.
Succession is a mode of acquisition by virtue of which the property, rights, and obligations to
the extent of the value of the inheritance, of a person are transmitted through his death to
another or others either by his will or by operation of law.
(Art. 774.) The rights to the succession are transmitted from the moment of the death of the
decedent. (Art. 777.) Where a person who has acquired land by inheritance causes the legal
title to be placed in the name of another, a resulting trust is presumed in law in favor of the
true owner, the heir.
(see Custodio vs. Casiano, 9 SCRA 841 [1963].) Here, the heir himself by his voluntary
action, causes the registration of his legal title under the name of another person. (Pilapil vs.
Heirs of M.R. Briones, 484 SCRA 308 [2006].) Where, through fraudulent representations or
by pretending to be the sole heir of the deceased, an heir succeeded in having the original
title of a land in the name of the deceased cancelled and a new one issued in his name
thereby enabling him to possess the land and get its produce, there is created what is called
constructive trust in favor of the defrauded. (Baysa vs. Baysa, [C.A.] 53 O.G. 728, Oct. 2,
1957.)
No trust relationship can exist over a property in favor of an heir as benefciary where it
appears that the deceased predecessor had no title to the property in question. (De la Cruz
vs. De la Cruz, 130 SCRA 666 [1984].)
Art. 1455. When any trustee, guardian or other person holding a fiduciary
relationship uses trust funds for the purchase of property and causes the
conveyance to be made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the funds belong.
(1) Constructive trust created. Article 1456 illustrates a constructive trust. Where a
party acquires through mistake or fraud a legal title to property to which another has a
better right, there is created by law what is termed in jurisprudence as constructive trust
in favor of the aggrieved party who is truly entitled to it or his successors-in-interest, and
grants to the latter the right to recover his or their title over the property by way of
reconveyance while the same has not yet passed to an innocent purchaser for value, in
keeping with the primary principle of law and equity that one should not unjustly enrich
himself at the expense of another.13 According to the Supreme Court (in Diaz vs. Gorricho,
103 Phil. 261 [1958].), Article 1456 merely expresses a rule recognized in Gayondato vs.
Insular Treasurer. (49 Phil. 244 [1926].)
The presence of fraud or mistake creates an implied trust for the benefi t of the rightful and
legal owner giving him the right to seek reconveyance of the property. All that must be
alleged in the complaint are two (2) facts: (a) that the plaintiff was the owner of the
property; and (b) that the defendant had illegally dispossessed him of the same. (Heirs of A.
Kionisala vs. Heirs of H. Dacut, 378 SCRA 206 [2002]; Heirs of M. Sanjoyo vs. Heirs of M.
Quijano, 449 SCRA 15 [2005]; Mendezabel vs. Apao, 483 SCRA 587 [2006].)
Applying the rule in Article 1456,14 the Supreme Court, held that a buyer of a parcel of land
at a public auction to satisfy a judgment against a widow, acquired only 1/2 interest on the
land corresponding to the share of the widow and the other half belonging to the heirs of her
husband became impressed with a constructive trust in behalf of said heirs. (Noel vs. Court
of Appeals, 240 SCRA 78 [1995]; see Salvatierra vs. Court of Appeals, 260 SCRA 45 [1996].)
A purchaser in bad faith is, by Article 1456, considered a trustee of an implied trust for the
benefi t of the true owner of the property. That being the case, he may not successfully set
up prescription as a defense. (Francisco vs. Magbitang, 173 SCRA 382 [1989].) Under the
Article, the mistake or fraud that results in an implied trust being impressed upon the
property involved, may be the mistake or fraud of a third person, and need not be a mistake
or fraud committed directly by the trustee himself under the implied trust. (see Sumaoang
vs. Judge, RTC, 215 SCRA 136 [1992].)
(2) Not trust in the technical sense. The use of the word trust in Article 1456 is
not basically accurate. The law has styled such a situation a trust and the person obtaining
the property a trustee for want of a better term as such person has no title to the property
and really holds it for the true owner. (Gayondato vs. Treasurer, supra; Sevilla vs. De los
Angeles, 97 Phil. 875 [1955]; Manlicon vs. De Vera, 86 Phil. 115 [1950]; Gemora vs. F.M.
Yaptico and Co., 52 Phil. 161 [1928]; Ramos vs. Ramos, 61 SCRA 284 [1974].) 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 as constructive frauds, there can be no misapprehension in
continuing the same phraseology while a change might lead to confusion and
misunderstanding. (Estate of the Late M. Jacob vs. Court of Appeals, 283 SCRA 474 [1998].)
The trust alluded to, as just pointed out, is constructive trust arising by operation of law. It is
not trust in the technical sense (Gonzales vs. Intermediate Appellate Court, 204 SCRA
106 [1991].) for in a typical trust, confi dence is reposed in one person for the benefi t of
another respecting property which is held by the former for the benefi t of the latter.15 (see
Art. 1440; Phil. National Bank vs. Court of Appeals, 217 SCRA 347 [1993].)
It is created as a means of affording relief to the innocent, and constitutes a remedial device
through which preference of self is made subordinate to loyalty to others. (Sumaoang vs.
Judge, RTC, supra.)
