trusts complete

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TRUSTS (Rule 98 Parol Evidence Rule 130 Sec 9; Arts.

1440-1457)

1. Concept

SOTTO vs. TEVES

FACTS:

Subject of the plaintiffs'action for declaration of ownership and/or

reconveyance, and for the recovery of possession, rentals, damages

and attorney's fees, are five (5) parcels of land, all located in Cebu

City.

Properties originally belonged to the conjugal partnership of the

spouses FlorentinoRallos and Maria Fadullon. When

FlorentinoRallos died, the parcels of land in question, together with

the other properties comprising the estate of the deceased,

descendedto his sole heirs, his widow, Maria Fadullon, and two

children, named Concepcion and Carmen Rallos. The lawyer to

whom the Rallos heirs entrusted the settlement of the estate was

Atty. Filemon Sotto.

Shortly after the closure of the probate proceeding in 1913, Atty.

Sotto married Carmen Rallos. Carmen died in 1945 without leaving

any issue. Concepcion died later leaving many children. Maria

Fadullon predeceased her two daughters. Atty. Sotto died intestate

on October 10, 1966.

Competing for the ownership of the five lots are the direct

descendants and blood relatives of FlorentinoRallos and Maria

Fadullon, opposed by the administrator of the intestate estate of

Atty. Sotto. The grandchildren of FlorentinoRallos and Maria

Fadullon, some of whom are assisted by their spouses, are the

plaintiffs in this case. Defendant administrator represents Atty.

Sotto's children out of wedlock. It is claimed by the defendant that

Atty. Sotto was at the time of his death the owner of the five lots in

question.

In life, Atty. Filemon Sotto was a very prestigious man. He wielded

tremendous social and political influence. Successively, he was

municipal councilor, vice-president of Cebu City, Assemblyman,

Senator and Delegate to the Constitutional Convention of 1934.

When his life, however, was almost at an end, he was declared

incompetent.

All along, the direct descendants and blood relatives of

FlorentinoRallos had rested on the belief that the properties in

question, which are the fruits of the sweat and toil of their

grandfather, would one day be delivered unto them. The revelation

of Cesar Sotto, however, led the plaintiffs to the discovery that all

the properties in question were now titled in the name of Atty.

Sotto. and were in danger of falling into the hands of his children

out of wedlock, who are total strangers to the spouses Rallos and

Fadullon. Upon such discovery, the plaintiffs initiated the present

lawsuit forthwith."

On June 13, 1967, the herein private respondents(heirs of

Concepcion Rallos)filed suit in the Court of First Instance of Cebu

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against petitioner Marcelo Sotto, as administrator of the intestate

estate of Filemon Sotto, for the recovery of possession and

ownership of the 5 parcels of land described in the complaint, with

damages.

The complaint was based mainly upon the theory that a trust

relation was established and created with respect to the said

properties, with Atty. Filemon Sotto as trustee and as cestuisque

trust, his mother-in-law, Maria FadullonVda. deRallos; his wife,

Carmen Rallos; and his sister-in-law, Concepcion Rallos (predecessor

in interest of herein private respondents); and that in gross violation

of the trust reposed upon him by Concepcion Rallos and after her

death, by her heirs, the said Atty. Filemon Sotto, through sheer

manipulation, fraudulent acts and means, non-existent and void

decrees, fictitious sales and transfers, succeeded in causing the

transfer of the ownership of the properties to the name of his wife

Carmen Rallos, and finally to his name alone.

It is alleged that Atty. Filemon Sotto, having married Carmen Rallos,

thereby virtually making him a member of the Rallos family, was

looked upon as the head of the Rallos family to look after the

properties inherited from the deceased FlorentinoRallos including

the 5 parcels of land hereinbefore mentioned, thereby establishing

a trust relation with Don Filemon Sotto as trustee of the said

properties for the benefit of his mother-in-law Maria FadullonVda.

deRallos, his wife Carmen Rallos de Sotto and sister-in-law

Concepcion Rallos and the heirs of the latter, as cestuisque trust;

Answering the complaint, petitioner Marcelo Sotto denied that

there was any trust relation between Don Filemon Sotto on one

hand and Maria FadullonVda. deRallos, Carmen Rallos and

Concepcion Rallos on the other; that granting that such relationship

existed between Don Filemon Sotto and Concepcion Rallos, such a

relationship could not have endured until the death of Don Filemon

Sotto;

ISSUE:

Whether or not Don Filemon Sotto became a co-trustee by virtue of

his subsequent marriage to Carmen Rallos.

HELD:

The Court that Atty. Sotto can be regarded as the constructive

trustee of his wife and of the widow and descendants of

FlorentinoRallos

RATIO:

Under the law on Trusts, it is not necessary, as petitioner insists,

that the document expressly state and provide for the express trust,

for no particular words are required for the creation of an express

trust, it being sufficient that a trust is clearly intended. (Art. 1444,

N.C.C.)

Petitioner contends that the Court of Appeals erred in finding that

Don Filemon Sotto became a co-trustee by virtue of his subsequent

marriage to Carmen Rallos. Petitioner, while admitting that as a

lawyer some form of trust devolved upon the shoulders of Filemon

Sotto

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The trust on the shoulder of Filemon Sotto as the family lawyer in

the intestate proceedings of FlorentinoRallos was only coterminous

with the duration of the proceedings itself. The trust on the

shoulder of Filemon Sotto by virtue of his marriage to Carmen Rallos

was only as much as the trust on the shoulders of the two husbands

of Concepcion Rallos, Mariano Teves and Mariano Camara, and this

trust is not the trust defined in our Civil Code on express trust."

By reason of his marriage to Carmen Rallos, and on account of his

prestige and tremendous social and political influence, Atty. Sotto

enjoyed and exercised a personal, domestic, social, political and

moral ascendancy and superiority not only over his wife but also

over Maria Fadullon, Concepcion Rallos, and the latter's children.

The evidence reveals that the Ralloses looked up to Atty. Sotto as

protector and benefactor, as one on whom they could repose their

trust and confidence and who would take care of the properties

inherited from FlorentinoRallos, and on his part, Atty. Sotto

acknowledged his position as protector of the rights and interests of

the Rallos family.

