TRUST (IN GENERAL)

(1) One-half interest in a fishpond which she had

inherited from her parents, Feliciano Ignacio and
Damiana Mendoza, and the other half of which
was owned by her co-owner, Josefa Sta. Ana . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700

G.R. No. L-26699 March 16, 1976

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, plaintiffsappellants,
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.

(2) Fishpond inherited from her parents . . . . . . . .

. . . . 7,418
(3) Fishpond inherited from her parents . . . . . . . .
. . . . . 6,989
(4) Fishpond with a bodega for salt . . . . . . . . . . . .
. . . . 50,469
(5) Fishpond with an area of one hectare, 12 ares
and 5 centares purchased from Bernabe and
Honorata Ignacio by Valentina Ignacio on
November 9, 1895 with a bodega for salt . . . . . . .
.......................................
. . . 11,205
(6)
Fishpond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 8,000

Eusebio V. Navarro for plaintiffs-appellants.

Nicolas Belmonte & Benjamin T. de Peralta for
defendants-appellants.

(7) One-half interest in a fishpond with a total

area of 10,424 square meters, the other half was
owned by A. Aguinaldo . . . . . . . . . . . . . . . . . . . . .
. . 5,217

AQUINO, J.:
(8)
Riceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 50,454

This litigation regarding a forty-seven-hectare

fishpond located at Sitio Calunuran, Hermosa,
Bataan involves the law of trusts and
prescription. The facts are as follows:

(9) Riceland purchased by Valentina Ignacio from

Eduardo Salao on January 27, 1890 with a house
and two camarins thereon . . . . . . . . . . . . . . . . . .
8,065

The spouses Manuel Salao and Valentina Ignacio

of Barrio Dampalit, Malabon, Rizal begot four
children named Patricio, Alejandra, Juan (Banli)
and Ambrosia. Manuel Salao died in 1885. His
eldest son, Patricio, died in 1886 survived by his
only child. Valentin Salao.

(10) Riceland in the name of Ambrosia Salao,

with an area of 11,678 square meters, of which
2,173 square meters were sold to Justa
Yongco . . . . . . . . . .9,505

There is no documentary evidence as to what,

properties formed part of Manuel Salao's estate,
if any. His widow died on May 28, 1914. After her
death, her estate was administered by her
daughter Ambrosia.

TOTAL . . . . . . . . . . . . .. 179,022 square

meters
To each of the legal heirs of Valentina Ignacio was
adjudicated a distributive share valued at
P8,135.25. In satisfaction of his distributive
share, Valentin Salao (who was then already
forty-eight years old) was given the biggest
fishpond with an area of 50,469 square meters, a
smaller fishpond with an area of 6,989 square
meters and the riceland with a net area of 9,905
square meters. Those parcels of land had an
aggregate appraised value of P13,501 which
exceeded Valentin's distributive share. So in the
deed of partition he was directed to pay to his coheirs the sum of P5,365.75. That arrangement,
which was obviously intended to avoid the

It was partitioned extrajudicially in a deed dated

December 29, 1918 but notarized on May 22,
1919 (Exh. 21). The deed was signed by her four
legal heirs, namely, her three children, Alejandra,
Juan and Ambrosia, and her grandson, Valentin
Salao, in representation of his deceased father,
Patricio.
The lands left by Valentina Ignacio, all located at
Barrio Dampalit were as follows:
Nature of Land Area in squmeters

fragmentation of the lands, was beneficial to

Valentin.

Thus, on December 1, 1911 Ambrosia Salao sold

under pacto de retro for P800 the Calunuran
fishpond to Vicente Villongco. The period of
redemption was one year. In the deed of sale
(Exh19) Ambrosia confirmed that she and her
brother Juan were the dueos proindivisos of the
said pesqueria. On December 7, 1911 Villongco,
the vendee a retro, conveyed the same fishpond
to Ambrosia by way of lease for an anual
canon of P128 (Exh. 19-a).

In that deed of partition (Exh. 21) it was noted

that "desde la muerte de Valentina Ignacio y
Mendoza, ha venido administrando sus bienes la
referida Ambrosia Salao" "cuya administracion lo
ha sido a satisfaccion de todos los herederos y
por designacion los mismos". It was expressly
stipulated that Ambrosia Salao was not obligated
to render any accounting of her administration
"en consideracion al resultado satisfactorio de
sus gestiones, mejoradas los bienes y pagodas
por ella las contribusiones (pages 2 and 11, Exh.
21).

After the fishpond was redeemed from Villongco

or on June 8, 1914 Ambrosia and Juan sold it
under pacto de retro to Eligio Naval for the sum
of P3,360. The period of redemption was also one
year (Exh. 20). The fishpond was later redeemed
and Naval reconveyed it to the vendors a retro in
a document dated October 5, 1916 (Exh. 20-a).

By virtue of the partition the heirs became

"dueos absolutos de sus respectivas
propiedadas, y podran inmediatamente tomar
posesion de sus bienes, en la forma como se han
distribuido y llevado a cabo las adjudicaciones"
(page 20, Exh. 21).

The 1930 survey shown in the computation

sheets of the Bureau of Lands reveals that the
Calunuran fishpond has an area of 479,205
square meters and that it was claimed by Juan
Salao and Ambrosia Salao, while the
Pinanganacan fishpond (subsequently acquired
by Juan and Ambrosia) has an area of 975,952
square meters (Exh. 22).

The documentary evidence proves that in 1911

or prior to the death of Valentina Ignacio her two
children, Juan Y. Salao, Sr. and Ambrosia Salao,
secured a Torrens title, OCT No. 185 of the
Registry of Deeds of Pampanga, in their names
for a forty-seven-hectare fishpond located at Sitio
Calunuran, Lubao, Pampanga (Exh. 14). It is also
known as Lot No. 540 of the Hermosa cadastre
because that part of Lubao later became a part of
Bataan.

Likewise, there is no controversy as to the fact

that on May 27, 1911 Ambrosia Salao bought for
four thousand pesos from the heirs of Engracio
Santiago a parcel of swampland planted
to bacawan and nipa with an area of 96 hectares,
57 ares and 73 centares located at Sitio Lewa,
Barrio Pinanganacan, Lubao, Pampanga (Exh. 17d).

The Calunuran fishpond is the bone of contention

in this case.

The record of Civil Case No. 136, General Land

Registration Office Record No. 12144, Court of
First Instance of Pampanga shows that Ambrosia
Salao and Juan Salao filed an application for the
registration of that land in their names on
January 15, 1916. They alleged in their petition
that "han adquirido dicho terreno por partes
iguales y por la compra a los herederos del
finado, Don Engracio Santiago" (Exh. 17-a).

Plaintiffs' theory is that Juan Y. Salao, Sr. and his

sister Ambrosia had engaged in the fishpond
business. Where they obtained the capital is not
shown in any documentary evidence. Plaintiffs'
version is that Valentin Salao and Alejandra Salao
were included in that joint venture, that the funds
used were the earnings of the properties
supposedly inherited from Manuel Salao, and that
those earnings were used in the acquisition of the
Calunuran fishpond. There is no documentary
evidence to support that theory.

At the hearing on October 26, 1916 before Judge

Percy M. Moir, Ambrosia testified for the
applicants. On that same day Judge Moir
rendered a decision, stating, inter alia, that the
heirs of Engracio Santiago had sold the land to
Ambrosia Salao and Juan Salao. Judge Moir
"ordena la adjudicacion y registro del terreno
solicitado a nombre de Juan Salao, mayor de
edad y de estado casado y de su esposa Diega
Santiago y Ambrosia Salao, de estado soltera y
mayor de edad, en participaciones iguales" (Exh.
17-e).

On the other hand, the defendants contend that

the Calunuran fishpond consisted of lands
purchased by Juan Y. Salao, Sr. and Ambrosia
Salao in 1905, 1906, 1907 and 1908 as, shown in
their Exhibits 8, 9, 10 and 13. But this point is
disputed by the plaintiffs.
However, there can be no controversy as to the
fact that after Juan Y. Salao, Sr. and Ambrosia
Salao secured a Torrens title for the Calunuran
fishpond in 1911 they exercised dominical rights
over it to the exclusion of their nephew, Valentin
Salao.

On November 28, 1916 Judge Moir ordered the

issuance of a decree for the said land. The decree
was issued on February 21, 1917. On March 12,
1917 Original Certificate of Title No. 472 of the

Registry of Deeds of Pampanga was issued in the

names of Juan Salao and Ambrosia Salao.

Juan Y. Salao, Sr. (Banli) The deed of denotion

included other pieces of real property owned by
Ambrosia. She reserved for herself the usufruct
over the said properties during her lifetime (Exh.
2 or M).

That Pinanganacan or Lewa fishpond later

became Cadastral Lot No. 544 of the Hermosa
cadastre (Exh. 23). It adjoins the Calunuran
fishpond (See sketch, Exh. 1).

The said deed of donation was registered only on

April 5, 1950 (page 39, Defendants' Record on
Appeal).

Juan Y. Salao, Sr. died on November 3, 1931 at

the age of eighty years (Exh. C). His nephew,
Valentin Salao, died on February 9, 1933 at the
age of sixty years according to the death
certificate (Exh. A. However, if according to
Exhibit 21, he was forty-eight years old in 1918,
he would be sixty-three years old in 1933).

The lawyer of Benita Salao and the Children of

Victorina Salao in a letter dated January 26, 1951
informed Juan S. Salao, Jr. that his clients had a
one-third share in the two fishponds and that
when Juani took possession thereof in 1945, he
refused to give Benita and Victorina's children
their one-third share of the net fruits which
allegedly amounted to P200,000 (Exh. K).

The intestate estate of Valentin Salao was

partitioned extrajudicially on December 28, 1934
between his two daughters, Benita Salao-Marcelo
and Victorina Salao-Alcuriza (Exh. 32). His estate
consisted of the two fishponds which he had
inherited in 1918 from his grandmother,
Valentina Ignacio.

Juan S. Salao, Jr. in his answer dated February 6,

1951 categorically stated that Valentin Salao did
not have any interest in the two fishponds and
that the sole owners thereof his father Banli and
his aunt Ambrosia, as shown in the Torrens titles
issued in 1911 and 1917, and that he Juani was
the donee of Ambrosia's one-half share (Exh. K1).

If it were true that he had a one-third interest in

the Calunuran and Lewa fishponds with a total
area of 145 hectares registered in 1911 and 1917
in the names of his aunt and uncle, Ambrosia
Salao and Juan Y. Salao, Sr., respectively, it is
strange that no mention of such interest was
made in the extrajudicial partition of his estate in
1934.

Benita Salao and her nephews and niece filed

their original complaint against Juan S. Salao, Jr.
on January 9, 1952 in the Court of First Instance
of Bataan (Exh. 36). They amended their
complaint on January 28, 1955. They asked for
the annulment of the donation to Juan S. Salao, Jr.
and for the reconveyance to them of the
Calunuran fishpond as Valentin Salao's supposed
one-third share in the 145 hectares of fishpond
registered in the names of Juan Y. Salao, Sr. and
Ambrosia Salao.

It is relevant to mention that on April 8, 1940

Ambrosia Salao donated to her grandniece,
plaintiff Benita Salao, three lots located at Barrio
Dampalit with a total area of 5,832 square
meters (Exit. L). As donee Benita Salao signed
the deed of donation.

Juan S. Salao, Jr. in his answer pleaded as a

defense the indefeasibility of the Torrens title
secured by his father and aunt. He also invoked
the Statute of Frauds, prescription and laches. As
counter-claims, he asked for moral damages
amounting to P200,000, attorney's fees and
litigation expenses of not less than P22,000 and
reimbursement of the premiums which he has
been paying on his bond for the lifting of the
receivership Juan S. Salao, Jr. died in 1958 at the
age of seventy-one. He was substituted by his
widow, Mercedes Pascual and his six children and
by the administrator of his estate.

On that occasion she could have asked Ambrosia

Salao to deliver to her and to the children of her
sister, Victorina, the Calunuran fishpond if it were
true that it was held in trust by Ambrosia as the
share of Benita's father in the alleged joint
venture.
But she did not make any such demand. It was
only after Ambrosia Salao's death that she
thought of filing an action for the reconveyance
of the Calunuran fishpond which was allegedly
held in trust and which had become the sole
property of Juan Salao y Santiago (Juani).

In the intestate proceedings for the settlement of

his estate the two fishponds in question were
adjudicated to his seven legal heirs in equal
shares with the condition that the properties
would remain under administration during the
pendency of this case (page 181, Defendants'
Record on Appeal).

On September 30, 1944 or during the Japanese

occupation and about a year before Ambrosia
Salao's death on September 14, 1945 due to
senility (she was allegedly eighty-five years old
when she died), she donated her onehalf proindiviso share in the two fishponds in
question to her nephew, Juan S. Salao, Jr. (Juani)
At that time she was living with Juani's family. He
was already the owner of the the other half of the
said fishponds, having inherited it from his father,

After trial the trial court in its decision consisting

of one hundred ten printed pages dismissed the

amended complaint and the counter-claim. In

sixty-seven printed pages it made a laborious
recital of the testimonies of plaintiffs' fourteen
witnesses, Gregorio Marcelo, Norberto
Crisostomo, Leonardo Mangali Fidel de la Cruz,
Dionisio Manalili, Ambrosio Manalili, Policarpio
Sapno, Elias Manies Basilio Atienza, Benita Salao,
Emilio Cagui Damaso de la Pea, Arturo Alcuriza
and Francisco Buensuceso, and the testimonies
of defendants' six witnesses, Marcos Galicia, Juan
Galicia, Tiburcio Lingad, Doctor Wenceslao
Pascual, Ciriaco Ramirez and Pablo P. Salao.
(Plaintiffs presented Regino Nicodemus as a
fifteenth witness, a rebuttal witness).

However, as the amounts involved exceed two

hundred thousand pesos, the Court of Appeals
elevated the case to this Court in its resolution of
Octoter 3, 1966 (CA-G.R. No. 30014-R).
Plaintiffs' appeal. An appellant's brief should
contain "a subject index index of the matter in
the brief with a digest of the argument and page
references" to the contents of the brief (Sec. 16
[a], Rule 46, 1964 Rules of Court; Sec. 17, Rule
48, 1940 Rules of Court).
The plaintiffs in their appellants' brief consisting
of 302 pages did not comply with that
requirement. Their statements of the case and
the facts do not contain "page references to the
record" as required in section 16[c] and [d] of
Rule 46, formerly section 17, Rule 48 of the 1940
Rules of Court.

The trial court found that there was no

community of property among Juan Y. Salao, Sr.,
Ambrosia Salao and Valentin Salao when the
Calunuran and Pinanganacan (Lewa) lands were
acquired; that a co-ownership over the real
properties of Valentina Ignacio existed among her
heirr after her death in 1914; that the coownership was administered by Ambrosia Salao
and that it subsisted up to 1918 when her estate
was partitioned among her three children and her
grandson, Valentin Salao.

Lawyers for appellants, when they prepare their

briefs, would do well to read and re-read section
16 of Rule 46. If they comply strictly with the
formal requirements prescribed in section 16,
they might make a competent and luminous
presentation of their clients' case and lighten the
burden of the Court.

The trial court surmised that the co-ownership

which existed from 1914 to 1918 misled the
plaintiffs and their witnesses and caused them to
believe erroneously that there was a coownership in 1905 or thereabouts. The trial court
speculated that if valentin had a hand in the
conversion into fishponds of the Calunuran and
Lewa lands, he must have done so on a salary or
profit- sharing basis. It conjectured that Valentin's
children and grandchildren were given by
Ambrosia Salao a portion of the earnings of the
fishponds as a reward for his services or because
of Ambrosia's affection for her grandnieces.

What Justice Fisher said in 1918 is still true now:

"The pressure of work upon this Court is so great
that we cannot, in justice to other litigants,
undertake to make an examination of the
voluminous transcript of the testimony (1,553
pages in this case, twenty-one witnesses having
testified), unless the attorneys who desire us to
make such examination have themselves taken
the trouble to read the record and brief it in
accordance with our rules" (Palara vs. Baguisi 38
Phil. 177, 181). As noted in an old case, this
Court decides hundreds of cases every year and
in addition resolves in minute orders an
exceptionally considerable number of petitions,
motions and interlocutory matters (Alzua and
Arnalot vs. Johnson, 21 Phil. 308, 395; See In re
Almacen, L-27654, February 18, 1970, 31 SCRA
562, 573).

