HOW TO PROVE EXPRESS TRUST
Go vs. Heirs of Buenaventura Petitioners SOLEDAD CAÑEZO, substituted by WILLIAM CAÑEZO and VICTORIANO CAÑEZO
On March 17, 1959, the late Felisa Tamio de Buenaventura owned a 533 sq.m piece of land situated in Sta. Mesa Heights,
Quezon City. Thereafter, she constructed a three-storey building thereon, called D'Lourds Building, where she resided
until her death on February 19, 1994.
Felisa supposedly sold the subject property to her daughter Bella, Delfin Sr. (bella’s husband), and Felimon Sr. (Felisa’s
baby daddy) on February 10, 1960 . In 1968, Resurrection, Bella’s sister and Felisa’s daughter, resided on the second floor
of herein building until her death in 2007.
When Felisa died on February 19, 1994, she allegedly bequeathed, in a disputed last will and testament, half of the subject
property to Resurrecion and her daughters, Rhea A. Bihis and Regina A. Bihis, (collectively, the Bihis Family). The Bihis
Family caused the annotation of an adverse claim on TCT No. RT-74910 (49869) which is registered in Petitioners’ names.
Felisa's purported will likewise declared Bella as the administrator of the subject property.
Bella was named administratrix of Felisa’s estate, and she included D’Lourds Building in the estate. The heirs of Felimon
Sr, namely Felimon Jr. and Teresita Robles, executed an Extrajudicial Settlement of the Estate of Felimon Sr. Thereafter,
the annotation of adverse claim of the Bihis Family was cancelled from the TCT of D’Lourds. On January 1997, Bella caused
the sale of D’ Lourds Building to Wilson and Peter Go. The sale was unknown to the other heirs of Felisa, who were
currently residing in the building. Wilson and Peter filed ejectment cases against the said occupants.
The Bihis family filed a complaint for reconveyance with damages against the petitioners, alleging that Bella, Delfin Sr.,
and Felimon Sr. were actually Trustees of Felisa. D’Lourds Building was allegedly transferred in their names for them to
be able to obtain a loan and mortgage from GSIS. The said allegation was supported by a letter to remind them of the
reason why the building was entrusted, made by Felisa addressed to Bella, Delfin Sr., and Felimon Sr., and that the said
letter had Bella and Delfin Sr.’s signatures on the bottom part of the said letter.
ISSUE: Whether or not D’Lourds Building was entrusted to Bella, Delfin Sr., and Felimon Sr. [YES]
HELD: Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between
parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties, while
an implied trust comes into being by operation of law.
In the present case, both the R TC and the CA found that an implied trust was established, heavily giving credence, among
others, to the September 21, 1970 letter executed by Felisa during her lifetime.
The words of Felisa in the above-quoted letter unequivocally and absolutely declared her intention of transferring the title
over the subject property to Bella, Delfin, Sr., and Felimon, Sr. in order to merely accommodate them in securing a loan
from the GSIS. She likewise stated clearly that she was retaining her ownership over the subject property and articulated
her wish to have her heirs share equally therein. Hence, while in the beginning, an implied trust was merely created
between Felisa, as trustor, and Bella, Delfin, Sr., and Felimon, Sr., as both trustees and beneficiaries, the execution of the
September 21, 1970 letter settled, once and for all, the nature of the trust established between them as an express one, their
true intention irrefutably extant thereon.
In light of the foregoing, while the Court agrees with the RTC, as affirmed by the CA, that Bella, Delfin, Sr., and Felimon,
Sr. only hold the subject property in trust for Felisa, the Court however finds that an express trust, not an implied one, was
established in this case.
CAÑEZO vs ROJAS
Respondent CONCEPCION ROJAS
On January 29, 1997, petitioner Soledad Cañezo filed a Complaint for the recovery of real property plus damages with
the MTC Biliran, against her father's second wife, respondent Concepcion Rojas.
The subject property is an unregistered land with an area of 4,169 square meters, situated at Biliran.
(Petitioner’s Claims)
Petitioner alleged that she bought the parcel of land in 1939 from Crisogono Limpiado, although the transaction was
not reduced into writing. Thereafter, she immediately took possession of the property
When she and her husband left for Mindanao in 1948, petitioner entrusted the said land to her father, Crispulo Rojas,
who took possession of, and cultivated, the property. In 1980, she found out that the respondent, her stepmother, was in
possession of the property and was cultivating the same. She also discovered that the tax declaration over the property
was already in the name of Crispulo Rojas.
(Respondent’s Claims)
The respondent asserted that it was her husband, Crispulo Rojas, who bought the property from Crisogono Limpiado,
which accounts for the tax declaration being in Crispulo's name. From then on, until his death in 1978, Crispulo possessed
and cultivated the property. Upon his death, the property was included in his estate, which was administered by a special
administrator, Bienvenido Ricafort.
MTC RULING: (Favored the Petitioner)
On July 1998,MTC rendered a Decision in favor of the petitioner (Soledad Canezo).
Court finds a preponderance of evidence in favour of plaintiff Soledad Cañezo by declaring plaintiff the true and lawful
owner of the land and ordering respondent Concepcion Rojas:
1. To vacate and surrender possession of the land to plaintiff
2. To pay plaintiff P34,000.00 actual damages, P10,000.00 for attorney's fees and litigation expenses
3. To pay the costs.
Despite the respondent's objection that the verbal sale cannot be proven without infringing the Statute of Frauds.
The MTC gave credence to the testimony of the petitioners' two witnesses attesting to the fact that Crisogono Limpiado
sold the property to the petitioner in 1939.
The MTC also found no evidence to show that Crispulo Rojas bought the property from Crisogono Limpiado in 1948. It
held that the 1948 tax declaration in Crispulo's name had little significance on respondent's claim, considering that in
1948, the "country was then rehabilitating itself from the ravages of the Second World War" and "the government was
more interested in the increase in tax collection than the observance of the niceties of law."
RTC RULING: (Favored the Respondents)
On October 1998, the RTC reversed the MTC decision on the ground that the action had already prescribed and
acquisitive prescription had set in.
The decision of the Municipal Trial Court of Naval, Biliran awarding ownership of the disputed land to the plaintiff and
further allowing recovery of damages is hereby REVERSED. The said property remains as the legitime of the defendant
Concepcion Rojas and her children.
MODIFIED RTC RULING: (Favored the Petitioners)
Acting on petitioner's motion for reconsideration, the RTC amended its original decision on December 1998. This time, it
held that the action had not yet prescribed considering that the petitioner merely entrusted the property to her father.
The ten-year prescriptive period for the recovery of a property held in trust would commence to run only from the time
the trustee repudiates the trust.
The RTC found no evidence on record showing that Crispulo Rojas ever ousted the petitioner from the property.
CA RULING: (Favored the Respondents)
She then filed a petition for review with the Court of Appeals (CA), which reversed the Amended Decision of the RTC on
September 2000, thus the amended decision dated December 1998 rendered in Civil Case is hereby REVERSED and SET
ASIDE.
The complaint filed by Soledad Cañezo before the MTC Biliran is hereby DISMISSED on grounds of laches and
prescription and for lack of merit.
The CA held that the petitioner's inaction for several years casts a serious doubt on her claim of ownership over the
parcel of land. It noted that 17 years lapsed since she discovered that respondent was in adverse possession of the
property before she instituted an action to recover the same. And during the probate proceedings, the petitioner did not
even contest the inclusion of the property in the estate of Crispulo Rojas.
The CA further held that, assuming that there was an implied trust between the petitioner and her father over the
property, her right of action to recover the same would still be barred by prescription since 49 years had already lapsed
since Crispulo adversely possessed the contested property in 1948.
ISSUE: W/N there was an express trust between the parties; and action for recovery of real property has already been
barred by prescription and laches.
SC RULING: (Favored the Respondents)
In this petition for review, the petitioner was substituted by her heirs.
Petitioner further posits that prescription and laches are unavailing because there was an express trust relationship
between the petitioner and Crispulo Rojas and his heirs, and express trusts do not prescribe. Even assuming that it was
not an express trust, there was a resulting trust which generally does not prescribe unless there is repudiation by the
trustee.
*Petitioner insists that her right of action to recover the property cannot be barred by prescription or laches even with the
respondent's uninterrupted possession of the property for 49 years because there existed between her and her father an
express trust or a resulting trust. Indeed, if no trust relations existed, the possession of the property by the respondent,
through her predecessor, which dates back to 1948, would already have given rise to acquisitive prescription in accordance
with Act No. 190 (Code of Civil Procedure). 19 Under Section 40 of Act No. 190, an action for recovery of real property, or
of an interest therein, can be brought only within ten years after the cause of action accrues. This period coincides with the
ten-year period for acquisitive prescription provided under Section 41 20 of the same Act.
A trust is the legal relationship between one person having an equitable ownership of property and another person
owning the legal title to such property, the equitable ownership of the former entitling him to the performance of
certain duties and the exercise of certain powers by the latter.
Trusts are either express or implied.
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 evincing an intention to create a trust.
Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of
intent or, independently, of the particular intention of the parties, as being super induced on the transaction by
operation of law basically by reason of equity.
An implied trust may either be a resulting trust or a constructive trust.
In express trusts and resulting trusts, a trustee cannot acquire by prescription a property entrusted to him unless he
repudiates the trust.
Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust for the recovery of
the property held in trust where
1. Trustee has performed unequivocal acts of repudiation amounting to an ouster of cestui que trust;
2. Such positive acts of repudiation have been made known to the cestui que trust
3. The evidence thereon is clear and conclusive.
As a rule, burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear
and satisfactorily show the existence of the trust and its elements.
The presence of the following elements of a trust must be proven:
1. a trustor or settlor who executes the instrument creating the trust;
2. a trustee, who is the person expressly designated to carry out the trust;
3. the trust res, consisting of duly identified and definite real properties; and
4. the cestui que trust, or beneficiaries whose identity must be clear.
Accordingly, it was incumbent upon petitioner to prove the existence of the trust relationship. Petitioner sadly failed
to discharge that burden.
The existence of express trusts concerning real property may not be established by parol evidence.
It must be proven by some writing or deed. In this case, the only evidence to support the claim that an express trust
existed between the petitioner and her father was the self-serving testimony of the petitioner. Bare allegations do not
constitute evidence adequate to support a conclusion.
In one case, the Court allowed oral testimony to prove the existence of a trust, which had been partially performed. It was
stressed therein that what is important is that there should be an intention to create a trust, thus: What is crucial is the
intention to create a trust. While oftentimes the intention is manifested by the trustor in express or explicit language, such
intention may be manifested by inference from what the trustor has said or done, from the nature of the transaction, or
from the circumstances surrounding the creation of the purported trust. However, an inference of the intention to create a
trust, made from language, conduct or circumstances, must be made with reasonable certainty. It cannot rest on vague,
uncertain or indefinite declarations.
An inference of intention to create a trust, predicated only on circumstances, can be made only where they admit of no
other interpretation. Although no particular words are required for the creation of an express trust, a clear intention to
create a trust must be shown; and the proof of fiduciary relationship must be clear and convincing.
The creation of an express trust must be manifested with reasonable certainty and cannot be inferred from loose and
vague declarations or from ambiguous circumstances susceptible of other interpretations.
What distinguishes a trust from other relations is the separation of the legal title and equitable ownership of the
property.
In a trust relation, legal title is vested in the fiduciary while equitable ownership is vested in a cestui que trust
(beneficiary).
The petitioner alleged in her complaint that the tax declaration of the land was transferred to the name of Crispulo without
her consent. Had it been her intention to create a trust and make Crispulo her trustee, she would not have made an issue
out of this because in a trust agreement, legal title is vested in the trustee. The trustee would necessarily have the right to
transfer the tax declaration in his name and to pay the taxes on the property. These acts would be treated as beneficial to
the cestui que trust and would not amount to an adverse possession.
Neither can it be deduced from the circumstances of the case that a resulting trust was created.
Resulting trust is a species of implied trust that is presumed always to have been contemplated by the parties, the
intention as to which can be found in the nature of their transaction although not expressed in a deed or instrument of
conveyance. A resulting trust is based on the equitable doctrine that it is the more valuable consideration than the legal
title that determines the equitable interest in property.
While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts
with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily be fabricated.
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. In the present case, there was no evidence of any transaction between the
petitioner and her father from which it can be inferred that a resulting trust was intended.
We hold that there was no express trust or resulting trust established between the petitioner and her father. Thus, in
the absence of a trust relation, we can only conclude that Crispulo's uninterrupted possession of the subject property
for 49 years, coupled with the performance of acts of ownership, such as payment of real estate taxes, ripened into
ownership.
While tax declarations and receipts are not conclusive evidence of ownership and do not prove title to the land,
nevertheless, when coupled with actual possession, they constitute evidence of great weight and can be the basis of a claim
of ownership through prescription.
Assuming that such a relation existed, it terminated upon Crispulo's death in 1978.
A trust terminates upon the death of the trustee where the trust is personal to the trustee in the sense that the trustor
intended no other person to administer it. If Crispulo was indeed appointed as trustee of the property, it cannot be said
that such appointment was intended to be conveyed to the respondent or any of Crispulo's other heirs. Hence, after
Crispulo's death, the respondent had no right to retain possession of the property. At such point, a constructive trust
would be created over the property by operation of law. Where one mistakenly retains property which rightfully belongs
to another, a constructive trust is the proper remedial device to correct the situation.
A constructive trust is one created not by any word or phrase, either expressly or impliedly, evincing a direct intention
to create a trust, but one which arises in order to satisfy the demands of justice.
It does not come about by agreement or intention but in the main by operation of law, construed against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good
conscience, to hold.
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. 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 relation of trustee and cestui que trust does not in fact exist, and the holding
of a constructive trust is for the trustee himself, and therefore, at all times adverse.
The principle of estoppel — by one's acts, representations, admissions, or silence when there is a need to speak out —
one, intentionally or through culpable negligence, induces another to believe certain facts to exist; and the latter rightfully
relies and acts on such belief, so as to be prejudiced if the former is permitted to deny the existence of those facts. 46 Such
a situation obtains in the instant case.
Second, the action is barred by laches. The petitioner allegedly discovered that the property was being possessed by the
respondent in 1980. However, it was only in 1997 that she filed the action to recover the property.
Laches is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to it has either abandoned or declined to assert it.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals, dated September 7,
2000, and Resolution dated May 9, 2001, are AFFIRMED.
IMPLIED TRUST
JUAN v. YAP
NOTES: Mortgaged properties in trust
DOCTRINE: Unconventional implied trusts in contracts involving the purchase of housing units by officers of tenants’
associations in breach of their obligations, the partitioning of realty contrary to the terms of a compromise agreement,
and the execution of a sales contract indicating a buyer distinct from the provider of the purchase money. In all these
cases, the formal holders of title were deemed trustees obliged to transfer title to the beneficiaries in whose favor the
trusts were deemed created and the same obligation in a mortgage contract meeting the standards for the creation of an
implied trust must also be recognized.
ARTICLES APPLICABLE: Article 1447
FACTS:
On 31 July 1995, the spouses Maximo and Dulcisima Cañeda (Cañeda spouses) mortgaged to petitioner Richard Juan
(petitioner), employee and nephew of respondent Gabriel Yap, Sr. (respondent), two parcels of land in Talisay, Cebu to
secure a loan of ₱1.68 million, payable within one year. The Contract was prepared and notarized by Atty. Antonio Solon
(Solon).
On 30 June 1998, petitioner, represented by Solon, sought the extrajudicial foreclosure of the mortgage. Although
petitioner and respondent participated in the auction sale, the properties were sold to petitioner for tendering the highest
bid of ₱2.2 million.3 No certificate of sale was issued to petitioner, however, for his failure to pay the sale’s commission.
On 15 February 1999, respondent and the Cañeda spouses executed a memorandum of agreement (MOA) where (1) the
Cañeda spouses acknowledged respondent as their "real mortgagee-creditor x x x while Richard Juan [petitioner] is
merely a trustee"5 of respondent; (2) respondent agreed to allow the Cañeda spouses to redeem the foreclosed properties
for ₱1.2 million; and (3) the Cañeda spouses and respondent agreed to initiate judicial action "either to annul or reform
the [Contract] or to compel Richard Juan to reconvey the mortgagee’s rights"6 to respondent as trustor. Three days later,
the Cañeda spouses and respondent sued petitioner in the Regional Trial Court of Cebu City (trial court) to declare
respondent as trustee of petitioner vis a vis the Contract, annul petitioner’s bid for the foreclosed properties, declare the
Contract "superseded or novated" by the MOA, and require petitioner to pay damages, attorney’s fees and the costs. The
Cañeda spouses consigned with the trial court the amount of ₱1.68 million as redemption payment.
In his Answer, petitioner insisted on his rights over the mortgaged properties. Petitioner also counterclaimed for
damages and attorney’s fees and the turn-over of the owner’s copy of the titles for the mortgaged properties.
RTC RULING: (in favor of the petitioner)
The trial court ruled against respondent and his co-plaintiffs and granted reliefs to petitioner by declaring petitioner the
"true and real" mortgagee, ordering respondent to pay moral damages and attorney’s fees, and requiring respondent to
deliver the titles in question to petitioner. In arriving at its ruling, the trial court gave primacy to the terms of the
Contract, rejecting respondent’s theory in light of his failure to assert beneficial interest over the mortgaged properties
for nearly four years.
CA’s RULING: (in favor of the respondent)
The CA granted the petition, set aside the trial court’s ruling, declared respondent the Contract’s mortgagee, directed the
trial court to release the redemption payment to respondent, and ordered petitioner to pay damages and attorney’s fees.
The CA found the following circumstances crucial in its concurrence with respondent’s theory, notwithstanding the
terms of the Contract:
(1) Solon testified that he drew up the Contract naming petitioner as mortgagee upon instructions of respondent;
(2) Dulcisima Cañeda acknowledged respondent as the creditor from whom she and her husband obtained the loan the
Contract secured; and
(3) respondent shouldered the payment of the foreclosure expenses.9 Instead, however, of annulling the Contract, the
CA held that reformation was the proper remedy, with the MOA "serv[ing] as the correction done by the parties to
reveal their true intent.”
ISSUE:
(1) W/N an implied trust arose between petitioner and respondent, binding petitioner to hold the beneficial title
over the mortgaged properties in trust for respondent [YES]
(2) W/N respondent is entitled to collect damages [YES]
RULING:
1. YES. An implied trust arising from mortgage contracts is not among the trust relationships the Civil Code
enumerates. The Code itself provides, however, that such listing "does not exclude others established by the
general law on trust x x x." Under the general principles on trust, equity converts the holder of property right
as trustee for the benefit of another if the circumstances of its acquisition makes the holder ineligible "in x x x
good conscience [to] hold and enjoy [it]." As implied trusts are remedies against unjust enrichment, the "only
problem of great importance in the field of constructive trusts is whether in the numerous and varying factual
situations presented x x x there is a wrongful holding of property and hence, a threatened unjust enrichment
of the defendant.”
Applying these principles, this Court recognized unconventional implied trusts in contracts involving the purchase of
housing units by officers of tenants’ associations in breach of their obligations, the partitioning of realty contrary to the
terms of a compromise agreement, and the execution of a sales contract indicating a buyer distinct from the provider of
the purchase money. In all these cases, the formal holders of title were deemed trustees obliged to transfer title to the
beneficiaries in whose favor the trusts were deemed created. We see no reason to bar the recognition of the same
obligation in a mortgage contract meeting the standards for the creation of an implied trust.
Having established such and after a review of the records, we find no reason to reverse the ruling of the CA finding
respondent’s case convincing.
In the first place, the Cañeda spouses acknowledged respondent as the lender from whom they borrowed the funds
secured by the Contract. They did so in the MOA and Dulcisima Cañeda reiterated the concession on the stand. True
enough, when the Cañeda spouses sought an extension of time within which to settle their loan, they directed their
request not to petitioner but to respondent who granted the extension. Petitioner, therefore, was a stranger to the loan
agreement, the principal obligation the Contract merely secured.
Secondly, Solon, the notary public who drew up and notarized the Contract, testified that he placed petitioner’s name in
the Contract as the mortgagor upon the instruction of respondent. Respondent himself explained that he found this
arrangement convenient because at the time of the Contract’s execution, he was mostly abroad and could not personally
attend to his businesses in the country. Respondent disclosed that while away, he trusted petitioner, his nephew by
affinity and paid employee, to "take care of everything." This arrangement mirrors that in Tigno v. Court of Appeals
where the notary public who drew up a sales contract testified that he placed the name of another person in the deed of
sale as the vendee upon instructions of the actual buyer, the source of the purchase money, who had to go abroad to
attend to pressing concerns. In settling the competing claims between the nominal buyer and the financier in Tigno, we
gave credence to the parol evidence of the latter and found the former liable to hold the purchased property in trust of
the actual buyer under an implied trust. No reason has been proffered why we should arrive at a different conclusion
here.