(3) Remedy of owner under the torrens system. The sole remedy of the landowner
whose property has been wrongfully or erroneously registered under the torrens system in
anothers name is, after one year from the date of the decree of registration, not to set aside
the decree but, respecting it as incontrovertible and no longer open to review, to bring an
ordinary action in the ordinary court of justice for reconveyance or, if the property has
passed into the hands of an innocent purchaser for value, for damages. (Aban vs. Cedea,
[Unrep.] 103 Phil. 1153 [1958]; Director of Lands vs. Register of Deeds of Rizal, 92 Phil. 826
[1953]; see Armamento vs. Guerrero, 96 SCRA 178 [1980]; Gomez vs. Duyan, 453 SCRA 708
[2005]; Ceervantes vs. Court of Appeals, 503 SCRA 451 [2006]; see Sec. 53, Pres. Decree
No. 1529 [Property Registration Decree].)
The principle that a trustee who takes a torrens title in his name cannot repudiate the trust
by relying on the registration, is a well-known exception to the principle of conclusiveness of
a certifi cate of title. (Adriano vs. Court of Appeals, 328 SCRA
738 [2000].) The benefi ciary has the right to enforce the trust, notwithstanding the
irrevocability of the torrens title, and the trustee and his successors-in-interest are bound to
execute the deed of reconveyance. After all, the torrens system was never designed to
shield and protect one who had committed fraud or misrepresentation and thus holds title in
bad faith. (Mun. of Victorias vs. Court of Appeals, 149 SCRA 32 [1987]; Amerol vs.
Bagumbaran, 154 SCRA 396 [1987]; Adille vs. Court of Appeals, 157 SCRA 455, 546 [1988].)
It does not create or vest title but only confi rms and records title already existing and
vested. Where one does not have any rightful claim over a real property, the torrens system
of registration can confi rm or record nothing. (Rosario vs. Court of Appeals, 310 SCRA 464
[1999].) Where a party is in actual possession of the property, the action to enforce the trust
and recover the property and thereby quiet title thereto, is imprescriptible. (Heirs of
Clemente Ermac vs. Heirs of Vicente Ermac, 403 SCRA 291 [2003].)
supra.; De Leon vs. Molo-Peckson, 6 SCRA 978 [1962]; Ong Ching Po vs. Court of Appeals,
239 SCRA 341 [1994]; Morales vs. Court of Appeals, 274 SCRA 282 [1997].) In order to
establish an implied trust in real property, by parol evidence, the proof should be as fully
convincing as if the acts giving rise to the trust obligation are proven by an authentic
document. An implied trust, in fine, cannot be established upon vague and inconclusive
proof. (Heirs of L. Yap vs. Court of Appeals, 312 SCRA 603 [1999].)
(2) An implied trust cannot be established contrary to the recitals of a Torrens Title,
upon vague and inconclusive proof. (Salao vs. Salao, 70 SCRA 65 [1976].) Thus, in a case,
where the supposed trustees had appeared to be the registered owners of the lot in question
for more than forty years and had possessed it during that period, and the trustors who
created the alleged trust, died a long time ago, their title and possession cannot be
defeated by oral evidence which can be easily fabricated. Any pretension as to the existence
of an implied trust should not be countenanced. (Sinaon vs. Sorongon, 134 SCRA 407
[1985].)
(3) The doctrine of implied trust finds no application where there are no proven facts
to support it. While an implied trust (of real and personal property) does not require the
formalities of an express trust over realty which as mandated by Article
1443 cannot be proved by oral evidence, still there must be proof that the trustor wanted to
grant one party only the beneficial ownership of a property, although said beneficiary may
have legal title in himself. (Ferrer-Lopez vs. Court of Appeals, 150 SCRA 393 [1987].)
(4) The bare existence of confi dential relation between grantor and grantee (motherin-law and son-in-law) does not, standing alone, raise the presumption of fraud. A deed (of
sale) will not be set aside merely because the grantor and the grantee sustained a
confidential relationship where the evidence shows no fraud or abuse of confidence.
(Esquivias vs. Court of Appeals, 270 SCRA 803 [1997].)
SPS. FELIPE and JOSEFA PARINGIT, petitioner, vs. MARCIANA P. BAJIT, ADOLIO
PARINGIT and ROSARIO PARINGIT ORDOO, respondents.
FACTS:
During their lifetime, spouses Julian and Aurelia Paringit leased a lot in Sampaloc, Manila
(the lot) from Terocel Realty, Inc. (Terocel Realty). They built their home there and raised five
children. Aurelia died on November 6, 1972.
For having occupied the lot for years, Terocel Realty offered to sell it to Julian. Julian sought
the help of his children so he can buy the property but only his son Felipe and wife Josefa
had the financial resources he needed at that time. To bring about the purchase, on January
16, 1984 Julian executed a deed of assignment of leasehold right in favor of Felipe and his
wife that would enable them to acquire the lot. On April 12, 1984 Felipe and his wife paid the
last installment and the realty company executed a Deed of Absolute Sale in their favor and
turned over the title to them.
In 1985, due to issues among Julians children regarding the ownership of the lot, Julian
executed an affidavit clarifying the nature of Felipe and his wifes purchase of the lot. He
claimed that it was bought for the benefit of all his children.
Expressing their concurrence with what their father said in his affidavit, Felipes siblings
(Marciana, et. al.), except Florencio, signed the same.
Marciana, et al continued to occupy the lot with their families without paying rent. This was
the situation when their father Julian died on December 21, 1994.