The trial court rationalized that Valentin's

omission during his lifetime to assail the Torrens
titles of Juan and Ambrosia signified that "he was
not a co-owner" of the fishponds. It did not give
credence to the testimonies of plaintiffs'
witnesses because their memories could not be
trusted and because no strong documentary
evidence supported the declarations. Moreover,
the parties involved in the alleged trust were
already dead.

Plaintiffs' first assignment of error raised a

procedural issue. In paragraphs 1 to 14 of their
first cause of action they made certain averments
to establish their theory that Valentin Salao had a
one-third interest in the two fishponds which
were registrered in the names of Juan Y. Salao, Sr.
(Banli) and Ambrosia Salao.

It also held that the donation was validly

executed and that even if it were void Juan S.
Salao, Jr., the donee, would nevertheless be the
sole legal heir of the donor, Ambrosia Salao, and
would inherit the properties donated to him.

Juan S. Salao, Jr. (Juani) in his answer

"specifically" denied each and all the allegations"
in paragraphs I to 10 and 12 of the first cause of
action with the qualification that Original
certificates of Title Nos. 185 and 472 were issued
"more than 37 years ago" in the names of Juan
(Banli) and Ambrosia under the circumstances
set forth in Juan S. Salao, Jr.'s "positive defenses"
and "not under the circumstances stated in the in
the amended complaint".

Both parties appealed. The plaintiffs appealed

because their action for reconveyance was
dismissed. The defendants appealed because
their counterclaim for damages was dismissed.
The appeals, which deal with factual and legal
issues, were made to the Court of Appeals.

The plaintiffs contend that the answer of Juan S.

Salao, Jr. was in effect tin admission of the
allegations in their first cause of action that there
was a co-ownership among Ambrosia, Juan,
AIejandra and Valentin, all surnamed Salao,
regarding the Dampalit property as early as 1904
or 1905; that the common funds were invested
the acquisition of the two fishponds; that the 47hectare Calunuran fishpond was verbally
adjudicated to Valentin Salao in the l919 partition
and that there was a verbal stipulation to to
register "said lands in the name only of Juan Y.
Salao".

containing the statement that it denied

"generally ans specifically each and every
allegation contained in each and every paragraph
of the complaint". It did not set forth in its answer
any matters by way of confession and avoidance.
It did not interpose any matters by way of
confession and avoidance. It did not interpose
any affirmative defenses.
Under those circumstances, it was held that
defendant's specific denial was really a general
denial which was tantamount to an admission of
the allegations of the complaint and which
justified judgment on the pleadings. That is not
the situation in this case.

That contention is unfounded. Under section 6,

Rule 9 of the 1940 of Rules of Court the answer
should "contain either a specific dinial a
statement of matters in accordance of the cause
or causes of action asserted in the complaint".
Section 7 of the same rule requires the defendant
to "deal specificaly with each material allegation
of fact the truth of wihich he does not admit and,
whenever practicable shall set forth the
substance of the matters which he will rely upon
to support his denial". "Material averments in the
complaint, other than those as to the amount
damage, shall be deemed admitted when
specifically denied" (Sec. 8). "The defendant may
set forth set forth by answer as many affirmative
defenses as he may have. All grounds of
defenses as would raise issues of fact not arising
upon the preceding pleading must be specifically
pleaded" (Sec. 9).

The other nine assignments of error of the

plaintiffs may be reduced to the decisive issue of
whether the Calunuran fishpond was held in trust
for Valentin Salao by Juan Y. Salao, Sr. and
Ambrosia Salao. That issue is tied up with the
question of whether plaintiffs' action for
reconveyance had already prescribed.
The plaintiffs contend that their action is "to
enforce a trust which defendant" Juan S. Salao, Jr.
allegedly violated. The existence of a trust was
not definitely alleged in plaintiffs' complaint.
They mentioned trust for the first time on page 2
of their appelants' brief.
To determine if the plaintiffs have a cause of
action for the enforcement of a trust, it is
necessary to maek some exegesis on the nature
of trusts (fideicomosis). Trusts in Anglo-American
jurisprudence were derived from
thefideicommissa of the Roman law (Government
of the Philippine Islands vs. Abadilla, 46 Phil. 642,
646).

What defendant Juan S. Salao, Jr. did in his

answer was to set forth in his "positive defenses"
the matters in avoidance of plaintiffs' first cause
of action which which supported his denials of
paragraphs 4 to 10 and 12 of the first cause of
action. Obviously, he did so because he found it
impracticable to state pierceneal his own version
as to the acquisition of the two fishponds or to
make a tedious and repetitious recital of the
ultimate facts contradicting allegations of the
first cause of action.

"In its technical legal sense, a trust is defined as

the right, enforceable solely in equity, to the
beneficial enjoyment of property, the legal title to
which is vested in another, but the word 'trust' is
frequently employed to indicate duties, relations,
and responsibilities which are not strictly
technical trusts" (89 C.J.S. 712).

We hold that in doing so he substantially

complied with Rule 9 of the 1940 Rules of Court.
It may be noted that under the present Rules of
Court a "negative defense is the specific denial of
t the material fact or facts alleged in the
complaint essential to plaintiff's cause of causes
of action". On the other hand, "an affirmative
defense is an allegation of new matter which,
while admitting the material allegations of the
complaint, expressly or impliedly, would
nevertheless prevent or bar recovery by the
plaintiff." Affirmative defenses include all matters
set up "by of confession and avoidance". (Sec. 5,
Rule 6, Rules of Court).

A person who establishes a trust is called the

trustor; one in whom confidence is reposed as
regards property for the benefit of another
person is known as the trustee; and the person
for whose benefit the trust has been created is
referred to as the beneficiary" (Art. 1440, Civil
Code). There is a fiduciary relation between the
trustee and the cestui que trust as regards
certain property, real, personal, money or choses
in action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express
trusts are created by the intention of the trustor
or of the parties. Implied trusts come into being
by operation of law" (Art. 1441, Civil Code). "No
express trusts concerning an immovable or any

The case of El Hogar Filipino vs. Santos

Investments, 74 Phil. 79 and similar cases are
distinguishable from the instant case. In the El
Hogar case the defendant filed a laconic answer

interest therein may be proven by parol

evidence. An implied trust may be proven by oral
evidence" (Ibid, Arts. 1443 and 1457).

Not a scintilla of documentary evidence was

presented by the plaintiffs to prove that there
was an express trust over the Calunuran fishpond
in favor of Valentin Salao. Purely parol evidence
was offered by them to prove the alleged trust.
Their claim that in the oral partition in 1919 of
the two fishponds the Calunuran fishpond was
assigned to Valentin Salao is legally untenable.

"No particular words are required for the creation

of an express trust, it being sufficient that a trust
is clearly intended" (Ibid, Art. 1444; Tuason de
Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan,
L-19012, October 30, 1967, 21 SCRA 543, 546).
"Express trusts are those which are created by
the direct and positive acts of the parties, by
some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to
create a trust" (89 C.J.S. 72).

It is legally indefensible because the terms of

article 1443 of the Civil Code (already in force
when the action herein was instituted) are
peremptory and unmistakable: parol evidence
cannot be used to prove an express trust
concerning realty.

"EXORESS trusts are those which, without being

expressed, are deducible from the nature of the
transaction asmatters of intent, or which are
superinduced on the transaction by operation of
law as matter of equity,independently of the
particular intention of the parties" (89 C.J.S. 724).
They are ordinarily subdivided into resulting and
constructive trusts (89 C.J.S. 722).

Is plaintiffs' massive oral evidence sufficient to

prove an implied trust, resulting or constructive,
regarding the two fishponds?
Plaintiffs' pleadings and evidence cannot be
relied upon to prove an implied trust. The trial
court's firm conclusion that there was no
community of property during the lifetime of
Valentina; Ignacio or before 1914 is substantiated
by defendants' documentary evidence. The
existence of the alleged co-ownership over the
lands supposedly inherited from Manuel Salao in
1885 is the basis of plaintiffs' contention that the
Calunuran fishpond was held in trust for Valentin
Salao.

"A resulting trust. is broadly defined as a trust

which is raised or created by the act or
construction of law, but in its more restricted
sense it is a trust raised by implication of law and
presumed to have been contemplated by the
parties, the intention as to which is to be found in
the nature of their transaction, but not expressed
in the deed or instrument of conveyance (89
C.J.S. 725). Examples of resulting trusts are found
in articles 1448 to 1455 of the Civil Code. (See
Padilla vs. Court of Appeals, L-31569, September
28, 1973, 53 SCRA 168, 179; Martinez vs. Grao
42 Phil. 35).

But that co-ownership was not proven by any

competent evidence. It is quite improbable
because the alleged estate of Manuel Salao was
likewise not satisfactorily proven. The plaintiffs
alleged in their original complaint that there was
a co-ownership over two hectares of land left by
Manuel Salao. In their amended complaint, they
alleged that the co-ownership was
over seven hectares of fishponds located in
Barrio Dampalit, Malabon, Rizal. In their brief
they alleged that the fishponds, ricelands and
saltbeds owned in common in Barrio Dampalit
had an area of twenty-eight hectares, of which
sixteen hectares pertained to Valentina Ignacio
and eleven hectares represented Manuel Salao's
estate.

On the other hand, a constructive trust is -a trust

"raised by construction of law, or arising by
operation of law". In a more restricted sense and
as contra-distinguished from a resulting trust, a
constructive trust is "a trust not created by any
words, either expressly or impliedly evincing a
direct intension to create a trust, but by the
construction of equity in order to satisfy the
demands of justice." It does not arise "by
agreement or intention, but by operation of law."
(89 C.J.S. 726-727).

They theorized that the eleven hectares "were,

and necessarily, the nucleus, nay the very root,
of the property now in litigation (page 6,
plaintiffs-appellants' brief). But the eleven
hectares were not proven by any trustworthy
evidence. Benita Salao's testimony that in 1918
or 1919 Juan, Ambrosia, Alejandra and Valentin
partitioned twenty-eight hectares of lands
located in Barrio Dampalit is not credible. As
noted by the defendants, Manuel Salao was not
even mentioned in plaintiffs' complaints.

Thus, "if property is acquired through mistake or

fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the
benefit of the person from whom the property
comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by
fraud or concealment, courts of equity will
impress upon the title a so-called constructive
trust in favor of the defrauded party". Such a
constructive trust is not a trust in the technical
sense. (Gayondato vs. Treasurer of the P. I., 49
Phil. 244).

The 1919 partition of Valentina Ignacio's estate

covered about seventeen hectares of fishponds
and ricelands (Exh. 21). If at the time that
partition was made there were eleven hectares of

land in Barrio Dampalit belonging to Manuel

Salao, who died in 1885, those eleven hectares
would have been partitioned in writing as in the
case of the seventeen hectares belonging to
Valentina Ignacio's estate.

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. (Syllabus,
Suarez vs. Tirambulo, 59 Phil.
303).

It is incredible that the forty-seven-hectare

Calunuran fishpond would be adjudicated to
Valentin Salao mere by by word of mouth.
Incredible because for the partition of
the seventeen hectares of land left by Valentina
Ignacio an elaborate "Escritura de Particion"
consisting of twenty-two pages had to be
executed by the four Salao heirs. Surely, for the
partition of one hundred forty-five hectares of
fishponds among three of the same Salao heirs
an oral adjudication would not have sufficed.

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 improbability of the alleged oral partition

becomes more evident when it is borne in mind
that the two fishponds were registered land and
"the act of registration" is "the operative act"
that conveys and affects the land (Sec. 50, Act
No. 496). That means that any transaction
affecting the registered land should be evidenced
by a registerable deed. The fact that Valentin
Salao and his successors-in-interest, the
plaintiffs, never bothered for a period of nearly
forty years to procure any documentary evidence
to establish his supposed interest ox participation
in the two fishponds is very suggestive of the
absence of such interest.

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.

The matter may be viewed from another angle.

As already stated, the deed of partition for
Valentina Ignacio's estate wag notarized in 1919
(Exh. 21). The plaintiffs assert that the two
fishponds were verbally partitioned also in 1919
and that the Calunuran fishpond was assigned to
Valentin Salao as his share.

On the other hand, a Torrens title is generally a

conclusive 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 (Yumul vs. Rivera and Dizon,
64 Phil. 13, 17-18).

Now in the partition of Valentina Ignacio's estate,

Valentin was obligated to pay P3,355.25 to
Ambrosia Salao. If, according to the plaintiffs,
Ambrosia administered the two fishponds and
was the custodian of its earnings, then it could
have been easily stipulated in the deed
partitioning Valentina Ignacio's estate that the
amount due from Valentin would just be
deducted by Ambrosia from his share of the
earnings of the two fishponds. There was no such
stipulation. Not a shred of documentary evidence
shows Valentin's participation in the two
fishponds.

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" (Legarda and Prieto vs. Saleeby,
31 Phil. 590, 593).

The plaintiffs utterly failed to measure up to the

yardstick that a trust must be proven by clear,
satisfactory and convincing evidence. It cannot
rest on vague and uncertain evidence or on
loose, equivocal or indefinite declarations (De
Leon vs. Molo-Peckson, 116 Phil. 1267, 1273).

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 and trustee; establishment

of trust by parol evidence;
certainty of proof. Where a

trust by the heirs of Juan Y. Salao, Sr. for the heirs

of Valentin Salao.

gandnephews like the plaintiffs Alcuriza (Pavia vs.

Iturralde 5 Phil. 176).

And even assuming that there was an implied

trust, plaintiffs' action is clearly barred by
prescription or laches (Ramos vs. Ramos, L19872, December 3, 1974, 61 SCRA 284;
Quiniano vs. Court of Appeals, L-23024, May 31,
1971, 39 SCRA 221; Varsity Hills, Inc. vs. Navarro,
9, February 29, 1972, 43 SCRA 503; Alzona vs.
Capunitan and Reyes, 114 Phil. 377).

The trial court did not err in dismissing plaintiffs'

complaint.
Defendants' appeal. The defendants dispute
the lower court's finding that the plaintiffs filed
their action in good faith. The defendants
contend that they are entitled to damages
because the plaintiffs acted maliciously or in bad
faith in suing them. They ask for P25,000
attorneys fees and litigation expenses and, in
addition, moral damages.

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 (Sec. 40; Diaz vs. Gorricho and
Aguado, 103 Phil. 261, 266).

We hold that defemdamts' appeal is not

meritorious. The record shows that the plaintiffs
presented fifteen witnesses during the protracted
trial of this case which lasted from 1954 to 1959.
They fought tenaciously. They obviously incurred
considerable expenses in prosecuting their case.
Although their causes of action turned out to be
unfounded, yet the pertinacity and vigor with
which they pressed their claim indicate their
sincerity and good faith.

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 predecessorin-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).

There is the further consideration that the parties

were descendants of common ancestors, the
spouses Manuel Salao and Valentina Ignacio, and
that plaintiffs' action was based on their honest
supposition that the funds used in the acquisition
of the lands in litigation were earnings of the
properties allegedly inherited from Manuel Salao.

"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." (Buenaventura
vs. David, 37 Phil. 435, 440-441).

Considering those circumstances, it cannot be

concluded with certitude that plaintiffs' action
was manifestly frivolous or was primarily
intended to harass the defendants. An award for
damages to the defendants does not appear to
be just and proper.

Having reached the conclusion that the plaintiffs

are not entitled to the reconveyance of the
Calunuran fishpond, it is no longer n 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.

The worries and anxiety of a defendant in a

litigation that was not maliciously instituted are
not the moral damages contemplated in the law
(Solis & Yarisantos vs. Salvador, L-17022, August
14, 1965, 14 SCRA 887; Ramos vs.
Ramos, supra). The instant case is not among the
cases mentioned in articles 2219 and 2220 of the
Civil Code wherein moral damages may be
recovered. Nor can it be regarded as analogous
to any of the cases mentioned in those articles.

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-

The adverse result of an action

does not per se make the act
wrongful and subject the actor to
the payment of moral damages.
The law could not have meant to
impose a penalty on the right to
litigate; such right is so precious
that moral damages may not be
charged on those who may
exercise it erroneously. (Barreto
vs. Arevalo, 99 Phil. 771. 779).