Thirdly, it was respondent, not petitioner, who shouldered the payment of the foreclosure expenses. Petitioner’s failure
to explain this oddity, coupled with the fact that no certificate of sale was issued to him (despite tendering the highest
bid) for his non-payment of the commission, undercuts his posturing as the real mortgagor.
Clearly then, petitioner holds title over the mortgaged properties only because respondent allowed him to do so. The
demands of equity and justice mandate the creation of an implied trust between the two, barring petitioner from
asserting proprietary claims antagonistic to his duties to hold the mortgaged properties in trust for respondent. To arrive
at a contrary ruling is to tolerate unjust enrichment, the very evil the fiction of implied trust was devised to remedy.
2. YES. Nor do we find reversible error in the CA’s award of moral and exemplary damages to respondent.
Respondent substantiated his claim for the former and the interest of deterring breaches of trusts justifies latter
HEIRS OF NARVASA SR vs. IMBORNAL
RECIT READY FACTS:
Ciriaco Abrio applied for and was granted a Homestead Patent over a 31,367 sqm riparian land (motherland) with his
heirs occupying the northern part and herein respondents the southern part. Petitioners’ predecessors, relatives of Ciriaco’s
wife, however, claim rights over the whole motherland alleging that Ciriaco had urged his wife’s sisters to sell their
Sabangan property to fund his then-pending patent and that he would hold the motherland in trust for them. Respondent
contend that petitioner’s, heirs of the original claimants, lacked cause of action and in any case were barred by prescription,
also that the properties sought to be reconveyed and partitioned are not the properties of their predecessors-in-interest but
covered by Torrens title free from encumbrance and declared for tax purposes in their name.
IMPORTANT RULING RELATED TO THE PROVISION/DOCTRINE:
ACTION FOR RECONVEYANCE: action that seeks to transfer property, wrongfully registered by another, to its rightful
and legal owner; a remedy granted only to the owner of the property alleged to be erroneously titled
ARTICLE 1456: person acquiring property thru fraud becomes, by operation of law, A TRUSTEE OF AN IMPLIED TRUST
for the benefit of the real owner of the property
1. Petitioners are the HEIRS and successors-in-interest of Francisco Narvasa, Sr., Pedro Ferrer, and Petra Imbornal
(FRANCISCO ET AL) a.k.a. relatives of wife of CIRIACO
2. RESPONDENTS: Emiliana, Victoriano, Felipe, Mateo, Raymundo, Maria, and Eduardo (all Imbornal) and
descendants of Pablo (no surname but probs Imbornal lol)
3. Basilia Imbornal, during her lifetime, owned a parcel of land situated at Sabangan, Brgy. Nibaliw West, San
Fabian, Pangasinan, with an area of 4,144 sqm more or less (a.k.a. SABANGAN PROPERTY)
a. She conveyed said property to her 3 daughters (IMBORNAL SISTERS): Balbina, Alejadra, and
CATALINA sometime in 1920
4. Catalina’s husband, CIRIACO ABRIO, applied for and was granted a homestead patent over a 31,367 sqm
riparian land (a.k.a. MOTHERLAND) adjacent to the Cayanga River.
a. Homestead Patent # 24991
b. Original Certificate of Title (OCT) # 1462 (issued in his name Dec 5, 1933)
5. OCT # 1462 was cancelled and Transfer Certificate of Title (TCT) # 101495 was issued in the name of Ciriaco’s
heirs (9)
a. CIRIACO HEIRS: Margarita Mejia; Rodrigo Abrio (married to Rosita Corpuz); Antonio Abrio
(married to Crisenta Corpuz); Remedios Abrio (married to Leopoldo Corpuz); Pepito Abrio;
Dominador Abrio; Francisca Abrio; Violeta Abrio; and Perla Abrio
b. CIRIACO + HEIRS: occupied northern portion of Motherland; RESPONDENTS: occupied the
southern portion.
6. 1ST ACCRETION (1949): approx. 59,772 sqm, adjoined the southern portion
a. OCT # P-318 was issued in the name of respondent Victoriano (married to Esperanza Narvante),
covering the 1st accretion
7. 2 ACCRETION (1971): approx. 32,307 sqm, adjoined 1ST ACCRETION
ND
a. OCT # 21481 was issued in the names of respondents covering 2nd accretion
8. FRANCISCO ET AL, as children of Alejandra and Balbina (remaining Imbornal sissez) claimed rights over the
entire Motherland on Feb 27, 1984 by virtue of an Amended Complaint for reconveyance, partition, and/or
damages against respondents
a. They anchored their claim on the allegation that Ciriaco, with the help of his wife Catalina, urged
Balbina and Alejandra to sell the SABANGAN PROPERTY and that Ciriaco used the proceeds to fund
his then-pending homestead patent application over the Motherland.
i. Claimed that Ciriaco agreed that once patent was approved, he would be deemed to be
holding the Motherland (including accretions) in trust for the Imbornal sisters.
b. But thru deceit, fraud, falsehood, and misrepresentation, respondent Victoriano (re 1 st accretion) and
the respondents collectively (re 2nd accretion) had illegally registered the said accretions in their
names, notwithstanding fact that they were not the riparian owners
c. Francisco et al explained that they did not assert their inheritance claims over the Motherland and the
2 accretions because they respected respondents’ rights, until they discovered in 1983 that they had
repudiated their (Francisco et al’s) shares thereon.
9. Respondents’ Amended Answer contended that
a. Amended Complaint stated no cause of action against them, having failed to clearly and precisely
describe disputed properties and specify transgressions that they have allegedly committed
b. Action was barred by prescription
c. Properties sought to be reconveyed and partitioned are not the properties of their predecessors-in-
interest but, instead, covered by Torrens title, free from encumbrance and declared for tax purposes
in their name
10. NOTE: during trial established that Motherland eventually sold by Heirs of Ciriaco to one Gregorio de Vera and
that heirs + de Vera were not impleaded as parties in case.
11. RTC: in favor of Francisco et al; that an implied trust existed between Ciriaco and Imbornal sisters re
Motherland.
a. Sabangan property, inherited by Imbornal sisters, was sold in order to help Ciriaco raise funds for his
then-pending patent application. In exchange, Ciriaco agreed that he shall hold the Motherland in
trust for them once his homestead patent application had been approved. Ciriaco was only able to
acquire the Motherland thru proceedings from sale of Sabangan property. Imbornal sisters and,
consequently, Francisco et al (as children of Alejandra and Balbina) are netitled to their proportionate
shares over Motherland
b. Also ruled that owner of Motherland is likewise owner of accretion. Since Imbornal sisters have
become proportionate owners by virtue of implied trust, Imbornal sisters + their heirs also entitled to
ownership of said accretion despite fact that respondent were able to register them in their name.
12. CA: Ciriaco heirs are exclusive owners of the Motherland; respondent Victoriano heirs as exclusive owners of
1st acc; and respondents collectively as exclusive owners of 2nd
a. Homestead patent was not an inheritance by Catalina. It was awarded by the gov’t to Ciriaco after
having fully satisfied the stringent requirements set forth under Commonwealth Act No. 141 as
amended and his title thereto had already become indefeasible.
i. Since entire Motherland in Ciriaco’s name, descendants should be regarded as the
ABSOLUTE OWNERS thereof
b. Re accretion: respondents need not be owners of Motherland to acquire them by acquisitive
prescription (petitioners took no action to protect interests)
i. Considering that accretions are not automatically registered in the name of the riparian
owner and are, therefore, subject to acquisitive prescription by 3rd persons, any occupant
may apply for their registration. In this case, respondents acquired title to accretions by
prescription, considering that they have been in continuous possession and enjoyment of
1st accretion in concept of an owner since 1949 and 2nd accretion since 1971.
ii. Plus given that they had caused issuance of OCT # 21481 in their names, they have also
become the absolute owners thereof
ISSUES:
1. W/N reconveyance action already prescribed [YES for MOTHERLAND & 1ST ACC; NO for 2ND ACC]
2. W/N there is an implied trust between Imbornal sisters and Ciriaco [NO]
RULING:
1. ACTION FOR RECONVEYANCE BASED ON IMPLIED TRUST PRESCRIBES IN 10 YRS FROM DATE OF
REGISTRATION OF DEED OR DATE OF ISSUANCE OF CERTIFICATE OF TITLE OVER PROPERTY, IF
PLAINTIFF NOT IN POSSESSION (imprescriptible if plaintiff in possession of property) (Lasquite v.
Victory Hills, Inc.)
a. ACTION FOR RECONVEYANCE: action that seeks to transfer property, wrongfully registered by
another, to its rightful and legal owner; a remedy granted only to the owner of the property alleged
to be erroneously titled
i. When property is registered in another’s name, an implied or constructive trust is created
by law in favor of the true owner.
ii. Art 1456 CC: person acquiring property thru fraud becomes, by operation of law, A
TRUSTEE OF AN IMPLIED TRUST for the benefit of the real owner of the property
b. Francisco et al had 10 yrs from registration of respective titles covering disputed properties within
which to file their action for reconveyance, taking into account the fact that they were never in
possession of the said properties
i. MOTHERLAND (OCT # 1462): issued Dec 5, 1933 in name of Ciriaco (prescribes Dec 5,
1943)
ii. 1ST ACCRETION (OCT # P-318): issued Aug 15, 1952 in name of respondent Victoriano
(prescribes Aug 15, 1962)
iii. 2ND ACCRETION (OCT # 21481): issued Noc. 10, 1978 in the name of the respondents
(prescribes Nov 10, 1988)
c. AMENDED COMPLAINT COVERING ALL 3 DISPUTED PROPERTIES WAS FILED ONLY ON FEB
27, 1984
 i. Petitioners only have cause of action pertaining to 2ND ACC
2. HIGHLY IMPROBABLE THAT MOTHERLAND ACQUIRED AND REGISTERED BY MISTAKE OR
FRAUD AS PER ARTICLE 1456, ESPECIALLY CONSIDERING LACK OF EVIDENCE SHOWING THAT
IMBORNAL SISTERS ENTERED INTO POSSESSION OF MOTHERLAND, OR PORTION THEREOF, OR
ASSERTED ANY RIGHT OVER SAME AT ANY POINT.
a. Implied trust arises, not from any presumed intention of the parties, but by operation of law in order
to satisfy the demands of justice and equity and to protect against unfair dealing or downright fraud
i. Burden of proving existence of trust is on the party asserting its existence, and such proof
must be clear and satisfactorily show existence of trust and its elements
A. Altho may be proven by oral evidence, must still be trustworthy and received by
courts with extreme caution, and should not rest on loose, equivocal, or indefinite
declarations.
b. Cannot be said, merely on basis of oral evidence from Francisco et al, that Motherland had been either
mistakenly or fraudulently registered in favor of Ciriaco nor can it be said that he was merely a trustee
of an implied trust holding the Motherland for the benefit of Imbornal sisters or their heirs.
i. Homestead patent award requires: actual possession, cultivation, and improvement of the
homestead.
ii. Must be presumed that Ciriaco underwent the rigid process and duly satisfied the strict
conditions necessary for grant of patent app
iii. Proceedings for land registration that led to issuance of patent and OCT in Ciriaco’s name
are presumptively regular and proper and which had not been overcome by evidence
presented
c. Francisco et al likewise failed to prove and establish their claims of ownership
i. Oral testimony as to a certain fact, depending as it does exclusively on human memory is
not as reliable as written or documentary evidence (especially since “agreement” was
decades ago in 1920s)
3. CONCLUSION: WHETHER THRU ACCRETION OR, INDEPENDENTLY, THRU PRESCRIPTION,
FRACISCO ET AL, AND/OR PETITIONERS’ CLAIM OF TITLE OVER ACCRETIONS HAD NOT BEEN
SUBSTANTIATED, AND, AS A RESULT, SAID PROPERTIES CAN’T BE RECONVEYED IN THEIR
FAVOR
a. SINCE FAILED TO PROVE OWNERSHIP RIGHTS OVER MOTHERLAND, CAUSE OF ACTION
WITH 1ST ACCRETION AND 2ND ACCRETION MUST LIKEWISE FAIL
i. Art 457 CC: “to the owners of lands adjoining the banks of rivers belong the accretion which
they gradually receive from the effects of the current of the waters.”
A. Alluvial deposits along the banks of a creek or a river do not form part of the
public domain as the alluvial property automatically belongs to the owner of the
estate to which it may have been added. The only restriction provided by law is
that owner of adjoining property must register same under the Torrens system;
otherwise, alluvial property may be subject to acquisition through prescription
by third persons. (Office of the City Mayor of Paranaque City v. Ebio)
b. Francisco et al and, now, their heirs (herein petitioners), are NOT the riparian owners of the
Motherland to which the 1ST ACC had attached, nor to 2ND ACC which attached to the 1ST ACC, hence,
cannot assert ownership over the accretions. Neither were they able to show that they acquired these
properties through prescription as it was not established that they were in possession of any of them.
i. Respondents, on the other hand, were armed with a certificate of title I their names covering
both accretions coupled with their possession thereof, both of which give rise to the superior
credibility of their own claim.
FROM FOOTNOTES:
HOMESTEADS (Sec 12 Commonwealth Act 141): any citizen of the Philippines over the age of 18 yrs, or the head of a
family, who does not own more than 24 hectares of land or has not had the benefit of any gratuitous allotment of more
than 24 hectares of land since occupation of PH by the US, may enter a homestead of not exceeding 24 hectares of
agricultural land of the public domain.
BENITA SALAO et al vs. JUAN SALAO et al
BENITA SALAO, assisted by her husband, GREGORIO MARCELO; ALMARIO ALCURIZA, ARTURO ALCURIZA,
OSCAR ALCURIZA and ANITA ALCURIZA, the latter two being minors are represented by guardian ad litem, ARTURO
ALCURIZA, plaintiffs-appellants,
vs.
JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the Intestate of JUAN S. SALAO; now
MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO, MARIA SALAO VDA. DE SANTOS, LUCIANA P. SALAO,
ISABEL SALAO DE SANTOS, and PABLO P. SALAO, as successors-in-interest of the late JUAN S. SALAO, together with
PABLO P. SALAO, Administrator, defendants-appellants.
Eusebio V. Navarro for plaintiffs-appellants.
Nicolas Belmonte & Benjamin T. de Peralta for defendants-appellants.
1. The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot four children:
Patricio, Alejandra, Juan (Banli) and Ambrosia.
2. Manuel Salao died in 1885. No documentary evidence as to what properties formed part of his estate.
3. Patricio (eldest son) died in 1886 & survived by Valentin Salao (his only child).
4. Valentina died in 1914, her estate was administered by her daughter Ambrosia.
5. It was extrajudicially partitioned in a deed (December 29, 1918) but notarized on May 22, 1919 -> signed by her
four legal heirs: her 3 remaining children & Valentin (grandson; succeeded Patricio).
6. To each of the legal heirs was a distributive share of Php 8,135.25.
7. Valentin was given an aggregate appraised value of Php 13,501 (exceeded distributive share, composed of
biggest fishpond 50T+ sqm, smaller fishpond area 6T+ sqm & Riceland 9T+ sqm) -> in the deed, he was directed
to pay his co-hrs Php 5T+ (to avoid fragmentation of land; beneficial to Valentin)
8. The documentary evidence proves that in 1911/prior to the death of Valentina Ignacio -> her 2 children (Juan Y.
Salao, Sr. & Ambrosia Salao) secured a Torrens title (OCT No. 185) in their names at ROD Pampanga.
9. The property in question is the 47-ha. fishpond located at Sitio Calunuran, Lubao, Pampanga, wherein Benita
Salao-Marcelo (daughter of Valentin Salao) claimed 1/3 interest on the said fishpond.
10. Plaintiff’s theory (no documentary evidence):
a. Juan Y. Salao, Sr and Ambrosia Salao had engaged in the fishpond business -> where they obtained
the capital was not shown in any documentary evidence
b. Valentin Salao and Alejandra Salao were included in that joint venture
c. the funds used were the earnings of the properties supposedly inherited from Manuel Salao,
d. those earnings were used in the acquisition of the Calunuran fishpond.
e. Defendant’s contention: the Calunuran fishpond consisted of lands purchased by Juan Salao, Jr &
Ambrosia Salao from 1905 – 1908 (w/ exhibits) -> disputed by plaintiffs.
11. Undisputed that after securing title (1911), Juan & Ambrosia exercised dominical rights over it -> exclusion of
Valentin (nephew).
12. Ambrosia sold the Calunuran fishpond under pacto de retro to Vicente Villongco -> confirmed in the deed of
sale: they were duenos proindivisos of the said pisqueria
13. Villongco conveyed the same fishpond -> Ambrosia by lease for an anual canon of Php 128
14. The same fishpond was redeemed by Ambrosia & Juan and then sold it again (pacto de retro) to Eligio Naval
but was later redeemed and reconveyed to the vendors
 15. 1930 survey -> computation sheets of BOL:
a. Calunuran fishpond – 479,205 sqm claimed by Juan & Ambrosia
b. Pinanganacan fishpond – 975,952 sqm acquired by Juan & Ambrosia
16. Undisputed: Ambrosia bought for 4T from the heirs of Engracio Santiago a parcel of swampland planted to
bacawan & nipa-
a. area: 96+ has at Lewa, Pinanganacan, Lubao, Pampanga -> OCT was issued in the name of Juan Salao
& Ambrosia Salao
17. This Pinanganacan/Lewa fishpond became Cad. Lot #544 of Hermosa Cad -> adjoining Calunuran fishpond
18. Juan Salao Sr died (80yo) in 1931 -> Valentin (nephew; 60yo) died in 1933
19. Intestate estate of Valentin (2 fishponds inherited in 1918 from grandmother Valentina Ignacio) was partitioned
extrajudicially 1934 -> b/n 2 daughters: Benita & Victorina
a. No mention of Valentin’s 1/3 interest in the Calunuran & Lewa fishponds (registered in the names of
his aunt & uncle Ambrosia & Juan Sr in 1911 & 1917 respectively)
20. In 1940, Ambrosia donated to Benita (grandniece) 3 lots at Dampalit & the latter signed the Deed of Donation
w/o asking for reconveyance of the alleged share of his father Valentin in the Calunuran fishpond alleged held
in trust by Ambrosia because of the alleged joint venture.
21. Benita made no demand until Ambrosia died -> Benita filed an ACTION FOR RECONVEYANCE OF THE
CALUNURAN FISHPOND -> allegedly held in trust & become sole property of Juan Salao y Santiago (Juani)
a. In 1944 (during Japanese occupation) & 1 yr BEFORE Ambrosia’s death due to senility -> she donated
her ½ proindiviso share in the 2 fishponds in question to Juan Salao Jr (Juani; nephew) who owned
the other half because of his father’s share (Juan Sr (Banli))
b. Donation includes other real properties of Ambrosia; she reserved for herself the usufruct over the
said properties during her lifetime
c. Deed of Donation registered only in 1950
22. In 1951, lawyer of Benita Salao & children of Victorina Salao in a letter informed Juan S. Salao, Jr. that his clients
had a 1/3 share in the 2 fishponds and that when Juan took possession thereof in 1945, in which he refused to
give Benita and Victorina’s children their 1/3 share of the net fruits which allegedly amounted to P200,000.
However, no mention on the deeds as to the share of Valentin and Alejandra.
23. Juan S. Salao, Jr. in his answer categorically stated that Valentin Salao did not have any interest in the two
fishponds and that the sole owners thereof his father Banli and his aunt Ambrosia, as shown in the Torrens titles
issued in 1911 and 1917, and that he was the donee of Ambrosia’s 1/2 share.
24. Benita Salao & her nephews and niece asked for the ANNULMENT OF THE DONATION to Juan S. Salao, Jr.
and for the RECONVEYANCE to them of the Calunuran fishpond as Valentin Salao’s supposed 1/3 share in the
145 hectares of fishpond registered in the names of Juan Y. Salao, Sr. & Ambrosia Salao.
25. Juan Jr invoked indefeasibility of the Torrens title (Ambrosia & Juan Sr), Statute of Frauds, prescription and
laches and damages.