In 1995. Felipe and his wife sent a demand letter to Marciana, et al asking them to pay
rental arrearages for occupying the property from March 1990 to December 1995 at the rate
of P2,400.00 a month, totaling P168,000.00. Marciana, et al refused to pay believing that
they had the right to occupy the house and lot, it being their inheritance from their parents.
On March 11, 1996 Felipe and his wife filed an ejectment suit against them. The suit
prospered, resulting in the ejectment of Marciana, et al and their families from the property.
Shortly after, Felipe and his wife moved into the same.
Marciana, et al filed the present action against Felipe and his wife for annulment of title and
reconveyance of property.
In his answer, Felipe denied knowledge of the agreement among the siblings that the
property would devolve to them all. Josefa, his wife, claimed that she signed the affidavit
only because Marciana, et al were going to get mad at her had she refused. She also claimed
that she signed the document only to prove having received it.
RTC rendered a decision, finding the evidence of Marciana, et al insufficient to prove by
preponderance of evidence that Felipe and his wife bought the subject lot for all of the
siblings.
CA rendered judgment reversing the decision of the RTC and ordering Felipe and his wife to
reconvey to Marciana, et al their proportionate share in the lot upon reimbursement of what
the spouses paid to acquire it plus legal interest.
ISSUE: Whether or not CA erred in finding that Felipe and his wife purchased the subject lot
under an implied trust for the benefit of all the children of Julian
CIVIL LAW: Implied Trust on sale of land
HELD:
The CA found that Felipe and his wifes purchase of the lot falls under the rubric of the
implied trust provided in Article 1450 of the Civil Code.
Implied trust under Article 1450 presupposes a situation where a person, using his own
funds, buys property on behalf of another, who in the meantime may not have the funds to
purchase it. Title to the property is for the time being placed in the name of the trustee, the
person who pays for it, until he is reimbursed by the beneficiary, the person for whom the
trustee bought the land. It is only after the beneficiary reimburses the trustee of the
purchase price that the former can compel conveyance of the property from the latter.
Petitioner claims that since it needed funds to pay the retirement and pension benefits of
VMC employees and to reimburse advances made by VMC, petitioner's Board of Trustees
authorized the sale of its share in the MBP lot. 11
On 14 March 1997, VMC negotiated the sale of the MBP lot with Metropolitan Bank and Trust
Company, Inc. (Metrobank) for P81,675,000, but the consummation of the sale was withheld.
12 On 26 March 1997, VMC eventually sold the MBP lot to Metrobank. VMC, through its Vice
President Rolando Rodriguez and Assistant Vice President Teodorico Escober, signed the
Deed of Absolute Sale as the sole vendor.
Since Lot 1 has been sold for P81,675,000.00 (gross of 7.5% withholding tax and 3% broker's
commission, MJOPFI's share in the proceeds of the sale is P40,500,000.00 (gross of 7.5%
withholding tax and 3% broker's commission. However, MJO Pension Fund is indebted to VMC
representing pension benefit advances paid to retirees amounting to P21,425,141.54,
thereby leaving a balance of P14,822,358.46 in favor of MJOPFI. Check for said amount of
P14,822,358.46 will therefore be issued to MJOPFI as its share in the proceeds of the sale of
Lot 1. The check corresponding to said amount will be deposited with MJOPFI's account with
BPI Asset Management & Trust Group which will then be invested by it in the usual course of
its administration of MJOPFI funds.
Petitioner claims that it is a co-owner of the MBP lot as trustee of the Employees' Trust Fund,
based on the notarized Memorandum of Agreement presented before the appellate courts.
Petitioner asserts that VMC has confirmed that petitioner, as trustee of the Employees' Trust
Fund, is VMC's co-owner of the MBP lot. Petitioner maintains that its ownership of the MBP
lot is supported by the excerpts of the minutes and the resolutions of petitioner's Board
Meetings. Petitioner further contends that there is no dispute that the Employees' Trust Fund
is exempt from income tax. Since petitioner, as trustee, purchased 49.59% of the MBP lot
using funds of the Employees' Trust Fund, petitioner asserts that the Employees' Trust Fund's
49.59% share in the income tax paid (or P3,037,697.40 rounded off to P3,037,500) should be
refunded.
The Issues
1.Whether petitioner or the Employees' Trust Fund is estopped from claiming that the
Employees' Trust Fund is the beneficial owner of 49.59% of the MBP lot and that VMC merely
held 49.59% of the MBP lot in trust for the Employees' Trust Fund.
2.If petitioner or the Employees' Trust Fund is not estopped, whether they have sufficiently
established that the Employees' Trust Fund is the beneficial owner of 49.59% of the MBP lot,
and thus entitled to tax exemption for its share in the proceeds from the sale of the MBP lot.
The Ruling of the Court
The law expressly allows a co-owner (first co-owner) of a parcel of land to register his
proportionate share in the name of his co-owner (second co-owner) in whose name the
entire land is registered. The second co-owner serves as a legal trustee of the first co-owner
insofar as the proportionate share of the first co-owner is concerned. The first co-owner
remains the owner of his proportionate share and not the second co-owner in whose name
the entire land is registered. Article 1452 of the Civil Code provides:
the parties. 39Based on this resulting trust, the Employees' Trust Fund is considered the
beneficial co-owner of the MBP lot.