The defendants invoke article 2208 (4) (11) of

the Civil Code which provides that attorney's fees
may be recovered "in case of a clearly unfounded
civil action or proceeding against the plaintiff"
(defendant is a plaintiff in his counterclaim) or "in
any other case where the court deems it just and
equitable" that attorney's fees should he
awarded.

revoking said donation which was acknowledged

before Notary Public Leoncio C. Jimenez.
No testimonial evidence was presented by either
party. Instead, both agreed to submit the case
upon the presentation of their respective exhibits
which were all admitted by the trial court.
After trial on the merits, the court a quo rendered
on September 21, 1960 a decision wherein it held
that, under the facts established by the evidence,
trust has been constituted by the late spouses
Mariano Molo and Juana Juan over the ten parcels
of land in question in favor plaintiffs as
beneficiaries and, as a consequence concluded:

But once it is conceded that the plaintiffs acted in

good faith in filing their action there would be no
basis for adjudging them liable to the defendants
for attorney's fees and litigation expenses (See
Rizal Surety & Insurance Co., Inc. vs. Court of
Appeals, L-23729, May 16, 1967, 20 SCRA 61).
It is not sound public policy to set a premium on
the right to litigate. An adverse decision does not
ipso facto justify the award of attorney's fees to
the winning party (Herrera vs. Luy Kim Guan, 110
Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61
O. G. 6959).

Considering all the foregoing, the Court

orders:
1. The defendants, jointly and severally
to free the said ten (10) parcels of land
from the mortgage lien in favor of the
Rehabilitation Finance Corporation (now
Development Bank of the Philippines)
and Claro Cortez, and thereafter to sign
and execute in favor of the plaintiffs a
deed of absolute sale of the said
properties for and in consideration of TEN
(P10.00) PESOS already deposited in
Court after all conditions imposed in
Exhibit A have been complied with;

The trial court's judgment is affirmed. No

pronouncement as to costs.
SO ORDERED.
G.R. No. L-17809

December 29, 1962

RESURRECCION DE LEON, ET AL., plaintiffsappellees,

vs.
EMILIANA MOLO-PECKSON, ET
AL., respondents-appellants.

2. That in the event the defendants shall

refuse to execute and perform the above,
they are ordered, jointly and severally, to
pay the plaintiffs the value of said ten
(10) parcels of land in question, the
amount to be assessed by the City of
Pasay City as the fair market value of the
same, upon orders of the Court to assess
said value;

Cornelio R. Magsarili for plaintiffs-appellees.

Sycip, Salazar, Luna and Associates for
respondents-appellants.
BAUTISTA ANGELO, J.:

3. The defendants jointly and severally to

pay the plaintiffs' Attorney's fees in the
amount of P3,000.00, as defendants
acted in gross and evident bad faith in
refusing to satisfy the plaintiffs' plainly
valid, just and demandable claim, under
Article 2208 sub-paragraph 5 of the New
Civil Code;

Resurreccion De Leon, et al. filed on November

13, 1958 before the Court of First Instance of
Rizal a complaint seeking to compel Emiliana
Molo-Peckson, et al. to convey to the former ten
parcel of land located in Pasay City with an area
of 1,749 sq. m. upon payment of P1.00 per parcel
upon the plea that said lots were willed or
donated in 1948 to the latter by their foster
parents Mariano Molo y Legaspi and Juana Juan
with the understanding that they should sell
them to the plaintiffs under the terms abovestated.

4. The defendants to render an

accounting of the fruits of said ten (10)
parcels of land from the time plaintiffs
demanded the conveyance of said
parcels of land on August 11, 1956 as per
Exhibits B and C, in accordance with the
provisions of Article 1164, New Civil Code
which provides that the creditor has a
right to the fruit of the thing from the
time the obligation to deliver it arises;
and

Defendants, in their answer, disclaimed any legal

obligation on their part to sell the above
properties to the plaintiffs for the nominal
consideration of P1.00 per lot alleging that if they
executed the document on which the complaint
is predicated it was on the mistaken assumption
that their foster parents had requested them that
they executed on August 9, 1956 a document

5. The defendants to pay the costs.

Defendants took the present appeal.

and thorough study, realized that the abovementioned public instruments . . . do not
represent their true and correct interpretation of
the verbal wishes of the late spouses Don
Mariano Molo y Legaspi and Dona Juana Francisco
Juan y Molo." But after the execution of this
document, that is, on August 11, 1956, the
beneficiary Resurreccion de Leon and Justa de
Leon, thru their counsel demanded the
conveyance to them of the ten parcels of land for
the consideration of P1.00 per parcel as stated in
the document of December 5, 1950. And having
the defendants refused to do so, said
beneficiaries consigned on July 8, 1957 the
amount of P10.00 as the consideration of the ten
parcels of land.lawphil.net

On January 24, 1941, Mariano Molo y Legaspi

died leaving a will wherein he bequeathed his
entire estate to his wife, Juana Juan. This will was
probated in the Court of First Instance of Pasay
City, Rizal, which was affirmed by the Supreme
Court on November 26, 1956 (G.R. No. L-8774).
On May 11, 1948, Juana Juan in turn executed a
will naming therein many devisees and legatees,
one of whom is Guillermo San Rafael, mother of
the plaintiffs and defendant Pilar Perez Nable. On
June 7, 1948, however, Juana Juan executed a
donation inter vivos in favor of Emiliana MoloPeckson and Pilar Perez Nable of almost all of her
entire property leaving only about P16,000.00
worth of property for the devisees mentioned in
the will. Among the properties conveyed to the
donees are the ten parcels of land subject of the
present action. Juana Juan died on May 28, 1950.

In this appeal, appellants assign the following

errors:
I

On December 5, 1950, Emiliana Molo-Peckson

and Pilar Perez Nable executed a document which
they called "MUTUAL AGREEMENT" the pertinent
provisions of which are:

THE LOWER COURT ERRED IN HOLDING

THAT THE SPOUSES, MARIANO MOLO AND
JUANA JUAN, CONSTITUTED A TRUST
OVER THE PROPERTIES IN QUESTION
PETITION WITH PLAINTIFFS-APPELLEES AS
BENEFICIARIES.

That the above named parties hereby

mutually agree by these presents . . .
that the following lots should be sold at
ONE (1) PESO each to the following
persons and organization:
xxx

xxx

II
THE LOWER COURT ERRED IN APPLYING
ARTICLE 1440, 1441, 1449, 1453 AND
1457 OF THE NEW CIVIL CODE TO THE
CASE AT BAR.

xxx

TO JUSTA DE LEON and

RESURRECCION DE LEON, several parcels
of land located at Calle Tolentino (South
of Tenorio and Kapitan Magtibay), Pasay
City, share and share alike or half and
half of TEN (10) LOTS described in:

III
THE LOWER COURT ERRED IN HOLDING
PLAINTIFFS-APPELLEES' EXHIBIT "A" TO
BE A DECLARATION AGAINST INTEREST
AND AN ADMISSION BY DEFENDANTSAPPELLANTS.

Transfer Certificate of Title No. 28157

and allocated as follows:
(a) To JUSTA DE LEON Five (5) Lots.

IV

(b) To RESURRECCION DE LEON, the

remaining Five (5) Lots.

THE LOWER COURT ERRED IN HOLDING

THAT DEFENDANTS-APPELLANTS HAD NO
RIGHT TO REVOKE EXHIBIT "A".

That this agreement is made in

conformity with the verbal wish of the
late Don Mariano Molo y Legaspi and the
late Dona Juana Francisco Juan y Molo.
These obligations were repeatedly told to
Emiliana Molo Peckson, before their
death and that same should be fulfilled
after their death.

V
THE LOWER COURT ERRED, IN ORDERING
APPELLANTS TO RENDER AN
ACCOUNTING OF THE FRUIT OF THE
PROPERTIES IN QUESTION.
VI

On August 9, 1956, however, the same

defendants, assisted by their husbands, executed
another document in which they revoked the socalled mutual agreement mentioned above, and
another relating to the same subject matter,
stating therein that the parties, "after matured

THE LOWER COURT ERRED IN ORDERING

APPELLANTS TO FREE THE PROPERTIES
FROM THE MORTGAGE LIENS IN FAVOR

10

OF THE DEVELOPMENT BANK OF THE

PHILIPPINES AND CLARO CORTEZ.

question is evident. A declaration of trust has

been defined as an act by which a person
acknowledges that the property, title to which he
holds, is held by him for the use of another
(Griffith v. Maxfield, 51 S.W. 832, 66Ark. 513,
521). This is precisely the nature of the will of the
donor: to convey the titles of the lands to
appellants with the duty to hold them intrust for
the appellees. Appellants oblingly complied with
this duty byexecuting the document under
consideration.

VII
THE LOWER COURT ERRED IN AWARDING
ATTORNEY'S FEES TO THE APPELLEES.
VIII
THE LOWER COURT ERRED IN NOT
DISMISSING THE COMPLAINT.

True it is that to establish a trust the proof must

be clear, satisfactory and convincing. It cannot
rest on vague, uncertain evidence, or on a
loose,equivocal or indefinite declaration (In
re Tuttle's Estate, 200 A. 921, 132 Pa. Super 356);
but here the document in question clearly and
unequivocallydeclares the existence of the trust
even if the same was executed subsequent to the
death of the trustor, Juana Juan, for it has been
held that the right creating or declaring a trust
need not be contemporaneous or inter-parties
(Stephenson v. Stephenson, 171 S.W. 2d 265,
351 Mo. 8; In re Corbin's Trust Orhp., 57 York Leg.
Rec. 201). It was even held that an express trust
maybe declared by a writing made after the legal
estate has been vested in the trustee (Kurtz v.
Robinson, Tex. Civ. App. 256 S.W. 2d 1003). The
contention, therefore, of appellants that the will
and the donation executed by their predecessorsin-interest were absolute for it did not contain a
hint that the lots in question will be held in trust
by them does not merit weight because the fact
that an express trust was created by a deed
which was absolute on its face may be shown by
a writing separate from the deed itself (Mugan v.
Wheeler, 145 S.W. 462, 241 Mo. 376).

There is no merit in the claim that the document

executed on December 5, 1950 does not
represent the true and correct interpretation by
appellants of the verbal wish of their foster
parents relative to the conveyance for a nominal
consideration to appellees of the ten parcels of
land in question considering the circumstances
obtaining in the present case. To begin with, this
document was executed by appellants on
December 5, 1950, or about two years and six
months from the time they acquired title to the
lands by virtue of the donation inter
vivos executed in their favor by their foster
mother Juana Juan and six months after the
death of the donor. There is nobody who could
cajole them to execute it, nor is there any force
that could corce them to make the declaration
therein expressed, except the constraining
mandat of their conscience to comply with "the
obligations repeatedly told to Emiliana Molo
Peckson," one of appellants, before their death,
epitomized inthe "verbal wish of the late Don
Mariano Molo y Legaspi and the late Doa Juana
Francisco Juan y Molo" to convey after their death
said ten parcelsof land at P1.00 a parcel to
appellees. In fact, the acknowledgement
appended to the document they subscribed
states that it was "their own free act
andvoluntary deed."1awphi1.net

The fact that the beneficiaries were not notified

of the existence of the trust or that the latter
have not been given an opportunity to accept it
isof no importance, for it is not essential to the
existence of a valid trustand to the right of the
beneficiaries to enforce the same that they had
knowledge thereof the time of its creation
(Stoehr v. Miller, 296 F. 414).Neither is it
necessary that the beneficiary should consent to
the creation of the trust (Wockwire-Spencer Steel
Corporation v. United Spring Mfg. Co.,142 N.E.
758, 247 Mass. 565). In fact it has been held that
in case of a voluntary trust the assent of the
beneficiary is not necessary to render itvalid
because as a general rule acceptance by the
beneficiary is presumed (Article 1446, new Civil
Code; Cristobal v. Gomez, 50 Phil. 810).

Indeed, it is to be supposed that appellants

understood and comprehended the legal import
of said documents when they executed it more so
when bothof them had studied in reputable
centers of learning, one being a pharmacist and
the other a member of the bar. Moreover, they
have more than ample time the six months
intervening betwen the death of the donor and
the execution of the document to ponder not
only wish of their predecessors-in-interest but
also on the propriety of putting in writing the
mandate they have received. It is, therefore,
reasonable to presume that that document
represents the real wish of appellants'
predecessors-in-interest and that the only thing
to be determinedis its real import and legal
implications.

It is true, as appellants contend, that the alleged

declaration of trust was revoked, and having
been revoked it cannot be accepted, but the
attempted revocation did not have any legal
effect. The rule is that in the absence of any
reservation of the power to revoke a voluntary
trust is irrevocable without the consent of the
beneficiary (Allen v. Safe Deposit and Trust Co.of

That the document represents a recognition of

pre-existing trust or a declaration of an express
trust impressed on the ten parcels of land in

11

Baltimore, 7 A. 2d 180, 177 Md. 26). It cannot be

revoked by the creatoralone, nor by the trustee
(Fricke v. Weber, C.C.A. Ohio, 145 F. 2d
737;Hughes v. C.I.R., C.C.A. 9, 104 F. 2d 144;
Ewing v. Shannahan, 20 S.W. 1065,113 Mo. 188).
Here, there is no such reservation.

We find no error in the directive of the trial court

that appellants shouldfree the lands in question
from the encumbrance that was created thereon
by them in favor of the Development Bank of the
Philippines and one Claro cortez, for as trustees it
is their duty to deliver the properties to
the cestui que trust free from all liens and
encumbrances.

Appellants contend that the lower court erred in

applying the provisions of the new Civil Code on
trust. This is correct. The express trust was
constituted during the lifetime of the
predecessor-in-interest of appellants,that is,
before the effectivity of the new Civil Code,
although the instrumentrecognizing and
declaring such trust was executed on December
5, 1950, afterthe effectivity of said Code. The
Civil Code of 1889 and previous laws
andauthorities on the matter, therefore, should
govern the herein trust under the provisions of
Article 2253 of the new Civil code.

To recapitulate, we hold: (1) that the document

executed on December 5, 1950 creates an
express trust in favor of appellees; (2) that
appellants had no right to revoke it without the
consent of the cestui que trust; (3) that
appellants must render an accounting of the
fruits of the lands from the datethe judgement
rendered in G.R. No. L-8774 became final and
executory; and (4)that appellants should free
said lands from all liens and encumbrances.
WHEREFORE, with the modification as above
indicated with regard to accounting,we hereby
affirm the decision appealed from, without
pronouncement as to costs.

But the Civil Code of 1889 contains no specific

provisions on trust as doesthe new Civil Code.
Neither does the Code of Civil Procedure of 1901
for thesame merely provides for the proceeding
to be followed relative to trustsand trustees
(Chapter XVIII). This silence, however, does not
mean that thejuridical institution of trust was
then unknown in this jurisdiction, for
theprinciples relied upon by the Supreme Court
before the effectivity of thenew Civil Code were
those embodied in Anglo-American jurisprudence
as derivedfrom the Roman and Civil Law
principles (Government v. Abadilla, 46 Phil.
42).And these are the same principles on which
we predicate our ruling heretoforestated and on
which we now rely for the validity of trust in
question.

G.R. No. L-21334. December 10, 1924. ]

THE GOVERNMENT OF THE PHILIPPINE
ISLANDS, Petitioner, v. ANASTACIA
ABADILLA ET AL., claimants. THE
MUNICIPALITY OF TAYABAS ET AL.,
claimants-appellees, MARIA PALAD ET AL.,
claimants-appellants.
Domingo Lopez, Ramon Diokno and Gabriel
N. Trinidad for Appellants.
Attorney-General Villa-Real for the
municipality as appellee.

The trial court ordered appellants to render an

accounting of the fruits of the properties in
question even if appellees did not expressly ask
for it intheir prayer for relief. We, however,
believe that this is covered by the general prayer
"for such other relief just and equitable under the
premises."What is important is to know from
what what date the accounting should bemade.
The trial court ordered that the accounting be
made from the time appellees demanded the
conveyance of the ten parcels of land on August
11, 1956, in accordance with Article 1164 of the
new Civil Code which provides that the creditor
has a right to the fruit of the thing from thetime
the obligation to deliver it arises. But this cannot
be done without first submitting proof that the
conditions stated in the mutual agreement
hadbeen complied with. And this only happened
when the decision of the Supreme Court in G.R.
No. L-8774 became final and executory. The
ruling of the trialcourt in this respect should
therefore be modified in the sense that the
accounting should be made from the date of the
finality of the said decision.

No appearance for the other appellees.