26. Juan Jr (71yo) died in 1958 and succeeded by Mercedes Pascual & 6 children and administrator of his estate.
27. In the intestate proceedings of the estate of Juan Jr, the 2 fishponds were adjudicated in equal shares to his 7
legal heirs.
RTC:
 Dismissed the amended complaint & counter-claim
 Found no community of property among Juan Sr, Ambrosia & Valentin when Calunuran & Lewa fishponds
were acquired
o A co-ownership over real properties of Valentina Ignacio existed among her heir after her death in
1914 & it was administered by Ambrosia & this subsisted up to 1918 -> her estate was partitioned
among her 3 children & grandson Valentin
o Surmised that the co-ownership (1914 to 1918) misled the plaintiffs & their witnesses & caused them
to believe erroneously that there was a co-ownership in 1905/thereabouts
o Speculated that if Valentin had a hand in the conversion into fishponds of Calunuran & Lewa lands,
he must have done so on a salary/profit-sharing basis
o Conjured that Valentin’s children & grandchildren were given by Ambrosia a portion of the earnings
of the fishponds as a reward for his services/because of Ambrosia’s affection for her grandnieces
o Rationalized that Valentin’s omission during his lifetime to assail the Torrens titles of Juan &
Ambrosia signified that “he was not a co-owner” of the fishponds
o Did not give credence to the testimonies of plaintiff’s witnesses bec. their memories could not be
trusted & bec. no strong documentary evidence supported the declarations -> the parties involved in
the alleged trust were already dead
o Donation was validly executed -> if void =>Juan Jr would be the sole legal heir of the Ambrosia &
would inherit the properties donated
o Both parties appealed
Plaintiffs -> their action for reconveyance was dismissed
Defendants -> appealed bec. their counterclaim for damages was dismissed
CA: elevated the case to SC bec. the amounts involved exceed Php200T
ISSUES:
1. W/N the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia Salao.
2. W/N plaintiffs’ action for reconveyance had already prescribed.
HELD:
1. There was no resulting trust in this case because there never was any intention on the part of Juan Y. Salao, Sr.,
Ambrosia Salao and Valentin Salao to create any trust. There was no constructive trust because the registration of the two
fishponds in the names of Juan and Ambrosia was not vitiated by fraud or mistake. This is not a case where to satisfy the
demands of justice it is necessary to consider the Calunuran fishpond ” being held in trust by the heirs of Juan Y. Salao,
Sr. for the heirs of Valentin Salao.
Ratio:
The plaintiffs utterly failed to prove by clear, satisfactory and convincing evidence. It cannot rest on vague and uncertain
evidence or on loose, equivocal or indefinite declarations.
Trust and trustee; establishment of trust by parol evidence; certainty of proof. — Where a trust is to be established by oral
proof, the testimony supporting it must be sufficiently strong to prove the right of the alleged beneficiary with as much
certainty as if a document proving the trust were shown. A trust cannot be established, contrary to the recitals of a Torrens
title, upon vague and inconclusive proof.
Trusts; evidence needed to establish trust on parol testimony. — In order to establish a trust in real property by parol
evidence, the proof should be as fully convincing as if the act giving rise to the trust obligation were proven by an authentic
document. Such a trust cannot be established upon testimony consisting in large part of insecure surmises based on ancient
hearsay. (Syllabus, Santa Juana vs. Del Rosario 50 Phil. 110).
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.
On the other hand, a Torrens title is generally a conclusive evidence of the ownership of the land referred to therein (Sec.
47, Act 496). A strong presumption exists that Torrens titles were regularly issued and that they are valid. In order to
maintain an action for reconveyance, proof as to the fiduciary relation of the parties must be clear and convincing.

The real purpose of the Torrens system is, to quiet title to land. “Once a title is registered, the owner may rest secure,
without the necessity of waiting in the portals of the court, or sitting in the mirador de su casa, to avoid the possibility of
losing his land”.
2. Reconveyance had already prescribed. Plaintiffs’ action is clearly barred by prescription or laches. Ratio:
Under Act No. 190, whose statute of limitation would apply if there were an implied trust in this case, the longest period
of extinctive prescription was only ten year.
The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its reconveyance was made by the
plaintiffs in 1951. Their action was filed in 1952 or after the lapse of more than forty years from the date of registration.
The plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if they had any rights at all. Vigilanti
prospiciunt jura or the law protects him who is watchful of his rights (92 C.J.S. 1011, citing Esguerra vs. Tecson, 21 Phil.
518, 521).
“Undue delay in the enforcement of a right is strongly persuasive of a lack of merit in the claim, since it is human nature
for a person to assert his rights most strongly when they are threatened or invaded”. “Laches or unreasonable delay on
the part of a plaintiff in seeking to enforce a right is not only persuasive of a want of merit but may, according to the
circumstances, be destructive of the right itself.”
Having reached the conclusion that the plaintiffs are not entitled to the reconveyance of the Calunuran fishpond, it is no
longer needed to pass upon the validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her one-half share
in the two fishponds The plaintiffs have no right and personality to assil that donation.
Even if the donation were declared void, the plaintiffs would not have any successional rights to Ambrosia’s share. The
sole legal heir of Ambrosia was her nephew, Juan, Jr., her nearest relative within the third degree. Valentin Salao, if living
in 1945 when Ambrosia died, would have been also her legal heir, together with his first cousin, Juan, Jr. (Juani). Benita
Salao, the daughter of Valentin, could not represent him in the succession to the estate of Ambrosia since in the collateral
line, representation takes place only in favor of the children of brothers or sisters whether they be of the full or half blood
is (Art 972, Civil Code). The nephew excludes a grandniece like Benita Salao or great-gandnephews like the plaintiffs
Alcuriza (Pavia vs. Iturralde 5 Phil. 176).
PNB vs. CA
IMPORTANT DOCTRINES
While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable delay.
a constructive "trust" is as much a misnomer as a "quasi-contract," so far removed are they from trusts and contracts proper,
respectively. In the case of a constructive trust, as in the case of quasi-contract, a relationship is "forced" by operation of
law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment, thus giving rise
to certain obligations not within the contemplation of the parties.
FACTS:
1. B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping
companies.
a. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star
Kist Foods(StarKist), Inc., USA.
b. As part of their agreement, Mata makes advances for the crew's medical expenses, National Seaman's
Board fees, Seaman's Welfare fund, and standby fees and for the crew's basic personal needs.
c. Subsequently, Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses
Mata by sending a telegraphic transfer through banks for credit to the latter's account.
2. On February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement
with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB
a. PNB was to pay the amount of US$14,000 to Mata by crediting the their account with the Insular Bank
of Asia and America (IBAA), per order of Star Kist.
i. (STAR KIST > SEPAC > PNB > IBAA > MATA) Think of it as a fund transfer.
b. PNB's noticed an error and sent a message to SEPAC Bank. The latter replied with instructions that
the amount of US$14,000 should only be for US$1,400.
c. Fourteen days after the initial payment, PNB effected another payment through Cashier's Check No.
270271 in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of
reimbursement from Star Kist, private respondent's foreign principal. (This was the whole issue
because PNB made a second payment)
3. Six years later, PNB requested Mata for refund of US$14,000 after it discovered its error in effecting the second
payment.
4. PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a constructive
trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to
respondent Mata
5. The RTC rendered judgment dismissing the complaint and found:
a. The instant case falls squarely under Article 2154 on solutio indebiti and not under Article 1456 on
constructive trust.
b. The lower court also ruled out constructive trust, applying strictly the technical definition of a trust
as "a right of property, real or personal, held by one party for the benefit of another;
6. CA affirmed the ruling of the RTC.
a. under Article 2154 on solutio indebiti, the person who makes the payment is the one who commits the
mistake vis-a-vis the recipient who is unaware of such a mistake.
b. Mata is duty bound to return the amount paid by mistake. But the appellate court concluded that
PNB’s demand for the return of US$14,000 cannot prosper because its cause of action had already
prescribed.
i. The prescription period for solutio indebiti is six years
ii. The prescription period for actions arising from a trust is ten years
iii. The complaint was filed almost seven years after the mistaken payment.
ISSUES: W/N the amount of US$14000 should be returned? [NO]
RULING:
1. OBITER DICTA ON DECIDING WHETHER OR NOT THE CASE FALLS UNDER SOLUTIO INDEBITI OR
TRUSTS (THE IMPORTANT PART OF THE CASE)
a. The Supreme Court did not make a determination whether the case falls under solution indebiti or
trusts.
b. It ruled presuming that a case is of a trust because this was the only action available to PNB since they
were already barred by prescription
c. The court made a distinction between solutio indebiti and Implied Trusts
i. The concept of quasi contracts came before trusts.
 ii. quasi-contractual obligations (solutio indebiti) give rise to a personal liability ordinarily
enforceable by an action at law, while constructive trusts are enforceable by a proceeding
in equity to compel the defendant to surrender specific property. To be sure, the distinction
is more procedural than substantive.
iii. "trusts" is as much a misnomer as a "quasi-contract," so far removed are they from trusts
and contracts proper, respectively. In the case of a constructive trust, as in the case of quasi-
contract, a relationship is "forced" by operation of law upon the parties, not because of any
intention on their part but in order to prevent unjust enrichment, thus giving rise to certain
obligations not within the contemplation of the parties
2. PNB may not claim the amount of US$14000 for laches.
a. PNB’s claim cannot prosper since it is already barred by laches. It is a well-settled rule now that an
action to enforce an implied trust, whether resulting or constructive, may be barred not only by
prescription but also by laches.
b. PNB tells the Supreme Court the reason for the delay was because of the volume of the international
transactions it handles, but the SC does not accept the reason.
RESULTING TRUST
TY vs. TY
IMPORTANT DOCTRINES
The ruling in Abellana v. Ponce, G.R. No. 160488, September 3, 2004, is not applicable, as the property in the case was
placed in the name of a niece, not a child, so the presumption of donation under Art. 1448 of the Civil Code did not arise;
and;
The judgment of the Court is complete because the matter of exactly how much to collate into the estate of petitioner in
the event of his death must necessarily be part of the collection proceedings in that event and is not proper to resolve
herein.
FACTS:
1.) Sylvia S. Ty, in her capacity as Administratrix of the Intestate Estate of Alexander Ty who died by reason of cancer at
the age if 34 on May 19, 1988. He was survived by his wife and daughter Katrina.
2.) Few months after his death, Sylvia filed a petition for the settlement of Alexander’s intestate estate before RTC Quezon
City.
Meanwhile, on July 20, 1989, upon petition of Sylvia Ty, as Administratrix, for settlement and distribution of the intestate
estate of Alexander in the County of Los Angeles, the Superior Court of California ordered the distribution of the
Hollywood condominium unit, the Montebello lot, and the 1986 Toyota pick-up truck to Sylvia Ty and Krizia Katrina Ty.
She further requests the court to sell or mortgage properties in order to pay the estate tax amounting to P4,714,560.02
assessed by the BIR.
EDSA Property a parcel of land with an area of 1,728 square meters situated in EDSA, Greenhills, Mandaluyong, Metro
Manila, registered in the name of Alexander Ty when he was still single, and covered by TCT No. 0006585;
Meridien Condominium A residential condominium with an area of 167.5 square meters situated in 29 Annapolis Street,
Greenhills, Mandaluyong, Metro Manila, registered in the name of the spouses Alexander Ty and Sylvia Ty, and covered
by Condominium Certificate of Title No. 3395;
Wack-Wack Property A residential land with an area of 1,584 square meters situated in Notre Dame, Wack-Wack,
Mandaluyong, Metro Manila, registered in the name of the spouses Alexander Ty and Sylvia Ty, and covered by TCT No.
62670.
3.) On the other hand, Alejandro Ty opposed the same and filed for recovery of the property with prayer for preliminary
injunction and/or temporary restraining order. Plaintiff Alejandro claims that he owns the EDSA, Wack Wack and
Meridien condo unit because he paid for them. The property was supposedly registered in trust for Alexander’s brothers
and sisters in case plaintiff dies. Plaintiff also claimed that Alex had no financial capacity to purchase the disputed
property, as the latter was only dependent on the former.
4.) Sylvia contended that Alexander had purchased the property with his money. Alexander was financially capable of
purchasing it because he had been managing the family corporations since he was 18 years old and was also engage in
other profitable businesses.
5.) The RTC granted the application for preliminary injunction and decides in favor of plaintiff regarding the recovery of
the property. CA reversed the RTC stating that the implication created by law under Art. 1448 does not apply if the
property was in the name of the purchaser’s child. They agreed that plaintiff partly paid for the EDSA property. Plaintiff
appealed.
ISSUES: Whether there was an implied trust under Art. 1448 of the Civil Code?
RULING:
No, there was no implied trust created in relation to the EDSA property. If the person to whom the title is conveyed is the
child of the one paying the price of the sale, no trust is implied by law under Art. 1448, the so-called purchase money
resulting trust. The said article provides an exception: “if the person to whom the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale, NO TRUST is IMPLIED by LAW, it being disputable presumed that
there is a gift in favor of the child.” The Court also noted that plaintiff failed to prove that he did not intend a donation.
Meridien Condo and Wack Wack property, the court said that plaintiff failed to prove that purchase money came from
him. They also said that Alexander was capable of purchasing the property as he had been working for nine years, had a
car care business, and was actively engaged in the business dealings of several family corporations from which he received
emoluments and other benefits. Hence, no implied trust created because there was no proof that plaintiff had paid for said
properties.
PNB vs. AZNAR
PETITIONER: PHILIPPINE NATIONAL BANK
RESPONDENT: MERELO B. AZNAR; MATIAS B. AZNAR III; JOSE L. AZNAR (deceased), represented by his heirs;
RAMON A. BARCENILLA; ROSARIO T. BARCENILLA; JOSE B. ENAD (deceased), represented by his heirs; and
RICARDO GABUYA (deceased), represented by his heirs,
 RISCO ceased operation due to business reverses.
 In respondents’ desire to rehabilitate RISCO, they contributed a total amount of P212,720.00 which was used in
the purchase of the three (3) parcels of land in Cebu.
 After the purchase of the above lots, titles were issued in the name of RISCO. The amount contributed by
respondents constituted as liens and encumbrances on the aforementioned properties as annotated in the titles
of said lots. Such annotation was made pursuant to the Minutes of the Special Meeting of the Board of Directors
of RISCO (hereinafter referred to as the "Minutes") on March 14, 1961.
  Thereafter, various subsequent annotations were made on the same titles, including the Notice of Attachment
and Writ of Execution both dated August 3, 1962 in favor of petitioner PNB.
 A Certificate of Sale was issued in favor of Philippine National Bank, being the lone and highest bidder of the
three (3) parcels of land. Thereafter, a Final Deed of Sale dated May 27, 1991 in favor of the Philippine National
Bank was also issued.
 This prompted respondents to file the instant complaint seeking the quieting of their supposed title to the subject
properties, declaratory relief, cancellation of TCT and reconveyance with temporary restraining order and
preliminary injunction alleging, among others, that the subsequent annotations on the titles are subject to the
prior annotation of their liens and encumbrances.
 The trial court ruled against PNB on the basis that there was an express trust created over the subject properties
whereby RISCO was the trustee and the stockholders, Aznar, et al., were the beneficiaries or the cestui que trust.
 The Court of Appeals which set aside the judgment of the trial court, holding that that the monetary
contributions made by Aznar,et al., to RISCO can only be characterized as a loan secured by a lien on the subject
lots, rather than an express trust. Thus, it directed PNB to pay Aznar, et al., the amount of their contributions
plus legal interest from the time of acquisition of the property until finality of judgment.
ISSUE:
 W/N THE CONTRIBUTIONS MADE BY THE STOCKHOLDERS OF RISCO WERE MERELY A LOAN
SECURED BY THEIR LIEN OVER THE PROPERTIES, SUBJECT TO REIMBURSEMENT OR REFUND,
RATHER THAN AN EXPRESS TRUST.
RULING: YES. At the outset, the Court agrees with the Court of Appeals that the agreement contained in the Minutes
of the Special Meeting of the RISCO Board of Directors held on March 14, 1961 was a loan by the therein named
stockholders to RISCO.
 We find that the money contributed by plaintiffs-appellees was in the nature of a loan, secured by their liens
and interests duly annotated on the titles. The annotation of their lien serves only as collateral and does not
in any way vest ownership of property to plaintiffs.
 We are not persuaded by the contention of Aznar, et al., that the language of the subject Minutes created an
express trust.
o 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.
o The creation of an express trust must be manifested with reasonable certainty and cannot be
inferred from loose and vague declarations or from ambiguous circumstances susceptible of other
interpretations.
o No such reasonable certitude in the creation of an express trust obtains in the case at bar. In fact, a
careful scrutiny of the plain and ordinary meaning of the terms used in the Minutes does not offer
any. indication that the parties thereto intended that Aznar, et al., become beneficiaries under an
express trust and that RISCO serve as trustor.
 Aznar, et al. have no right to ask for the quieting of title of the properties at issue because they have no legal
and/or equitable rights over the properties that are derived from the previous registered owner which is
RISCO.
o A corporation has a personality separate and distinct from those of its stockholders. Thus, the interest
of the stockholders over the properties of the corporation is merely inchoate and therefore does not
entitle them to intervene in litigation involving corporate property. While a share of stock represents
a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof
with any legal right or title to any of the property, his interest in the corporate property being equitable
or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is
owned by the corporation as a distinct legal person.
o Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the properties at
issue in this case on the strength of the Minutes which, at most, is merely evidence of a loan agreement
between them and the company. There is no indication or even a suggestion that the ownership of
said properties were transferred to them which would require no less that the said properties be
registered under their names.
At most, what Aznar, et al., had was merely a right to be repaid the amount loaned to RISCO.
SIME DARBY PILIPINAS INC vs. JESUS B. MENDOZA
Facts: Sime Darby employed Mendoza as sales manager to handle sales, marketing, and distribution of the company's tires
and rubber products. On 3 July 1987, Sime Darby bought club share in Alabang Country Club (ACC) from de Araneta as
evidenced by a Deed of Absolute Sale. The share was placed under the name of Mendoza in trust for Sime Darby since the
By-Laws of ACC state that only natural persons may own a club share. As part of the arrangement, Mendoza endorsed
the Club Share Certificate in blank and executed a Deed of Assignment, also in blank, and handed over the documents to
Sime Darby. From the time of purchase in 1987, Sime Darby paid for the monthly dues and other assessments on the club
share.
Mendoza retired in April 1995 and Sime Darby fully paid Mendoza his separation pay. On July 2004, Sime Darby found
an interested buyer of the club share for P1.1M. Before the sale could push through, the broker required Sime Darby to
secure an authorization to sell from Mendoza since the club share was still registered in Mendoza’s name. However,
Mendoza refused to sign the required authority to sell or special power of attorney unless Sime Darby paid him the amount
of P300,000, claiming that this represented his unpaid separation benefits. As a result, the sale did not push through and
Sime Darby was compelled to return the payment to the prospective buyer.
Sime Darby filed a complaint for Damages with Writ of Preliminary Injunction against Mendoza for the Club membership.
Sime Darby claims that it was the practice of the company to extend to its senior managers and executives the privilege of
using and enjoying the facilities of various club memberships, and that it paid for the monthly dues of the memberships
even after Mendoza’s retirement in 1995. Lastly, it alleged that in 2004, Mendoza sent a letter to the petitioner to have the
billing statements of the club memberships be sent to his home long after the employment contract has been severed.
Mendoza claimed for the payment of P300k of alleged unpaid additional retirement benefit before he would sign an
authorization to sell the membership.
The RTC ruled in favour of Sime Darby, but upon appeal, the Court of Appeals reversed the ruling and ruled in favour of
Mendoza.
ISSUE: Whether or not the ACC Club membership was owned by Mendoza. [NO]
HELD: The Supreme Court found that Sime Darby had the grounds for the issuance of preliminary injunction. In citing
the case of Medina vs. Greenfield Development Corp., the Court stated the need for Sime Darby to establish the following
requisites: (1) a right in esse or a clear and unmistakable right to be protected; (2) a violation of that right; (3) that there is
an urgent and permanent act and urgent necessity for the writ to prevent serious damage.
Even during the trial, at Mendoza’s cross-examination, Mendoza identified his signature over the printed words “name of
assignee” as his own and when confronted with his Reply-Affidavit, he did not refute Sime Darby’s ownership of the club
share as well as Sime Darby’s payment of the monthly billings from the time the share was purchased. Further, Mendoza
admitted signing the club share certificate and the assignment of rights, both in blank, and turning it over to Sime Darby.