Petitioner assumes that the respondent Court of Appeals found the

existence of an express trust between Atty. Filemon Sotto and the

heirs of FlorentinoRallos, which is not correct. What the appellate

court held is that Atty. Sotto can be regarded as the constructive

trustee of his wife and of the widow and descendants of

FlorentinoRallos.

The relation between parties, in order to be a fiduciary relation"

need not be legal, but may be moral, social, domestic or merely

personal; and where by reason of kinship, business association,

disparity in age or physical or mental condition or other reason, the

grantee is in an especially intimate position with regard to another

and the latter reposes a degree of trust and confidence in the

former, confidential relationship exists which prohibits the one

entrusted from seeking a selfish benefit for himself during the

course of relationship, and affords a basis for imposing a

constructive trust. (89 CJS Art. 151, pp. 1054-1057)

Atty. Sotto's special relationship with the Rallos heirs inhibited him

from any act or conduct that would put his interests above, or in

direct collision with, the interests of those who had reposed their

trust and confidence in him." 15

Private respondents are entitled to the relief prayed for, which is for

the reconveyance of the properties to them. Since

tMariaFadullonVda.deRallos died in 1938, her pro-indiviso share in

the properties then owned in co-ownership descended by intestacy

to her daughters, Concepcion and Carmen. Upon Carmen's death in

1945 without issue, the properties devolved to Concepcion

pursuant to their agreement in 1925 as testified to by PilarTeves.

When Concepcion Rallos died, her heirs, who are now the private

respondents, are entitled to these properties and should be

declared owners thereof. They are also entitled to the fruits

thereof, the rentals of the properties, including damages and

attorney's fees as assessed by the appellate court, which we find

just and reasonable.

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2. Express

Ramos vs. Ramos

FACTS:

Spouses Martin Ramos & Candida Tanate died and were survived by

their 3 legitimate children named Jose, Agustin and Granada. Martin

was also survived by his 7 natural children: Atanacia, Timoteo,

Modesto, Manuel, Emiliano, Maria & Federico.

Martin Ramos left considerable real estate to include Hacienda

Calaza and Hacienda Ylaya, both located in Negros Occidental.

Upon their father's death, his properties were left under the

administration of Rafael Ramos, the younger brother of their father

and their uncle. Rafael Ramos later gathered all the heirs saying he

would return the administration of the properties. He turned over

Hacienda Ylaya to Agustin Ramos and Hacienda Calaza to Jose

Ramos.

All said children continued to live in the same house of their father

in Hacienda Ylaya, now under support of Agustin Ramos. Plaintiffs

Modesto, Manuel and Maria eventually left house. Agustin

supported plaintiffs where they asked money pertaining to their

share in the produce of Hacienda Ylaya and received varied

amounts. Jose Ramos gave plaintiffs also money as their shares.

Upon Jose Ramos death, his widow Gregoria continued to give

plaintiffs money pertaining to their shares. She however stopped

doing so in 1951, telling them that the lessee Estanislao Lacson was

not able to pay the lease rental.

No accounting was made to plaintiffs by Jose Ramos, plaintiffs

reposing confidence in their elder brother.

Plaintiff Modesto was informed that a survey of the properties shall

be conducted but he did not intervene since he was promised that

Jose and Agustin would be the ones responsible to have it

registered in the names of the heirs. But apparently, what

happened include the following:

A project of partition was submitted. It was signed by the legitimate

children; by the 2 natural children, Atanacia and Timoteo, and by

Timoteo Zayco in representation of the other 5 natural children who

were minors. The conjugal hereditary estate was appraised at

P74,984.93. It consisted of 18 parcels of land, some head of cattle

and the advances to the legitimate children.

It was agreed that Jose Ramos would pay the cash adjudications to

Atanacia, Timoteo and Manuel, while Agustin would pay the cash

adjudications to Modesto, Federico, Emiliano and Maria. It was

further agreed that Jose and Agustin would pay their sister,

Granada, the sums of P3,302.36 and P14,273.78, respectively.

The estate had an appraised value of P74,985, or

P37,492brepresented the estate of Martin Ramos. 1/3 was the free

portion or P12,497. The shares of the 7 natural children were to be

taken from that 1/3 free portion. Dividing P12,497 by seven gives a

result of P1,783. The partition was made in accordance with the old

Civil Code.

Judge Richard Campbell approved the project of partition.

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Judge V. Nepomuceno asked the administrator to submit a report,

complete with the supporting evidence, showing that the shares of

the heirs had been delivered to them as required in the decision. In

a manifestation, which was signed by Jose, Agustin, Granada,

Atanacia and Timoteo, and by Timoteo Zayco, they acknowledged.

However, no receipts were attached to the manifestation.

Apparently, the manifestation was not in strict conformity with the

terms of judge's order.

Plaintiffs did not know that intestate proceedings were instituted

for the distribution of the estate of their father. They never

received any sum of money in cash the alleged insignificant sum

of P1,7855 each. Plaintiffs only discovered later on that the

property administered by their elder brother Jose had a Torrens

Title in the name of his widow and daughter. They were then

constrained to bring the present suit seeking for the reconveyance

in their favor by defendants Gregoria and daughter Candida and

husband Jose Bayot of their corresponding participations in said

parcels of land in accordance with article 840.

The petitioners action was predicated on the theory that their

shares were merely held in trust by defendants. Nonetheless, no

Deed of Trust was alleged and proven. Lower court dismissed the

complaint on the ground of res judicata. The plaintiffs appealed and

vigorously pressed on the Court their theory that they were

acknowledged natural children and were grievously prejudiced by

the partition and that the doctrine of res judicata should not bar

their action.

ISSUE: W/N plaintiffs action was barred by prescription, laches and

res judicata to the effect that they were denied of their right to

share in their fathers estate.

HELD: Yes. Trial court's judgment is affirmed with the clarification

that defendants' counterclaim is dismissed. No costs

RATIO:

The crucial issue is prescription. With it the question of res judicata

and the existence of a trust are inextricably interwoven.