SYLLABUS
1. WILLS; CONSTRUCTION. Testamentary
dispositions must be liberally construed so s to
give effect to the intention of the testator as
revealed by the will itself.
2. ID.; RULE AGAINST PERPETUITIES. Where
the will does not prohibit the alienation of land
devised in trust, there is no violation of any rule
against perpetuities.
3. MUNICIPAL CORPORATIONS; "AYUNTAMIENTO."
An ayuntamiento corresponds to what, in
English, is termed a municipal corporation and
the ordinary municipal government in these
Islands falls short of being such a corporation.
4. PROVINCIAL GOVERNOR; PROVINCIAL CIVIL
GOVERNOR DURING SPANISH REGIME. Though
the functions and powers of the offices of
provincial civil governor during the Spanish
regime and of provincial governor of the present
regime differ in detail, the latter must be
regarded as the successor of the former.

12

5. ID.; NOT A PUBLIC ESTABLISHMENT; MAY

RECEIVE A DEVISE IN TRUST WITHOUT PREVIOUS
APPROVAL. A provincial governor cannot be
regarded as a public establishment within the
meaning of article 748 of the Civil Code and may
therefore accept and receive a testamentary
devise in trust without the previous approval of
the central government.

whom he had been married since October 4,

1885. On July 27, 1897, the Court of First
Instance of Tayabas ordered the protocolization of
the will over the opposition of Leopoldo and
Policarpio Palad, collateral heirs of the deceased
and of whom the appellants Palad are
descendants.
The will contained a clause in Tagalog which,
translated into English,
reads:jgc:chanrobles.com.ph

6. TRUSTS, PRIVATE AND CHARITABLE; "CESTUI

QUE TRUST" NOT "IN ESSE." In regard to
private trusts, it is not always necessary that the
cestui que trust should be named, or even be in
esse at the time the trust is created in his favor
and this is especially so in regard to charitable
trusts.

"That the cocoanut land in Colongcolong, which I

have put under cultivation, be used by my wife
after my death during her life or until she
marries, which property is referred to in the
inventory under No. 5 but from this cocoanut
land shall be taken what is to be lent to the
persons who are to plant cocoanut trees and that
which is to be paid to them as their share of the
crop if any should remain; and that she try to
earn with the product of the cocoanut trees of
which those bearing fruit are annually increasing;
and if the times aforementioned should arrive, I
prepare and donate it to a secondary college to
be erected in the capital of Tayabas; so this will
be delivered by my wife and the executors to the
Ayuntamiento of this town, should there by any,
and if not, to the civil governor of this province in
order to cause the manager thereof to comply
with my wishes for the good of many and the
welfare of the town."cralaw virtua1aw library

7. REAL PROPERTY; TITLE TO LAND DEVISED IN

TRUST; REVERSION. Under an ordinary devise
of land in trust, the trustee holds the legal title
and the cestui que trust the beneficial title and
the natural heirs of the testator who are neither
trustees nor cestui que trust have no remaining
interest in the land devised except the right to
the reversion in the event the devise should fail,
or the trust for other reasons terminate.
8. ID.; ID.; STATUTE OF LIMITATIONS AS BETWEEN
TRUSTEE AND "CESTUI QUE TRUST" ; AS
BETWEEN TRUST AND THIRD PARTY;
PRESCRIPTION. Though the statute of
limitations does not run between trustee and
cestui que trust as long as the trust relations
subsist, it does run between the trust and third
persons, and a third person who holds actual,
open, public, and continuous possession of land
for over ten years, adversely to the trust,
acquires title to the land by prescription as
against such trust.

After the death of Luis Palad the widow Dorotea

Lopez remained in possession of the land and in
the year 1900 married one Calixto Dolendo. On
April 20, 1903, the aforesaid collateral heirs of
Luis Palad brought an action against the widow
for the partition of the lands here in question on
the ground that she, by reason of her second
marriage, had lost the right to their exclusive use
and possession. In the same action the
municipality of Tayabas intervened claiming the
land under the clause of the Palad will above
quoted. During the pendency of the action and
agreement was arrived at by the parties under
which the land which now constitutes lots Nos.
3464 and 3469 were turned over to the
municipality as its share of the inheritance under
the will, and the remaining portion of the land in
controversy and which now forms lot No. 3470
was left in the possession of Dorotea Lopez. On
the strength of the agreement the action was
dismissed on November 9, 1904, upon motion by
the counsel for the municipality and concurred in
by all the parties, reserving to the collateral heirs
the right to bring another action. The
municipality of Tayabas has been in possession of
said lots Nos. 3464 and 3469 ever since and
Dorotea Lopez has likewise held uninterrupted
possession of lot No. 3470.

DECISION

OSTRAND, J. :

This is an appeal from a judgment in cadastral

land registration case No. 3 of the Court of First
Instance of Tayabas (G.L.R.O. Record No. 213) in
which case lots Nos. 3464, 3469, and 3470 are
claimed by the municipality of Tayabas and the
governor of the province on one side, and by
Maria, Eufemio, Eugenia Felix, Caridad, Segunda,
and Emilia Palad on the other. Lot No. 3470 is
also claimed by Dorotea Lopez. The court below
ordered the registration of all three lots in the
name of the governor of the Province of Tayabas
in trust for a secondary school to be established
in the municipality of Tayabas. The claimants
Palad and Dorotea Lopez appealed.

In regard to lots Nos. 3464 and 3469, claimed by

the appellants Palad and the appellees, the case
presents several problems not directly covered
by statutory provisions or by Spanish or local
precedents and, for the solutions of which, we
must resort to the underlying principles of the
law on the subject. As it is doubtful whether the
possession of the municipality of Tayabas can be

It appears from the evidence that the lands in

question were originally owned by one Luis Palad,
a school teacher, who obtained title to the land
by composicion gratuita in 1894. On January 25,
1892, Palad executed a holographic will partly in
Spanish and partly in Tagalog. Palad died in
December 3, 1896, without descendants, but
leaving a widow, the appellant Dorotea Lopez, to

13

considered adverse within the meaning of section

41 of the Code of Civil Procedure, the case as to
these lots turns upon the construction and
validity of the clause quoted from the will of Luis
Palad, rather than upon the question of
prescription of title.

regime, may act as trustee in the present case.

In the regard to private trusts it is not always
necessary that the cestui que trust should be
named, or even be in esse at the time the trust is
created in his favor. (Flint on Trusts and Trustees,
section 25; citing Frazier v. Frazier, 2 Hill Ch.,
305; Ashurst v. Given, 5 Watts & S., 329; Carson
v. Carson, 1 Wins. [N.C. ], 24.) Thus a devise to a
father in trust for accumulation for his children
lawfully begotten at the time of his death has
been held to be good although the father had no
children at the time of the vesting of the funds in
him as trustee. In charitable trusts such as the
one here under discussion, the rule is still further
relaxed. (Perry on Trusts, 5th ed., section 66.)

The clause is very unskillfully drawn; its language

is ungrammatical and at first blush seems
somewhat obscure, but on closer examination it
sufficiently reveals the purpose of the testator.
And if its provisions are not in contravention of
some established rule of law or public policy,
they must be respected and given effect. It may
be observed that the question as to the
sufficiency of the form of the will must be
regarded as settled by the protocolization
proceedings had in the year 1897.

This principle is in harmony with article 788 of

the Civil Code which read as
follows:jgc:chanrobles.com.ph

It is a well-know rule that testamentary

dispositions must be liberally construed so as to
give effect to the intention of the testators
revealed by the will itself. Applying this rule of
construction it seems evident that by the clause
in question the testator proposed to create a
trust for the benefit of a secondary school to be
established in the town of Tayabas, naming as
trustee the ayuntamiento of the town or if there
be no ayuntamiento, then the civil governor of
the Province of Tayabas.

"Any disposition which imposes upon an heirs the

obligation of periodically investing specified sums
in charitable works, such as dowries for poor
maidens or scholarships for students, or in favor
of the poor, or any charitable or public
educational institution, shall be valid under the
following conditions:jgc:chanrobles.com.ph
"If the charge is imposed on real property and is
temporary, the heir or heirs may dispose of the
encumbered estate, but the lien shall continue
until the record thereof is canceled.

As the law of trusts has been much more

frequently applied in England and in the United
States that it has in Spain, we may draw freely
upon American precedents in determining the
effect of the testamentary trust here under
consideration, especially so as the trusts known
to the American and English equity jurisprudence
are derived from the fidei commissa of the
Roman Law and are based entirely upon Civil Law
principles.

"If the charge is perpetual, the heir may

capitalize it and invest the capital at interest,
fully secured by first mortgage.
"The capitalization and investment of the
principal shall be made with the intervention of
the civil governor of the province after hearing
the opinion of the prosecuting officer.

In order that a trust may become effective there

must, of course, be a trustee and a cestui que
trust, and counsel for the appellants Palad argues
that we here have neither; that there is no
ayuntamiento, no Gobernador Civil of the
province, and no secondary school in the town of
Tayabas.

"In any case, if the testator should not have laid

down any rules for the management and
application of the charitable legacy, it shall be
done by the executive authorities upon whom
this duty devolves by law."cralaw virtua1aw
library

An ayuntamiento corresponds and it may be

conceded that the ordinary municipal corporation
and it may be conceded that the ordinary
municipal government in these Islands falls short
of being such a corporation. But we have
provincial governors who like their predecessors,
the civil governors, are the chief executives of
their respective provinces. It is true that in a few
details the functions and powers of the two
offices may vary somewhat, but it cannot be
successfully disputed that one office is the legal
successor of the other. It might as well be
contended that when under the present regime
the title of the chief executive of the Philippines
was changed from Civil Governor to that of
Governor-General, the latter was not the legal
successor of the former. There can therefore be
but very little doubt that the governor of the
Province of Tayabas, as the successor of the civil
governor of the province under the Spanish

It is true that minor distinctions may possibly be

drawn between the case before us and that
presupposed in the articles quoted, but the
general principle in the same in both cases. Here
the trustee, who holds the legal title, as
distinguished from the beneficial title resting in
the cestui que trust, must be considered the heir.
The devise under consideration does not in terms
require periodical investments of specified sums,
but it is difficult to see how this can affect the
general principle involved, and unless the devise
contravenes some other provision of the Code it
must be upheld.
We have been unable to find any such provision.
There is no violation of any rule against
perpetuities: the devise does not prohibit the
alienation of the land devised. It does not violate
article 670 of the Code: the making of the will
and the continuance or quantity of the estate of

14

the heir are not left in the discretion of a third

party. the devisee is not uncertain and the devise
is therefore not repugnant to article 750 of the
Civil Code. the provincial governor can hardly be
regarded as a public establishment within the
meaning of article 748 and may therefore receive
the inheritance without the previous approval of
the Government.

Gomez and Jose Gomez, for the purpose of

recovering from Marcelino Gomez two parcels of
land located in the sitio of Jabay, municipality of
Bacoor, Province of Cavite, and lot located in the
town of Bacoor, Cavite, all more particularly
described in the second paragraph of the
complaint, and for the purpose of compelling the
defendant to pay to the plaintiffs the income
received by him from said property since 1918.
To the complaint the defendant answered with a
general denial and two special defenses not
necessary to be here recounted other than to
indicate that he claimed to be owner in his own
right of all of the property which is the subject of
the action. Upon hearing the cause the trial court
found that the property in question belongs to
the plaintiffs, as coowners, and he therefore
ordered the defendant to surrender the property
to them and execute an appropriate deed of
transfer as well as to pay the costs of the
proceeding. From this judgment the defendant
appealed.

But counsel argues that assuming all this to be

true the collateral heirs of the deceased would
nevertheless be entitled to the income of the
land until the cestui que trust is actually in esse.
We do not think so. If the trustee holds the legal
title and the devise is valid, the natural heirs of
the deceased have no remaining interest in the
land except their right to the reversion in the
event which has not as yet taken place. From a
reading of the testamentary clause under
discussion it seems quite evident that the
intention of the testator was to have the income
of the property accumulate for the benefit of the
proposed school until the same should be
established.

The property with which this action is concerned

formerly belonged to Epifanio Gomez, deceased
husband of the plaintiff Paulina Cristobal an
father of the four Gomez children who joined with
their mother Paulina in the complaint. On
December 13, 1891, Epifanio Gomez sold this
property under contract of sale with pacto de
retro to Luis R. Yangco, redeemable in five years
for the sum of P2,500 the vendor remaining in
possession in the character of lessee. The period
expressed in this agreement passed of lessee.
The period expressed in this agreement passed
without redemption, with the result that the
property consolidated in Yangco, who,
nevertheless, many years later conceded to the
vendor the privilege of repurchasing. Gomez was
without means to effect the repurchase of the
property himself, and he therefore found it
necessary to apply to a kinsman, Bibiano Baas,
for assistance. Baas hesitated to lend Gomez
the money upon his own sole credit; but told him
that he would let him have the money if his
brother Marcelino Gomez and his sister Telesfora
Gomez would make themselves responsible for
the loan. Epifanio therefor consulted with his
brother and sister and they agreed to assist him
in getting back his property. Accordingly, in the
latter part of July, 1907, Bibiano Baas was called
in consultation, at the home of Telesfora Gomez
in Manila, with Epifanio Gomez and Marcelino
Gomez. These four being present upon that
occasion, an agreement was reached, which was,
in substance, that Bibiano Baas, should advance
the sum of P7,000, upon the personal credit of
Marcelino and Telesfora Gomez, and that this
money should be used to repurchase the
property in the name of Telesfora Gomez and
Marcelino Gomez, who should hold and
administer the property until the capital
advanced by Baas should be paid off, after
which the property would be returned to Epifanio
Gomez. This agreement was carried into effect by
the execution of the Exhibits A and D of the

From what has been said it follows that the

judgment appealed from must be affirmed in
regard to lots Nos. 3464 and 3469.
As to lot No. 3470 little need be said. It may be
noted that though the Statute of Limitations dies
not run as between trustee and cestui que trust
as long as the trust relations subsist, it may run
as between the trust and third persons.
Contending that the Colongcolong land was
community property of her marriage with Luis
Palad and that lot No. 3470 represented her
share thereof, Dorotea Lopez has held possession
of said lot, adverse to all other claimants, since
the year 1904 and has now acquired title by
prescription.
The judgment appealed from is affirmed in regard
to lots Nos. 3464 and 3469 and is reversed as to
lot No. 3470, and it is ordered that said lot No.
3470, be registered in the name of the claimant
Dorotea Lopez. No costs will be allowed. So
ordered.
G.R. No. L-27014

October 5, 1927

PAULINA CRISTOBAL, ET AL., plaintiffsappellees,

vs.
MARCELINO GOMEZ, defendant-appellant.
M. H. de Joya and Jose Batungabacal for
appellant.
Ambrosio Santos for appellees.

STREET, J.:
This action was instituted in the Court of First
Instance of the Province of Cavite by Paulina
Cristobal, Luis Gomez, Josefa Gomez, Paciencia

15

plaintiffs, and though executed two days apart,

these documents, as the trial court found, really
constitute parts of one transaction. By the Exhibit
A, executed on August 12, 1907, Marcelino
Gomez and Telesfora Gomez created a "private
partnership in participation" for the purpose of
redeeming the property which their brother
Epifanio had sold to Yangco. It was therein agreed
that the capital of this partnership should consist
of P7,000, of which Marcelino Gomez was to
supply the amount of P1,500, and Telesfora
Gomez the sum of P5,550. It was further agreed
that all the property to redeemed should be
placed in the name of the two namely, Marcelino
Gomez and Telesfora Gomez, and that Marcelino
Gomez should be its manager. Among the
provisions in this agreement of major importance
to the present decision, we find the following:

Epifanio Gomez died, leaving a widow, Paulina

Cristobal, and the four children who are
coplaintiffs with their mother in this action.
Marcelino Gomez meanwhile entered into
possession of the property, a possession which
he subsequently maintained until his death,
which occurred after this action had been tried in
the court below. During this period of about
twenty years Marcelino Gomez improved the
larger parcel by extending the salt beds
constructed upon it and by converting them from
the Filipino form to the Chinese style. During the
same period the three parcels of property
quintupled in value, being now worth about
P50,000, according to the estimate made by
Marcelino Gomez himself.
Less than a year after the death of Epifanio
Gomez, his sister Telesfora became desirous of
freeing herself from the responsibility which she
had assumed to Bibianio Baas. Accordingly, on
September 10, 1909, with the consent of Baas,
the document Exhibit E was prepared and
executed by Telesfora and Marcelino Gomez. By
this instrument Telesfora conveyed to Marcelino
her interest and share in the three properties
previously redeemed from Yangco. The
conveyance recites a consideration of the sum of
P6,096, paid in the act. Nevertheless, no money
passed, and the real consideration of the
conveyance, as admitted by Marcelino Gomez
himself, was that Marcelino should assume the
obligation which Telesfora had contracted with
Baas by reason of the loan of P7,000 made the
latter upon the occasion of the redemption of the
property from Yangco. The amount of this
obligation was estimated at P6,096, and the
consideration mentioned in the Exhibit E was
therefore fixed in this amount. At the time that
Exhibit E was executed the same parties,
Marcelino Gomez and Telesfora Gomez, executed
the document Exhibit 13 of the defendant,
whereby they declared dissolved the partnership
that had been created by the Exhibit A; and
Telesfora Gomez again declared that she
conveyed to Marcelino Gomez the three parcels
in questions for the same consideration recited in
the Exhibit E.