Clearly, these circumstances show that there existed a trust relationship between the parties.
While the share was bought by Sime Darby and placed under the name of Mendoza, his title is only limited to the usufruct,
or the use and enjoyment of the club’s facilities and privileges while employed with the company. In Thomson v. Court of
Appeals, we held that a trust arises in favor of one who pays the purchase price of a property in the name of another,
because of the presumption that he who pays for a thing intends a beneficial interest for himself. While Sime Darby paid
for the purchase price of the club share, Mendoza was given the legal title. Thus, a resulting trust is presumed as a matter
of law. The burden then shifts to the transferee to show otherwise.
GABUTAN vs. NACALABAN
Petitioners: TRIFONIA D. GABUTAN, deceased, herein represented by her heirs, and TIRSO DALONDONAN,
deceased, herein represented by his heirs
Respondents: DANTE D. NACALABAN, HELEN N. MAANDIG, SUSAN N. SIAO, and CAGAYAN CAPITOL
COLLEGE
Godofredo Nacalaban (Godofredo) purchased an 800-square meter parcel of prime land (property) in Poblacion, Cagayan
de Oro City from Petra, Fortunata, Francisco and Dolores, all surnamed Daamo. Pursuant to the sale, TCT No. T-2259
covering the property was issued in the name of Godofredo. He thereafter built a house on it.
Godofredo died. He was survived by his wife, Baldomera, and their children, Dante, Helen, and Susan. Baldomera issued
a Certification in favor of her mother, Melecia. It provided, in effect, that Baldomera was allowing her mother to build and
occupy a house on the portion of the property. Accordingly, the house was declared for taxation purposes. The tax
declaration presented in evidence showed that Melecia owned the building on the land owned by Godofredo.
Baldomera died. Her children executed an Extrajudicial Settlement with Sale where they adjudicated unto themselves the
property and sold it to the College. TCT No. T-2259 was cancelled and TCT No. T-111846 covering the property was issued
in the name of the College.
Melecia died and was survived by her children, Trifonia, Buna, Felisia, Crisanta, and Tirso.
In a letter, the College demanded Trifonia D. Gabutan, Mary Jane Gilig, Allan Ubaub, and Evelyn Dailo, the heirs of
Melecia who were occupying the house on the property, to vacate the premises.
Gabutan, et al. filed a Complaint for Reconveyance of Real Property, Declaration of Nullity of Contracts, Partition and
Damages with Writ of Preliminary Attachment and Injunction against Nacalaban, et al. and the College.
They alleged that: (1) Melecia bought the property using her own money but Godofredo had the Deed of Absolute Sale
executed in his name instead of his mother-in-law; (2) Godofredo and Baldomera were only trustees of the property in
favor of the real owner and beneficiary, Melecia; (3) they only knew about the Extrajudicial Settlement with Sale upon
verification with the Registry of Deeds; and (4) the College was a buyer in bad faith, being aware they were co-owners of
the property.
ISSUE: Whether the action for reconveyance was proper [YES]
RULING:
The action for reconveyance filed by Gabutan, et al. is proper.
An implied resulting trust was created between Melecia and Godofredo.
Article 1448 of the Civil Code provides in part that there is an implied trust when property is sold, and the legal estate is
granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary.
The trust created here, which is also referred to as a purchase money resulting trust, occurs when there is (1) an actual
payment of money, property or services, or an equivalent, constituting valuable consideration; (2) and such consideration
must be furnished by the alleged beneficiary of a resulting trust. These two elements are present here.
Gabutan, et al. through the testimonies of Felisia, Crisanta, and Trifonia, established that Melecia's money was used in
buying the property, but its title was placed in Godofredo's name. She purchased the property because Felisia wanted to
build a pharmacy on it. On one occasion in Melecia's house, and when the entire family was present, Melecia gave
Godofredo the money to purchase the property. Melecia entrusted the money to Godofredo because he was in Cagayan
de Oro, and per Melecia's instruction, the deed of sale covering the property was placed in his name. It was allegedly her
practice to buy properties and place them in her children's name, but it was understood that she and her children co-own
the properties.
Melecia built a residential building on the property, where her daughter Crisanta and some of her grandchildren resided.
Godofredo also thereafter built a house on the property. Twice, he also mortgaged the property to secure loans. Melecia
allowed him to do so because she trusted him. After Godofredo's death, and when Baldomera fell ill, there were family
discussions to transfer the title in Melecia's name so Melecia's children can divide it together with the rest of Melecia's
properties. The plans, however, always fell through.
Having established the creation of an implied resulting trust, the action for reconveyance filed by Gabutan, et al. , the heirs
of Melecia in whose benefit the trust was created, is proper. An action for reconveyance is a legal and equitable remedy
granted to the rightful landowner, whose land was wrongfully or erroneously registered in the name of another, to compel
the registered owner to transfer or reconvey the land to him. The action for reconveyance is imprescriptible because the
plaintiffs are in possession of the property.
PARINGIT vs. BAJIT
NOTES: This case is about the existence of an implied trust in a transaction where a property was bought by one sibling
supposedly for the benefit of all. The other siblings now want to recover their share in the property by reimbursing their
brother for their share in the purchase price.
ARTICLE/DOCTRINE APPLICABLE: Article 1450 which 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.
FACTS:
During their lifetime, spouses Julian and Aurelia Paringit leased a lot on Norma Street, Sampaloc, Manila (the lot) from
Terocel Realty, Inc. (Terocel Realty). They built their home there and raised five children, namely, Florencio, Felipe,
Marciana, Adolio, and Rosario. Aurelia died on November 6, 1972.
For having occupied the lot for years, Terocel Realty offered to sell it to Julian but he did not have enough money at that
time to meet the payment deadline. Julian sought the help of his children so he can buy the property but only his son
Felipe and wife Josefa had the financial resources he needed at that time. To bring about the purchase, on January 16, 1984
Julian executed a deed of assignment of leasehold right in favor of Felipe and his wife that would enable them to acquire
the lot. On January 30, 1984 the latter bought the same from Terocel Realty for P55,500.00 to be paid in installments. On
April 12, 1984 Felipe and his wife paid the last installment and the realty company executed a Deed of Absolute Sale in
their favor and turned over the title to them.
On February 25, 1985, due to issues among Julians children regarding the ownership of the lot, Julian executed an affidavit
clarifying the nature of Felipe and his wife’s purchase of the lot. He claimed that it was bought for the benefit of all his
children.
Expressing their concurrence with what their father said in his affidavit, Felipes siblings, namely, Marciana, Rosario, and
Adolio (collectively, Marciana, et al) signed the same. Josefa, Felipes wife, also signed the affidavit for Felipe who was in
Saudi Arabia. Only Florencio, among the siblings, did not sign. On January 23, 1987 Felipe and his wife registered their
purchase of the lot, resulting in the issuance of Transfer Certificate of Title 172313 in their names. Despite the title, however,
the spouses moved to another house on the same street in 1988. Marciana, et al, on the other hand, continued to occupy
the lot with their families without paying rent. This was the situation when their father Julian died on December 21, 1994.
On December 18, 1995 Felipe and his wife sent a demand letter to Marciana, et al asking them to pay rental arrearages for
occupying the property 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 or reply to the letter, believing that they had the right to occupy the house and lot, it being their
inheritance from their parents. On March 11, 1996 Felipe and his wife filed an ejectment suit against them. 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.
To vindicate what they regarded as their right to the lot and the house, on July 24, 1996 Marciana, et al filed the present
action against Felipe and his wife for annulment of title and reconveyance of property before the Regional Trial Court
(RTC) of Manila, Branch 39.
In his answer, Felipe denied knowledge of the agreement among the siblings that the property would devolve to them all.
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. For their part, Marciana, et al
insisted that the agreement was that Felipe and his wife would acquire the lot for the benefit of all the siblings. They even
tried to reimburse the spouses for their shares in the lots price. In fact, Adolio offered to pay P32,000.00 for his 30 square
meter- portion of the lot but Felipe and his wife did not accept it. The other siblings tried to pay for their shares of the
purchase price, too, but the spouses already avoided them. Marciana, et al denied pressuring Josefa into signing the
document in question. They claimed that it was in fact Josefa who caused the drafting of the affidavit.
RTC’s RULING:
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’s RULING:
The 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.
Felipe and his wife filed a motion for reconsideration of the decision but the CA denied it.
ISSUES:
1) Whether or not Felipe and his wife purchased subject lot under an implied trust for benefit of all the children of Julian;
2) Whether or not the action to recover their portions of the house and lot had already prescribed
3) Whether or not Marciana, et al.’s right of action was barred by prescription or laches.
RULING:
1. YES. 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.
Although no express agreement covered Felipe and his wifes purchase of the lot for the siblings and their father, it came
about by operation of law and is protected by it. The nature of the transaction established the implied trust and this in turn
gave rise to the rights and obligations provided by law. Implied trust is a rule of equity, independent of the particular
intention of the parties. Here, the evidence shows that Felipe and his wife bought the lot for the benefit of Julian and his
children, rather than for themselves. Thus:
First. There is no question that the house originally belonged to Julian and Aurelia who built it. When Aurelia died, Julian
and his children inherited her conjugal share of the house. When Terocel Realty, therefore, granted its long time tenants
on Norma Street the right to acquire the lots on which their house stood, that right technically belonged to Julian and all
his children.
Second. Julian said in his affidavit that Felipe and his wife bought the lot from Terocel Realty on his behalf and on behalf
of his other children. Felipe and his wife advanced the payment because Julian and his other children did not then have
the money needed to meet the realty companys deadline for the purchase. Julian added that his other children were to
reimburse Felipe for the money he advanced for them.
Third. If Felipe and his wife really believed that the assignment of the house and the right to buy the lot were what their
transactions with Julian were and if the spouses also believed that they became absolute owners of the same when they
paid for the lot and had the title to it transferred in their name in 1987, then their moving out of the house in 1988 and
letting Marciana, et al continue to occupy the house did not make sense. They would make sense only if, as Marciana, et
al and their deceased father claimed, Felipe and his wife actually acquired the lot only in trust for Julian and all the children.
Fourth. Felipe and his wife demanded rent from Marciana, et al only on December 18, 1995, a year following Julians death
on December 21, 1994. This shows that from 1984 when they bought the lot to December 18, 1995, when they made their
demand on the occupants to leave, or for over 10 years, Felipe and his wife respected the right of the siblings to reside on
the property. This is incompatible with their claim that they bought the house and lot for themselves back in 1984. Until
they filed the suit, they did nothing to assert their supposed ownership of the house and lot.
2. NO. A right of action implies the existence of a cause of action and a cause of action has three elements:
a. the existence of a right in plaintiffs favor;
b. defendants obligation to respect such right; and
c. defendants act or omission that violates the plaintiffs right.
Only when the last element occurs or takes place can it be said in law that a cause of action has arisen.
In an implied trust, the beneficiary’s cause of action arises when the trustee repudiates the trust, not when the trust was
created as Felipe and his wife would have it. The spouses of course registered the lot in their names in January 1987 but
they could not be said to have repudiated the implied trust by that registration. Their purchase of the land and registration
of its title in their names are not incompatible with implied trust. It was understood that they did this for the benefit of
Julian and all the children.
At any rate, even assuming that Felipe and his wifes registration of the lot in their names in January 1987 constituted a
hostile act or a violation of the implied trust, Marciana, et al had 10 years or until January of 1997 within which to bring
their action. Here, they filed such action in July 1996 well within the period allowed them.
3. NO. There is no basis for such claim. Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier.
Here, Marciana, et al had no reason to file an earlier suit against Felipe and his wife since the latter had not bothered them
despite their purchase of the lot in their names on January 30, 1984. Only about 12 years later or on December 18, 1995
when they wrote their demand letter did the spouses take an adverse attitude against Marciana, et al. The latter filed their
action to annul Felipe and his wifes title and have the same transferred to their names not too long later on July 24, 1996.
DE OCAMPO vs. ZAPORTEZA
RECIT READY FACTS:
Juan Zaporteza et al (herein defendants-appellants) sought to reverse the trial court judgment holding instrument EXHIBIT
A to be a mortgage rather than a sale subject to repurchase; also prayed to annul the contract. Appellees, however, contend
that contract of sale was only made to appear as if it were a sale, as suggested by defendants’ attorney, to prevent
defendants from appearing in bad light.
IMPORTANT:
EXHIBIT A: instrument in question if mortgage or sale subject to repurchase (“pacto de retro”)
EXHIBIT 1: Certificate of Transfer issued in favor of Agripino de Ocampo et al (defendants)
DEFENDANTS: claim Exhibit A is a sale subject to repurchase
PLAINTIFFS: claim Exhibit A is a mortgage contract
RULING:
The defendants only hold the certificate of transfer in trust for the plaintiffs with respect to the portion of the lot planted
with 1,300 coconut trees. They are therefore bound to execute a deed in favor of the plaintiff, in favor of the plaintiff,
transferring to them said portion planted with 1,300 coconut trees
(head’s up: full text is only 3 pages but is confusing)
FACTS:
1. CASE: appeal seeking reversal of judgment holding contract EXHIBIT A is a mortgage rather than a sale subject
to repurchase and praying that contract be annulled
2. DEFENDANTS-APPELLANTS: Juan Zaporteza et al maintain that:
a. That TC erred in holding that Exhibit A is a mortgage deed
b. That the parties herein submitted an agreed statement of facts wherein it appeared that appellees
executed the instrument in favor of appellants
c. That they received the price of the sale and that there was no fraud in the execution of the instrument
in question
3. PLAINTIFFS-APPELLEES: Agripino de Ocampo et al presented the ff evidence:
a. That portion of land conveyed to ZAPORTEZA et al by DE OCAMPO et al, added to the land
conveyed to them by the (DECEASED) ALEJANDRO DE OCAMPO, only comprises area of land
planted with 700 coconut trees
b. That the conveyance by Alejandro, and that subsequently made by the plaintiffs, were only to secure:
i. P1,000 received by Alejandro; and
ii. P2,000 furnished by Zaporteza et al to pay off a debt of Alejandro to the National Bank
(P1,604.44), + funeral expenses (P400)
4. By means of witnesses ARIPINO and GREGORIO DE OCAMPO, plaintiffs contend that contract between the
parties is in reality a simple mortgage
a. Was made to appear as if it were a sale, subject to repurchase, at the suggestion of NAZARIO P. DE
MESA, attorney for defendants, who told them that there was no objection to drawing up the deed in
that form; whereas, if agreement were evidenced as a loan, defendants might appear in a bad light if
the transaction were not dissimulated
i. In view of this, plaintiffs consented to sign the instrument
5. TC: (in favor of DE OCAMPO et al) convinced that plaintiffs gave a substantially correct account of the
conversations between the parties which preceded the execution of the document in question
6. RE INSTRUMENT EXHIBIT A:
a. March 1924: instrument executed
b. Decree adjudicating Lot # 4210, which includes the 2 parcels of land in question, in the registration
proceeding thereof, had not yet been issued
i. Issuance took place August 31, 1925 in favor of DE OCAMPO et al
c. Jan 27, 1926: TC that took cognizance of REGISTRATION PROCEEDING, amending its decree, on
motion of defendants, by including therein the lien of a sale subject to repurchase for P3,000 for 3 yrs
from March 4, 1924
d. June 18, 1926: original certificate was issued in favor of those to whom the lot was adjudicated in
accordance with the amended decree
e. Sept 14, 1927: Certificate of Transfer (EXHIBIT 1) was issued in favor of defendants
ISSUES: W/N the instrument Exhibit A expresses the true agreement entered into by and between the parties [NO]
RULING:
1. DULY PROVEN IN THE PROCEEDINGS THAT THE CERTIFICATE OF TRANSFER IN FAVOR OF
DEFENDANTS INCLUDES NOT ONLY THE 2 PARCELS DESCRIBED IN THE INSTRUMENTS EXHIBIT
(WITH 700 COCONUT TREES), BUT ALL OF LOT # 4210 (WITH 2,000 COCONUT TREES)
a. Altho true that deed apparently evidences an agreement of sale subject to repurchase; as the plaintiffs-
appellees have put in issue a mistake of said writing, and its failure to express the true intent and
agreement of the parties, the presumption established in Sec 285 of Code of Civil Procedure depends on
the evidence in the case.
i. Evident that the certificate of transfer (EXHIBIT 1) insofar as it includes a portion of land
planted with 1,300 coconut trees, to which defendants are not at all entitled, should not be
given legal effect, especially when said certificate of transfer has been obtained by the
defendants during the pendency of the present action wherein the value of the instrument
EXHIBIT A is precisely the matter in dispute
2. THE INSTRUMENTS EXHIBIT A DOES NOT EXPRESS THE TRUE CONTRACT ENTERED INTO BY THE
PARTIES
a. And taking for granted that EXHIBIT 1 is valid, we hold, nevertheless, that as the defendants obtained
the amendment of the decree of adjudication by means of said instrument, and having furthermore
obtained the Certificate of Transfer of Title knowing that only 2 parcels of Lot 4210 had been
transferred to them, application must here be made of the doctrines held in several cases* to the effect
that:
i. THE DEFENDANTS ONLY HOLD THE CERTIFICATE OF TRANSFER IN TRUST FOR
THE PLAINTIFFS WITH RESPECT TO THE PORTION OF THE LOT PLANTED WITH
1,300 COCONUT TREES
ii. They are therefore bound to execute a deed in favor of the plaintiff, in favor of the
plaintiff, transferring to them said portion planted with 1,300 coconut trees.
b. * “several cases”:
i. Uy Aloc v. Cho Jan Ling (12 PHIL 202)
ii. Camacho v. Municipality of Baliuag (28 PHIL 466)
iii. Severino v Severino (44 PHIL 343)
3. RE THE 2 PORTIONS DESCRIBED IN THE INSTRUMENT EXHIBIT A: affirmed judgment appealed from,
ruling that within 90 days from the date this decision becomes final, administrator of estate of deceased
Alejandro de Ocampo must redeem the land which is the subject matter of the contract, paying the sum of P3,000
 to the defendants who shall restore said land to the administrator, provided that if the administrator fails to
exercise this right within the period fixed, ownership of land described in deed exhibit a shall be consolidated
in defendants
MIGUEL J. OSSORIO PENSION FOUNDATION vs. CA & CIR
Petitioner, a non-stock and non-profit corporation, was organized for the purpose of holding title to and administering the
employees’ trust or retirement funds (Employees’ Trust Fund) established for the benefit of the employees of Victorias
Milling Company, Inc. (VMC).
• Petitioner, as trustee, claims that the income earned by the
Employees’ Trust Fund is tax exempt under Section 53(b) of the
National Internal Revenue Code (Tax Code).
- Petitioner bought the MBP lot through VMC. Petitioner claims that its share in the MBP lot is 49.59%. Petitioner’s
investment manager, the Citytrust
Banking Corporation (Citytrust), in submitting its Portfolio Mix Analysis, regularly reported the Employees’ Trust Fund’s
share in the MBP lot.
- On 26 March 1997, VMC eventually sold the MBP lot to Metrobank.
• Petitioner claims that it is a co-owner of the MBP lot as trustee of the Employees’ Trust Fund, based on the
notarized Memorandum of
Agreement. Petitioner maintains that its ownership of the MBP lot is supported by the excerpts of the minutes and the
resolutions of petitioner’s Board Meetings.
• Petitioner further contends that there is no dispute that the
Employees’ Trust Fund is exempt from income tax. Since petitioner, as trustee, purchased 49.59% of the MBP lot using
funds of the
Employees’ Trust Fund, petitioner asserts that the Employees’ Trust
Fund's 49.59% share in the income tax paid (or P3,037,697.40 rounded off to P3,037,500) should be refunded.
- The CTA denied petitioner's claim for refund of withheld creditable tax of P3,037,500 arising from the sale of
real property of which petitioner claims to be a co-owner as trustee of the employees' trust or retirement funds.
- CA agreed with the CTA that pieces of documentary evidence submitted by petitioner are largely self-serving
and can be contrived easily. The CA ruled that these documents failed to show that the funds used to purchase the
MBP lot came from the Employees’ Trust Fund.
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? [NOT ESTOPPED.]