Discussion on Trust:

A trust is defined as the right, enforceable solely in equity, to the

beneficial enjoyment of property, the legal title to which is vested in

another, but the words 'trust' is frequently employed to indicate

duties, relations, and responsibilities which are not strictly technical

trusts.A person who establishes a trust is called the trust or; one in

whom confidence is reposed is known as the trustee; and the

person for whose benefit the trust has been created is referred to

as the beneficiary.

Trusts are either express or implied. Express trusts are created by

the intention of the trust or of the parties. Implied trusts come into

being by operation of law. No express trusts concerning an

immovable or any interest therein may be proven by oral evidence.

An implied trust may be proven by oral evidence. No particular

words are required for the creation of an express trust, it being

sufficient that a trust is clearly intended. Express trusts are those

which are created by the direct and positive acts of the parties, by

some writing or deed, or will, or by words either expressly or

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impliedly evincing an intention to create a trust. Implied trust are

those which, without being expressed, are deducible from the

nature of the transaction as matters of intent, or which are super

induced on the transaction by operation of law as matters of equity,

independently of the particular intention of the parties. They are

ordinarily subdivided into resulting and constructive trusts

A resulting trust is broadly defined as a trust which is raised or

created by the act or construction of law, but in its more restricted

sense it is a trust raised by implication of law and presumed always

to have been contemplated by the parties, the intention as to which

is to be found in the nature of their transaction, but not expressed

in the deed or instrument of conveyance. On the other hand, a

constructive trust is a trust raised by construction of law, or arising

by operation of law; a trust not created by any words, either

expressly or impliedly evincing a direct intention to create a trust,

but by the construction of equity in order to satisfy the demands of

justice. It does not arise by agreement or intention but by operation

of law. If a person obtains legal title to property by fraud or

concealment, courts of equity will impress upon the title a so-called

constructive trust in favor of the defrauded party. A constructive

trust is not a trust in the technical sense

There is a rule that a trustee cannot acquire by prescription the

ownership of property entrusted to him, or that an action to

compel a trustee to convey property registered in his name in trust

for the benefit of the cestui qui trust does not prescribed, or that

the defense of prescription cannot be set up in an action to

recover property held by a person in trust for the benefit of

another, or that property held in trust can be recovered by the

beneficiary regardless of the lapse of time. This applies squarely to

express trusts. The basis of the rule is that the possession of a

trustee is not adverse. Not being adverse, he does not acquire by

prescription the property held in trust.

Discussion of Case:

The plaintiffs did not prove any express trust in this case. The

project of partition, the decision and the manifestation as to the

receipt of shares negatives the existence of an express trust. Those

public documents prove that the estate of Martin Ramos was

settled in that proceeding and that adjudications were made to his

seven natural children. A trust must be proven by clear,

satisfactory, and convincing evidence. It cannot rest on vague and

uncertain evidence or on loose, equivocal or indefinite

declarations. As already noted, an express trust cannot be proven

by parol evidence.

Plaintiffs did not also specify the kind of implied trust contemplated

in their action. We have stated that whether it is a resulting or

constructive trust, its enforcement may be barred by laches. In the

cadastral proceedings, which supervened after the closure of the

intestate proceeding, the lots involved were claimed by Jose Ramos

and Gregoria T. Ramos to the exclusion of the plaintiffs. After the

death of Jose Ramos, the said lots were adjudicated to his widow

and daughter. Transactions following this prove that the heirs of

Jose Ramos had repudiated any trust which was supposedly

constituted over Hacienda Calaza in favor of the plaintiffs. Under

Act 190, whose statute of limitations applies to this case (Art. 116,

Civil Code), the longest period of extinctive prescription was 10

years.

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Atanacia, Modesto and Manuel, all surnamed Ramos, were already

of age in 1914. From that year, they could have brought the action

to annul the partition. Maria and Emiliano reached the age of 21 in

1917. They could have brought the action. The actions were filed

more than 40 years after it accrued. The delay was inexcusable. The

instant action is unquestionably barred by prescription and res

judicata. Plaintiffs contend that the partition was not binding on

them. They ask that the case be remanded to the lower court for

the determination and adjudication of their rightful shares. All those

contentions would have a semblance of cogency and would deserve

serious consideration if the plaintiffs had not slept on their rights.

Cuaycong vs. Cuaycong

Facts: Eduardo Cuaycong, married to Clotilde de Leon, died in 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 the Haciendas Sta. Cruz and Pusod both known as Hacienda Bacayan. Hacienda Bacayan is in the name of Luis D. Cuaycong, son of Justo Cuaycong. The surviving children of Lino Cuaycong filed a suit against Justo and Luis Cuaycong for conveyance of inheritance and accounting, before the CFI of Negros Occidental alleging that:

1. Eduardo Cuaycong, made known to his brothers and sisters that he and his wife Clotilde had an understanding and made arrangements with Luis and Justo, that it was their desire to divide Hacienda Bacayan among his brothers and sister and his wife Clotilde.

2. The brothers and sister failed to pay for the share in the hacienda thus it was later acquired by Luis Cuaycong thru clever strategy, fraud, misrepresentation and in disregard of Eduardo's wishes by causing the issuance in his name of certificates of title covering said properties.

3. Plaintiffs demands had been refused and in 1960 during the estate proceedings of Praxedes Escalon, deceased wife of Luis D. Cuaycong, the latter fraudulently made it appear that the plaintiffs had nothing to do with the land; that Luis Cuaycong had possessed the lands since 1936. xxx 8. Said two haciendas were then the subject of certain transactions between the spouses Eduardo Cuaycong and Clotilde de Leon on one hand, and Justo and Luis D. Cuaycong on the other, Eduardo Cuaycong told his brother Justo and his nephew, defendant Luis D. Cuaycong, to hold in trust what might belong to his brothers and sister as a result of the arrangements and to deliver to them their shares when the proper time comes, to which Justo and Luis D. Cuaycong agreed.

CFI ruled that the trust alleged, particularly in paragraph 8 of the complaint, refers to an immovable which under Article 1443 of the Civil Code may not be proved by parole evidence. Plaintiffs were given 10 days to file an amended complaint mentioning or alleging therein the written evidence of the alleged trust, otherwise the case would be dismissed.