(h) That all the income, rent, and produce

of the aforesaid property of Epifanio
Gomez shall be applied exclusively to the
amortization of the capital employed by
the two parties, that is to say, Don
Marcelino Gomez and Doa Telesfora
Gomez, with its corresponding interest
and other incidental expenses.
(i) As soon as the capital employed, with
its interest and other incidental
expenses, shall have been covered, said
properties shall be returned to our
brother Epifanio Gomez or to his
legitimate children, with the direct
intervention, however, of both parties,
namely, Don Marcelino Gomez and Doa
Telesfora Gomez, or one of them.
(j) In order that the property of Epifanio
Gomez may be returned, it is made
essential that he shall manifest good
behavior in the opinion of Don Marcelino
Gomez and Doa Telesfora Gomez jointly.
By the Exhibit D, executed on July 10, 1907, Luis
Yangco conveyed to Marcelino Gomez and
Telesfora Gomez the three pieces of property
which he had obtained from Epifanio Gomez.
Though this conveyance recited a consideration
of 5,000, the amount really paid to Yangco upon
this occasion was P6,700, consisting of the sum
of P5,000 which was needed to redeem the
property from Yangco, the further sum of P1,500
necessary to pay a loan which Epifanio Gomez
had obtained from Gregoria Yangco, sister of Luis
R. Yangco, and finally the sum of P200 which
Yangco exacted as a present for his manager. The
payment of these sums left P300 of the capital
which Baas had advanced, and this balance was
left with Marcelino Gomez to pay the expenses of
documentation and to make certain needed
repairs upon the property.

As long as both Telesfora and Marcelino Gomez

had been personally answerable to Baas for the
loan of P7,000, he had been content to look to
their personal responsibility for reimbursement;
but not that the loan was being novated, with
Marcelino as the sole debtor, Baas required him
to execute a contract of sale for the three
parcels, with pacto de retro, for the purpose of
securing the indebtedness (Exhibit 14 of the
defendant). This instrument was executed on
September 10, 1909, contemporaneously with
the execution of the documents by which
Telesfora conveyed her interest in the property to
Marcelino and by which the partnership was
declared dissolved. In the instrument Exhibit 14 it
is declared that Marcelino Gomez sells the
property to Baas for the sum of P8,500,

A little more than a year after the transaction

above-mentioned had been consummate,

16

with pacto de retro, redeemable within the period

of five years, extendible for whatever time Baas
may consider convenient. At the same time, and
by the same instrument, Baas leased the
property to the vendor Gomez for the period
fixed for repurchase at a semiannual rental of
P510, taxes to be paid by the lessee. The period
of repurchase fixed in this contract passed
without redemption having been effected, but by
an instrument dated June 26, 1915, Baas
conceded to Gomez the right to repurchase,
without any definite limit of time, conditioned
upon the payment of the rent. Finally, on April 1,
1918, Marcelino Gomez paid to Baas the sum of
P7,575.92 in full satisfaction of the entire claim
and received from Baas a reconveyance of the
three parcels, thus closing the documentary
history of the property so far as concerns this
litigation. Reflection upon the foregoing
transaction leaves no room for doubt as to the
fact that Baas held the property under the
contract of sale with pacto de retro (Exhibit 14)
as a mere security for his loan. This inference is
borne out by the fact that partial payments on
the capital had been accepted by him and that
he voluntarily extended the period of redemption
indefinitely after the property had nominally
consolidated.

The facts sketched above exhibit the dominant

features of the case, and reflection upon their
import conducts us to the conclusion that the
trial court committed no error in holding that the
defendant Marcelino Gomez must surrender the
property involved in this lawsuit; and he being
now dead, the same obligation devolves on his
heirs. The so-called partnership agreement
(Exhibit A) between Marcelino Gomez and his
sister created a trust for the express purpose of
rescuing the property of Epifanio Gomez; and
now that the purpose has been accomplished,
the property should be returned to his legitimate
children, as provided in paragraph (i) of the
agreement. This bilateral contract was fully
binding on both the contracting parties; and the
trial court did not err in declaring that, under the
second trial paragraph of article 1257 of the Civil
Code, the successors of Epifanio Gomez are
entitled to demand fulfillment of the trust.
In Martinez vs. Grao (42 Phil., 35), we held that
a person who, before consolidation of property in
the purchaser under a contract of sale with pacto
de retro, agrees with the vendors to buy the
property and administer it till all debts
constituting an encumbrance thereon shall be
paid, after which the property shall be turned
back to the original owner, is bound by such
agreement; and upon buying in the property
under these circumstances such person becomes
in effect a trustee and is bound to administer the
property in this character. The same rule is
applicable in the case before us.

The defendant Gomez says that the money used

by him to redeem the property in the end was
money of his own which he had obtained from
the sale of lithographic plant. Assuming that this
is true, it must nevertheless be remembered that
the properties in question, especially the salt
beds, were productive of considerable income;
and Gomez admitted at the trial that he had
obtained enough from the property to reimburse
him for all outlays. It is therefore evident that the
Baas loan has been fully liquidated from the
income of the property, or the equivalent, and
that the purpose of the original trust had been
fully accomplished before this action was
brought.

But it is claimed for the applicant that the trust

agreement (Exhibit A) was kept secret from
Epifanio Gomez and that, having no knowledge of
it, he could not have accepted it before the
stipulation was revoked. This contention is
contradicted in act by the testimony of Bibiano
Baas, who says that Epifanio Gomez was
present when the arrangement for the
repurchase of the property from Yangco was
discussed and that he assented thereto.
Moreover, Baas states that after the agreement
had been executed, he told Epifanio Gomez in
the presence of his brother and sister that he
should be well pleased as the object he had in
view had been accomplished, meaning, that the
property was recorded. But even supposing that
Epifanio Gomez may never have seen the Exhibit
A, we have no doubt that he understood the
nature of the arrangement and his assent thereto
was a sufficient acceptance. This being true, it
was not competent for the parties to the trust
agreement thereafter to dissolve the partnership
and destroy the beneficial right of Epifanio
Gomez in the property. The effect of Exhibits E
and 13 was merely to eliminate Telesfora Gomez
from responsibility in the performance of the
trust and to clothe Marcelino Gomez alone with
the obligations that had been created by Exhibit
A.

The proof shows that Epifanio Gomez was in

financial straits from the time of the Philippine
revolution until his death; and in the early years
of the present century he had from time to time
informally hypothecated several of these salt
beds to different creditors to secure petty loans,
and this notwithstanding the fact that the
property had previously been sold under contract
of sale with pacto de retro to Luis R. Yangco. The
fact that these loans had been made was known
to Marcelino and Telesfora Gomez when they
entered into partnership arrangement to get back
the property from Yangco. Marcelino Gomez, as a
manager, was therefore confronted with the
necessity of paying off these small debts, with
the result that he finally paid out upon the
property a total of around P10,000, including of
course the debt to Baas of P7,000. For these
and all other expenses incident to the property
he has, upon his own statement, been fully
reimbursed.1awph!l.net

Much energy has been expended by the

attorneys for the appellant in attempting to

17

demonstrate that, if Epifanio Gomez at any time

had any right in the property by virtue of the
Exhibit A, such right could only be derived from
the aspect of Exhibit A as a donation, and that,
inasmuch as the donation was never accepted by
Epifanio Gomez in a public document, his
supposed interest therein is unenforceable. But
this, in our opinion, is not a tenable hypothesis.
The partnership agreement should not be viewed
in the light of an intended donation, but as an
express trust.

and adverse to all other claimants; but, as we

have already demonstrated, he was merely a
trustee in possession under a continuing and
subsisting trust. Prescription is not effective in
favor of such a holder (Code of Civil Procedure,
sec. 38). Moreover, even supposing that the
statute of limitations might have begun to run in
the defendant's favor when he recovered the
property from Baas in 1918, the ten years
allowed by law had not been completed when
this action was instituted; and in this connection
the minority of one or more of the plaintiffs
during this period may be disregarded.

Much stress is placed in the appellant's brief

upon paragraph (j) of the partnership agreement
which, it is claimed, makes it a condition
precedent to the return of the property to
Epifanio Gomez that he should Exhibit good
behavior in the opinion of Marcelino and Telesfora
Gomez; and it is claimed that Epifanio Gomez
violated this condition by two kinds of
misbehavior before his death, namely, first, by
selling different salt lots to various persons, and
secondly, by attending cockfights, an activity
distasteful to his brother and sister. This feature
of the case if fully discussed and the contention
of the appellant refuted in the appealed decision.
But a few words may be here added upon this
aspect of the case. The trust agreement provides
that after the capital employed and other
expenses shall have been covered, the property
shall be returned to Epifanio Gomez or his
legitimate children. This contemplated the action
to be taken when the debt should be fully
liquidated, something that did not occur in this
case until 1918. But Epifanio Gomez died in
1908. It is evident that misbehavior on the part of
Epifanio Gomez during the year or more that he
lived after the trust agreement was made could
not be attributed as a ground of forfeiture to his
legitimate children ten years later, especially as
no step had ever been taken in the life of Epifanio
Gomez to defeat his rights under the trust on
account of his alleged misbehavior.

A point unconnected with the other issues in the

case is raised by the fourth assignment of error in
the appellants brief. This has reference to the
title to parcel C, the lot located in Bacoor. There
can be no doubt that the ownership of this piece
of property was originally vested in Epifanio
Gomez by virtue of a composition title from the
Government; and said title has never passed
from him except by virtue of the contract of sale
of 1891 in favor of Luis R. Yangco. Nevertheless,
the defendant has submitted in evidence a
notarial document emitted on December 31,
1904, by Epifanio Gomez, in the character of
notary public, wherein he certifies that Marcelino
Gomez had requested him to draw up a notarial
act showing the properties of which Marcelino
Gomez was known to be the true owner: upon
which follows an enumeration of properties
possessed by Marcelino Gomez. Among these we
find the lot in Bacoor, being the parcel C
described in the complaint. The appellant relies
upon this instrument as proving title in Marcelino
Gomez, and it is contended that Epifanio Gomez
and his successors are estopped from claiming
said lot. This contention is untenable. It is true
that we have here the written admission of
Epifanio Gomez would have been estopped from
asserting ownership in himself. Nevertheless, it is
clear enough this document Epifanio Gomez, in
conclusion with his brother Marcelino, was merely
laying the basis of a scheme to defeat Yangco's
rights under his contract of purchase of 1891, or
perhaps to defeat other creditors of Epifanio
Gomez, a plot which, in view of subsequent
occurrences, they did not attempt to carry into
effect. No estoppel can be invoked by Marcelino
Gomez or his successors, based upon this
document, for the reason that he was not misled
by the false statement contained therein.

Again, it is contended for the appellant that

inasmuch as the property consolidated in Baas
in the year 1915 under the contract of sale
with pacto de retro to him, the subsequent
repurchase of the property by Marcelino Gomez
in 1918 vested an indefeasible title in the latter
free from the original trust. But it is obvious that
the purchase effected in 1918 was really a
repurchase, consequent upon the extension of
the time of redemption by Baas, and Gomez
must be considered to be holding in the same
right as before, that is, subject to the trust in
favor of Epifanio Gomez.

In conclusion we note that the trial court did not

determine the extent of the proportional interest
in the property pertaining to the different
plaintiffs, and no issue has been made with
respect to the extent of their several rights. The
solution of this point, if any contention should
arise among them in the future, depends upon
the character of the property in relation to the
spouses Epifanio Gomez and Paulina Cristobal,
that is, whether it was conjugal property or the
individual property of Epifanio Gomez. In the
dispositive paragraph of the appealed decision

Lastly, it is urged that Gomez has the benefit of

prescription in his favor, having been in
possession more than ten years under the deed
by which he acquired the sole right from his
sister in 1909. This contention would be valid if
the defendant had really been holding adversely
under a claim of title exclusive of any other right

18

the court ordered Marcelino Gomez to executed a

deed conveying the three parcels in question to
the plaintiffs; but, the defendant being now dead,
and the exact extent of the several interests
pertaining to the plaintiffs not being determined,
it will be sufficient for us to declares, as we now
do, that the plaintiffs are the owners of the
property in question, and to require the
successors in interest of the defendant to deliver
the property to the plaintiffs.

Cadastre. On December 23, 1939, Juan Cruz sold

Lot 1846-C to the Commonwealth of the
Philippines for the amount of P6,347.50. 3 On that
same day, Juan Cruz, as vendor, and C.B. Cam
and Miguel N. Lansona as sureties, executed a
surety bond in favor of the vendee to guarantee
the vendor's absolute title over the land sold. 4
The cadastral survey plan was approved by the
Director of Lands on July 10, 1940, 5 and on
March 7, 1941, Original Certificate of Title No. 26
was issued in the means of Victoriana Ang
Bansing, Orfelina Ang Bansing and Francisco Ang
Bansing as claimants of the land, pursuant to
Decree No. 745358 issued on July 29, 1940. On
March 31, 1941, OCT No. 26 was cancelled
pursuant to a Deed of Adjudication and Transfer
Certificate of Title No. 1783 was issued in the
name of Francisco Ang Bansing. 6

The appealed judgment will therefore be

modified by incorporating therein a declaration of
ownership in favor of the plaintiffs and by
eliminating the requirement for the specific
execution of a conveyance. In other respects the
judgment is affirmed. So ordered, with costs
against the appellant.
G.R. No. L-49087 April 5, 1982

On that day, March 31, 1941, Ang Banging sold

Lot 1846-A to Juan Cruz and TCT No. 1783 was
cancelled. TCT No. 1784 was issued in the name
of Juan Cruz, for Lot 1846-A and TCT No. 1785
was issued in the name of Ang Bansing for the
remaining Lots 1846-B, 1846-C, 1846-D, and
1846-E. Later, Ang Bansing sold two subdivision
lots of Lot 1846-B, namely: Lot 1846-B-2-C and
Lot 1846-B-1 to Vedasto Corcuera for which TCT
No. 2551 and TCT No. 2552, respectively, were
issued in the name of the said Vedasto Corcuera
on August 10, 1946. Thereafter, Lot 1848-A, with
an area of 9.6508 hectares, and Lots 1846-B-A
and 1848- B-2-D all subdivided portions of Lot
1846-B, were similarly conveyed to Juan Cruz for
which TCT No. 2599 and TCT No. 2600,
respectively, were issued in the name of Juan
Cruz on September 26, 1946. TCT No. 2601 was
issued in the name of Ang Bansing for the
remainder of the property, including the lot in
question. Then, another portion of 1846-B,
designated in the subdivision plan as Lot 1848-B2-B was sold to Juan Cruz for which TCT No. 184
was issued in the latter's name. On November
28, 1946, after these conveyances, there
remained in the possession of Ang Bansing under
TCT No. 2601, Lot 1846-C, the lot in question; Lot
1846-D; and Lot 1846-E. However, TCT No. 2601
was again partially cancelled when Ang Bansing
sold Lot 1846-D to Vedasto Corcuera. 7