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. [YES]
RATIO:
1. Article 1452 of the Civil Code provides:
Art. 1452. If two or more persons agree to purchase a property and by common consent the legal title is taken in the name
of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of
each. (Emphasis supplied)
For Article 1452 to apply, all that a co-owner needs to show is that there is “common consent” among the purchasing co-
owners to put the legal title to the purchased property in the name of one co-owner for the benefit of all. Once this
“common consent” is shown, “a trust is created by force of law.” The BIR has no option but to recognize such legal trust
as well as the beneficial ownership of the real owners because the trust is created by force of law. The fact that the title is
registered solely in the name of one person is not conclusive that he alone owns the property.
Thus, this case turns on whether petitioner can sufficiently establish that petitioner, as trustee of the Employees’ Trust
Fund, has a common agreement with VMC and VFC that petitioner, VMC and VFC shall jointly purchase the MBP lot and
put the title to the MBP lot in the name of VMC for the benefit petitioner, VMC and VFC.
We rule that petitioner, as trustee of the Employees’ Trust Fund, has more than sufficiently established that it has an
agreement with VMC and VFC to purchase jointly the MBP lot and to register the MBP lot solely in the name of VMC for
the benefit of petitioner, VMC and VFC.
The CTA ruled that the documents presented by petitioner cannot prove its co-ownership over the MBP lot especially that
the TCT, Deed of Absolute Sale and the Remittance Return disclosed that VMC is the sole owner and taxpayer. However,
the appellate courts failed to consider the genuineness and due execution of the notarized Memorandum of Agreement
acknowledging petitioner’s ownership of the MBP lot. The BIR failed to present any clear and convincing evidence to
prove that the notarized Memorandum of Agreement is fictitious or has no legal effect. Likewise, VMC, the registered
owner, did not repudiate petitioner’s share in the MBP lot. Further, Citytrust, a reputable banking institution, has prepared
a Portfolio Mix Analysis for the years 1994 to 1997 showing that petitioner invested P5,504,748.25 in the MBP lot. Absent
any proof that the Citytrust bank records have been tampered or falsified, and the BIR has presented none, the Portfolio
Mix Analysis should be given probative value.
2. Income from Employees’ Trust Fund is Exempt from Income Tax
Tax exemption cannot arise by implication and any doubt whether the exemption exists is strictly construed against the
taxpayer. Further, the findings of the CTA, which were affirmed by the CA, should be given respect and weight in the
absence of abuse or improvident exercise of authority.
Section 53(b) and now Section 60(b) of the Tax Code provides:
SEC. 60. Imposition of Tax. -
(A) Application of Tax. - x x x
(B) Exception. - The tax imposed by this Title shall not apply to employee’s trust which forms part of a pension,
stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are
made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings
and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is
impossible, at any time prior to the satisfaction of all liabilities with
respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used
for, or diverted to, purposes other than for the exclusive benefit of his employees: Provided, That any amount actually
distributed to any employee or distributee shall be taxable to him in the year in which so distributed to the extent that it
exceeds the amount contributed by such employee or distributee.
Petitioner’s Articles of Incorporation state that its purpose is to hold legal title to, control, invest and administer in the
manner provided, pursuant to applicable rules and conditions as established, and in the interest and for the benefit of its
beneficiaries and/or participants,the private pension plan as established for certain employees of Victorias Milling
Company, Inc., and other pension plans of Victorias Milling Company affiliates and/or subsidiaries; and The SC has long
been settled the tax-exemption privilege of income derived from employee's trusts.
The tax-exempt character of the Employees' Trust Fund has long been settled. It is also settled that petitioner exists for the
purpose of holding title to, and administering, the tax-exempt Employees’ Trust Fund established for the benefit of VMC’s
employees. As such, petitioner has the personality to claim tax refunds due the Employees' Trust Fund.
In Citytrust Banking Corporation as Trustee and Investment Manager of Various Retirement Funds v. Commissioner of
Internal Revenue, the CTA granted Citytrust’s claim for refund on withholding taxes paid on the investments made by
Citytrust in behalf of the trust funds it manages, including petitioner.
Similarly, in BIR Ruling [UN-450-95], Citytrust wrote the BIR to request for a ruling exempting it from the payment of
withholding tax on the sale of the land by various BIR-approved trustees and tax-exempt private employees' retirement
benefit trust funds represented by Citytrust. The BIR ruled that the private employees benefit trust funds, which
included petitioner, have met the requirements of the law and the regulations and therefore qualify as reasonable
retirement benefit plans within the contemplation of Republic Act No. 4917 (now Sec. 28(b)(7)(A), Tax Code).
The income from the trust fund investments is therefore exempt from the payment of income tax and consequently from
the payment of the creditable withholding tax on the sale of their real property.
Thus, the documents issued and certified by Citytrust showing that money from the Employees’ Trust Fund was
invested in the MBP lot cannot simply be brushed aside by the BIR as self-serving, in the light of previous cases holding
that Citytrust was indeed handling the money of the Employees’ Trust Fund. These documents together with the
notarized Memorandum of Agreement, clearly establish that petitioner, on behalf of the Employees’ Trust Fund, indeed
invested in the purchase of the MBP lot.
Thus, the Employees' Trust Fund owns 49.59% of the MBP lot.
Since petitioner has proven that the income from the sale of the MBP lot came from an investment by the Employees' Trust
Fund, petitioner, as trustee of the Employees’ Trust Fund, is entitled to claim the tax refund of P3,037,500 which was
erroneously paid in the sale of the MBP lot.
The Case
- The Miguel J. Ossorio Pension Foundation, Incorporated (petitioner or MJOPFI) filed this Petition for Certiorari
to reverse the CA Decision as well as the Resolution denying the MR.
- In the assailed decision, the CA affirmed the Court of Tax Appeals’ (CTA) Decision where the CTA denied
petitioner’s claim for refund of withheld creditable tax of P3,037,500 arising from the sale of real property of which
petitioner claims to be a co-owner as trustee of the employees’ trust or retirement funds.
The Facts
- MJOPFI, a non-stock and non-profit corporation, was organized for the purpose of holding title to and
administering the employees’ trust or retirement funds (Employees’ Trust Fund) established for the benefit of the
employees of Victorias Milling Company, Inc. (VMC).
- MJOPFI as trustee, claims that the income earned by the
Employees’ Trust Fund is tax exempt under Section 53(b) of the National Internal Revenue Code (Tax Code).
- MJOPFI decided to invest part of the Employees’ Trust Fund to purchase a lot in the Madrigal Business Park
(MBP lot) in Alabang, Muntinlupa. MJOPFI alleges that its investment in the MBP lot came about upon the invitation of
VMC, which also purchased two lots.
- MJOPFI 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.
- VMC negotiated the sale of the MBP lot with (Metrobank) for P 81,675,000,
- Metrobank, as withholding agent, paid the Bureau of Internal Revenue (BIR) P6,125,625 as withholding tax on
the sale of real property.
- 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.
- Since MJOPFI, as trustee, purchased 49.59% of the MBP lot using funds of the Employees’ Trust Fund, MJOPFI
asserts that the Employees’ Trust Fund’s 49.59% share in the income tax paid (or P3,037,697.40 rounded off toP3,037,500)
should be refunded.
- MJOPFI maintains that the tax exemption of the Employees’ Trust Fund rendered the payment ofP3,037,500 as
illegal or erroneous.
- On 5 May 1997, petitioner filed a claim for tax refund.
- the BIR, through its Revenue District Officer, wrote MJOPFI stating that under Section 26 of the Tax Code,
MJOPFI is not exempt from tax on its income from the sale of real property. The BIR asked MJOPFI to submit documents
to prove its co-ownership of the MBP lot and its exemption from tax.[16]
- MJOPFI replied that the applicable provision granting its claim for tax exemption is not Section 26 but Section
53(b) of the Tax Code. MJOPFI claims that its co-ownership of the MBP lot is evidenced by Board Resolution Nos. 92-34
and 96-46 and the memoranda of agreement among petitioner, VMC and its subsidiaries.
- MJOPFI elevated its claim to the Commissioner of Internal Revenue
(CIR) on 26 October 1998. The CIR did not act on petitioner’s claim for refund.
- Hence, MJOPFI filed a petition for tax refund before the CTA. On 24 October 2000, the CTA rendered a decision
denying the petition.
- MJOPFI filed its Petition for Review before the Court of Appeals. On 20 May 2003, the CA rendered a decision
denying the appeal. The CA also denied petitioner’s Motion for Reconsideration.
- Aggrieved by the appellate court’s Decision, petitioner elevated the case before this Court.
The Issues
1. Whether MJOPFI 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.
HELD: PETITION GRANTED
RATIO: The Ruling of the Court;
- This case turns on whether petitioner can sufficiently establish that MJOPFI, as trustee of the Employees’ Trust
Fund, has a common agreement with VMC and VFC that MJOPFI, VMC and VFC shall jointly purchase the MBP lot and
put the title to the MBP lot in the name of VMC for the benefit petitioner, VMC and VFC.
- COURT -We rule that petitioner, as trustee of the
Employees’ Trust Fund, has more than sufficiently established that it has an agreement with VMC and VFC to purchase
jointly the MBP lot and to register the MBP lot solely in the name of VMC for the benefit of petitioner, VMC and VFC.
Factual findings of the CTA will be reviewed when judgment is based on a misapprehension of facts.
- Generally, the factual findings of the CTA, a special court exercising expertise on the subject of tax, are regarded
as final, binding and conclusive upon this Court, especially if these are substantially similar to the findings of the CA
which is normally the final arbiter of questions of fact.
- However, there are recognized exceptions to this rule, such as when the judgment is based on a misapprehension
of facts.
- The issues of whether petitioner or the Employees’ Trust Fund is estopped from claiming 49.59% ownership in
the MBP lot, whether the documents presented by petitioner are self-serving, and whether petitioner has proven its
exemption from tax, are all questions of fact which could only be resolved after reviewing, examining and evaluating the
probative value of the evidence presented.
- The CTA ruled that the documents presented by petitioner cannot prove its co-ownership over the MBP lot
especially that the TCT, Deed of Absolute Sale and the Remittance Return disclosed that VMC is the sole owner and
taxpayer.
- However, the appellate courts failed to consider the genuineness and due execution of the notarized
Memorandum of Agreement acknowledging petitioner’s ownership of the MBP lot
- Thus, there is a “common consent” or agreement among petitioner, VMC and VFC to co-own the MBP lot in the
proportion specified in the notarized Memorandum of Agreement.
- No particular words are required for the creation of a trust, it being sufficient that a trust is clearly intended
- The fact that the TCT, Deed of Absolute Sale and the Remittance
Return were in VMC’s name does not forestall the possibility that the property is owned by another entity because Article
1452 of the Civil Code expressly authorizes a person to purchase a property with his own money and to take conveyance
in the name of another.
- MJOPFI 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.
Income from Employees’ Trust Fund is Exempt from Income Tax
- MJOPFI claims that the Employees’ Trust Fund is exempt from the payment of income tax. Petitioner further
claims that as trustee, it acts for the Employees’ Trust Fund, and can file the claim for refund. As trustee, petitioner
considers itself as the entity that is entitled to file a claim for refund of taxes erroneously paid in the sale of the MBP lot.
- The Office of the Solicitor General argues that the cardinal rule in taxation is that tax exemptions are highly
disfavored and whoever claims a tax exemption must justify his right by the clearest grant of law. Tax exemption cannot
arise by implication and any doubt whether the exemption exists is strictly construed against the taxpayer.
- Further, the findings of the CTA, which were affirmed by the CA, should be given respect and weight in the
absence of abuse or improvident exercise of authority.
- Section 53(b) and now Section 60(b) of the Tax Code provides:
SEC. 60. Imposition of Tax. -
(A) Application of Tax. – x x x
(B) Exception. – The tax imposed by this Title shall not apply to employee’s trust which forms part of a pension,
stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are
made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings
and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is
impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of
the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the
exclusive benefit of his employees: Provided, That any amount actually distributed to any employee or distributee shall
be taxable to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee
or distributee.
- MJOPFI’s Articles of Incorporation state the purpose for which the corporation was formed: Primary Purpose:
To hold legal title to, control, invest and administer in the manner provided, pursuant to applicable rules and conditions
as established, and in the interest and for the benefit of its beneficiaries and/or participants, the private pension plan as
established for certain employees of Victorias Milling Company, Inc., and other pension plans of Victorias Milling
Company affiliates and/or subsidiaries, the pension funds and assets, as well as accruals, additions and increments thereto,
and such amounts as may be set aside or accumulated for the benefit of the participants of said pension plans; and in
furtherance of the foregoing and as may be incidental thereto.
- Thus, MJOPFI is a corporation that was formed to administer the Employees’ Trust Fund. Petitioner invested
P5,504,748.25 of the funds of the Employees’ Trust Fund to purchase the MBP lot. When the MBP lot was sold, the gross
income of the Employees’ Trust Fund from the sale of the MBP lot wasP40,500,000. The 7.5% withholding tax of P3,037,500
and broker’s commission were deducted from the proceeds.
- The pension plan was thereafter submitted to the Bureau of Internal Revenue for registration and for a ruling as - WHEREFORE, we GRANT the petition and SET ASIDE the Decision of 30 May 2003 of the Court of Appeals in
to whether its income or earnings are exempt from income tax pursuant to Rep. Act 4917, in relation to Sec. 56(b), now Sec. CA-G.R. SP No. 61829.
54(b), of the Tax Code.
- Respondent Commissioner of Internal Revenue is directed to refund petitioner Miguel J. Ossorio Pension
- It asserted that the pension plan in question was previously submitted to the Bureau of Internal Revenue for a Foundation, Incorporated, as trustee of the Employees’ Trust Fund, the amount of P3,037,500, representing income tax
ruling as to whether the income or earnings of the retirement funds of said plan are exempt from income tax and in a letter erroneously paid.
dated January 18,1984, the Bureau ruled that the earnings of the trust funds of the pension plan are exempt from income
tax under Sec. 56(b) of the Tax Code. HEIRS OF PATIWAYAN vs. MARINEZ
IMPORTANT DOCTRINES
- The tax-exempt character of petitioner’s Employees’ Trust Fund is not at issue in this case. The tax-exempt
character of the Employees’ Trust Fund has long been settled. It is also settled that petitioner exists for the purpose of When a person through fraud succeeds in registering the property in his name, the law creates what is called a
holding title to, and administering, the tax-exempt Employees’ Trust Fund established for the benefit of VMC’s employees. "constructive or implied trust" in favor of the defrauded party and grants the latter the right to recover the property
fraudulently registered within a period of ten years
As such, petitioner has the personality to claim tax refunds due the Employees’ Trust Fund.
FACTS:
- In resolving the second issue, we note that the same is not a case of first impression. Indeed, the MJOPFI is
1. Tanak Pangawaran-Patiwayan filed a complaint against the private respondent (her brother) for annulment of
correct in its adherence to the clear ruling laid by the Supreme Court way back in 1992 in the case of Commissioner of
title, reconveyance of successional shares, partition, accounting and damages. The complaint alleged that:
Internal Revenue vs. The Honorable Court of Appeals, The Court of Tax Appeals and GCL Retirement Plan, 207 SCRA
a. a certain Pangawaran (father), during his lifetime married legitimately three successive times
487 at page 496, supra, wherein it was succinctly held:
b. that complainant is the daughter by the second marriage;
c. that during the first and second marriages, there were no liquidations of the conjugal partnership after
x x x There can be no denying either that the final withholding tax is collected from income in respect of which
the death of Pangawaran's respective spouses
employees’ trusts are declared exempt (Sec. 56(b), now 53(b), Tax Code). The application of the withholdings system to
d. that respondent Tagwalan is the child by the third marriage; and that since the latter was the only son
interest on bank deposits or yield from deposit substitutes is essentially to maximize and expedite the collection of income
of Pangawaran, he was able to convince his co-heirs that he should act as administrator of the
taxes by requiring its payment at the source. If an employees’ trust like the
properties left by Pangawaran but instead, managed to obtain a patent in his own name and later an
original certificate of title to the complainant's prejudice.
GCL enjoys a tax-exempt status from income, we see no logic in withholding a certain percentage of that income which it
is not supposed to pay in the first place.
2. Respondents filed an answer denying the marriage of Pangawaran to complainant Tanak's mother alleging that
Pangawaran married only twice, the offsprings of which are the respondents themselves. Respondents then had
- Similarly, the income of the trust funds involved herein is exempt from the payment of final withholding taxes.
filed a motion to dismiss for the case
- This CTA decision became final and executory when the CIR failed to file a Petition for Review within the
a. Tanak Pangawaran was already dead by this time, so the heirs substituted her
extension granted by the CA.
- The BIR ruled that the private employees benefit trust funds, which included petitioner, have met the
3. The trial court granted the motion and relied on these findings: (REALLY IMPORTANT BACKGROUND OF
requirements of the law and the regulations and therefore qualify as reasonable retirement benefit plans within the
FACTS)
contemplation of Republic Act No. 4917 (now Sec. 28(b)(7)(A), Tax Code).
a. Pangawaran (Moro) during his lifetime cultivated and occupied a parcel of land containing an area of
sixteen (16) hectares, more or less, situated at Binuring, Tigatto, Davao City,
- The income from the trust fund investments is therefore exempt from the payment of income tax and
b. He had three wives. He begot two children from the first marriage, one from the second (the child of
consequently from the payment of the creditable withholding tax on the sale of their real property.
which is the complainant), and a son from the third marriage (the respondent).
c. When Pangawaran died, Tagwalan, he being the only male child of Pangawaran allegedly prevailed
- Thus, the documents issued and certified by Citytrust showing that money from the Employees’ Trust Fund
upon the other heirs that he should act as administrator and overseer of the entire property but in
was invested in the MBP lot cannot simply be brushed aside by the BIR as self-serving, in the light of previous cases
due time he shall cause the partition and distribution of the respective shares of all the rightful
holding that Citytrust was indeed handling the money of the Employees’ Trust Fund. These documents, together with the
heirs.
notarized Memorandum of Agreement, clearly establish that petitioner, on behalf of the Employees’ Trust Fund, indeed
d. However, defendant Tagwalan filed an application for free patent over the parcel of land with the
invested in the purchase of the MBP lot. Thus, the
Bureau of Lands which led to an issuance of a free patent
e. Tagwalan was able to have the property registered solely in his name since 'he falsified the application
Employees’ Trust Fund owns 49.59% of the MBP lot.
for free patent by stating falsely that he was the only heir of Pangawaran (Moro) when in truth and in
fact there were other heirs like the plaintiff Tanak and the other defendants;
- Since MJOPFI has proven that the income from the sale of the MBP lot came from an investment by the
f. Tagwalan exercised and usurped rights of ownership over the entire land as if he is the sole owner
Employees’ Trust Fund, petitioner, as trustee of the Employees’ Trust
thereof reaping therefrom the fruits of his own personal profit to the unlawful unjust and illegal
Fund, is entitled to claim the tax refund of P3,037,500 which was erroneously paid in the sale of the MBP lot.
 exclusion of herein plaintiff Tanak and she only knew about it ten years after the issuance of the free
patent.
g. The court dismissed for lack of jurisdiction and prescription stating that the complaint should have
been raised one year from the time the title arising from the free patent was given to Tanak.
4. Motion for Reconsideration Denied.
ISSUES:
1. W/N the lower court has jurisdiction? [YES]
2. W/N the lower court erred in ruling that the action has prescribed? [YES]
RULING:
1. THE LOWER COURT HAS JURISDICTION.
a. The petitioners' main purpose in bringing the action is to recover their rightful share of their
inheritance However, the lower court was of the opinion that "Tanak cannot get her rightful share in
the property unless and until the title issued has been cancelled." And that "once the title is cancelled
then the land automatically reverts to the public domain'
b. This is error on the part of the respondent court because when the patent was issued, the property in
question ceased to become part of the public domain and, therefore, even if respondent Tagwalan
eventually is proven to have procured the patent and the original certificate of title by means of fraud,
the land would not revert back to the state but will be partitioned among the rightful heirs which also
include Tagwalan and his co-respondents.
2. THE ACTION HAS NOT YET PRESCRIBED (RELEVANT TO CLASS)
a. The respondent court seems to be unmindful of the fact that since respondent Tagwalan, through
fraud was able to secure a title in his own name to the exclusion of his co-heirs who equally have the
right to a share of the land covered by the title, an implied trust was created in favor of said co-heirs.