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Plaintiff thereafter manifested that the claim is based on an implied trust as shown by paragraph 8 of the complaint. They added that there being no written instrument of trust, they could not amend the complaint to include such instrument. Complaint was dismissed. Hence this petition. Issue: W/N the trust referred by the plaintiff is implied or expressed? Held: NO. It was an express trust. Express and Implied trust can be understood as:

Express Implied

- created by the intention of the trustor or of the parties

- comes into being by operation of law

- direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust

without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, in dependently of the particular intention of the parties

From these and from the provisions of paragraph 8 of the complaint itself, the court found that the plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor expressly told the defendants of his intention to establish the trust. Thus, such a situation definitely falls under Article 1443 (Express) of the Civil Code.

Further, the intention of the trustor to establish the alleged trust may be seen in paragraphs 5 and 6. Article 1453 (Implied trust) would apply if the person conveying the property did not expressly state that he was establishing the trust, unlike the case at bar where he was alleged to have expressed such intent.

Even assuming the alleged trust to be an implied one, the right alleged by plaintiffs would have already prescribed since starting in 1936 when the trustor died, plaintiffs had already been allegedly refused by the aforesaid defendants in their demands over the land, and the complaint was filed only in 1961 more than the 10-year period of prescription for the enforcement of such rights under the trust. It is settled that the right to enforce an implied trust in one's favor prescribes in ten (10) years. And even under the Code of Civil Procedure, action to recover real property such as lands prescribes in ten years.

LORENZO V. POSADAS

Facts:

On 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will

and considerable amount of real and personal properties. Hanleys

will provides the following: his money will be given to his nephew,

Matthew Hanley, as well as the real estate owned by him. It further

provided that the property will only be given ten years after Thomas

Hanleys death. Thus, in the testamentary proceedings, the Court of

First Instance of Zamboanga appointed P.J.M. Moore as trustee of

the estate. Moore took oath of office on March 10, 1924, and

resigned on Feb. 29, 1932. Pablo Lorenzo was appointed in his

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stead. Juan Posadas, Collector of Internal Revenue, assessed

inheritance tax against the estate amounting to P2,057.74 which

includes penalty and surcharge. He filed a motion in the

testamentary proceedings so that Lorenzo will be ordered to pay

the amount due. Lorenzo paid the amount in protest after CFI

granted Posadas motion. He claimed that the inheritance tax

should have been assessed after 10 years. He asked for a refund but

Posadas declined to do so. The latter counterclaimed for the

additional amount of P1,191.27 which represents interest due on

the tax and which was not included in the original assessment.

However, CFI dismissed this counterclaim. It also denied Lorenzos

claim for refund against Posadas. Hence, both appealed.

Issue:

1. Whether or not Hanley intended to create a trust in his will?

Held:

Yes.

Ratio:

The defendant maintains that it was the duty of the executor to pay

the inheritance tax before the delivery of the decedent's property

to the trustee. Stated otherwise, the defendant contends that

delivery to the trustee was delivery to the cestui que trust, the

beneficiery in this case, within the meaning of the first paragraph of

subsection (b) of section 1544 of the Revised Administrative Code.

This contention is well taken and is sustained. The appointment of

P. J. M. Moore as trustee was made by the trial court in conformity

with the wishes of the testator as expressed in his will. It is true that

the word "trust" is not mentioned or used in the will but the

intention to create one is clear. No particular or technical words are

required to create a testamentary trust. The words "trust" and

"trustee", though apt for the purpose, are not necessary. In fact, the

use of these two words is not conclusive on the question that a trust

is created. "To create a trust by will the testator must indicate in the

will his intention so to do by using language sufficient to separate

the legal from the equitable estate, and with sufficient certainty

designate the beneficiaries, their interest in the ttrust, the purpose

or object of the trust, and the property or subject matter thereof.

Stated otherwise, to constitute a valid testamentary trust there

must be a concurrence of three circumstances: (1) Sufficient words

to raise a trust; (2) a definite subject; (3) a certain or ascertain

object; statutes in some jurisdictions expressly or in effect so

providing." There is no doubt that the testator intended to create a

trust. He ordered in his will that certain of his properties be kept

together undisposed during a fixed period, for a stated purpose. The

probate court certainly exercised sound judgment in appointment a

trustee to carry into effect the provisions of the will.

3. Implied

JUAN VS. YAP

Facts

Spouses Maximo and Dulcisima Castaneda mortgaged to petitioner

Richard Juan, employee and nephew of respondent Gabriel Yap, Sr.

(respondent), two parcels of land in Talisay, Cebu to secure a loan of

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P1.68 million, payable within one year. The Contract was prepared

and notarized by Atty. Antonio Solon.

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 P2.2 million. No

certificate of sale was issued to petitioner, however, for his failure

to pay the sale's commission.

Respondent and the Castaneda spouses executed a memorandum

of agreement (MOA) where (1) the Castaneda spouses

acknowledged respondent as their "real mortgagee-creditor x xx

while Richard Juan [petitioner] is merely a trustee" of respondent;

(2) respondent agreed to allow the Castaneda spouses to redeem

the foreclosed properties for P1.2 million; and (3) the Castaneda

spouses and respondent agreed to initiate judicial action "either to

annul or reform the [Contract] or to compel Richard Juan to

reconvey the mortgagee's rights" to respondent as trustor. Three

days later, the Castaneda spouses and respondent sued petitioner

in the RTC of Cebu City 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 Castanedaspouses consigned with

the trial court the amount of P1.68 million as redemption payment.

Issue

Whether an implied trust arose between petitioner and respondent,

binding petitioner to hold the beneficial title over the mortgaged

properties in trust for respondent

Ruling

Yes. The question of the existence of an implied trust is factual,

hence, ordinarily outside the purview of a Rule 45 review of purely

legal questions. Nevertheless, our review is justified by the need to

make a definitive finding on this factual issue in light of the

conflicting rulings rendered by the courts below.

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 xx 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 xx 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

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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.