MINDANAO DEVELOPMENT AUTHORITY, now

the SOUTHERN PHILIPPINES DEVELOPMENT
ADMINISTRATION, petitioner,
vs.
THE COURT OF APPEALS and FRANCISCO
ANG BANSING, respondents.
CONCEPCION JR., J.:
Petition for review on certiorari of the decision of
the Court of Appeals in CA-G.R. No. 48488-R,
entitled: "Mindanao Development Authority, etc.,
plaintiff-appellee, versus Francisco Ang Bansing
defendant-appellant",which reversed the decision
of the Court of First Instance of Davao and
dismissed the complaint filed in Civil Case No.
6480 of the said court.
It is not disputed that the respondent Francisco
Ang Bansing was the owner of a big tract of land
with an area of about 300,000 sq.m., situated in
Barrio Panacan Davao City. On February 25, 1939,
Ang Bansing sold a portion thereof, with an area
of about 5 hectares to Juan Cruz Yap Chuy The
contract provided, among others, the following:
That I hereby agree to work for
the titling of the entire area of my
land under my own expenses and
the expenses for the titling of the
portion sold to me shall be under
the expenses of the said Juan
Cruz Yap Chuy. 1

On February 25, 1965, the President of the

Philippines issued Proclamation No. 459,
transferring ownership of certain parcels of land
situated in Sasa Davao City, to the Mindanao
Development Authority, now the Southern
Philippines Development Administration, subject
to private rights, if any. Lot 1846-C, the disputed
parcel of land, was among the parcels of land
transferred to the Mindanao Development
Authority in said proclamation. 8

After the sale, the land of Ang Banging was

surveyed and designated as Lot 664-B, Psd-1638.
Lot 664-B was further subdivided into five (5) lots
and the portion sold to Juan Cruz Yap Chuy
shortened to Juan Cruz, was designated as Lot
664B-3, with an area of 61.107 square meters,
more or less. 2 On June 15-17 and December 15,
1939, a cadastral survey was made and Lot 664B-3 was designated as Lot 1846-C of the Davao

On March 31, 1969, Atty. Hector L. Bisnar counsel

for the Mindanao Development Authority, wrote
Ang Bansing requesting the latter to surrender

19

the Owner's duplicate copy of TCT No. 2601 so

that Lot 1846-C could be formally transferred to
his client but Ang Bansing
refused. 9 Consequently, on April 11, 1969, the
Mindanao Development Authority filed a
complaint against Francisco Ang Bansing before
the Court of First Instance of Davao City,
docketed therein as Civil Case No. 6480, for the
reconveyance of the title over Lot 1846-C,
alleging, among others, the following:

the expenses of
the said Juan
Cruz Yap Chuy.
and defendant in fact secured at
his expense his OCT No. 26 for
his entire land; that in the
process of defendant's securing
his title neither Juan Cruz Yap
Chuy nor the Commonwealth of
the Philippines asserted any right
to ownership of the subject
property and that was almost 30
years ago until plaintiff filed its
complaint, thus plaintiff is forever
barred from claiming any right
over the subject property. There
was no real sale made but only
the intention to sell a portion of
the land as stated by defendant
in Annex 'C' of the complaint.

xxx xxx xxx

9. That the deed of sale, marked
as Annex 'A', it was stipulated by
the parties that the defendant
would work to secure title of his
entire tract of land of about 30
hectares defraying the expenses
for the same and the expenses
for the title of the portion sold by
the defendant to Juan Cruz Yap
Chuy shall be borned by the
latter;

10. That defendant denies

allegations contained in
paragraph 10 of the complaint
that he acted as the trustee of
Juan Cruz Yap Chuy Defendant
was never such; matter of fact
Juan Cruz Yap Chuy for the last 26
years, that is until he. died in
October, 1965, never made any
demand to have the title of the
subject property transferred in
his name because he knew all the
time that the alleged sale in his
favor was per se null and void he
also knew that no sale was ever
consummated. 11

10. That the defendant as vendor

and the one who worked to
secure the title of his entire tract
of land which included the
portion sold by him. to Juan Cruz
Yap Chuy acted in the capacity of
and/or served as trustee for any
and all parties who become
successor-in-interest to Juan Cruz
Yap Chuy and the defendant was
bound and obligated to give,
deliver and reconvey to Juan Cruz
Yap Chuy and/or his successor-ininterest the title pertaining to the
portion of land sold and conveyed
by him to Juan Cruz Yap Chuy by
virtue of the deed of sale marked
as Annex 'A' and his affidavit
marked as Annex 'C'. 10

After trial, the Court of First Instance of Davao

City found that an express trust had been
established and ordered the reconveyance of the
title to Lot 1846-C of the Davao Cadastre to the
plaintiff Mindanao Development Authority. 12

In answer, Ang Bansing replied:

Ang Banging appealed to the Court of Appeals

and the said appellate court ruled that no
express trust has been created and, accordingly,
reversed the judgment and dismissed the
complaint. 13

xxx xxx xxx

9. That defendant admits that in
Annex'A'of the complaint, it was
agreed and stipulated in
paragraph 6 thereof that:

Hence, the present recourse.

The petition is without merit. As found by the
respondent Court of Appeals, no express trust
had been created between Ang Banging and Juan
Cruz over Lot 1846-C of the Davao Cadastre.
"Trusts are either express or implied. Express
trusts are created by the intention of the trustor
or of the parties. Implied trusts come into being
by operation of law." 14 It is fundamental in the
law of trusts that certain requirements must exist
before an express trust will be recognized.
Basically, these elements include a competent
trustor and trustee, an ascertainable trust res,

That I hereby
agree to work for
the titling of the
entire area of my
land under my
own expense and
the expenses for
the titling of the
portion sold to
me shall be under

20

and sufficiently certain beneficiaries. Stilted

formalities are unnecessary, but nevertheless
each of the above elements is required to be
established, and, if any one of them is missing, it
is fatal to the trusts. Furthermore, there must be
a present and complete disposition of the trust
property, notwithstanding that the enjoyment in
the beneficiary will take place in the future. It is
essential, too, that the purpose be an active one
to prevent trust from being executed into a legal
estate or interest, and one that is not in
contravention of some prohibition of statute or
rule of public policy. There must also be some
power of administration other than a mere duty
to perform a contract although the contract is for
a third-party beneficiary. A declaration of terms is
essential, and these must be stated with
reasonable certainty in order that the trustee
may administer, and that the court, if called upon
so to do, may enforce, the trust." 15

or object thereof is strong evidence that he

intended no trust. 18
The intent to create a trust must be definite and
particular. It must show a desire to pass benefits
through the medium of a trust, and not through
some related or similar device. 19
Clear and unequivocal language is necessary to
create a trust and mere precatory language and
statements of ambiguous nature, are not
sufficient to establish a trust. As the Court stated
in the case of De Leon vs. Packson,20 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. Considering that the trust intent has
not been expressed with such clarity and
definiteness, no express trust can be deduced
from the stipulation aforequoted.

In this case, the herein petitioner relies mainly

upon the following stipulation in the deed of sale
executed by Ang Bansing in favor of Juan Cruz to
prove that an express trust had been established
with Ang Bansing as the settlor and trustee and
Juan Cruz as the cestui que trust or beneficiary:

Nor will the affidavit executed by Ang Banging on

April 23, 1941, 21 be construed as having
established an express trust. As counsel for the
herein petitioner has stated, "the only purpose of
the Affidavit was to clarify that the area of the
land sold by Ang Bansing to Juan Cruz Yap Chuy
is not only 5 hectares but 61,107 square meters
or a little over six (6) hectares." 22

That I hereby agree to work for

the titling of the entire area of my
land under my own expenses and
the expenses for the titling of the
portion sold to me shall be under
the expenses of said Juan Cruz
Yap Chuy.

That no express trust had been agreed upon by

Ang Bansing and Juan Cruz is evident from the
fact that Juan Cruz, the supposed beneficiary of
the trust, never made any attempt to enforce the
alleged trust and require the trustee to transfer
the title over Lot 1846-C in his name. Thus, the
records show that the deed of sale, covering Lot
1846-C, was executed by Ang Bansing in favor of
Juan Cruz on February 25, 1939. Two years later,
or on March 31, 1941, Ang Bansing sold Lot 1846A to the said Juan Cruz for which TCT No. 1784
was issued in the name of Juan Cruz.
Subsequently thereafter, Lot 1848-A, with an
area of 9.6508 hectares, and Lots 1846-A and
1848-B-2-D, all subdivided portions of Lot 1846-B,
were similarly conveyed to the said Juan Cruz for
which TCT No. 2599 and TCT No. 2600,
respectively, were issued in the name of Juan
Cruz on September 26, 1946. Then, another
portion of 'Lot 1846-B, designated in the
subdivision plan as Lot 1848-B-2-13, was sold to
Juan Cruz for which TCT No. 184 was issued in his
name on November 28, 1948. Despite these
numerous transfers of portions of the original 30hectare parcel of land of Ang Bansing to Juan
Cruz and the issuance of certificates of title in the
name of Juan Cruz, the latter never sought the
transfer of the title to Lot 1846-C in his name. For
sure, if the parties had agreed that Ang Bansing
shall hold the property in trust for Juan Cruz until
after the former shall have obtained a certificate
of title to the land, the latter would have asked
for the reconveyance of the title to him in view of
the surety bond executed by him in favor of the
Commonwealth Government wherein he warrants

The above-quoted stipulation, however, is

nothing but a condition that Ang Bansing shall
pay the expenses for the registration of his land
and for Juan Cruz to shoulder the expenses for
the registration of the land sold to him. The
stipulation does not categorically create an
obligation on the part of Ang Bansing to hold the
property in trust for Juan Cruz. Hence, there is no
express trust. It is essential to the creation of an
express trust that the settlor presently and
unequivocally make a disposition of property and
make himself the trustee of the property for the
benefit of another. 16
In case of a declaration of trust,
the declaration must be clear and
unequivocal that the owner holds
property in trust for the purposes
named. 17
While Ang Bansing had agreed in the deed of sale
that he will work for the titling of "the entire area
of my land under my own expenses," it is not
clear therefrom whether said statement refers to
the 30-hectare parcel of land or to that portion
left to him after the sale. A failure on the part of
the settlor definitely to describe the subjectmatter of the supposed trust or the beneficiaries

21

his title over the property. The conduct of Juan

Cruz is inconsistent with a trust and may well
have probative effect against a trust.

Francisco Ang Banging. From that date up to April

11, 1969, when the complaint for reconveyance
was filed, more than 28 years had passed.
Clearly, the action for reconveyance had
prescribed.

But, even granting, arguendo, that an express

trust had been established, as claimed by the
herein petitioner, it would appear that the trustee
had repudiated the trust and the petitioner
herein, the alleged beneficiary to the trust, did
not take any action therein until after the lapse of
23 years. Thus, in its Reply to the Defendant's
Answer, filed on June 29, 1969, the herein
petitioner admitted that "after the last war the
City Engineer's Office of Davao City made
repeated demands on the defendants for the
delivery and conveyance to the Commonwealth
Government, now the Republic of the Philippines,
of the title of land in question, Lot 1846-C, but
the defendant ignored and evaded the
same." 23 Considering that the demand was
made in behalf of the Commonwealth
Government, it is obvious that the said demand
was made before July 4, 1946, when the
Commonwealth Government was dismantled and
the Republic of the Philippines came into being.
From 1946 to 1969, when the action for
reconveyance was filed with the Court, 23 years
had passed. For sure, the period for enforcing the
rights of the alleged beneficiary over the land in
question after the repudiation of the trust by the
trustee, had already prescribed.

Besides, the enforcement of the constructive

trust that may have been impressed upon the
title of Ang Bansing over Lot 1846-C of the Davao
Cadastre is barred by laches. 29 It appears that
the deed of sale in favor of the Commonwealth
Government was executed by Juan Cruz on
December 23, 1939, during the cadastral
proceedings, and even before the cadastral
survey plan was approved by the Director of
Lands on July 10, 1940. But, the vendee therein
did not file an answer, much less an opposition to
the answer of Ang Bansing in the said Cadastral
proceedings. The judgment rendered in the said
cadastral proceeding, awarding the lot in
question to Ang Bansing is already final. After an
inexcusable delay of more than 28 years and
acquiescence to existing conditions, it is now too
late for the petitioner to complain.
WHEREFORE, the petition should be, as it is
hereby, DENIED. No costs.
SO ORDERED.

Needless to say, only an implied trust may have

been impressed upon the title of Ang Banging
over Lot 1846-C of the Davao Cadastre since the
land in question was registered in his name
although the land belonged to another. In implied
trusts, there is neither promise nor fiduciary
relations, the so-called trustee does not
recognize any trust and has no intent to hold the
property for the beneficiary." 24 It does not arise
by agreement or intention, but by operation of
law. Thus, if property is acquired through mistake
or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for
the benefit of the person from whom the property
comes. 25

G.R. No. L-27294 June 28, 1983

ALFREDO ROA, JR., LETICIA ROA DE BORJA,
RUBEN ROA, CORNELIO ROA and ELSIE ROACACNIO (as heirs of the late Alfredo Roa,
Sr.). petitioners,
vs.
HON. COURT OF APPEALS and the spouses
JOAQUIN CASIO and CUSTODIA
VALDEHUESA,respondents.
Alberto Cacnio for petitioners.
Melecio Virgilio Law Office for respondents.

If a person obtains legal title to property by fraud

or concealment, courts of equity will impress
upon the title a so-called constructive trust in
favor of the defrauded party. 26

GUERRERO, J.:
Appeal by way of certiorari from the Decision of
the Court of Appeals 1 in CA-G.R. No. 34746-R
entitled "Alfredo Roa, Plaintiff-Appellant, versus
Joaquin Casio et al., Defendants-Appellees," and
from the Resolution of the said Court 2denying
plaintiff-appellant's motion for reconsideration of
the said Decision.

There is also a constructive trust if a person sells

a parcel of land and thereafter obtains title to it
through fraudulent misrepresentation. 27
Such a constructive trust is not a trust in the
technical sense and is prescriptible; it prescribes
in 10 years. 28

On September 1, 1955, an action for recovery of

possession of a parcel of land was filed before
the Court of First Instance of Misamis Oriental by
Alfredo Roa, Sr. (now deceased and subsequently

Here, the 10-year prescriptive period began on

March 31, 1941, upon the issuance of Original
Certificate of Title No. 26 in the names of
Victoriana Ang Bansing Orfelina Ang Bansing and

22

substituted by his heirs, the herein petitioners)

against respondent spouses, Joaquin Casio and
Custodia Valdehuesa (real name appears to be
Teodosia Valdehuesa), successors-in- interest of
one Pablo Valdehuesa, now deceased.

That parties herein, assisted by

their respective attorneys, have
agreed on the following facts:
1. That the plaintiff and the
defendants are all of age and
with capacity to sue and be sued.

In his complaint, Alfredo Roa, Sr. alleged that the

said land is agricultural; that it is situated in
Bugo, formerly within the municipality of
Tagoloan, Misamis Oriental, now comprised within
the limits of the City of Cagayan de Oro; that it is
registered in his name under Original Certificate
of Title No. T-21D; that he found the private
respondents occupying said land. He prayed that
possession of the same be returned to him and
that he be awarded actual and moral damages in
the sum of P10,000.00.

2. That the plaintiff and his

brothers and sisters Trinidad
Reyes Roa, Esperanza Roa de
Ongpin, Concepcion Roa and
Zosimo Roa, husband of the
latter, were the owners proindiviso of a parcel of land
located in Tagoloan, Misamis
Oriental, containing an area of
several hundred hectares, and
sometime in 1925, and for the
purpose of registering their title
to said parcel of land, the said coowners filed an application with
the Court of First Instance of
Misamis Oriental, and said
application was docketed in said
Court as Expediente No. 12,
G.L.R.O. Record No. 10003.

In answer to the complaint, respondent spouses

alleged that the land in question formerly
belonged to one Pablo Valdehuesa, father of
respondent Custodia (Teodosia) Valdehuesa and
now deceased; that it was however titled in the
name of Alfredo Roa, Sr., Trinidad Reyes Roa,
Esperanza Roa de Ongpin, Concepcion Roa and
her husband Zosimo Roa in Land Registration
Case No. 12, G.R.L.O. Record No. 10003 of the
Court of First Instance of Misamis Oriental by
virtue of an agreement entered into between the
Roas and said Pablo Valdehuesa; that the
conditions of the said compromise agreement
were never complied with by the Roas
notwithstanding the death of Pablo Valdehuesa in
1928 and despite repeated demands for
compliance thereof; that the heirs of said Pablo
Valdehuesa sold the land in question to them on
April 30, 1930, after rescinding the
aforementioned compromise agreement; and
that they now enjoy the privileges of absolute
ownership over said land by reason of their
continuous and adverse possession thereof since
time immemorial. By way of counterclaim, the
respondents prayed for the reconveyance of the
said parcel of land contending that the
compromise agreement created an implied trust
between the parties to it, and for damages in the
amount of P10,000.00.