Respondent Tagwalan is deemed to merely hold the property for their and his benefit.
b. it is clear that the prescriptive period which is applicable in this case is ten (10) years. Consequently,
the action of petitioner was not yet barred since it was filed on July 1, 1976 while the last day for filing
such action was on July 19, 1976, ten years after the issuance of the original certificate of title.
c. When a person through fraud succeeds in registering the property in his name, the law creates what
is called a "constructive or implied trust" in favor of the defrauded party and grants the latter the right
to recover the property fraudulently registered within a period of ten years
HEIRS OF EMILIO CANDELARIA vs. LUISA ROMERO et al
IMPORTANT DOCTRINES
Continuous recognition of a resulting trust, however, precludes any defense of laches in a suit to declare and enforce the
trust. The beneficiary of a resulting trust may, therefore, without prejudice to his right to enforce the trust, prefer the trust
to persist and demand no conveyance from the trustee. It being alleged in the complaint that Lucas held the title to the lot
in question merely in trust for Emilio and that this fact was acknowledged not only by him but also by his heirs, herein
defendants — which allegation is hypothetically admitted.
FACTS:
1.) The complaint was filed on Dec 20, 1956 by Ester Candelaria. in her own behalf and in representation of the other
alleged heirs of Emilio Candelaria, alleges in substance that sometime prior to 1917 the latter and his brother Lucas
Candelaria bought each a lot in the Solokan Subdivision on the installment basis;
2.) Lucas Candelaria bought each a lot in the Solokan Subdivision on the installment basis; that Lucas paid the first two
installments corresponding to his lot, but faced with the inability of meeting the subsequent installments because of
sickness which caused him to be bedridden, he sold his interest therein to his brother Emilio, who then reimbursed him
the amount he had already paid, and thereafter continued payment of the remaining installments until the whole purchase
price had been fully satisfied for Lucas Candelaria, Emilio having no interest therein.
3.) That in 1918 a transfer certificate of title for said lot was issued by the register of deeds of Manila in the name of "Lucas
Candelaria married to Luisa Romero".
4.) Lucas held the title to said lot merely in trust for Emilio acknowledge by the latter's heirs. that Lucas' possession of the
lot was merely tolerated by Emilio and his heirs; that from the time Emilio bought the lot from his brother, Lucas had been
collecting all its rents for his own use as financial aid to him as a brother in view of the fact that he was bedridden without
any means of livelihood and with several children to support and
5.) Emilio was confined at the Culion Leper Colony up to his death on February 5, 1936, Lucas had been giving part of the
rents to Fortunata Bautista, the second wife of Emilio, in accordance with the latter's wishes.
6.) Later, Lucas died in August, 1942, survived by the present defendants, who are his spouse Luisa Romero and several
children; and that said defendants are still in possession of the lot, having refused to reconvey it to plaintiff despite
repeated demands.
Defendants filed their motion to dismiss for lack of cause of action, the court favored the motion. In the order granting
the motion to dismiss, the lower court held that an express and not an implied trust was created as may be gleaned from
the facts alleged in the complaint, which is unenforceable without any writing.
ISSUES: Whether or not resulting trust exists; whether ot not trust be barred by lapse of time.
RULING:
1.) YES .In the present case, the complaint expressly alleges that "although Lucas Candelaria had no more interest over the
lot, the subsequent payments made by Emilio Candelaria until fully paid were made in the name of Lucas Candelaria,
with the understanding that the necessary documents of transfer will be made later, the reason that the transaction being
brother to brother." From this allegation, it is apparent that Emilio Candelaria who furnished the consideration intended
to obtain a beneficial interest in the property in question. Having supplied the purchase money, it may naturally be
presumed that he intended the purchase for his own benefit. Indeed, it is evident from the above-quoted allegation in the
complaint that the property in question was acquired by Lucas Candelaria under circumstances which show it was
conveyed to him on the faith of his intention to hold it for, or convey it to the grantor, the plaintiff's predecessor in interest.
2.) Constructive or implied trusts may, of course, be barred by lapse of time. The rule in such trusts is that laches constitutes
a bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of the facts giving rise
to the trust. Continuous recognition of a resulting trust, however, precludes any defense of laches in a suit to declare and
enforce the trust. The beneficiary of a resulting trust may, therefore, without prejudice to his right to enforce the trust,
prefer the trust to persist and demand no conveyance from the trustee. It being alleged in the complaint that Lucas held
the title to the lot in question merely in trust for Emilio and that this fact was acknowledged not only by him but also by
his heirs, herein defendants — which allegation is hypothetically admitted.
 CUAYCONG vs. CUAYCONG
FACTS:
 Eduardo Cuaycong, married to Clotilde de Leon, died on June 21, 1936 without issue but with three brothers
and a sister surviving him: Lino, Justo, Meliton and Basilisa. Upon his death, his properties were distributed to
his heirs as he willed except two haciendas in Victorias, Negros Occidental, devoted to sugar and other crops —
the Haciendas Sta. Cruz and Pusod both known as Hacienda Bacayan. Hacienda Bacayan is comprised of eight
(8) lots which are titled in the name of Luis D. Cuaycong, son of Justo Cuaycong. Lino Cuaycong died and was
survived by his children. Meliton and Basilisa died without any issue.
 Plaintiffs, surviving heirs of Lino, filed a suit against Justo, Luis and Benjamin Cuaycong for conveyance of
inheritance and accounting alleging, among others that: Eduardo Cuaycong had an understanding and made
arrangements with Luis Cuaycong and his father Justo Cuaycong, that it was their desire to divide Haciendas
Sta. Cruz and Pusod among his brothers and sisters and his wife Clotilde. Eduardo had asked his brothers and
sister to pay his wife P75,000 (the haciendas were worth P150,000) and then divide equally the remaining one-
half share of Eduardo. And the brothers and sister failed to pay the 1/2 share of Clotilde over the two haciendas
which were later acquired by Luis Cuaycong thru clever strategy, fraud, misrepresentation causing the issuance
in his name of certificates of title covering said properties. The plaintiffs also claimed that Eduardo had an
arrangement with Justo and Luis that the latter will hold in trust what might belong to his brothers and sister as
a result of the arrangements and deliver to them their share when the proper time comes.
 Luis, on the other hand, moved to dismiss the case on the grounds of unenforceability of the claim under the
statute of frauds, no cause of action and bar of causes of action by the statute of limitations.
 Court of First Instance ruled that the trust alleged refers to an immovable which under Article 1443 of the Civil
Code may not be proved by parole evidence. And dismissed the case for the plaintiffs’ failure to file an amended
complaint mentioning or alleging therein the written evidence of the alleged trust. The plaintiffs thereafter
claimed that an implied trust is referred to in the complaint which, under Article 1457 of the Civil Code, may be
proved by parole evidence.
ISSUE: WON the trust is express or implied [EXPRESS]
RULING:
 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 (Art. 1141) 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, independently of the particular intention
of the parties. Thus, if the intention to establish a trust is clear, the trust is express; if the intent to establish a trust
is to be taken from circumstances or other matters indicative of such intent, then the trust is implied.
 From the provisions of the complaint herein, it is clear that 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.
ADAZA vs. CA
FACTS: In the lawful wedlock of Victor Adaza and Rosario Gonzales were born six (6) children: petitioner Horacio,
Homero, Demosthenes, respondent Violeta, Teresita and Victor, Jr.The head of the family, Victor Adaza, Sr., died in 1956,
while the wife died in 1971. During his lifetime, Victor Adaza, Sr. executed a Deed of Donation dated 10 June 1953, covering
the parcel of land subject matter of this case, located in Zamboanga del Norte, in favor of respondent Violeta, then still
single. The donation was accepted in the same instrument, which both donor and donee acknowledged before Notary
Public ex officio Milagros C. Galeposo. The land donated was then part of the public domain, being disposable public
land, and had been held and cultivated by Victor Adaza, Sr. for many years.
Violeta, with the aid of her brother Horacio, filed a homestead application covering the land involved. Original Certificate
of Title was issued in her name. She declared the property in her name under Tax Declaration No. 9808. But in 1962, Violeta
and her husband Lino Amor, obtained a loan from the Philippine National Bank which they secured with a mortgage on
the land covered by the OCT of the said lot. The land was, and continued to be administered by Violeta's brother, Homero
Adaza.
Petitioner was appointed as a Fiscal of Davao Oriental in 1967 and had to leave the lot. Four years later, he returned and
during the town Fiesta he invited Violeta and his other siblings to gather in his house. There, he asked Violeta to sign a
waiver stating that the lot which their father donated is owned in common, and that ½ of the lot and its improvements
were to be conveyed and transferred to petitioner.
A few months later, Violeta filed a complaint for the annulment of the Deed of Waiver which petitioner asked her to sign,
alleging that she was the absolute owner of the lot, and that the signing of the Waiver was done with fraud,
misrepresentation, and undue influence.
In his answer, petitioner Horacio claims that the Deed of Waiver is valid because the said lot was owned by him and
Violeta although only registered in the latter’s name only, and that she signed the document freely and voluntarily.
ISSUE: Whether or not Victor Adaza Sr. really intended his donated properties to be shared by two of his children. [YES]
HELD: it may be noted that this is not a case of an older brother exploiting or cheating his younger sister. On the contrary,
the evidence showed that petitioner Horacio had taken care of his father and mother and of his sister Violeta, that petitioner
Horacio had been quite relaxed and unworried about the title remaining in the name of his sister alone until Violeta had
gotten married and her husband began to show what petitioner thought was undue and indelicate interest in the land in
Sinonok.
All the above circumstances lead this Court to the conclusion which Violeta had admitted in the Deed of Waiver, that is,
that the "property [here involved] is owned in common by [her] and [her] brother, Horacio G. Adaza, although the
certificate of title was issued only in [her] name." We believe and so hold that this statement is an admission that she held
half of the land in trust for petitioner Horacio. The execution of the Deed of Donation of 10 June 1953 by respondent
Violeta's father created an implied trust in favor of Violeta's brother, petitioner Horacio Adaza, in respect of half of the
property donated.
Art. 1449. There is also an implied trust when a donation is made to a person but it appears that
although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial
interest or only a part thereof
CONSTRUCTIVE TRUST
DIAZ vs. GORRICHO & AGUADO
Plaintiff - appellants: MANUEL DIAZ, CONSTANCIA DIAZ and SOR PETRA DIAZ
Defendant - appellees: CARMEN GORRICHO and her husband FRANCISCO AGUADO
FACTS:
- Lots Nos. 1941 and 3073 of the Cadastral Survey of Cabanatuan originally belonged to the spouses Francisco Diaz and
Maria Sevilla. Francisco Diaz died in 1919, survived by his widow Maria Sevilla and their three children — Manuel Diaz,
Lolita Diaz, and Constancia Diaz.
- Sometime in 1935, appellee Carmen J. Gorricho led an action against Maria Sevilla and a writ of attachment was issued
upon the shares of Maria Sevilla in said lots numbers 1941 and 3073.
- Said parcels were sold at public auction and purchased by the plaintiff herself, Carmen Gorricho. Maria Sevilla failed to
redeem within one year, the acting provincial sheriff executed a final deed of sale in favor of Carmen Gorricho. In said
final deed, however, the sheriff conveyed to Gorricho the whole of parcels numbers 1941 and 3073 instead of only the half-
interest of Maria Sevilla.
- Pursuant to said deed, Carmen Gorricho obtained TCT Nos. 1354 and 1355 in her name on April 13, 1937, and has been
possessing said lands as owner ever since.
- In November, 1951, Maria Sevilla died. The following year, on March 31, 1952, her children Manuel Diaz, Constancia
Diaz, and Lolita Diaz led the present action against Spouses Gorricho to compel them to execute in their favor a deed of
reconveyance over an undivided one-half interest over the lots in question. (the share of their deceased father Francisco
Diaz illegally conveyed by the provincial sheriff to Gorricho), which Spouses Gorricho were allegedly holding in trust for
them.
- Gorricho answered denying the allegations of the complaint and alleging that plaintiffs' action has long prescribed.
- After trial, the court below rendered judgment, holding that while a constructive trust in plaintiffs' favor arose when
defendant Gorricho took advantage of the error of the provincial sheriff in conveying to her the whole of the parcels in
question and obtained title in herself, the action of plaintiffs was, however, barred by laches and prescription.
ISSUE WON laches constitutes a bar to actions to enforce a constructive trust [YES]
RULING:
Article 1456 of the new Civil Code, while not retroactive in character, merely expresses a rule already recognized by our
courts prior to the Code's promulgation. Appellants are in error in believing that like express trusts, such constructive
trusts may not be barred by lapse of time. The American law on trusts has always maintained a distinction between express
trusts created by intention of the parties, and the implied or constructive trusts that are exclusively created by law, the
latter not being trusts in their technical sense. The express trusts disable the trustee from acquiring for his own benefit the
property committed to his management or custody, at least while he does not openly repudiate the trust, and makes such
repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared
that the rules on adverse possession do not apply to "continuing and subsisting" (i.e., unrepudiated) trusts.
But in constructive trusts, as pointed out by the court below, the rule is that laches constitutes a bar to actions to enforce
the trust, and repudiation is not required, unless there is concealment of the facts giving rise to the trust.
"SEC. 581 (old CC). In case of Constructive or Resulting Trust. — Laches constitutes a defense to a suit to declare
and enforce a constructive trust, and for the purpose of the rule, repudiation of the constructive trust is not
required, and time runs from the moment that the law creates the trust, which is the time when the cause of
action arises. But laches does not exist while the trustee fraudulently and successfully conceals the facts giving
rise to the trust, although the concealment must be adequately pleaded by the plaintiff in a suit to declare a trust
where the delay is apparent on the face of his pleading.
The reason for the difference in treatment is obvious. In express trusts, the delay of the beneficiary is directly attributable
to the trustee who undertakes to hold the property for the former, or who is linked to the beneficiary by confidential or
fiduciary relations. The trustee's possession is, therefore, not adverse to the beneficiary, until and unless the latter is made
aware that the trust has been repudiated. But in constructive trusts (that are imposed by law), there is neither promise nor
fiduciary relation; the so- called trustee does not recognize any trust and has no intent to hold for the beneficiary; therefore,
the latter is not justified in delaying action to recover his property. It is his fault if he delays; hence, he may be estopped
by his own laches.
Of course, the equitable doctrine of estoppel by laches requires that the one invoking it must show, not only the
unjustified inaction, but that some unfair injury would result to him unless the action is held barred. This requirement
the appellees have not met, and they are thereby bereft of the protection of this rule.
Nevertheless, we are of the opinion that the judgment of dismissal should be upheld, because the appellants' cause of
action to attack the sheriff's deed and cancel the transfer certificates of title issued to the appellees accrued from the
year of issuance and recording, 1937, and appellants have allowed fifteen (15) years to elapse before taking remedial
action in 1952. Even considering that the youngest among them (Constancia), born in 1918, only became of age in 1939,
more than sufficient time (thirteen years) has been allowed to elapse, notwithstanding the appellees' public assertion of
title during this entire period, to extinguish appellants' action. Under the old Code of Civil Procedure (Ch. III), in force at
the time, the longest period of extinctive prescription was only ten years.
SING JUCO & SING BENGCO vs. ANTONIO SUNYANTONG & (wife) VICENTE LLORENTE DE
SUNYANTONG
NOTES: Sale of land, employee
DOCTRINE: Equitable trust" by virtue of which the things acquired by anemployee is deemed not to have been acquired
for his own benefit or that of any other person but for his principal, and held in trust for the latter
FACTS:
On May 20, 1919, the plaintiffs obtained from Maria Gay a written option to purchase an estate known as "San Antonio
Estate." The term of the option expired, but the plaintiffs had it extended verbally until 12 o 'clock noon of June 17, 1919.
Antonio Sunyantong was at the time an employee of the plaintiffs and that they reposed confidence in him and did not
mind disclosing their plans to him, concerning the purchase of the aforesaid estate and the progress of their negotiations
with Maria Gay. On a conference where Sing Juco, Sing Bengco and Antonio Sunyantong was present, the latter suggested
that it would be better if they would wait for a few days elapse before accepting the terms of the transfer proposed by
Maria Gay as not to give the impression that they are coveting the property. In the morning of June 17, 1919, on the midday
of which the term of plaintiff's option to purchase was to expire, said defendant Antonio Sunyantong called at the house
of Mari Gay when she was having breakfast, and offered to buy the estate on the same terms proposed by her not yet
accepted by the plaintiffs, making the offer to buy not for the benefit of the plaintiff's, but for own wife, his codefendant
Vicenta Llorente de Sunyatong. In view of the opportunity that offered itself, but respecting the option granted the
plaintiffs, Maria Gay communicated by telephone with Manuel Sotelo, who was acting as broker for the plaintiffs in these
transactions, and told him that another buyer of the estate had presented himself who would accept the terms proposed
by her and that she would like to know immediately what decision had been reached by the plaintiffs on the matter. For
their reply, Sing Bengco instructed Sotelo to inform her at the time that if she did not care to wait until 12 o'clock, "ella
cuidado" (she could do as she pleased) (in Tagalog, it is equivalent to siya ang bahala or ambut sa iya which may have
different interpretations). Interpreting the phrase to mean that the plaintiffs waived their option to buy, Maria Gay closed
the sale of the estate in favor of the defendant Antonio Sunyantong.
ISSUE: W/N the plaintiff-petitioners has a remedy to acquire the property? [YES]
RATIO:
YES, the plaintiff-petitioners may acquire the property by virtue of an equitable trust. The fact cannot be denied that he
was the cause of the option having precipitously come to such an end. His disloyalty to his employers was responsible for
Maria Gay not accepting the terms proposed by the plaintiffs, because of being certain of another less exigent buyer. Such
an act of infidelity committed by a trusted employee calculated to redound to his own benefit and to the detriment of his
employers cannot pass without legal sanction. In the North American law such sanction is expressly recognized, and the
transaction of this nature might be regarded as an "equitable trust" by virtue of which the things acquired by an employee
is deemed not to have been acquired for his own benefit or that of any other person but for his principal, and held in trust
for the latter. (There is no assignment of errors in this case.)
CORNELIA M HERNANDEZ vs. CECILIO F. HERNANDEZ
RECIT READY FACTS:
The Republic of the Phil, thru DPWH, offered to purchase a portion of a parcel of land for use in the expansion of the South
Luzon Expressway, one of the affected lands by the expansion project belonged to the Hernandez family (pro-indiviso
owned by 3 people, respondent’s aunt, cousins, and mother). Respondent Cecilio was herein appointed to be the
representative of the owners of the land in the expropriation proceeding, and, later during the course of the proceeding,
was also appointed by the court as a commissioner to help determine the just compensation for the properties sought to
be taken by the DPWH. After expropriation case had been concluded and petitioner Cornelia sought to withdraw her
share to the compensation, respondent issued a Receipt and Quitclaim document in his favor for her to sign to which she
now seeks to annul.