Petitioner has sufficiently proven that it had a "common consent" or agreement with VMC
and VFC to jointly purchase the MBP lot. The absence of petitioner's name in the TCT does
not prevent petitioner from claiming before the BIR that the Employees' Trust Fund is the
beneficial owner of 49.59% of the MBP lot and that VMC merely holds 49.59% of the MBP lot
in trust, through petitioner, for the benefit of the Employees' Trust Fund.
The BIR has acknowledged that the owner of a land can validly place the title to the land in
the name of another person. In BIR Ruling [DA-(I-012) 190-09] dated 16 April 2009, a certain
Amelia Segarra purchased a parcel of land and registered it in the names of Armin Segarra
and Amelito Segarra as trustees on the condition that upon demand by Amelia Segarra, the
trustees would transfer the land in favor of their sister, Arleen May Segarra-Guevara. The
BIR ruled that an implied trust is deemed created by law and the transfer of the land to the
beneficiary is not subject to capital gains tax or creditable withholding tax.
the use of the word trust is not required or essential to its constitution, it being sufficient
that a trust is clearly intended. Implied trust comes into existence by operation of law,
either through implication of an intention to create a trust as a matter of law or through the
imposition of the trust irrespective of, and even contrary to any such intention. Judging
from their documented acts immediately before and subsequent to the actual transfer on
September 7, 1964 of MC No. 590, Parsons, as transferee, and Grimm, as transferor,
indubitably contemplated a trust arrangement.
And lest it be overlooked, Parsons had previously acknowledged Grimm to be the owner of
MC No. 1088, after his earlier repeated declarations that the transfer of the replaced MC No.
580 was temporary. Parsons was thus in contextually in estoppel to deny, thru the Letter of
Trust aforementioned, hypothetically assuming its authenticity, Grimms ownership of the
replacement certificate.
Held:
Section 7, Article XII of the 1987 Constitution states: Save in cases of hereditary succession,
no private lands shall be transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain. Aliens, whether
individuals or corporations, are disqualified from acquiring lands of the public domain.
Hence, they are also disqualified from acquiring private lands. The primary purpose of the
constitutional provision is the conservation of the national patrimony.
Respondent was aware of the constitutional prohibition and expressly admitted his
knowledge thereof to this Court. He declared that he had the Antipolo property titled in the
name of petitioner because of the said prohibition. His attempt at subsequently asserting or
claiming a right on the said property cannot be sustained.
The Court of Appeals erred in holding that an implied trust was created and resulted by
operation of law in view of petitioners marriage to respondent. Save for the exception
provided in cases of hereditary succession, respondents disqualification from owning lands
in the Philippines is absolute. Not even an ownership in trust is allowed. Besides, where the
purchase is made in violation of an existing statute and in evasion of its express provision,
no trust can result in favor of the party who is guilty of the fraud. To hold otherwise would
allow circumvention of the constitutional prohibition.
To allow reimbursement would in effect permit respondent to enjoy the fruits of a property
which he is not allowed to own. Thus, it is likewise proscribed by law.
ALBERTO HERBON, MARGARITO HERBON AND GABINO HERBON, petitioners, vs. LEOPOLDO
T. PALAD AND HELEN P. CAYETANO, respondents.
Facts:
In his lifetime, Gonzalo Palad (Gonzalo) was a co-owner of a parcel of agricultural land
located in Poblacion, Bagac, Bataan, otherwise known as Lot 421, with an area of 32,944
square meters and covered by Transfer Certificate of Title (TCT) No. 4408 of the Register of
Deeds of Bataan. 2 The extent of his co-ownership in Lot 421 is 1/4 and 1/14. The other coowners of Lot 421 and their respective shares were: Jacinto Palad (Jacinto), 1/4 and 1/14;
Spouses Juan Banzon and Elena Gutierrez, 1/14; Francisco Palad, 1/14; Lorenzo Palad, 1/14;
Ramon Nojadera, 1/28; Ana Nojadera, 1/28; Modesta Nojadera (Modesta), 1/28; and,
Concordia Nojadera (Concordia), 1/28. 3 Gonzalo's share in Lot 421 was conjugal property,
having been acquired during his marriage with one Alejandra Nava (Alejandra). 4 Adelaida, 5
Benjamin, 6 and Ignacio, respondents' father, were their children.
Sometime during the Japanese Occupation, Alejandra died. On September 14, 1949, Gonzalo
contracted a second marriage with Remedios Torres (Remedios). 7 Remedios, a widow, had
three children from her previous marriage, herein petitioners. The union of Gonzalo and
Remedios bore no children. On November 16, 1983, Gonzalo died. About a decade later, or
on November 9, 1992, Remedios died. Thereafter, petitioners took possession of a portion of
Lot 421 and despite respondents' demands to vacate and turn over possession of the
property, petitioners refused to do so. When respondents brought the matter to conciliation
before the Office of the Barangay Captain of Ibaba, Bagac, Bataan, the matter was not
On March 2, 1994, petitioners filed their Answer with Counterclaim claiming that they have a
right to possess and occupy a portion of Lot 421 as heirs of Remedios. 10
During the trial, respondents presented oral evidence to show that Gonzalo expressed his
intentions regarding the disposition of his properties, which included his share in Lot 421 and
a 173-square meter lot in Pag-asa, Bagac, Bataan (Pag-asa property); that Gonzalo intended
that the Pag-asa property would be given to Remedios and the same would be left to her
granddaughter, Merlita Herbon Espiritu (Merlita), 11 eldest daughter of petitioner Gabino
Herbon; that Gonzalo's share in Lot 421 should be left to Ignacio; that the Pag-asa property
has already been transferred to Merlita in accordance with the wishes of Gonzalo; that it was
the Palad tradition that land inherited by members of the clan shall be disposed only to the
clan and to no other person. IASTDE
On the other hand, petitioners presented a Deed of Absolute Sale dated December 9, 1957
executed by Jacinto selling his shares in Lot 421 to Gonzalo, Adelaida and Ignacio, 12 as well
as a Deed of Absolute Sale dated December 16, 1957 executed by sisters Modesta and
Concordia selling their separate shares in Lot 421 in favor of Gonzalo, Adelaida and Ignacio.