Kiel vs. Estate of Sabert

Facts

Albert F. Kiel commenced to work on certain public lands situated in

the municipality of Parang, Cotabato, known as Parang Plantation

Company. In 1910, Kiel and P. S. Sabert entered into an agreement

to develop the plantation. Sabert was to furnish the capital and Kiel

was to manage it. It seems that this partnership was formed so that

the land could be acquired in the name of Sabert, Kiel being a

German citizen and not deemed eligible to acquire public lands in

the Philippines.

During the World War, Kiel was deported from the Philippines. Five

persons, including P. S. Sabert, organized the Nituan Plantation

Company, to which Sabert transferred all the rights and interests of

the Parang Plantation Company. Kiel appears to have tried to secure

a settlement from Sabert. But Sabert's death came before any

amicable arrangement could be reached and before an action by

Kiel against Sabert could be decided. So these proceedings against

the estate of Sabert.

Issue

What is the nature of the proceeding? Is this an action to establish a

resulting trust in the land of Sabert? NO

Held

The court held that a ruling on the issue of establishing trust is not

needed. Note that the complaint as framed asks for a straight

money judgment against an estate. In no part of the complaint did

plaintiff allege any interest in land, claim any interest in land, or

pretend to establish a resulting trust in land. This is not an action

to establish trust in the land, because a trust will not be created

when, for the purpose of evading the law prohibiting one from

taking or holding real property, he takes a conveyance thereof in

the name of a third person.

Also, no partnership agreement in writing was entered into by Kiel

and Sabert. Thus the real issue is whether or not the alleged verbal

copartnership formed by Kiel and Sabert has been proved. The court

held that declarations of one partner, not made in the presence of

his copartner, are not competent to prove the existence of a

partnership between them, and that the existence of a partnership

cannot be established by general reputation, rumor, or hearsay.

Although we feel that competent evidence exists establishing the

partnership, Kiel under the facts had no standing in court to ask for

any part of the land and in fact he does not do so. His only legal

right is to ask for what is in effect an accounting with reference to

its improvements and income when Sabert became the trustee of

the estate on behalf of Kiel.

Kiel is not entitled to any share in the land itself, but he has clearly

shown his right to one-half of the value of the improvements and

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personal property on the land. The value of these improvements

and of the personal property cannot be ascertained from the record

and the case must therefore be remanded for further proceedings.

Thomson vs. CA

FACTS

Petitioner Marsh Thomson (Thomson) was the EVP and, later on,

the Management Consultant of private respondent, the American

Chamber of Commerce of the Philippines, Inc. (AmCham) for over

ten years, 1979-1989.

While petitioner was still working with private respondent, his

superior, A. Lewis Burridge, retired as AmChams President. Before

Burridge decided to return to his home country, he wanted to

transfer his proprietary share in the Manila Polo Club (MPC) to

petitioner. However, private respondent insisted on paying for the

share but had it listed in petitioners name, with the condition that

Thomson should execute such necessary documents to

acknowledge beneficial ownership thereof by the Chamber.

Burridge then transferred said proprietary share to petitioner, as

confirmed in a letter of notification to the MPC.

Upon his admission as a new member of the MPC, petitioner paid

the transfer fee of P40,000.00 from his own funds; but private

respondent subsequently reimbursed this amount. MPC issued

Proprietary Membership Certificate in favor of petitioner. But

petitioner, however, failed to execute a document recognizing

private respondents beneficial ownership over said share.

When petitioners contract of employment was up for renewal in

1989, he notified private respondent that he would no longer be

available as EVP. Still, the private respondent asked the petitioner

to stay on for another six (6) months. Petitioner indicated his

acceptance of the consultancy arrangement with a counter-

proposal in his letter stipulating his intention to retain the Polo Club

share, subject to his reimbursing the purchase price to the

Chamber, or P110,000.

Private respondent rejected petitioners counter-proposal.

Pending the negotiation for the consultancy arrangement, private

respondent executed on a Release and Quitclaim, stating that the

chamber intended to release Thomson from any and all existing

claims that it (Amcham) may have against the latter (Thomson). The

quitclaim however failed to mention the MPC share.

In April 1990, private respondent, through counsel sent a letter to

the petitioner demanding the return and delivery of the MPC share.

Failing to get a favorable response, private respondent filed a

complaint against petitioner.

The trial court awarded the MPC share to Thomson on the ground

that the Articles of Incorporation and By-laws of Manila Polo Club

prohibit artificial persons, such as corporations, to be club

members. The CA reversed the trial courts judgment and ordered

herein petitioner to transfer the MPC share to the nominee of

private respondent. Hence this petition for review.

ISSUES

(1) W/N AmCham was the beneficial owner of the disputed share

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(2) W/N it was right for Thomson to transfer said share to

Amchams nominee

DECISION and RATIO

YES

Petitioner claims ownership of the MPC share, asserting that he

merely incurred a debt to respondent when the latter advanced the

funds for the purchase of the share. On the other hand, private

respondent asserts beneficial ownership whereby petitioner only

holds the share in his name, but the beneficial title belongs to

private respondent. To resolve the first issue, we must clearly

distinguish a debt from a trust.

TRUST DEBT

Beneficiary of a trust has beneficial interest in the trust property

Creditor has merely a personal claim against the debtor

There is a fiduciary relation b/w a trustee and a beneficiary

There is no such relation b/w a debtor and creditor

Trust refers to a duty to deal w/ a specific property for the benefit of another

Debt implies merely an obli to pay a certain sum of money

If a creditor-debtor relationship exists, but not a fiduciary relationship between the parties, there is no express trust. However, it is understood that when the purported trustee of funds is entitled to use them as his or her own (and commingle them with his or her own money), a debtor-creditor relationship exists, not a trust.