3. That in the application as well

as in the plans accompanying
said application in Expediente No.
12, G.L.R.O. No. 10003, was
included a parcel of land which is
now the portion in litigation in
this case.
4. That one Pablo Valdehuesa
filed an opposition in said
Expediente No. 12, G.L.R.O.
Record No. 10003. claiming
absolute and exclusive ownership
over a portion which is now the
property under litigation.
5. That sometime during the year
1925, the co-owners, said
Concepcion Roa, Esperanza Roa
de Ongpin and Trinidad Reyes
Roa and Zosimo Roa entered into
an agreement with the said Pablo
Valdehuesa, and the terms of
their agreement are contained in
the document hereto attached,
made a part hereof, and marked
as Exhibit "1".

In answer to private respondent's counterclaim,

Alfredo Roa, Sr. maintained that the heirs of Pablo
Valdehuesa cannot rescind the compromise
agreement by their own act alone or without
going to court; and that the alleged sale of the
said heirs to private respondents was null and
void, in view of the fact that respondent spouses
knew that the land was then titled in the name of
the Roas under Act 496.

6. That in compliance with his

obligation under and by virtue of
said Exhibit " 1" the said Pablo
Valdehuesa withdrew the
opposition filed by him in said
case Expediente No. 12, G.L.R.O.
Record No. 10003, and as the
result of said withdrawal, the
plaintiff and his co-owners

On December 22, 1959, the parties submitted to

the Court a quo an agreed Stipulation of Facts, to
wit:
STIPULATION OF FACTS

23

succeeded in registering their

title to their property, including
the portion owned by Pablo
Valdehuesa as claimed in his
opposition.

last World War, and the parties

reserve the right to present
additional evidence during the
hearing of this case.
Cagayan de Oro City, December 22, 1959.

7. That the said Pablo Valdehuesa

died in May of 1928, and upon his
death his estate passed to the
ownership of his widow and
legitimate children including all
his rights under said Exhibit " 1 "
to the property in question.

Sgd.) ALFREDO ROA

Plaintiff
(Sgd.) HERNANDO PINEDA
(Attorney for Plaintiff)
(Sgd.) JOAQUIN CASIO

8. That since then the property in

question has been in the
possession of the defendants,
and their possession together
with the possession of their
predecessors in said property has
been open, continuous and
uninterrupted to this date.

(Sgd.) CUSTODIA VALDEHUESA

(Defendants)
(Sgd.) MANUEL C. FERNANDEZ
(Sgd.) CONCORDIO C. DIEL
(Attorney for defendants")

9. That sometime after the

issuance of title in favor of the
plaintiff (Transfer Certificate of
Title No. 21-A) and his
aforementioned brothers and
sisters covering the parcel of land
subject matter of the application
filed by them in Expediente No.
12, G.L.R.O. Record No. 10003,
the said plaintiff and his brothers
and sisters partitioned among
themselves said property, and
plaintiff was adjudicated a share
in said property, of which the
parcel of land covered by the
opposition of Pablo Valdehuesa
withdrawn under the terms of
Exhibit " 1" is a part or portion of
said charge, and covered by T-21D (copy attached as Exh. "A").

The aforesaid compromise agreement mentioned

in paragraph 5 of the agreed Stipulation of Facts
was thereafter ratified on May 11, 1927 as shown
in Exhibit " 1" as follows:
SEPAN TODOS LOS QUE LA
PRESENTE VIEREN :
Que nosotros, los abajo
firmantes, mayores de edad
hacemos constar:
1. Que somos los dueos
mancomunados de la propiedad
conocida por Terrenos de Bugu,
en el municipio de Tagoloan,
provincia de Misamis.
2. Que en la tramitacion del Exp.
No.12,G.L.R.O.,Record No. 10003,
para el registro de dicha
propiedad, el Sr. Pablo
Valdehuesa del municipio de
Tagoloan, que era uno de los
opositores, consintio en retirar su
oposicion contra nuestra citada
solicitud de registro a condicion
de que le reconozcamos su
dominio y propiedad sobre una
parcela de terreno dentro de la
comprension de Bugu que el
ocupaba, o se le compre, y de
otro modo se le compense al
reintegrarnos dicha parcela en
tiempo oportuno. La descripcion
del terreno referido cuya
extension es de una hectares,
cuarenta y nueve areas y
cincuenta y nueve centiareas,
aparece en el escrito de

10. That the portion in litigation

as correctly described in
paragraph 3 of the complaint is
covered by the certificate of title
referred to above.
11. That in 1955 the plaintiff had
a surveyor relocate the corners
and boundaries of his land as
described in his title and that the
portion of about 2 hectares on
the eastern end of the land is in
the possession and is actually
occupied by the defendant. This
is the portion in litigation
described in par. 3 of the
complaint .
12. That Expediente No. 12,
G.L.R.O. Record No. 10003 have
been totally destroyed during the

24

oposicion que obra en el referido

Exp. 12, y que luego fue retirado
por convenio de partes.

land occupied by him until the same was sold by

the heirs of Pablo Valdehuesa to the respondent
spouses on April 30, 1930.

3. Por tanto, en complimiento de

dicho convenio y como
consecuencia del mismo,
ratificamos lo que tenemos
prometido, para lo cual
autorizamos al Sr. Zosimo Roa a
que busque y adquiera otro
pedazo de terreno fuera de la
comprension de Bugu, de una
hectarea, cuarenta y nueve areas
y cincuenta y nueve centiareas,
poco mas o menos, y que sea
acceptable para el Sr. Pablo
Valdehuesa, como canje or
permuta con la parcela que el
ocupa; en la inteligencia de que
el valor de compra no exceda de
P400.00 en su defecto, si no se
encuentra un terreno que sea
satisfactorio para el Sr. Pablo
Valdehuesa, se le compensara el
reintegro arriba citado en la
mencionada cantidad de
P400.00.

On March 6, 1964, the lower court rendered the

decision ordering the plaintiff Alfredo Roa to
reconvey the land in dispute to the defendants,
now the respondent spouses, on the ground that
same could not have been registered in the name
of the plaintiff and his brother and sisters if not
for the compromise agreement aforestated and
further to pay said defendants the amount of
P1,000.00 as attorney's fees plus costs.
On appeal taken by Alfredo Roa, the appellate
court affirmed the decision of the lower court and
declared that (a) the compromise agreement
created an express trust between the Roa
brothers and sisters, including Alfredo, Sr., (b)
that the respondent spouses' action for
reconveyance was imprescriptible on the
authority of Mirabiles, et al. v. Quito, et al., L14008, October 18, 1956; and (c) that Alfredo
Roa cannot invoke the indefeasibility and
imprescriptibility of the Torrens title issued in his
name for the land in dispute since the said title
was secured by him in breach of an express trust,
and thus, the Court ordered the reconveyance of
the property within fifteen (15) days from the
finality of the decision.

4. Por su parte, el Sr. Pablo

Valdehuesa, acepta todo lo
establecido en este documento,
obligandose a respetarlo y
acatarlo.

Alfredo Roa, now substituted by his heirs, the

herein petitioners Alfredo Roa, Jr., Leticia Roa de
Borja, Ruben Roa, Cornelio Roa and Elsie RoaCacnio, moved to reconsider the adverse
decision. Acting on this motion for
reconsideration, the Court of Appeals in a
majority resolution denied the said motion, and
while conceding that "the creation of an express
trust leaves room for doubt," the said Court ruled
that the compromise agreement, at the least
gave rise to an implied trust under Art. 1456 of
the New Civil Code. Hence, petitioners filed this
present petition on the following assignment of
errors:

En testimonio de todo lo cual,

firmamos el presente documento
en Cagayan de Misamis, hoy, 11
de Mayo de 1927.
(Sgd.) Trinidad Roa de Reyes
(Sgd.) Esperanza Roa de Ongpin
(Sgd.) Concepcion Roa (Sgd.)
Zosimo Roa

I. The respondent Court of

Appeals erred when it ruled that
Alfredo Roa, the petitioners'
predecessor-in-interest, was
bound by the compromise
agreement (Exh. "I") in the
execution of which, according to
the Stipulation of Facts, said
Alfredo Roa neither participated
nor signed.

__________________________
Alfredo Roa
___________________________
Pablo Valdehuesa
Pursuant to said Exhibit "1", Concepcion,
Esperanza, Trinidad and Zosimo, all surnamed
Roa, agreed to replace the land of Pablo
Valdehuesa with another parcel of land with an
area of 1.4959 hectares to be given to Pablo
Valdehuesa in exchange for the land occupied by
him, or if said land was not acceptable to him, to
pay him the amount of P400.00. Neither of these
undertakings was complied with by the Roas and
Pablo Valdehuesa continued in possession of the

II. On the assumption that the

aforementioned compromise
agreement was binding upon
Alfredo Roa, the respondent
Court of Appeals erred when it
held the said agreement, which
stipulated the conveyance of the
property in dispute for a

25

consideration, as having
established a trust relationship
between the parties to it.

claim that under the terms of the compromise

agreement, the land claimed by Pablo
Valdehuesa should be deemed held in trust by
the Roas when the latter failed to relocate him or
pay the price therefor. The respondent appellate
court took private respondents' position, and
opined, 3 thus

III. The respondent Court of

Appeals erred when it held that
the ruling in the case of Gerona,
et al. va. De Guzman, G.R. No. L19060, May 29, 1964, is
inapplicable to the case at bar.

It could thus be gleaned that had

it not been for the promise of the
Roas contained in Exhibit 1,
Valdehuesa would not have been
induced to withdraw his
opposition in the land registration
case. When, therefore, the Roas
turned their back to a solemn
agreement entered in a court
proceedings, they were guilty of
fraud.

On the first assigned error, We reject the

contention of the petitioners that Alfredo Roa, Sr.
was not bound by the compromise agreement for
not being a participant or signatory thereto. It
may be true that Alfredo Roa, Sr. did not sign the
compromise agreement, Exh. " 1 ", for he was
then in Manila working as a newspaperman but
he certainly benefited from the effects of the
compromise agreement which obliged Pablo
Valdehuesa to withdraw, as he did withdraw his
opposition to the registration of the Roa property
under the Torrens system. The Roa property was
subsequently registered without opposition and
title was issued thereto in the name of Alfredo
Roa, his brother Zosimo and his sisters Trinidad,
Esperanza and Concepcion, all surnamed Roa as
co-owners thereof. Certainly, the Roas may not
escape compliance from their obligation under
the compromise agreement by partitioning the
property and assigning the property in dispute as
part of the share of the petitioners. Moreover, it
will be a pure and simple case of unjust
enrichment for petitioners to acquire and own the
property of Pablo Valdehuesa, without paying the
value thereof or exchanging the land with
another with an equal area as originally agreed.

Fraud is every
kind of deception,
whether in the
form of insidious
machinations,
manipulations,
concealments or
misrepresentatio
ns, for the
purpose of
leading another
party into error
and then execute
a particular act. It
must have a
determining
influence on the
consent of the
victim." (4
Tolentino, Civil
Code, p. 462)

With respect to the second assignment of error,

We do not agree with the holding of the
respondent appellate court that an express trust
was created between the parties by reason of the
compromise agreement entered into between
them. Express trusts are created by the intention
of the trustor or one of the parties (Article 1441,
New Civil Code). While no particular words are
required for the creation of an express trust, it
being sufficient that a trust is clearly intended
(Article 1444, New Civil Code), in the case at bar,
We find no direct and positive intent to create a
trust relationship between the parties to the
compromise agreement under which Pablo
Valdehuesa agreed to withdraw his opposition to
the application for registration upon the
commitment of the Roas to give Valdehuesa
another piece of land of equal area or pay its
price of P 400.00. It seems clear to Us that the
Roas under the compromise agreement did not
commit themselves to hold the lot claimed by
Pablo Valdehuesa for Pablo Valdehuesa and in
Pablo Valdehuesa's name.

It results from the foregoing that

although the creation of an
express trust leaves room for
doubt, by operation of law, an
implied trust is created,
Art. 1456. If
property is
acquired through
mistake or fraud,
the person
obtaining it is, by
force of law,
considered a
trustee of an
implied trust for
the benefit of the
person from
whom the
property comes.
(N.C.C)".

If the compromise agreement did not result to an

express trust relationship, did it, however, give
rise to an implied trust? Private respondents

26

We cannot sustain the holding of the respondent

appellate court in its Resolution denying
petitioners' motion for reconsideration that by
operation of law an implied trust was created
under the terms of the compromise agreement in
the light of Article 1456 of the New Civil Code
cited above. We rule that Art. 1456 is not
applicable because it is quite clear that the
property of Pablo Valdehuesa was acquired by
the Roas not through mistake or fraud but by
reason of the voluntary agreement of Valdehuesa
to withdraw his opposition to the registration of
the land under the Torrens system.

questionable means, or who in

any way against equity and good
conscience, either has obtained
or holds the legal right to
property which he ought not, in
equity and good conscience, hold
and enjoy. It is raised by equity to
satisfy the demands of justice.
However, a constructive trust
does not arise on every moral
wrong in acquiring or holding
property or on every abuse of
confidence in business or other
affairs; ordinarily such a trust
arises and will be declared only
on wrongful acquisitions or
retentions of property of which
equity, in accordance with its
fundamental principles and the
traditional exercise of its
jurisdiction or in accordance with
statutory provision, takes
cognizance. It has been broadly
ruled that a breach of confidence,
although in business or social
relations, rendering an
acquisition or retention of
property by one person
unconscionable against another,
raises a constructive trust. (76
Am. Jur. 2d, Sec. 221, pp. 446447).

There is incontrovertible evidence that the Roas

intended to abide by the compromise agreement
at the time of the execution of the same. The
private respondents themselves introduced
additional evidence which showed that on May
11, 1927, Trinidad Roa, Esperanza Roa de Ongpin,
Concepcion Roa and Zosimo Roa confirmed in
writing the terms and conditions of the
agreement they had entered into with Pablo
Valdehuesa in the land registration proceedings.
Even the respondent appellate court expressly
determined the aforesaid failure of the Roas to
comply with the terms of the compromise
agreement to be an afterthought; thus,
The change of mind of the
plaintiff-appellant later is of no
moment in the case at bar. 4

And specifically applicable to the case at bar is

the doctrine that "A constructive trust is
substantially an appropriate remedy against
unjust enrichment. It is raised by equity in
respect of property, which has been acquired by
fraud, or where, although acquired originally
without fraud, it is against equity that it should
be retained by the person holding it." (76 Am. Jur.
2d, Sec. 222, p. 447).

While it is Our ruling that the compromise

agreement between the parties did not create an
express trust nor an implied trust under Art. 1456
of the New Civil Code, We may, however, make
recourse to the principles of the general law of
trusts, insofar as they are not in conflict with the
New Civil Code, Code of Commerce, the Rules of
Court and special laws which under Art. 1442 of
the New Civil Code are adopted. While Articles
1448 to 1456 of the New Civil Code enumerates
cases of implied trust, Art. 1447 specifically
stipulates that the enumeration of the cases of
implied trust does not exclude others established
by the general law of trusts, but the limitations
laid down in Art 1442 shag be applicable.

The above principle is not in conflict with the New

Civil Code, Code of Commerce, Rules of Court
and special laws. And since We are a court of law
and of equity, the case at bar must be resolved
on the general principles of law on constructive
trust which basically rest on equitable
considerations in order to satisfy the demands of
justice, morality, conscience and fair dealing and
thus protect the innocent against fraud. As the
respondent court said, "It behooves upon the
courts to shield fiduciary relations against every
manner of chickanery or detestable design
cloaked by legal technicalities."

In American law and jurisprudence, We find the

following general principles:
A constructive trust, otherwise
known as a trust ex maleficio, a
trust ex delicto, a trust de son
tort, an involuntary trust, or an
implied trust, is a trust by
operation of law which arises
contrary to intention and in
invitum, against one who, by
fraud, actual or constructive, by
duress or abuse of confidence, by
commission of wrong, or by any
form of unconscionable conduct,
artifice, concealment, or

The next point to resolve is whether the

counterclaim of private respondents for the
reconveyance of the property in dispute has
already prescribed in the light of established
jurisprudence that the right to enforce an implied
trust prescribes in ten years.