13 They submit that since the shares were acquired during the marriage of Gonzalo and
Remedios, said shares form part of the conjugal property and Remedios was entitled to a
part thereof as her conjugal share. Moreover, as surviving heir of Gonzalo, Remedios
inherited Gonzalo's shares in Lot 421.
As rebuttal witnesses, Bayani M. Palad (Bayani) and Maria A. Gallego (Maria) testified that
Benjamin, Gonzalo's son, paid for Jacinto's shares in the Deed of Absolute Sale dated
December 9, 1957. Concordia Jornal, also a rebuttal witness, testified that she is the
Concordia Nojedera mentioned in the TCT but disowned the Deed of Absolute Sale dated
December 16, 1957 and her purported signature therein.
Issue:
Whether or not there is an implied trust
Held:
no.
On the matter of implied trust, Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of
the property. The former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying
the price of the sale, no trust is implied by law, it being disputably presumed that there is a
gift in favor of the child. (Emphasis supplied)
The trust created under the first sentence of Article 1448 is sometimes referred to as a
purchase money resulting trust, the elements of which are: (a) an actual payment of money,
property or services, or an equivalent, constituting valuable consideration; and (b) such
consideration must be furnished by the alleged beneficiary of a resulting trust. 23
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. 24 While implied trusts may be proved by oral evidence, 25 the evidence
must be trustworthy and received by the courts with extreme caution, and should not be
made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required
because oral evidence can easily be fabricated. 26 Thus, in order to establish an implied
trust in real property by parol evidence, the proof should be as fully convincing as if the acts
giving rise to the trust obligation are proven by an authentic document. 27 An implied trust,
in fine, cannot be established upon vague and inconclusive proof. 28
In the present case, the parol evidence offered to prove the existence of an implied trust is
lean, frail and far from convincing. The testimonies of Bayani and Maria that Benjamin,
instead of Gonzalo, paid for Jacinto's shares in Lot 421 are vague and contain no
specificities. 29 Their testimonies do not show that the payment was intended to establish a
trust relationship. Said witnesses are complete strangers in so far as the intent of the parties
to the contract is concerned. TSIEAD
The hornbook rule on interpretation of contracts gives primacy to the intention of the
parties, which is the law among them. Ultimately, their intention is to be deciphered from
the language used in the contract, not from the unilateral post facto assertions of one of the
parties, or even third parties who are strangers to the contract. And when the terms of the
agreement, as expressed in such language, are clear, they are to be understood literally, just
as they appear on the face of the contract. 30
In this case, the Deed of Absolute Sale dated December 9, 1957 executed by Jacinto is clear
and unequivocal as to who are the vendees, namely: Gonzalo, Adelaida and Ignacio. No
amount of extrinsic aids are required and no further extraneous sources are necessary in
order to ascertain the parties' intent, determinable as it is, from the document itself. 31 The
Court is thus convinced that the deed expresses truly the parties' intent as against the oral
testimony that Benjamin paid the consideration of the sale.
Without any doubt, oral testimony as to a certain fact, depending as it does exclusively on
human memory, is not as reliable as written or documentary evidence. 32 As Judge Limpkin
of Georgia once said, "I would sooner trust the smallest slip of paper for truth than the
strongest and most retentive memory ever bestowed on mortal man." 33 Indeed, spoken
words could be notoriously unreliable as against a written document that speaks a uniform
language. 34
As to the Deed of Absolute Sale dated December 16, 1957, executed by Modesta and
Concordia, the rule is settled that the notarization of a document carries considerable legal
effect. Notarization of a private document converts such document into a public one, and
renders it admissible in court without further proof of its authenticity 35 and is entitled to full
faith and credit upon its face. 36 A notarized document carries the evidentiary weight
conferred upon it with respect to its due execution, 37 and documents acknowledged before
a notary public have in their favor the presumption of regularity. 38 It must be sustained in
full force and effect so long as he who impugns it does not present strong, complete, and
conclusive proof of its falsity or nullity on account of some flaws or defects provided by law.