In the present case, as the EVP of AmCham, petitioner occupied a fiduciary position in the business of Amcham. AmCham released the funds to acquire a share in the Club for the use of petitioner but obliged him to execute such document as necessary to acknowledge beneficial ownership thereof by the Chamber. A trust relationship is, therefore, manifestly indicated. Moreover, petitioner failed to present evidence to support his allegation of being merely a debtor when the private respondent paid the purchase price of the MPC share. Applicable here is the rule that a trust arises in favor of one who pays the purchase money of property in the name of another, because of the presumption that he who pays for a thing intends a beneficial interest therein for himself. Although petitioner initiated the acquisition of the share, evidence on record shows that private respondent acquired said share with its funds. Petitioner did not pay for said share, although he later wanted to. Private respondents evident purpose in acquiring the share was to provide additional incentive and perks to its chosen executive, the petitioner himself. Although the share was placed in the name of petitioner, his title is limited to the usufruct, that is, to enjoy the facilities and privileges of such membership in the club appertaining to the share. Such arrangement reflects a trust relationship governed by law and equity. While private respondent paid the purchase price for the share, petitioner was given legal title thereto. Thus, a resulting trust is presumed as a matter of law. Petitioner could have negated the

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trust agreement by contrary, consistent and convincing evidence on rebuttal. However, on the witness stand, petitioner failed to do so persuasively. We, therefore, find no reversible error in the respondent Courts holding that private respondent, AmCham, is the beneficial owner of the share in dispute. (1) YES Turning now to the second issue, the petitioner contends that the Articles of Incorporation and By-laws of Manila Polo Club prohibit corporate membership. However, private respondent does not insist nor intend to transfer the club membership in its name but rather to its designated nominee. In this case, the petitioner was the nominee of the private respondent to hold the share and enjoy the privileges of the club. But upon the expiration of petitioners employment as officer and consultant of AmCham, the incentives that go with the position, including use of the MPC share, also ceased to exist. It now behooves petitioner to surrender said share to private respondents next nominee, another natural person. Obviously this arrangement of trust and confidence cannot be defeated by the petitioners citation of the MPC rules to shield his untenable position, without doing violence to basic tenets of justice and fair dealing. However, we still have to ascertain whether the rights of herein parties to the trust still subsist. It has been held that so long as there has been no denial or repudiation of the trust, the possession of the trustee of an express and continuing trust is presumed to be that of the beneficiary, and the statute of limitations does not run between them. With regard to a constructive or a resulting trust, the statute of limitations does not begin to run until the trustee clearly repudiates or disavows the trust and such disavowal is

brought home to the other party, cestui que trust. The statute of limitations runs generally from the time when the act was done by which the party became chargeable as a trustee by operation of law or when the beneficiary knew that he had a cause of action in the absence of fraud or concealment. Noteworthy in the instant case, there was no declared or explicit repudiation of the trust existing between the parties. Such repudiation could only be inferred as evident when the petitioner showed his intent to appropriate the MPC share for himself. The statute of limitation could start to set in at this point in time. But private respondent took immediate positive action. Since the private respondent filed the necessary action on time and the defense of good faith is not available to the petitioner, there is no basis for any purported claim of prescription, after repudiation of the trust, which will entitle petitioner to ownership of the disputed share. As correctly held by the respondent court, petitioner has the obligation to transfer now said share to the nominee of private respondent.

Uy Aloc vs. Cho Jan Ling

FACTS

A number of Chinese merchants raised a fund by voluntary

subscription with which they purchased a valuable tract of land and

erected a large building to be used as a sort of club house for the

mutual benefit of the subscribers to the fund.

The subscriber organized themselves into an irregular association,

which had no regular articles in the commercial registry or

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elsewhere. The association did not have any existence as a legal

entity

It was agreed to have the title to the property placed in the name of

one of the members, the defendant, Cho Jan Ling, who on his part

accepted the trust, and agreed to hold the property as the agent of

the members of the association.

After the club building was completed with the funds of the

members of the association, Cho Jan Ling collected some P25,000 in

rents for which he failed and refused to account, and upon

proceedings being instituted to compel him to do so, he set up title

in himself to the club property as well as to the rents accruing

therefrom, falsely alleging that he had bought the real estate and

constructed the building with his own funds, and denying the claims

of the members of the association that it was their funds which had

been used for that purpose.

The plaintiffs, being prejudiced filed a case against the defendant

and the lower court favored Uy Aloc and his companions and

granted relief to the damages they suffered. Hence, this appeal.

ISSUE

Whether or not there was an implied trust in the agreement of the

association

HELD

Yes. There was an implied trust. The decree entered by the court

below should be affirmed with costs against the appellants.

RATIO

We are nevertheless unable to see that any real or substantial right

of the appellants Cho Jan Ling, et al. was prejudiced thereby. Due,

doubtless, to the inherent difficulties which must be anticipated in

the conduct of a case wherein a large number of the parties are

Chinese persons, unable to speak any tongue but their own, some

formal or technical irregularities seem to have crept into the

proceedings in the court below but none of these irregularities or

amendments in any wise prejudiced the defense set up by the

appellants in the court below and assignments of error based

thereon can not be sustained under section 503 of the Code of Civil

Procedure, which provides that "No judgment shall be reversed on

formal or technical grounds, or for such error as has not prejudiced

the real rights of the excepting party."

Accepting, as we do, the truth and accuracy of the facts found by

the trial court there can be no shadow of doubt that the plaintiffs

are entitled to the relief furnished them by the decree.

In the case at bar we think that the evidence clearly discloses not

only that the funds with which the property in question was

purchased were furnished by the members of the association, but

that Cho Jan Ling, in whose name it was registered, received and

holds the property as the agent and trustee of the association; that

on at least one occasion he admitted the beneficial ownership to be

in the association; and that while the legal registered title is in his

name the beneficial ownership is in the association.

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In this case, the legal title of the holder of the registered title is not

questioned. It is admitted that the members of the association

voluntarily obtained the inscription in the name of Cho Jan Ling and

that they have no right to have that inscription cancelled. They do

not seek such cancellation, and on the contrary they allege and

prove that the duly registered legal title to the property is in Cho Jan

Ling, but they maintain, and we think that they rightly maintain,

that he holds it under an obligation, both express and implied, to

deal with it exclusively for the benefit of the members of the

association and subject to their will.

Muller vs Muller

FACTS:

This petition for review on certiorari assails the February 26, 2001

Decision of the Court of Appeals affirming with modification the

August 12, 1996 Decision 3 of the Regional Trial Court of Quezon

City which terminated the regime of absolute community of

property between petitioner and respondent, as well as the

Resolution 4 dated August 13, 2001 denying the motion for

reconsideration.