IMPORTANT RULING:
In regard to property subject matter of agency, an agent is estopped from acquiring or asserting a title adverse to that of
the principal (analogous to that of a trustee) and he cannot, consistent with the principles of good faith, be allowed to
create in himself an interest in opposition to that of his principal or certui que trust
SERVICE CONTRACT: invalidated by mistake
RECEIPT AND QUITCLAIM DOC: invalidated by fraud
SPA: fraudulent to Court and Hernandezes for Respondent to act as both disinterested commissioner and attorney-in-fact
in behalf of defendants
FACTS:
1. Republic of the PH, thru DPWH, offered to purchase a portion of a parcel of land for use in the expansion of the
South Luzon Expressway
a. 80,133 sqm;
b. Land located at San Rafael, Sto. Tomas, Batangas;
c. TCT # T-36751 of Registry of Deeds in Tanauan, Batangas
2. Land is pro-indiviso owned by:
a. CORNELIA Hernandez (petitioner)
b. ATTY. JOSE Hernandez (deceased father of RESPONDEN and represented by PACIENCIA
Hernandez)
c. MENA Hernandez (also deceased and represented by her heirs)
3. Initial purchase price offered by gov’t was P35/sqm for 14,643 sqm of said land but Hernandez family rejected
offer until the last offer stood at P70/sqm (but still rejected)
a. Aug 9, 1993: Government was forced to file an expropriation case
i. First docketed Civil Case # T-859, then Civil Case # C-023 before Branch Clerk of Court
Francisco Balderama issued certificate certifying that the docket numbers stated refers to
same case
4. Civil Case C-023: different parcels of land in Brgy. Tripache, Tanauan Batangas, which belongs to 34 families
(including Hernandezes) affected by expansion project of DPWH
a. Civil Case C-022: similar case later consolidated with C-023
b. Land in San Rafael, Sto Tomas, Batangas, which belonged to 23 families also subject of expropriation
5. Nov 11, 1993: owners of Hernandez property executed a letter indicating:
a. That Cecilio is the representative of the owners of the land
b. The compensation he gets in doing such job
i. 20% of any amount in excess of P70/sqm of our respective shares as success fee for your
efforts in representing us in CC # T-859.
ii. “Whatever excess beyond P300/sqm of the area shall likewise be given to you as additional
incentive.
iii. “P1,500 each for the preparation of the pleading before the RTC and such other reasonable
expenses of litigation pro-indiviso
6. Sept 13, 1996 (during course of expropriation proceedings): Order was issued by RTC Branch 83, informing
parties of appointment of commissioners to help determine the just compensation (Cecilio was appointed as one
of the commissioners to represent the defendants in Civil Case C-022)
7. Oct 18, 1996: CORNELIA, and her other co-owners who were also signatories of the Nov 11 letter, executed an
irrevocable SPA appointing CECILIO as their “true and lawful attorney” with respect to the expropriation of
the property
a. That SPA irrevocable and binding all throughout the negotiation and shall bind all successors and
assigns re any negotiation with the gov’t until consummation and binding transfer of a portion to be
sold to that entity with Cecilio as the sole signatory re rights and interests of signatories therein.
i. No compensation scheme mentioned
8. Jan 7, 1998: just compensation for the condemned properties was fixed and penned by Judge Rosales of RTC
Branch 83 and pegged at P1,500/sqm for 14,643 sqm of Hernandez’ property (total of P21,964,500 to be received
by Hernandez family)
a. Included in decision is directive of court to pay P4,000 to Cecilio as Commissioner’s fees
9. Oct 6, 1999: CORNELIA executed a Revocation of the SPA withdrawing the authority earlier granted to CECILIO
in the Oct 1996 SPA
10. Dec 28, 1999: (w/o termination of counsel on record) CORNELIA, with a new lawyer, moved for the withdrawal
of her 1/3 share of the just compensation (P7,321,500)
a. Jan 24, 2000: Judge Rosales granted motion (even with the irregularity that motion was not filed by
the counsel on record) with the condition that the money be released only to the attorney-in-fact
(CECILIO)
i. TC took cognizance of the irrevocable nature of SPA and Cecilio was able to withdraw THE
ENTIRE SUM of ~ P22 million
11. Feb 7, 2000: Cornelia received BPI check amounting to P1,123,000 from Cecilio accompanied by a Receipt and
Quitclaim document in favor of Cecilio stating that:
a. Amount received will be the share of Cornelia in the just compensation paid;
b. In consideration of the payment, it will release and forever discharge Cecilio from any action,
damages, claims, or demands; and
c. Cornelia will not institute any action and will not pursue her complaint or opposition to the release
to Cecilio or his heirs or assigns, of the entire amount deposited in the Land Bank of the Philippines
or in any other account with any bank, deposited or will be deposited therein, in connection with the
Civil Case # C-023, representing the total just compensation of properties.
12. Cornelia allegedly forced to receive amount because she needed the money immediately for medical expenses
due to her frail condition
a. Later sought the help of her niece (DAISY CASTILLO) to get the decision in Civil Case C-022 and it
was only then that she learned that she was entitled to receive P7,321,500
b. June 22, 2000: in a Letter demanded the accounting of the proceeds but was unanswered
13. Sept 18, 2000: Cornelia filed a Complaint for Annulment of Quitclaim and Recovery of Sum of Money and
Damages (Civil Case # 00-1184) before the RTC Branch 150 (Makati)
a. Cecilio failed to file answer even after 10 days extension to file answer (present in address but refused
to receive summons and copy of complaint)
i. Upon motion of petitioner, Cecilio declared in default
 b. Petitioner allowed to adduce evidence ex parte
i. Cecilio tried to file MR to lift the order of default but TC found that leeway given to file
answer was more than enough
14. RTC: denied motion and nullified quitclaim
15. CA: did not discuss whether default order proper but reversed and set aside the ruling of trial court, holding
the receipt and quitclaim document to be valid
a. Cecilio avers that he is the agent of the owners of the property and bound himself to render service
on behalf of her cousins, aunt, and mother, by virtue of the request of the latter. As an agent, Cecilio
insists that he be given the compensation he deserves based on the agreement made in the Nov 1993
letter (service contract) which was signed by all the parties
ISSUES: W/N Receipt and Quitclaim document contrary to law and jurisprudence [YES]
RULING:
1. SERVICE CONTRACT OF NOV 11 1993 WAS VITIATED BY MISTAKE (VOID)
a. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud
is voidable.
i. In determining whether consent is vitiated by any of the circumstances mentioned, courts
are given a wide latitude in weighing the facts or circumstances in a given case and in
deciding in their favor what they believe to have actually occurred
A. Will consider the age, physical infirmity, intelligence, relationship, and the
conduct of the parties at the time of the making of the contract and subsequent
thereto, irrespective of whether the contract is in public or private writing
ii. For mistake to invalidate consent, it should refer to the substance of the thing, which is the
object of the contract, or those conditions which have principally moved one or both parties
to contract
b. The conditions that moved the parties to the contract were the base price at P70/sqm set by the gov’t
before expropriation case, the increase of which would be compensated by 20% of whatever may be
added to the base price; and the ceiling price of P300/sqm, which was considerably high compared to
the P70 base, which would therefore allow Cecilio to get all that which would be in excess of the
elevated ceiling
i. The ceiling was, from the base, extraordinarily high, justifying the extraordinary grant of
all that would exceed the ceiling.
ii. Obvious mistake was made when parties were moved by these base and ceiling prices into
the agreement on the scheme of compensation.
c. Trial court deviated from the principle that just compensation is determined by the value of the land
at the time either of the taking or filing (1993)
i. Instead they used the 1998 value of P1,500/sqm because “the prices of real estate in Batangas
[had] skyrocketed in the past 2 yrs”
d. Cecilio’s position would have given him 83.07% of the just compensation due Cornelia as a co-owner
of the land and no evidence would show that Cornelia agreed, by way of Nov 1993 letter, to give
Cecilio 83.07% of the proceeds
2. RECEIPT AND QUITCLAIM DOCUMENT IS AN ACT OF FRAUD (VOID)
a. What is on record is that Cornelia asked for an accounting of the just compensation from Cecilio
several times but request was unheeded
i. Cecilio violated the fiduciary relationship of an agent and principal
b. Instead of an accounting, Cornelia received a receipt and quitclaim document that was ready for
signing which Cornelia nevertheless signed due to her frail condition and urgent need for money in
order to buy medicine
i. Cecilio did not disclose the truth and instead of coming up with the request of HIS AUNT,
he made a contract intended to bar her from recovering any further sum of money from sale
of her property
c. Preparation of receipt and quitclaim document which he asked Cornelia to sign indicate that even
Cecilio doubted that he could validly claim 83.07% of the price of Cornelia’s land on the basis of the
Nov 1993 agreement
i. In regard to property subject matter of agency, an agent is estopped from acquiring or
asserting a title adverse to that of the principal (analogous to that of a trustee) and he cannot,
consistent with the principles of good faith, be allowed to create in himself an interest in
opposition to that of his principal or certui que trust
3. CECILIO FOISTERED FRAUD ON BOTH COURT AND THE HERNANDEZ WHEN AFTER HIS
APPOINTMENT AS COMMISSIONER, HE ACCEPTED THE APPOINTMENT BY THE HERNANDEZ TO
“REPRESENT” & “SUE FOR” THEM
a. The SPA granted to Cecilio must be appreciated in the light of the fact that Cecilio was appointed and
acted as appraisal commissioner in expropriation case under Sec 5, Rule 67 of the Rules of Court
i. “[…] the court shall appoint not more than 3 competent and disinterested persons as commissioners
to ascertain and report to the court the just compensation for the property sought to be taken”
ii. DISINTERESTED: free from bias, prejudice, or partiality
b. When Cecilio accepted the position as commissioner and proceeded to perform the duties of such
commissioner until the completion of his mandate as such, he created a barrier that prevented his
performance of his duties under the SPA.
i. Due to the nature of his duties and functions as commissioner, he became an officer of the
court whose duty is to ascertain and report to the court the just compensation for the
property to be taken
ii. Cannot be allowed to consider his acting for expropriation court as an act for or in behalf of
the defendant in the same case; he could not have been hearing officer AND defendant at
the same time
GAYONDATO vs. TREASURER OF THE PHILIPPINE ISLANDS
DOCTRINES:
• If a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title,
acondition which is generally in a broad sense termed “constructive trust” in favor of the defrauded party, but the use of
the word “trust” in this sense is not technically accurate and is not in the kind of trust referred to in section 106 of the Land
Registration Act and which must be taken in its technical and more restricted sense.
FACTS:
Domingo Gayondato owned three parcels of land, which he inherited from his mother, Ramona Granada in 1896. In 1899,
Domingo married Adela Gasataya and had a child, herein petitioner Rosario Gayondato. Upon Domingo’s death in 1902,
Gabino Gasataya (Adela’s father) took charge of the lands in question, and eventually turned them over in 1908 when
Adela married Domingo Cuachon. Said lands were included in a cadastral case. In a hearing, Domingo Cuachon appeared
on behalf of his wife and stepdaughter and filed claims for the lots by way of answers in which he stated that the lots were
the property of “his wife Adela Gasayata and of her daughter, fifteen years old of age”. Notwithstanding said statement,
the CFI erroneously decreed the registration of the lots in the name of Adela alone. Subsequently, Adela, with consent of
her husband, mortgaged the property to National Bank, which Francisco Rodriguez eventually purchased (assumed
liability of mortgage and other debts).
Plaintiff brought an action to recover damages for the erroneous registration against Adela Gasataya, Domingo Cuachon,
Francisco Rodriguez and the Insular Treasurer as defendants. TC ruled in favor of the plaintiff ordering Gasataya and
Cauchon for indemnity. However, the Insular Treasurer and Francisco Rodriguez were absolved from the complaint.
Plaintiff appeals.
ISSUES
1. W/N the court erred in absolving the Insular Treasurer. [YES]
2. W/N the plaintiff can recover damages by virtue of a trust. (Agency related) [YES]
RATIO:
1. YES. Sections 102-103 of the Land Registration Act provides that the liability of the land registration assurance
fund is not confined to cases where the erroneous registration is due to omission, mistake or malfeasance on the part of
the employees of the registration court, but extends to all cases in which a person is wrongfully deprived of any kind or
any interest therein, without negligence on his part, through the bringing of the land under provisions of said Act.
“In all such actions where there are defendants other than the Treasurer and damages shall have been recovered, no final
judgment shall be entered against the Treasurer until
execution against the other defendants shall be returned unsatisfied in whole or in part, and the officer returning the
execution shall certify that the amount still due upon the execution cannot be collected except by application to the
assurance fund. Thereupon the court having jurisdiction of the action being satisfied as to the truth of such return, may,
upon proper showing, order the amount of the execution and costs, or so much thereof as remains unpaid, to be paid by
the Treasurer out of the assurance fund.”
As the plaintiff appellant was a minor at the time of the registration of the land and consequently no negligence can be
imputed to her in failing to appear in court and assert her right, it is clear from the sections that in the absence of special
circumstances to the contrary the assurance fund is secondarily liable for the damages suffered by her through the
wrongful registration.
2. YES. The Attorney-General raises the point that Domingo Cuachon and Adela Gastaya prior to the registration
of the land must be considered to have held the property in trust and for the benefit of the plaintiff; and therefore it falls
under section 106 of the Land Registration Act which provides that “the assurance fund shall not be liable to pay for any
loss or damage or deprivation occasioned by a breach of trust, whether express, implied, or constructive, by any registered
owner who is a trustee, or by the improper exercise of any sale in mortgage foreclosure proceedings”
If a person obtains legal title to property by fraud or concealment, court of equity will impress upon the title a so called
constructive trust in favor of the defrauded party. The use of the word “trust” in this sense is not technically accurate. If
this is the kind of constructive trust referred to in section 106, clearly, the plaintiff cannot recover damages from the
1Section 38. If the court after hearing finds that the applicant has title as stated in his application, and proper for
registration, a decree of confirmation and registration shall be entered. Every decree of registration shall bind the land,
and quiet title thereto, subject only to the exceptions stated in the following section. It shall be conclusive upon and
against all persons, including the Insular Government and all the branches thereof, whether mentioned by name in the
application, notice, or citation, or included in the general description “To all whom it may concern.” Such decree shall
not be opened by reason of the absence, infancy, or other disability of any person affected thereby, nor by any
proceeding in any court for reversing judgments or decrees; subject, however, to the right of any person deprived of land
assurance fund. But that is not the case. The term trust in section 106 must be taken in its technical and more restricted
sense, which as defined by Bouvier pertains to “a right of property, real or personal, held by one party for the benefit of
another.”
In this case, plaintiff was a minor at the time of the land registration. She could not have created a technical trust of any
kind. The mother was only a natural guardian as to her daughter’s person. She had no right of property or administration
in her daughter’s estate and was nothing but a mere trespasser.
ESCOBAR vs. LOCSIN
IMPORTANT DOCTRINES
A trust is sacred and inviolable. The Courts have shielded fiduciary relations against every manner of chicanery or
detestable design cloaked by legal technicalities. The Torrens system was never calculated to foment betrayal in the
performance of a trust.
FACTS:
1. Escobar filed a complaint praying for the reconveyance of a lot of the Cuyapo Cadastre in Nueva Ecija. He asserts
that he is the owner of such lot and that during the cadastral proceedings he asked Domingo Sumangil to claim
the lot for her. [take note that Escobar was illiterate]
2. Sumangil committed a breach of trust by claiming the lot for himself.
3. The CFI of Nueva Ecija found that the Escobar is the real owner of the lot which she had acquired in 1914 by
donation propter nuptias from Pablo Ringor; that plaintiff had since that year been in possession of the land; and
that the land had been decreed in the cadastral proceedings in favor of Domingo Sumangil.
4. The trial court, while recognizing that the plaintiff had the equitable title and the defendant the legal title,
nevertheless dismissed the complaint because the period of one year provided for in section 38 of the Land
Registration Act (No. 496) for the review of a decree had elapsed, and the plaintiff had not availed herself of
this remedy.
ISSUES: W/N the lower court erred in dismissing the complaint ? [YES]
RULING:
1. THE CASE DID NOT SEEK THE REVIEW OF THE CADASTRAL PROCEEDINGS BUT IS AN
ENFORCEMENT OF A TRUST
a. Section 38 of Act No. 4961 does not apply.
b. The estate of Juana Ringor as the successor in interest of Domingo Sumangil, is in equity bound to
execute a deed of conveyance of this lot to the cestui que trust, the plaintiff Escobar. [note that Sumangil
had died already by this time]
or of any estate or interest therein by decree of registration obtained by fraud to file in the Court of Land Registration a
petition for review within one year after the entry of the decree, provided no innocent purchaser for value has acquired
an interest. If there is any such purchaser, the decree of registration shall not be opened, but shall remain in full force and
effect forever, subject only to the right of appeal hereinbefore provided. But any person aggrieved by such decree in any
case may pursue his remedy by action for damages against the applicant or any other person for fraud in procuring the
decree. Whenever the phrase “innocent purchaser for value” or an equivalent phrase occurs in this Act, it shall be
deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

c. A trust — such as that which was created between the plaintiff and Domingo Sumangil — is sacred
and inviolable. The Courts have therefore shielded fiduciary relations against every manner of
chicanery or detestable design cloaked by legal technicalities. The Torrens system was never
calculated to foment betrayal in the performance of a trust.
LOPEZ vs. CA
IMPORTANT DOCTRINES
If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered
a trustee of an implied trust for the benefit of the person from whom the property comes.
The apparent mistake in the adjudication of the disputed properties to Jose created a mere implied trus
t of the constructive variety in favor of the beneficiaries of the Fideicomiso
1.) On 23 March 1968, Juliana Lopez executed a notarial will, whereby she expressed that she wished to
constitute a trust fund for her paraphernal properties, denominated as Fideicomiso de Juliana Lopez Manzano
(Fideicomiso), to be administered by her husband. If her husband were to die or renounce the obligation,
her nephew, Enrique Lopez, was to become administrator and executor of the Fideicomiso.
2.) Two-‐thirds (2/3) of the income from rentals over these properties were to answer for the education
of deserving but needy honor students .
3.) One-‐third (1/3) was to shoulder the expenses and fees of the administrator.
9.) The properties which Jose had alleged as registered in his and Juliana’s names, including the disputed
lots, were adjudicated to Jose as heir, subject to the condition that Jose would settle the obligations
charged on these properties.
10.) The probate court, thus, directed that new certificates of title be issued in favor of Jose as the
registered owner thereof in its Order dated 15 September 1969.
11.) On even date, the certificates of title of the disputed properties were issued in the name of Jose.
The Fideicomiso was constituted in S.P No. 706 encompassing one-‐half (1/2) of the Abra de Ilog lot on
Mindoro, the 1/6 portion of the lot in Antorcha St. in Balayan, Batangas and all other properties inherited
ab intestato by Juliana from her sister, Clemencia, in accordance with the order of the probate court in
S.P. No. 706.The disputed lands were excluded from the trust.
13.) Jose died on 22 July 1980, leaving a holographic will disposing of the disputed properties to
respondents. The will was allowed probate on 20 December 1983 in S.P. No. 2675 before the RTC of
Pasay City.
14.) Pursuant to Jose’s will, the RTC ordered on 20 December 1983 the transfer of the disputed properties
to the respondents as the heirs of Jose. Consequently, the certificates of title of the disputed properties
were cancelled and new ones issued in the names of respondents.
15.)
Petitioner’s father, Enrique Lopez, also assumed the trusteeship of Juliana’s estate. On 30 August 1984, t
he RTC of Batangas, Branch 9 appointed petitioner as trustee of Juliana’s estate in S.P. No. 706.

16.)
4.) As to her conjugal properties, Juliana bequeathed the portion that she could legally dispose to her
On 11 December 1984, petitioner instituted an action for reconveyance of parcels of land with sum of
husband, and after his death, said properties were to pass to her biznietos or great grandchildren.
money before the RTC of Balayan, Batangas against respondents.
5.) Juliana initiated the probate of her will five (5) days after its execution, but she died on 12 August
17.)
1968, before the petition for probate could be heard. The petition was pursued instead in Special Proceedings
The complaint essentially alleged that Jose was able to register in his name the disputed properties, whi
by her husband, Jose, who was the designated executor in the will.
ch were the paraphernal properties of Juliana, either during their conjugal union or in the course of the
performance of his duties as executor of the testate estate of Juliana and that upon the death of Jose,
6.) On 7 October 1968, the Court of First Instance, Branch 3, Balayan, Batangas, acting as probate court,
the disputed properties were included in the inventory as if they formed part of Jose’s estate when in
admitted the will to probate and issued the letters testamentary to Jose. Jose then submitted an inventory
fact Jose was holding them only in trust for the trust estate of Juliana.
of Juliana’s real and personal properties with their appraised values, which was approved by the probate
court.
10.)
The RTC dismissed the petition on the ground of prescription. The CA denied the appeals filed by bot
7.) Thereafter, Jose filed a Report dated 16 August 1969, which included a proposed project of partition.
h parties. Hence, this petition.
Jose proceeded to offer a project of partition. Then, Jose listed those properties which he alleged were
registered in both his and Juliana’s names, totaling 13 parcels in all. The disputed properties consisting of
ISSUES: Whether a constructive trust was constituted over the disputed properties when Jose, the trustee, registered
six (6) parcels, all located in Balayan, Batangas, were included in said list.
them in his name [YES]
8.) On 25 August 1969, the probate court issued an order approving the project of partition. As to the
RULING:
properties to be constituted into the Fideicomiso, the probate court ordered that the certificates of title
thereto be cancelled, and, in lieu thereof, new certificates be issued in favor of Jose as trustee of the
YES. On the premise that the disputed properties were the paraphernal properties of Juliana which shou
Fideicomiso covering one-‐half (1/2) of the properties listed under paragraph 14 of the project of partition;
ld have been included in the Fideicomiso, their registration in the name of Jose would be erroneous an
and regarding the other half, to be registered in the name of Jose as heir of Juliana.
d Jose’s possession would be that of a trustee in an constructive trust. Implied trusts are those which,
without being expressed, are deducible from the nature of the transaction as matters of intent or for
Constructive Trust which are super-
induced on the transaction by operation of law as matters of equity, independently of the particular int
ention of the parties.