39 In this case, respondents failed to present such required proof. IHAcCS
Mere denial by Concordia that she signed the deed 40 cannot prevail over the positive
presumption enjoyed by a notarial document. Negative and self-serving, denial deserves no
weight in law when unsubstantiated by clear and convincing evidence. No other witness or
evidence was presented to corroborate Concordia's testimony. Settled is the rule that forgery
cannot be presumed; it must be proved by clear, positive and convincing evidence. 41
extreme caution. The existence of an implied trust should not be made to rest on loose,
equivocal and indefinite declarations. 10
In this case, both the trial court and the Court of Appeals declared that
preponderance of evidence, in credibility and number, exists in favor of private
respondents. DTaSIc
The Court of Appeals quoted the testimonies of private respondents Jorge Olivar,
Praxedes Gantuangco and Emilio Dichos all to the effect that they had an agreement
with Antonina Oporto to purchase the subject property but that, upon petitioner
JesusDuran's expression of his desire to have the purchase price lowered, they gave
their authority for the latter to negotiate the reduction of the purchase price for the
property. Unfortunately, Jesus Duran breached the trust reposed upon him by leading
private respondents to believe that he intended to work towards the group's objective
and concealing the fact that he had already purchased the property for himself at a
reduced price.
In contrast, all that petitioners offered in evidence was petitioner Demetria Duran's
statement that there could not have been any such transaction because she was always
with her husband. Jesus Duran, who was in the best position to rebut private
respondents' claims, did not even take the witness stand and no justifiable reason was
given to explain his absence.
We find no reason to disturb the evaluation of the trial court and
the Court of Appeals of the credibility of the testimonies ofprivate respondents'
witnesses. It is a settled rule that the assessment of the credibility of witnesses is a
domain best left to the trial court judge because of his unique opportunity to observe
their deportment and demeanor on the witness stand, a vantage point denied appellate
tribunals. And when his findings have been affirmed by the Court of Appeals, these are
generally binding and conclusive upon this Court. 11
There is no showing that the trial court and the Court of Appeals overlooked matters
which, if taken under advisement, would have altered the outcome of the case. Their
factual findings regarding the agreement between the parties and legal conclusion that
a constructive trust was created and later breached by Jesus Duran are substantially
supported by the evidence on record and, for this reason, must stand. IDESTH
Petitioners' theory that Jesus Duran was not constituted as an agent because private
respondents did not entrust money to him for the negotiations has no merit. By his own
admission, Jesus Duran volunteered and was authorized by private respondents to
represent them in the negotiations for the sale of the property. Whether the designation
was as a spokesman or as an agent is immaterial. His actions thereafter should have
been in representation of, not only himself, but also private respondents as dictated by
the principle of equity, which lies at the core of constructive trust.
- Delfin vs. Billones, 485 SCRA 38 (2006)
When one's property is registered in another's name without the former's consent, an implied
trust is created by law in favor of the true owner. 27 Implied trusts are those which, without
being expressed, are deducible from the nature of the transaction by operation of law as matters
of equity, independently of the particular intention of the parties. Meanwhile, constructive trusts
are created in order to satisfy the demands of justice and prevent unjust enrichment. They arise
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. 28 An action for
reconveyance based upon an implied or constructive trust prescribes in ten (10) years from the
registration of the deed or from the issuance of the title, registration being constructive notice to
all persons. 29 However, an action for reconveyance based on fraud is imprescriptible where
the plaintiff is in possession of the property subject of the acts. 30|||
was declared for taxation purposes in Domingas name as administrator thereof; petitioner
caused the execution of a Deed of Donation over said property by taking advantage of
Domingas blindness, old age and physical infirmity; the said Deed of Donation is null and void
because: (a) Dominga had no right to donate the same since she is not its owner, (b) Dominga
did not give her consent and was misled to the execution of such document, (c) granting
Dominga had authority to donate, the donation is void because the property donated is the only
property declared in her name and therefore she could not have reserved for herself in full
ownership sufficient property to support herself; petitioner is in possession of the subject
property, depriving respondents of its ownership and enjoyment of its fruits.
ISSUE
Whether or not implied trust arise dove the subject property
RULING
In holding that an implied trust exists between respondents and Dominga in relation to
the subject property and therefore Dominga had no right to donate the same to petitioner, the
CA merely clarified the RTCs findings.
The trust created under the first sentence of Article 1448 is sometimes referred to as
a purchase money resulting trust, the elements of which are: (a) an actual payment of money,
property or services, or an equivalent, constituting valuable consideration; and (b) such
consideration must be furnished by the alleged beneficiary of a resulting trust. Respondents
have shown that the two elements are present in the instant case. Dominga was merely a
trustee of the respondents in relation to the subject property. Therefore, Dominga could not
have validly donated the subject property to petitioner, as expressly provided in Article 736 of
the Civil Code, thus:
Art. 736. Guardians and trustees cannot donate the property entrusted to them.
Truly, nobody can dispose of that which does not belong to him.
"ART. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, of the one
paying the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child." ESDcIA
Under the last sentence of Article 1448, respondent's alleged acts paying the price of
the subject properties and, in the titles, naming his children as owners raise the
presumption that a gift was effected in their favor. Respondent failed to rebut this
presumption. Absent any clear proof that a trust was created, he cannot be deemed a
real party in interest. 49 That he should be deemed a trustor on the basis merely of
having paid the purchase price is plainly contradicted by the presumption based on
Article 1448 of the Civil Code "that there is a gift in favor of the child," not a trust in favor
of the parent.