Petitioner Elena Buenaventura Muller and respondent Helmut

Muller were married in Hamburg, Germany on September 22, 1989

and resided in Germany at a house owned by respondent's parents

but decided to move and reside permanently in the Philippines in

1992. By this time, respondent had inherited the house in Germany

from his parents which he sold and used the proceeds for the

purchase of a parcel of land in Antipolo, Rizal at the cost of

P528,000.00 and the construction of a house amounting to

P2,300,000.00. The Antipolo property was registered in the name of

petitioner under Transfer Certificate of Title No. 219438 5 of the

Register of Deeds of Marikina, Metro Manila.

Due to incompatibilities and respondent's alleged womanizing,

drinking, and maltreatment, the spouses eventually separated.

Respondent filed a petition for separation of properties before the

Regional Trial Court of Quezon City.

On August 12, 1996, the trial court rendered a decision which

terminated the regime of absolute community of property and

decreed the separation of properties between them, ordering the

equal partition of personal properties located within the country,

excluding those acquired by gratuitous title during the marriage.

With regard to the Antipolo property, the court held that it was

acquired using paraphernal funds of the respondent.

However, the part of that inheritance used by the petitioner for

acquiring the house and lot in this country cannot be recovered by

the petitioner, its acquisition being a violation of Section 7, Article

XII of the Constitution which provides that "save in cases of

hereditary succession, no private lands shall be transferred or

conveyed except to individuals, corporations or associations

qualified to acquire or hold lands of the public domain." The law will

leave the parties in the situation where they are in without

prejudice to a voluntary partition by the parties of the said real

property.

The CA held that respondent merely prayed for reimbursement for

the purchase of the Antipolo property, and not acquisition or

transfer of ownership to him. It also considered petitioner's

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ownership over the property in trust for the respondent. As regards

the house, the Court of Appeals ruled that there is nothing in the

Constitution which prohibits respondent from acquiring the same.

Respondent Elena Buenaventura Muller is hereby ordered to

REIMBURSE the petitioner the amount of P528,000.00 for the

acquisition of the land and the amount of P2,300,000.00 for the

construction of the house situated in Antipolo, Rizal, deducting

therefrom the amount respondent spent for the preservation,

maintenance and development of the aforesaid real property.

ISSUES:

W/N the Ca erred in granting reimbursement to the respondent

(contested by the petitioner as a circumvention of the

Constitutions prohibition on aliens acquiring real properties in the

Philippines)

RULING:

The petition has merit.

Section 7, Article XII of the 1987 Constitution states:

Save in cases of hereditary succession, no private lands shall be

transferred or conveyed except to individuals, corporations, or

associations qualified to acquire or hold lands of the public domain.

Aliens, whether individuals or corporations, are disqualified from

acquiring lands of the public domain. Hence, they are also

disqualified from acquiring private lands.

"Sec. 5. Save in cases of hereditary succession, no private

agricultural land will be transferred or assigned except to

individuals, corporations, or associations qualified to acquire or hold

lands of the public domain in the Philippines."

This constitutional provision closes the only remaining avenue

through which agricultural resources may leak into aliens' hands. It

would certainly be futile to prohibit the alienation of public

agricultural lands to aliens if, after all, they may be freely so

alienated upon their becoming private agricultural lands in the

hands of Filipino citizens. . . .

If the term "private agricultural lands" is to be construed as not

including residential lots or lands not strictly agricultural, the result

would be that "aliens may freely acquire and possess not only

residential lots and houses for themselves but entire subdivisions,

and whole towns and cities," and that "they may validly buy and

hold in their names lands of any area for building homes, factories,

industrial plants, fisheries, hatcheries, schools, health and vacation

resorts, markets, golf courses, playgrounds, airfields, and a host of

other uses and purposes that are not, in appellant's words, strictly

agricultural." (Solicitor General's Brief, p. 6.) That this is obnoxious

to the conservative spirit of the Constitution is beyond question.

Respondent was aware of the constitutional prohibition and

expressly admitted his knowledge thereof to this Court. He declared

that he had the Antipolo property titled in the name of petitioner

because of the said prohibition. His attempt at subsequently

asserting or claiming a right on the said property cannot be

sustained.

The Court of Appeals erred in holding that an implied trust was

created and resulted by operation of law in view of petitioner's

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marriage to respondent. Save for the exception provided in cases

of hereditary succession, respondent's disqualification from

owning lands in the Philippines is absolute. Not even an ownership

in trust is allowed. Besides, where the purchase is made in

violation of an existing statute and in evasion of its express

provision, no trust can result in favor of the party who is guilty of

the fraud. To hold otherwise would allow circumvention of the

constitutional prohibition.

Respondent cannot seek reimbursement on the ground of equity

where it is clear that he willingly and knowingly bought the property

despite the constitutional prohibition.

Further, the distinction made between transfer of ownership as

opposed to recovery of funds is a futile exercise on respondent's

part. To allow reimbursement would in effect permit respondent to

enjoy the fruits of a property which he is not allowed to own.

Petition is GRANTED. The Decision ordering petitioner Elena

Buenaventura Muller to reimburse respondent Helmut Muller are

REVERSED and SET ASIDE. Decision of the Regional Trial Court of

Quezon City terminating the regime of absolute community

between the petitioner and respondent, decreeing a separation of

property between them and ordering the partition of the personal

properties located in the Philippines equally, is REINSTATED.