The provision on implied trust governing the factual milieu of this case is provided
in Article 1456 of the Civil Code, which states: ART. 1456
If property is acquired through mistake or fraud, the person obtaining it is, by force of law, conside
red a trustee of an implied trust for the benefit of the person from whom the property comes.
If property is acquired through mistake or fraud, the person obtaining it is, by force of law, conside
red a trustee of an implied trust for the benefit of the person from whom the property comes. Evide
ntly, Juliana’s testamentary intent was to constitute an express trust over her paraphernal properties whic
h was carried out when the Fideicomiso was established in S.P. No. 706. However, the disputed properti
es were expressly excluded from the Fideicomiso.
The disputed properties were excluded from the Fideicomiso at the outset. Jose registered the disputed
properties in his name partly as his conjugal share and partly as his inheritance from his wife Juliana,
which is the complete reverse of the claim of the petitioner, as the new trustee, that the properties are
intended for the beneficiaries of the Fideicomiso.
Furthermore, the exclusion of the disputed properties from the Fideicomiso was approved by the probate
court and, subsequently, by the trial court having jurisdiction over the Fideicomiso. The registration of t
he disputed properties in the name of Jose was actually pursuant to a court order.
PASIO vs. MONTERROYO
Petitioners: ROGELIO, GEORGE, LOLITA, ROSALINDA, and JOSEPHINE, all surnamed PASIÑO, represented by their
father and attorney-in-fact JOSE PASIÑO
Respondents: DR. TEOFILO EDUARDO F. MONTERROYO, substituted by ROMUALDO MONTERROYO, MARIA
TERESA MONTERROYO, and STEPHEN MONTERROYO
FACTS:
 Lot No. 2139 was part of a 24-hectare land occupied, cultivated and cleared by Laureano Pasiño. The 24-hectare
land formed part of the public domain which was later declared alienable and disposable. Laureano filed a
homestead application over the entire 24-hectare land. The Bureau of Forestry informed him that the tract of
land covered by his application was not needed for forest purposes. Still, the Director of Lands issued an Order
approving Laureano's homestead application and stating that Homestead Entry No. 154651 was recorded in his
name for the land applied for by him.
 Two years after Laureano's death, the Director of Lands issued an Order for the issuance of a homestead patent
in favor of Laureano, married to Graciana Herbito. Laureano's heirs did not receive the order and consequently,
the land was not registered under Laureano's name or under that of his heirs. The property was covered by Tax
Declaration No. 11102 in the name of Laureano with Graciana as administrator
 A Cadastral Survey was conducted in Iligan City. 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 claimed that Laureano's heirs, headed by his son Jose, continuously possessed and cultivated both
lots. Jose's co-heirs executed a Deed of Quitclaim renouncing their rights and interest over the land in favor of
Jose. Jose secured a title in his name for Lot No. 2138. Later, Jose alienated Lot No. 2139 in favor of his children
(petitioners in this case) who simultaneously filed applications for grant of Free Patent Titles over their
respective shares of Lot No. 2139 before the Land Management Bureau of the Department of Environment and
Natural Resources, which was granted
 Petitioners alleged that their possession of Lot No. 2139 was interrupted on 3 January 1993 when respondents
forcibly took possession of the property
 Respondents alleged that they had been in open, continuous, exclusive and notorious possession of Lot No.
2139, by themselves and through their predecessors-in-interest. They alleged that Rufo Larumbe sold Lot No.
2139 to Petra Teves who later executed a deed of sale over it in favor of Vicente Teves. Vicente then executed a
pacto de retro sale over the land in favor of Arturo Teves who sold the lot in favor of respondents' father, Dr.
Monterroyo by virtue of an oral contract. Arturo executed a Deed of Confirmation of Absolute Sale of
Unregistered Land in favor of Dr. Monterroyo's heirs.
 Respondents alleged that Jose was not the owner of Lot No. 2139 and as such, he could not sell the land to his
children. They alleged that petitioners' OCTs were null and void for having been procured in violation of the
Public Land Act. They further alleged that the Land Management Bureau had no authority to issue the free
patent titles because Lot No. 2139 was a private land.
 RTC: ruled in favor of respondents
 CA: affirmed RTC's decision
ISSUE: WON respondents are the rightful owners and possessors of Lot No. 2139 [YES]
HELD:
 Under the principle of constructive trust, registration of property by one person in his name, whether by
mistake or fraud, the real owner being another person, impresses upon the title so acquired the character of
a constructive trust for the real owner, which would justify an action for reconveyance.
 In the action for reconveyance, the decree of registration is respected as incontrovertible but what is sought
instead is the transfer of the property wrongfully or erroneously registered in another's name to its rightful
owner or to one with a better right.
 If the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere
trustee, and the real owner is entitled to file an action for reconveyance of the property.
 In the case before us, respondents were able to establish that they have a better right to Lot No. 2139 since they
had long been in possession of the property in the concept of owners, by themselves and through their
predecessors-in-interest. Hence, despite the irrevocability of the Torrens titles issued in their names and even if
they are already the registered owners under the Torrens system, petitioners may still be compelled under the
law to reconvey the property to respondents.
HOME GUARANTY CORP vs. LA SAVOIE
FACTS: La Savoie was a Real Estate Development Corporation incorporated on April 2, 1990. With the onset of the Asian
financial crisis in 1997, the devaluation of the Philippine peso and due to other factors such as lack of working capital; high
interest rates, penalties, and charges; low demand for real estate properties; and poor peace and order situations in some
of its project sites, La Savoie found itself unable to pay its obligations to its creditors. Thus, in 2003, it filed before the
Makati RTC a “petition for the declaration of state of suspension of payments with approval of proposed rehabilitation
plan” under the Interim Rules of Procedure on Corporate Rehabilitation. During the hearing on the petition, Home
Guaranty appeared filing an Opposition although it was not a creditor of the Petitioner because it allegedly had an interest
in some of the properties of La Savoie.
Home Guaranty Corporation noted that through the "La Savoie Asset Pool Formation and Trust Agreement" (Trust
Agreement), La Savoie obtained financing for some of its projects by conveying in trust by La Savoie, as trustor, to Planters
Development Bank, as trustee, some of the assets of La Savoie. These properties constituted into the La Savoie Asset Pool.
Home Guaranty Corporation added that in the course of its business, La Savoie collected a total amount of P60,569,134.30
from the buyers of some of the properties covered by the Asset Pool. This amount, however, was not remitted by La Savoie
to the trust. With La Savoie's failure to complete some of its projects and failure to remit sales collections, the Asset Pool
defaulted in redeeming and paying interest on the LSDC certificates. Thus, La Savoie's investors placed a call on the
guaranty. With La Savoie's failure to remit collections, however, Home Guaranty Corporation held in abeyance the
settlement of the investors' call. This settlement was then overtaken by the filing of La Savoie's Petition for Rehabilitation.
La Savoie filed its Comment/ Opposition, claiming It argued that the assignment of assets to the Asset Pool was not
absolute and subject to certain conditions. Specifically, it asserted that for the assignment to take effect, Home Guaranty
Corporation had to first pay the holders of the LSDC certificates. Thus, La Savoie claimed that the properties comprising
the Asset Pool remained to be its assets.
The RTC denied due course to La Savoie’s Petition for Rehabilitation. La Savoie filed an Appeal.
In the meantime, Home Guaranty paid a total of P128 Million in favour of Planter’s Bank as part of the Guaranty. In turn,
Planter’s Bank issued a Deed of Assignment and Conveyance in favour of Home Guaranty for the ownership of the “La
Savoie Asset Pool” in its possession.
After payment of Home Guaranty to Planter’s, the Court of Appeals found that La Savoie "convincingly showed that it
could undertake to market its projects through [the] Pag-Ibig Overseas Program, sell the existing inventories of unsold
subdivision lots and use the un-remitted collections due to HGC which will be converted as additional loan to fund its on-
going projects." And that Home Guaranty had no right to make such payment.
Hence, Home Guaranty filed a Petition for Certiorari under Rule 45 before the Supreme Court.
ISSUE: Whether or not a Constructive Trust exists between the parties. [YES]
HELD: A trust relation, with respect to the Asset Pool, in which La Savoie is the trustor, Planters Development Bank is the
trustee, and the holders of the LSDC certificates are the beneficiaries. A credit relation, with respect to the LSDC certificates,
in which La Savoie is the debtor (Planters Development Bank being a mere nominal issuer), the holders of the LSDC
certificates are the creditors, and Home Guaranty Corporation is the guarantor. (It will be recalled that Home Guaranty
Corporation itself acknowledged, in the Opposition it filed before the Regional Trial Court, that it was not a creditor of La
Savoie.) An agency relation, with respect to the transfer of the real properties in the Asset Pool should the guarantor pay
for the LSDC certificates, in which La Savoie is the principal and Planters Development Bank is the agent. In this event,
Home Guaranty Corporation is the transferee.
RULES ON PRESCRIPTION ON TRUSTS
TONG vs. GONG TIAT KUN
Petitioners JOSE JUAN TONG, ET AL.
Respondents GO TIAT KUN, ET AL.
FACTS:
The instant petition stemmed from an action for Nullification of Titles and Deeds of Extra-Judicial Settlement and Sale
and Damages instituted by the petitioners against the respondents over a parcel of land known as Lot 998-A of the
Cadastral Survey of Iloilo, having an area of 2,525 square meters and now covered by Transfer Certificate of Title (TCT)
No. 134082.
Petitioners are nine of the ten children of Spouses Juan Tong (Juan Tong) and Sy Un, namely: Jose Juan Tong, Lucio
Juan Tong, Simeon Juan Tong, Felisa Juan Tong Cheng, Luisa Juan Tong Tan, Julia Juan Tong Dihiansan, Ana Juan Tong
Dy, Elena Juan Tong Yng Choan, and Vicente Juan Tong, who being already deceased, is survived by his widow, Rosita
So and their children, Chanto Juan Tong and Alfonso SoChanto Juan Tong.
Completing the ten children of Spouses Juan Tong is the deceased Luis Juan Tong, Sr. (Luis, Sr.) whose surviving heirs
are: his spouse Go Tiat Kun, and their children, Leon, Mary, Lilia, Tomas, Luis, Jr., and Jaime, who being already dead,
is survived by his wife, Roma Cokee Juan Tong (respondents).
Sometime in 1957, Juan Tong had a meeting with all his children to inform them of his intention to purchase Lot 998 to
be used for the family's lumber business called "Juan Tong Lumber". Since he was a Chinese citizen and was
disqualified from acquiring the said lot, the title to the property will be registered in the name of his eldest son, Luis,
Sr., who at that time was already of age and was the only Filipino citizen among his children.
On May 1957, Juan Tong bought Lot 998 from the heirs of Jose Ascencio. Accordingly, on May 1957, TCT No. 10346 was
issued by the Register of Deeds in the name of Luis, Sr.
On December 1978, the single proprietorship of Juan Tong Lumber was incorporated into a corporation known as the
Juan Tong Lumber Inc. However, Sy Un and Juan Tong (Spouses) both died intestate.
On May 1981, Luis, Sr. died and the respondents, being his surviving heirs, claimed ownership over Lot 998 by
succession, alleging that no trust agreement exists and it was Luis, Sr. who bought Lot 998.
On July 1982, the respondents executed a Deed of Extra-Judicial Settlement of Estate of Luis, Sr., adjudicating unto
themselves Lot 998 and claiming that the said lot is the conjugal property of Luis, Sr., and his wife, which the Juvenile
and Domestic Relations Court of Iloilo City approved on June 1982. On July 1982, the said deed was registered causing the
cancellation of TCT No. 10346 and the issuance of TCT No. T-60231 in the name of the respondents.
Subsequently, the respondents agreed to subdivide Lot 998, two new titles were issued:
(1) TCT No. 97068 over Lot 998-A in the name of Go Tiat Kun and her children
(2) TCT No. T-96216 over Lot 998-B in the name of Luis, Jr.
After Lot 998 was subdivided, Luis, Jr. sold Lot 998-B to Fine Rock Development Corporation (FRDC), which in turn
sold the same to Visayas Goodwill Credit Corporation (VGCC).
It was only after the petitioners received a letter from VGCC, on August 31, 1995, that they discovered about the breach of
the trust agreement committed by the respondents. To protect their rights, the petitioners filed an action for Annulment
of Sales, Titles, Reconveyance and Damages of Lot 998-B docketed as Civil Case No. 22730 against Luis, Jr., FRDC and
VGCC.
Consequently, Lot 998-B was reconveyed to the petitioners and TCT No. T-14839 was issued under their names including
the late Luis, Sr. Then, on February 2001, Go Tiat Kun executed a Deed of Sale of Undivided Interest over Lot 998-A in
favor of her children, Leon, Mary, Lilia, Tomas, and the late Jaime, resulting in the issuance of TCT No. T-134082 over Lot
998-A.
Hence, on August 2005, the petitioners filed the instant case for Nullification of Titles, and Deeds of Extra-judicial
Settlement and Sale and Damages claiming as owners of Lot 998-A.
RTC RULING: (Favored the Petitioners)
The court rendered its judgment in favor of the petitioners, ruling that there was an implied resulting trust between
Juan Tong, Luis, Sr., the petitioners and the respondents, over Lot 998.
The trial court found that Luis Sr. was a mere trustee, and not the owner of Lot 998, and the beneficial interest over said
property remained in Juan Tong and subsequently in the Juan Tong Lumber, Inc.
The trust is further established by the fact that Luis Sr., during his lifetime:
1) did not build a house or any structure thereon or make use of the property in any manner;
2) resided with his family together with his parents, brothers and sisters in Juan Tong building in front of the said lot;
(3) have acquired a residential property at Ledesco Village, La Paz, Iloilo City and other places, where his heirs now reside;
and
(4) did not exercise any other act of ownership over the said lot.
Since the petitioners were deprived of Lot 998-A through the fraudulent acts of the respondents, the petitioners are entitled
to the reconveyance of the properties, and the validity of TCT No. T-134082 which covers Lot 998-A as well as the previous
titles and documents of conveyance covering the said lot were null and void.
Thus judgment is hereby rendered in favor of the plaintiffs and against the defendants:
1. Declaring null and void the following:
a. Deed of Extrajudicial Settlement of Estate of Deceased Person executed by the Defendants on July
1982 executed by Go Tiat Kun, Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and
Tomas Juan Tong, and the late Jaime Juan Tong;
b. Transfer Certificate of Title No. T-60231 in the name of defendants Go Tiat Kun, Leon Juan Tong, Mary
Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong;
c. Transfer Certificate of Title No. T-97068 in the name of defendants Go Tiat Kun, Leon Juan Tong, Mary
Juan Tong, Lilia Juan Tong, and Tomas Juan Tong and the late Jaime Juan Tong;
d. Deed of Sale of Undivided Interest over Real Property executed by defendant Go Tiat Kun on
February 24, 2001 in favor of defendants Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and
Tomas Juan Tong and the late Jaime Juan Tong;
e. Transfer Certificate of Title No. T-134082, and all titles issued subsequent thereto, covering Lot 998-A,
in the names of defendants Leon Juan Tong, Mary Juan Tong, Lilia Juan Tong, and Tomas Juan
Tong and the late Jaime Juan Tong.
2. Ordering defendants to jointly and severally pay Jose Juan Tong Moral Damages of Php200,000.00, and the
plaintiffs Litigation Expenses of Php100,000.00 and Attorney's Fees of Php200,000.00.
3. Ordering the Register of Deeds of the City of Iloilo to issue a new transfer certificate of title covering Lot
998-A in the name of the plaintiffs and Luis Juan Tong, in equal shares.
4. The Counterclaim is hereby ordered dismissed for lack of merit.
CA RULING: (Favored the Respondents)
The appellate court, more particularly ruled that an express trust was created because there was a direct and positive act
from Juan Tong to create a trust. And when an express trust concerns an immovable property or any interest therein, it
may not be proved by parol or oral evidence, but must be proven by some writing or deed. The CA also ruled that even
granting that an implied resulting trust was created; the petitioners are still barred by prescription because the said
resulting trust was terminated upon the death of Luis, Sr. and was then converted into a constructive trust. Since in an
action for reconveyance based on a constructive trust prescribes in ten years from the issuance of the Torrens title over
the property, counting from the death of Luis, Sr. in 1981, the action has already prescribed.
ISSUES: W/N
1) Was there an implied resulting trust constituted over Lot 998 when Juan Tong purchased the property and registered it
in the name of Luis, Sr.?
2) May parol evidence be used as proof of the establishment of the trust?
3) Were the petitioners' action barred by prescription, estoppel and laches?
SC RULING: (Favored the Petitioners)
At the outset, it is worthy to note that the issues posited in this case are not novel because in Civil Case No. 22730 involving
Lot 998-B which forms part of Lot 998, the trial court already found that said lot was held in trust by Luis Sr. in favor of
his siblings by virtue of an implied resulting trust. The trial court's decision was then affirmed by the CA in CA-G.R. CV
No. 56602, and this Court in G.R. No. 156068. Thus, Lot 998-A, the subject of this instant case, and Lot 998-B, are similarly
situated as they comprise the subdivided Lot 998, the property which in its entirety was held in trust by Luis Sr. in favor
of his siblings. A review of the records shows an intention to create a trust between the parties. Although Lot 998 was
titled in the name of Luis, Sr., the circumstances surrounding the acquisition of the subject property eloquently speak
of the intent that the equitable or beneficial ownership of the property should belong to the Juan Tong family.
First, Juan Tong had the financial means to purchase the property for P55,000.00.
On the other hand, respondents failed to present a single witness to corroborate their claim that Luis, Sr. bought the
property with his own money since at that time, Luis Sr., was merely working for his father where he received a monthly
salary of P200.00 with free board and lodging.
Second, the possession of Lot 998 had always been with the petitioners. The property was physically possessed by Juan
Tong and was used as stockyard for their lumber business before it was acquired, and even after it was acquired. In fact,
the lot remains to be the stockyard of the family lumber business until this very day.
The appellate court's conclusion that an express trust was created because there was a direct and positive act by Juan Tong
to create a trust must inevitably yield to the clear and positive evidence on record which showed that what was truly
created was an implied resulting trust. As what has been fully established, in view of the mutual trust and confidence
existing between said parties who are family members, the only reason why Lot 998 was registered in the name of Luis,
Sr. was to facilitate the purchase of the said property to be used in the family's lumber business since Luis, Sr. is the only
Filipino Citizen in the Juan Tong family at that time. As the registered owner of Lot 998, it is only natural that tax
declarations and the corresponding tax payment receipts be in the name of Luis, Sr. so as to effect payment thereof.
The principle of a resulting trust is based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have been contemplated by the parties. They
arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby
becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another.
On the other hand, a constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation.
Constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains
or holds the legal right to property which he ought not, in equity and good conscience, to hold.
The Court is in conformity with the finding of the trial court that an implied resulting trust was created as provided
under the first sentence of Article 1448 which is sometimes referred to as a purchase money resulting trust, the elements
of which are:
a) an actual payment of money, property or services, or an equivalent, constituting valuable consideration
b) such consideration must be furnished by the alleged beneficiary of a resulting trust.
Here, the petitioners have shown that the two elements are present in the instant case. Luis, Sr. was merely a trustee of
Juan Tong and the petitioners in relation to the subject property, and it was Juan Tong who provided the money for the
purchase of Lot 998 but the corresponding transfer certificate of title was placed in the name of Luis, Sr. The principle that
a trustee who puts a certificate of registration in his name cannot repudiate the trust by relying on the registration is one
of the well-known limitations upon a title. A trust, which derives its strength from the confidence one reposes on another
especially between families, does not lose that character simply because of what appears in a legal document. 17
Article 1457 of our Civil Code authorizes the admission of parol evidence to prove their existence.
Parol evidence that is required to establish the existence of an implied trust necessarily has to be trustworthy and it
cannot rest on loose, equivocal or indefinite declarations.
Contrary to the CA's finding that there was no evidence on record showing that an implied resulting trust relation arose
between Juan Tong and Luis, Sr., the Court finds that the petitioners before the trial court, had actually adduced
sufficient evidence to prove the intention of Juan Tong to transfer to Luis, Sr. only the legal title of Lot 998, with
attendant expectation that Luis, Sr. would hold the property in trust for the family. The evidence of course is not
documentary, but rather testimonial.

WHEREFORE, in consideration of the foregoing premises, the instant petition is hereby GRANTED.
The Decision dated October 2010 and Resolution dated March 2011 of the Court of Appeals are REVERSED and SET
ASIDE.
The Decision dated May 2009 of the Regional Trial Court of Iloilo City is REINSTATED.