- Miguel Cuenco vs. Concepcion Cuenco vda. De Manguerra, 440 SCRA 252
Implied Trust
Petitioner then contends that no constructive or implied trust exists between the
parties. aETDIc
A trust is a legal relationship between one having an equitable ownership in a property
and another having legal title to it. 15
Trust relations between parties may either be express or implied. 16 Express trusts are
created by the direct and positive acts of the parties, indicated through some writing,
deed, will, or words evidencing an intention to create a trust. 17 On the other hand,
implied trusts are those that, "without being express, are deducible from the nature of
the transaction as matters of intent[;] or which are superinduced on the transaction by
operation of law as a matter of equity, independently of the particular intention of the
parties. Implied trusts may either be resulting or constructive trusts, both coming into
being by operation of law." 18
Resulting trusts are presumed to have been contemplated by the parties and are based
on the equitable doctrine that valuable consideration, not legal title, determines the
equitable title or interest. 19 These trusts arise from the nature of or the circumstances
involved in a transaction, 20 whereby legal title becomes vested in one person, who is
obligated in equity to hold that title for the benefit of another.
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." 21
A review of the records shows that indeed there is an implied trust between the parties.
Although Lot 903-A was titled in Miguel's name, the circumstances surrounding the
acquisition and the subsequent partial dispositions of this property eloquently speak of
the intent that the equitable or beneficial ownership of the property should belong to
Mariano and his heirs. CTIDcA
First, Lot 903-A was one half of the one-hectare portion of Lot 903 given as attorney's
fees by a client of the law firm of PartnersMiguel and Mariano Cuenco. It constituted the
latter's share in the attorney's fees and thus equitably belonged to him, as correctly
found by the CA. That Lot 903-A had been titled in the name of Miguel gave rise to an
implied trust between him and Mariano, specifically, the former holds the property in
trust for the latter. In the present case, it is of no moment that the implied trust arose
from the circumstance a share in the attorney's fees that does not categorically fall
under Articles 1448 to 1456 of the Civil Code. The cases of implied trust enumerated
therein "does not exclude others established by the general law of trust." 22
Second, from the time it was titled in his name in 1938, 23 Lot 903-A remained
undivided and untouched 24 by Miguel. Only on February 3, 1947, did
Lourdes Cuenco, 25 upon the instruction of Mariano, have it surveyed and subdivided
into six almost equal portions 903-A-1 to 903-A-6. Each portion was specifically
allocated to each of the six children of Mariano with his first wife. 26
Third, Miguel readily surrendered his Certificate of Title 27 and interposed no
objection 28 to the subdivision and the allocation of the property to Mariano's six
children, including Concepcion.
Fourth, Mariano's children, including Concepcion, 29 were the ones who shouldered the
expenses incurred for the subdivision of the property.
Fifth, after the subdivision of the property, Mariano's children including
Concepcion 30 took possession of their respective portions thereof.
Sixth, the legal titles to five portions of the property were transferred via
a gratuitous deed of conveyance to Mariano's five children, following the allocations
specified in the subdivision plan prepared for Lourdes Cuenco. 31
With respect to Lot 903-A-6 in particular, the existence of Concepcion's equitable
ownership thereof is bolstered, not just by the above circumstances, but also by the fact
that respondent fenced the portion allocated to her and planted trees thereon. 32
More significantly, she also paid real property taxes on Lot 903-A-6 yearly, from 1956
until 1969 33 the year when she was dispossessed of the property. "Although tax
declarations or realty tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of owner,
for no one in his right mind would be paying taxes for a property that is not in his actual
or at least constructive possession." 34 Such realty tax payments constitute proof that
the holder has a claim of title over the property. HSEIAT
Tellingly, Miguel started paying real property taxes on Lot 903-A-6 only on April 4,
1964, 35 after the death of Mariano. 36 This fact shows that it was only in that year that
he was emboldened to claim, the property as his own and to stop recognizing
Mariano's, and subsequently Concepcion's, ownership rights over it. It was only by then
that the one who could have easily refuted his claim had already been silenced by
death. Such a situation cannot be permitted to arise, as will be explained below.
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 Pasio) claimed that
Laureanos heirs, headed by his son Jose, continuously possessed and cultivated
both lots. Joses 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 No. 2139 was interrupted when respondents
forcibly took possession of the property. Respondents (Dr. Teofilo 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 possession of Lot No. 2139, by themselves and through their
predecessors-ininterest. They alleged that Rufo Larumbe sold Lot No. 2139 to Petra
Teves. Petra 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. Monterroyos heirs
ISSUE W/N petitioners are rightful owners and possessors 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-ininterest. 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 Pasio, 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 anothers name
to its rightful owner or to one with a better right. If the registration of the land is
fraudulent, the person in whose name the land is registered holds it as a mere
trustee, and the real owner is entitled to file an action for reconveyance of the
property
(Rodrigo v. Ancilla, G.R. No. 139897, [June 26, 2006], 525 PHIL 590-598)
Held: The remedy of a landowner whose property has been wrongfully or
erroneously registered in another's name is an action for reconveyance, or an action
for damages if the property has passed onto the hands of an innocent purchaser for
value. Paragraph 3, Section 53 of PD 1529 provides that in all cases of registration
procured by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the rights of any
innocent holder for value of the decree of registration.
To be read in conjunction with the foregoing provision is Article 1456 of the Civil
Code which provides that "[i]f the property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes."