4. Prescription

AMEROL vs. BAGUMBARAN

FACTS

This is a petition for review on certiorari of the decision of the then

Court of First Instance of Lanao del Sur, Branch III, Marawi City. Lot

No. 524, Pls-126 is the tract of land alleged by the plaintiff to have

been forcibly entered into by the defendants and which plaintiff

now wishes to recover possession thereof. The same lot was

covered by two free patent applications: (1) that of defendant

Liwalug Datomanong (erroneously surnamed Amerol) which he

filed on the 4th day of September, 1953, and (2) that of Molok

Bagumbaran which was filed on December 27, 1954. As to these

two free patent applications, that of plaintiff Molok Bagumbaran

was given due course as a result of which Free Patent No. V-19050

was issued on August 16,1955 and duly registered with the office of

the Register of Deeds of the Province of Lanao whereupon Original

Certificate of Title No. P-466 was duly issued. Defendant Liwalug

Datomanong had never known of plaintiff's free patent

application on the land in question nor was he ever notified or

participated in the administrative proceedings relative to

plaintiff's free patent application. In the meantime, said defendant

has been and up to the present in continuous occupation and

cultivation of the same. Said defendant did not take appropriate

action to annul the patent and title of the plaintiff within one year

from issuance thereof and that the first step taken by him to

contest said patent and title was a formal protest dated April 24,

1964, filed before the Bureau of Lands after the lapse of 9 years

from the issuance of patent in favor of the plaintiff. The second

step he took was his counterclaim filed with this court on December

4, 1964, wherein defendant reiterated his stand that plaintiff

secured patent on the land by means of deceit and fraud. Proofs

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are sufficient to support defendant's contention that plaintiff is

guilty of fraud and misrepresentation. On or before filing his free

patent application, plaintiff knew that the land in question which

was covered by his free patent application was then actually

occupied and cultivated by defendant Liwalug Datomanong.

Notwithstanding the aforequoted findings, the trial court denied

the counterclaim of the defendants, now petitioners, for the

affirmative relief of reconveyance on the ground of prescription.

The trial court held that, since the answer and counter-claim was

filed on December 4, 1964, 9 years from the date of registration of

the patent, the defendants right to reconveyance within the

period of 4 years from the date of registration of said patent had

prescribed.

ISSUE: Whether or not the trial court erred in holding that the

petitioners right of action for reconveyance for violation of an

implied trust prescribed after 4 years from the registration of the

patent of respondent

HELD: YES. An action for reconveyance for violation of an implied

trust prescribes in 10 YEARS.

The act of respondent in misrepresenting that he was in actual

possession and occupation of the property in question, obtaining a

patent and Original Certificate of Title No. P- 466 in his name,

created an implied trust in favor of the actual possessor of the said

property. The land in question was patented and titled in

respondent's name by and through his false pretenses. Molok

Bagumbaran fraudulently misrepresented that he was the occupant

and actual possessor of the land in question when he was not

because it was Liwalug Datomanong. Bagumbaran falsely pretended

that there was no prior applicant for a free patent over the land but

there was Liwalug Datomanong. By such fraudulent acts, Molok

Bagumbaran is deemed to hold the title of the property in trust and

for the benefit of petitioner Liwalug Datomanong. Notwithstanding

the irrevocability of the Torrens title already issued in the name of

respondent, he, even being already the registered owner under the

Torrens system, may still be compelled under the law to reconvey

the subject property to Liwalug Datomanong. In an action for

reconveyance, the decree of registration is respected as

incontrovertible. What is sought instead is the transfer of the

property, in this case the title thereof, which has been wrongfully

or erroneously registered in another person's name, to its rightful

and legal owner, or to one with a better right.

It is now well-settled that an action for reconveyance based on an

implied or constructive trust prescribes in ten years from the

issuance of the Torrens title over the property. The only discordant

note, it seems, is Balbin vs. Medalla, which states that the

prescriptive period for a reconveyance action is four years.

However, this variance can be explained by the erroneous reliance

on Gerona vs. de Guzman. But in Gerona, the fraud was discovered

on June 25, 1948, hence Section 43(3) of Act No. 190, was applied,

the new Civil Code not coming into effect until August 30, 1950 as

mentioned earlier. It must be stressed, at this juncture, that Article

1144 and Article 1456, are new provisions. They have no

counterparts in the old Civil Code or in the old Code of Civil

Procedure, the latter being then resorted to as legal basis of the

four-year prescriptive period for an action for reconveyance of title

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of real property acquired under false pretenses. The action of

petitioner Datomanong for reconveyance, in the nature of a

counterclaim filed on December 4, 1964, has not yet prescribed.

Between August 16, 1955, the date of reference, being the date of

the issuance of the Original Certificate of Title in the name of the

respondent, and December 4, 1964, when the period of

prescription was interrupted by the filing of the Answer cum

Counterclaim, is less than ten years.

Marquez v. CA

Facts:

Spouses Rafael and Felicidad Marquez had 12 children. In 1945, the

spouses acquired a parcel of land in Rizal where they constructed

their conjugal home. When Felicidad died, Rafael Sr. executed an

Affidavit of Adjudication vesting unto himself sole ownership to the

property. In 1983, Rafael donated the property to 3 of his children -

-- petitioner Rafael JR, Alfredo (respondent) and Belen (respondent)

to the exclusion of his other children.

From 1983-1991, private repondentes (Alfredo and Belen) were in

actual possession of the land. When petitioners learned about the

title of the land, they demanded that since they are also children of

Rafael SR, they are entitled to their respective shares. Respondents

ignored petitioners demands.

According to petitioners, the Deed of Donation executed by their

father was fraudulent since the respondents took advantage of their

fathers advanced age. Respondents contend that the petitioners

action was already barred by the statute of limitations since the

same should have been filed within 4 years from the date of

discovery of the alleged fraud.

Issue:

Whether the action for reconveyance had prescribed

Held: NO

Ruling:

Petitioners contention:

By virtue of the fraudulent deed of donation, a constructive trust

was created, and that an action for reconveyance based on implied

or constructive trust prescribes in 10 years.

Held:

Indeed, when Rafael SR. obtained an affidavit stating that he was

the only heir of his wife when in fact their children were still alive,

and managed to secure a transfer of certificate of title under his

name, a constructive trust was established.

On whether the reconveyance had prescribed:

An action for reconveyance based on an implied or constructive

trust prescribes in 10 years from the issuance of the Torrens title

over the property.

The prescriptive period runs from the date when the transfer of

certificate of title was issued in favor of Rafael SR which was on June

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16, 1982. The action for reconveyance was filed on May 31, 1991 =

9 years later, which means that prescription had not yet barred the

action.

Additional:

Rafael SR, as trustee to his wifes share, cannot donate this portion

to the private respondents.

trusts complete

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