The foregoing circumstances lead to only one conclusion: petitioners are holding Lot
434 merely as trustees under an implied trust for respondent. "An implied trust is
one that, without being express, is deducible from the nature of the transaction as a
matter of intent or which is superinduced on the transaction by operation of law as
a matter of equity, independently of the particular intention of the parties." 18 The
law itself creates the obligation of the trustees to convey the property and the title
thereof in favor of the true owner. 19
Lastly, the action for reconveyance has not prescribed. An action for reconveyance
based on implied or constructive trust prescribes in 10 years. 20 This period is
reckoned from the date of issuance of the transfer certificate of title which operates
as constructive notice to the whole world. Here, TCT No. T-3062 in the name of
Vicente Sauza was issued on January 13, 1971. Thus, respondent's suit for
reconveyance filed on December 28, 1979 was well within the prescribed period.
Clearly, prescription did not attach.
G.R. No. 164787
MARLENE
CRISOSTOMO
&
JOSE
FLORITO M. GARCIA, JR., Respondent.
G.
In the case at bar, respondents action which is for Reconveyance and Cancellation
of Title is based on an implied trust under Art. 1456 of the Civil Code since he
averred in his complaint that through fraud petitioners were able to obtain a
Certificate of Title over the property. He does not seek the annulment of a voidable
contract whereby Articles 1390 and 1391 of the Civil Code would find application
such that the cause of action would prescribe in four years.
Art. 1456 of the Civil Code provides:
Art. 1456. If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
Thus, it was held that when a party uses fraud or concealment to obtain a certificate
of title of property, a constructive trust is created in favor of the defrauded party.36
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."37
When property is registered in anothers name, an implied or constructive trust is
created by law in favor of the true owner.38 The action for reconveyance of the title
to the rightful owner prescribes in 10 years from the issuance of the title.39
An action for reconveyance based on implied or constructive trust prescribes in ten
years from the alleged fraudulent registration or date of issuance of the certificate
of title over the property.40
It is now well-settled that the prescriptive period to recover property obtained by
fraud or mistake, giving rise to an implied trust under Art. 1456 of the Civil Code, is
10 years pursuant to Art. 1144. This ten-year prescriptive period begins to run from
the date the adverse party repudiates the implied trust, which repudiation takes
place when the adverse party registers the land.41
Clearly, the applicable prescriptive period is ten years under Art. 1144 and not four
years under Arts. 1389 and 1391.42
Applying the law and jurisprudential declaration above-cited to the allegations of
fact in the complaint, it can clearly be seen that respondent has a period of 10
years from the registration of the title within which to file the action. Since the title
was registered in the name of the petitioners on 16 November 1993, respondent
had a period of 10 years from the time of the registration within which to file the
complaint. Since the complaint was filed on 20 June 2002, the action clearly has not
prescribed and was timely-filed.
[G.R. No. 140457. January 19, 2005]
even date, Deed of Absolute Sale of a Portion of Land involving the opt-described
property was also executed by LORETO in favor of WILFREDO. The aforementioned
deeds, which were both executed on December 7, 1989 [and] notarized by Atty.
Warloo Cardenal[,] [appear] to have been given the same entry number in his
notarial books as both contained the designation Document No. 236, Page No. 49,
Book No. XI, Series of 1989.
WILFREDO obtained another loan from Development Bank of the Philippines (DBP
for brevity) in the amount of P200,000.00 and mortgaged Lot No. 1253-B as
collateral of the xxx loan and the transaction was inscribed at the back of TCT No.
18023 as Entry No. 196268. The said loan was paid and, consequently, the
mortgage was cancelled as Entry No. 202500.
On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter
DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document,
Reconveyance and Damages, with the Regional Trial Court of Antique, Sixth Judicial
Region, Branch 11, against spouses WILFREDO and Lolita Vagilidad (hereafter
LOLITA). The plaintiffs claimed that they are the lawful owners of Lot No. 1253-B
which was sold to him by LORETO in 1986.
They likewise raised that when GABINO SR. died, defendant WILFREDO requested
GABINO
JR.
to
transfer
the
ownership
of
Lot
No.
1253-B
in
defendant WILFREDOs name for loaning purposes with the agreement that the land
will be returned when the plaintiffs need the same. They added that, pursuant to
the mentioned agreement, plaintiff GABINO JR., without the knowledge and consent
of his spouse, DOROTHY, executed the Deed of Sale dated December 7, 1989 in
favor of defendant WILFREDO receiving nothing as payment therefor. They pointed
out that after defendant WILFREDO was able to mortgage the property, plaintiffs
demanded the return of the property but the defendants refused to return the same.
The plaintiffs claimed that the same document is null and void for want of
consideration and the same does not bind the non-consenting spouse.
ISSUES:
1. W/O THE DOCTRINE OF DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION
OF THE TORRENS TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL
2. W/O THE DOCTRINE OF DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION
OF THE TORRENS TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL
HELD:
SC deny the petition.
1. The trial court itself comprehensively traced the origin of Lot No. 1253-B. It
clearly demonstrated that the subject parcel was originally part of the registered lot
of ZOILO. It also showed how the subject parcel was eventually bounded by Lot No.
1253-A on the West and by Lot No. 1253-C on the East, as the lot would be later
described in the Deed of Absolute Sale of Portion of Land.
2. In the case at bar, although the TCT of WILFREDO became indefeasible after the
lapse of one year from the date of registration, the attendance of fraud in its
issuance created an implied trust in favor of GABINO, JR. under Article 1456 of the
Civil Code. Being an implied trust, the action for reconveyance of the subject
property therefore prescribes within a period of ten years from February 15, 1990.
Thus, when respondents filed the instant case with the court a quo on September
26, 1995, it was well within the prescriptive period.