27

Admittedly, Pablo Valdehuesa and his heirs

remained in possession of the property in
question in 1925 when by reason of the
compromise agreement Valdehuesa withdrew his
opposition to the registration applied for by the
Roas for which reason the latter were able to
obtain a Torrens title to the property in their
name. However, Valdehuesa and his heirs
continued their possession of the land until he
sold the property in question to private
respondents herein on April 30, 1930 and the
latter remained in possession and were never
disturbed in their occupancy until the filing of the
original complaint for recovery of possession on
Sept. 1, 1955 after demand was made upon them
when a relocation survey initiated by petitioners
established that private respondents were
actually occupying about 2 hectares on the
eastern end of the property. Upon these facts, the
prescriptive period may only be counted from the
time petitioners repudiated the trust relation in
1955 upon the filing of the complaint for recovery
of possession against private respondents so that
the counterclaim of the private respondents
contained in their amended answer of June 12,
1956 wherein they asserted absolute ownership
of the disputed realty by reason of their
continuous and adverse possession of the same
is well within the ten-year prescriptive period.

Appeal from an order denying a motion.

Sometime in 1948, Angela S. Tuason died
leaving a will, paragraph 4 of which reads:
Instituyo como mis unicos herederos a
mis mencionados tres hijos, a rason de
una novena parte del caudal hereditario
que dejare para cada uno de ellos. Lego
a mi hijo Antonio otra porcion
equivalente a dos novenas partes del
caudal hereditario. Lego asimismo a mis
nietos que fueren de mi hija Nieves, otra
porcion equivalente a dos novenas
partes del caudal hereditario. Y
finalmente lego a mis nietos que fueren
hijos de mi hija Angela otra porcion
equivalente de dos novenas partes del
caudal hereditario. Dichos tres legados,
sin embargo, estan sujetos a la manda
que se menciona en el parrafo
siguiente. Los dos legados, a favor de
mis mencionados nietos seran
administrados por mi albacea, J. Antonio
Araneta (y en defecto de este, su
hermano, Salvador Araneta), con
amplios poderes de vender los mismos,
y con suproducto adquirir otros bienes, y
con derecho a cobrar por su
administracion, honorarios razonables.
Los poderos de dicho administrador
seran los de un trustee con los poderes
mas amplios permitidos por la ley.
Deberasin embargo, rendir
trimestralmente, cuenta de su
administracion a los legatarious que
fueren mayores de edad. Y asimismo,
debera hacerles entrega de la
participacion que a cada legatario
corresponda en las rentas netas de la
administracion. La administracion sobre
un grupo cesara cuando todos misnietos
de dicho grupo llegare a su mayoria de
edad, y una mayoria de los mismos
acordaren la terminacion de la
administracion. Por nietos, debe
entederse no solamente a los nietos
varones sino tambien a los nietos
mujeres.

Finally, the case at bar is quite similar to the case

of Dolores Pacheco vs. Santiago Arro, 85 Phil.
505, wherein the claim to the lots in the cadastral
case was withdrawn by the respondents relying
upon the assurance and promise made in open
court by Dr. M. Y. in behalf of J. Y. y R., the
predecessor-in-interest of the petitioners and the
Court held that a trust or a fiduciary relation
between them arose, or resulted therefrom, or
was created thereby and the trustee cannot
invoke the statute of limitations to bar the action
and defeat the right of the cestuis que trustent.
(Cited in Tolentino, Civil Code of the Philippines,
Vol. IV, p. 627).
WHEREFORE, IN VIEW OF THE FOREGOING, the
judgment appealed from is hereby AFFIRMED.

G.R. No. L-16962

February 27, 1962

TRUSTEESHIP OF THE MINORS BENIGNO,

ANGELA and ANTONIO, all surnamed PEREZ
Y TUASON,
ANTONIO M. PEREZ, judicial-guardianappellant,
vs.
J. ANTONIO ARANETA, trustee-appellee.

In conformity with this provision of said will, the

present trusteeship proceedings was instituted
and certain properties of the estate of the
deceased, valued P900,00 were turned over in
1950 to J. Antonio Araneta, as trustee for the
benefit of Benigno, Angela and Antonio, all
surnamed Perez y Tuason, the grandchildren of
the decedent referred to in her aforementioned
will. Portions of said properties constituting the
trust were sold in 1956, 1957 and 1958 at prices
exceedingly by P13,418.42, P4,023.52 and

Alfonso L. Felix, Jr. for judicial-guardianappellant.

Araneta and Araneta for trustee-appellee.
CONCEPCION, J.:

28

P81,386.94, respectively aggregating

P98,828.88 the original appraised value
thereof. On September 28, 1959, the judicial
guardian and father of said minors filed a motion
in the trusteeship proceedings alleging that said
sum of P98,828.88 represents profits or income
of the trusteeship to which said minors are
entitled, pursuant to the above quoted provision
of the will, and praying that the trustee be
accordingly instructed to deliver said sum to the
movant. The trustee objected to the motion,
which, after due hearing, was denied by an
order dated March 10, 1960, from which said
guardian has appealed.

beneficiary shall be entitled to the 'income and

profits of' of the trust estate is not ordinarily
sufficient to indicate an intention that he should
be entitled to receive gains arising from the sale
of trust property ..." ( In re Account of Houston's
Trustees, 165 Atl. 132; Lauman v. Foster, 50
A.L.R. 531; Guthrie's Trustee v. Akers, 157 Ky.
649; Estate of Gartenlaule, 198 Cal. 204, 244
Pac. 348, 48 A.L.R. [M.S. 793]). Indeed:.
The corpus of the estate, no matter what
changes of form it undergoes, should be
regarded as the same property. That the
trust property is originally money, later
becomes bonds, and still later real
estate, ought not to affect the status of
the property as the capital fund. (In re
Graham's Estate, 198 Pa. 216, 219, 47
A. 1108; See Bogert on Trusts, 2d Ed.,
p. 436.)

The appeal hinges on whether or not the

aforesaid sum of P98,828.88 is a profit or
income which should be turned over to the
guardian of said minors according to the
provisions of the will quoted above. Appellant
maintains that it is, because said sum was
included as profit in the statements of profits
and losses attached to the corresponding
income tax returns. This pretense is untenable.

Hence, it is well settled that profits realized in

the sale of trust properties are part of the capital
held in trust to which the beneficiaries are not
entitled as income. (First Nat. Bank of Carlisle v.
Lee, 23 Ky. L. Rep. 1897; Coleman vs. Grimes,
33 Ky. L. Rep. 455; Bains v. Globe Bank & Trust
Co., 136 Ky. 332; Smith v. Hooper, 95 Md. 16;
Chase v. Union National Bank, 275 Mass. 503;
First National Bank of Canton vs. Mulholland, 13
A.L.R. 1000 [1920] [land]; Stewart v. Phelps, 75
N. & Supp. 526 Rathbun v. Colton, 15 Pick. 471;
Gibson v. Cooke, 1 Met. 75; See Scott on Trusts
Vol. 2 p. 1259.) In the language of the
Restatement of the Law:.

To begin with, the issue as to whether or not the

minors are entitled to the delivery of said sum of
P98,828.88 is a matter dependent exclusively
upon the conditions upon which the trust had
been established, as provided in the above
quoted paragraph of the will of the decedent,
which in turn depends upon the latter's intent, as
set forth in said paragraph. Upon the other
hand, the question whether the sum in question
is a profit or not within the purview of our
internal revenue law depends upon the
provisions of the latter, regardless of the will of
the decedent.

Subject to the allocation of receipts from

unproductive or wasting property, and
except as stated in Comment c, money
or other property received by the trustee
as the proceeds of a sale or exchange
of the principal of trust property is
principal. Similarly, where trust property
is taken on eminent domain, the
proceeds received by the trustee are
principal. If trust property is destroyed by
fire or other casualty, the proceeds of
insurance thereon received by the
trustee are principal. .... "Where it is
provided by the terms of the trust that
the 'income and profits' of the trust
estate shall be paid to the life
beneficiary, it is a question of
interpretation whether the life beneficiary
is to receive more than he would receive
if it were provided that the 'income'
should be paid to him. Ordinarily the
inference is that he is not to receive
more, and if trust property is sold at a
profit, the profit is principal.

1wph1.t

Secondly, the proceeds of the sale of portions of

the real estate held in trust, merely take the
place of the property sold. What is more, the
provision of the will of the decedent explicitly
authorizing the trustee to sell the property held
in trust and to acquire, with the proceeds of the
sale, other property ("con amplios poderos de
vender los mismos, y con su producto adquirir
otros bienes,") leaves no room for doubt about
the intent of the testatrix to keep, as part of the
trust, said proceeds of the sale, and not to turn
the same over to the beneficiary as net rentals
("rentas netas").
Thirdly, under the principles of general law on
trust, insofar as not in conflict with the Civil
Code, the Code of Commerce, the Rules of
Court and Special laws, are now part of our laws
(Article 1442, Civil Code of the Philippines).
Pursuant to the general law on trust, "a
provision in the instrument to the effect that the

29

BENGZON, J.P., J.:

(Restatement of the Law, Trusts, Vol. I,

pp. 682 and 691.)

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 No. 28, covered by
T.C.T. No. T-22130; Nos. 8, 17, 18 & 135, covered
by T.C.T. No. T-22131; Nos. 21, 22, 23, covered by
T.C.T. No. 22132 all of which are titled in the
name of Luis D. Cuaycong, son of Justo
Cuaycong.

WHEREFORE, the order appealed from is

hereby affirmed, with costs against appellant,
Antonio M. Perez. It is so ordered.

Lino Cuaycong died on May 4, 1937 and was

survived by his children Paz, Carolina, Gertrudes,
Carmen, Virgilio, Benjamin, Praxedes and
Anastacio. Praxedes Cuaycong, married to Jose
Betia, is already deceased and is survived by her
children Jose Jr., Jesus, Mildred, Nenita and Nilo,
all surnamed Betia. Anastacio Cuaycong, also
deceased, is survived by his children Ester,
Armando, Lourdes, Luis T., Eva and Aida, all
surnamed Cuaycong.
Meliton and Basilisa died without any issue.
On October 3, 1961, the surviving children of Lino
Cuaycong: Gertrudes, Carmen, Paz, Carolina,
Virgilio; the surviving children of Anastacio: Ester,
Armando, Lourdes, Luis T., Eva and Aida; as well
as Jose, Jr., Jesus, Mildred, Nenita, Nilo, all
surnamed Betia, children of deceased Praxedes
Cuaycong Betia, filed as pauper litigants, a suit
against Justo, Luis and Benjamin Cuaycong1 for
conveyance of inheritance and accounting,
before the Court of First Instance of Negros
Occidental (Civil Case No. 6314), alleging among
others that:
1. Eduardo Cuaycong had on several occasions,
made known to his brothers and sisters that he
and his wife Clotilde de Leon (died in 1940) 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 sister
and his wife Clotilde.

EXPRESS TRUST
G.R. No. L-21616

December 11, 1967

2. With the consent of his wife, 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.

GERTRUDES F. CUAYCONG, ET AL., plaintiffsappellants,

vs.
LUIS D. CUAYCONG, ET AL., defendantsappellees.

3. 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 and in
disregard of Eduardo's wishes by causing the

Benito C. Jalandoni and M. S. Gomez for plaintiffsappellants.

Hilado and Hilado for defendants-appellees.

30

issuance in his name of certificates of title

covering said properties.

stating that such a default declaration would be

of no purpose.

4. As the two haciendas were the subject of

transactions between the spouses and Justo and
Luis Cuaycong, Eduardo told Justo and Luis, and
the two agreed, to 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.

Failing in their efforts to have the dismissal

reconsidered, plaintiffs appealed to Us. The
resolution of the appeal hinges on whether the
trust is express or implied.
Paragraph 8 of the complaint state:
That as the said two haciendas were then
the subject of certain transactions
between the spouses Eduardo Cuaycong
and Clotilde de Leon on one hand, and
Justo and Luis D. Cuaycong on the other,
Eduardo Cuaycong told his brother Justo
and his nephew, defendant Luis D.
Cuaycong, to hold in trust what might
belong to his brothers and sister as a
result of the arrangements and to deliver
to them their shares when the proper
time comes, to which Justo and Luis D.
Cuaycong agreed.

5. That as far back as 1936 Lino demanded from

Justo and Luis his share and especially after
Eduardo's and Clotilde's death, the plaintiffs
demanded their shares.
6. That their 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
June 21, 1936 from which time he should be
made to account for the plaintiffs' share; and that
P1,500 attorney's fees should be paid in their
favor.

The plaintiffs claim that an inplied trust is

referred to in the complaint which, under Article
1457 of the Civil Code, may be proved by parole
evidence.

Luis D. Cuaycong on October 20, 1961 moved to

dismiss the complaint on the grounds of
unenforceability of the claim under the statute of
frauds, no cause of action (Rule 8, Sec. 1 [f] of
the Rules of Court), and bar of causes of action
by the statute of limitations (Rule 8, Sec. 1[e]).
Subsequently, opposition thereto, answer and
reply were filed; the plaintiffs also sought to have
Benjamin Cuaycong declared in default for his
failure to answer.

Our Civil Code defines an express trust as one

created by the intention of the trustor or of the
parties, and an implied trust as one that comes
into being by operation of law.2 Express trusts are
those created by the direct and positive acts of
the parties, by some writing or deed or will or by
words evidencing an intention to create a trust.
On the other hand, implied trusts are those
which, without being expressed, are deducible
from the nature of the transaction by operation of
law as matters of equity, in dependently of the
particular intention of the parties.3Thus, if the
intention to establish a trust is clear, the trust is
express; if the intent to establish a trust is to be
taken from circumstances or other matters
indicative of such intent, then the trust is implied.
From these and from the provisions of paragraph
8 of the complaint itself, We find it clear that the
plaintiffs alleged an express trust over an
immovable, especially since it is alleged that
the trustor expressly told the defendants of his
intention to establish the trust.lawphil Such a
situation definitely falls under Article 1443 of the
Civil Code.

On December 16, 1961, the Court of First

Instance ruled that the trust alleged, particularly
in paragraph 8 of the complaint, refers to an
immovable which under Article 1443 of the Civil
Code may not be proved by parole evidence.
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.
Later, on December 23, 1961, the court decreed
that since there was no amended complaint filed,
thus, no enforceable claim, it was useless to
declare Benjamin Cuaycong in default.
Plaintiff thereafter manifested that the claim is
based on an implied trust as shown by paragraph
8 of the complaint. They added that there being
no written instrument of trust, they could not
amend the complaint to include such instrument.

Appellants point out that not only paragraph 8

should be considered but the whole complaint, in
which case they argue that an implied trust
should be construed to exist. Article 1453, one of
the cases of implied trust, is also cited: "When
property is conveyed to a person in reliance upon
his declared intentions to hold it for or transfer it
to another or the grantor, there is an implied
trust in favor of the person whose benefit is
contemplated." Said arguments are untenable,
even considering the whole complaint. The

On January 13, 1962, the court dismissed the

case for failure to amend the complaint; it further
refused to reconsider its order denying the
motion to declare Benjamin Cuaycong in default,

31

intention of the trustor to establish the alleged

trust may be seen in paragraphs 5 and 6.4 Article
1453 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. Consequently, the lower court did not err
in dismissing the complaint.

Judge (later Justice) Carlos A. Imperial in a decree

dated March 4, 1916 adjudicated to Canuta
Soblingo (Somblingo), a widow, Lot No. 4781 of
the Sta. Barbara, Iloilo cadastre with an area of
5.5 hectares. OCT No. 6178-A was issued in 1917
to Canuta (Exh. 6 and 7 or B).
In 1923 Canuta sold the lot to the spouses
Patricio Sinaon and Julia Sualibio for P2,000 (Exh.
8). TCT No. 2542 was issued to the Sinaon
spouses (Exh. 9 or C). It is still existing and
uncancelled up to this time, Julia was the
granddaughter of Canuta.

Besides, 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.lawphil It is settled that the right to enforce
an implied trust in one's favor prescribes in ten
(10) years.5 And even under the Code of Civil
Procedure, action to recover real property such
as lands prescribes in ten years (Sec. 40, Act
190).

The lot was declared for tax purposes in Sinaon's

name (Exh. 3). The Sinaon spouses and their
children paid the realty taxes due thereon (Exh. 1
to 5-C). They have possessed the land as owners
from 1923 up to this time orfor more than half a
century.
Canuta was one of the five children of Domingo
Somblingo, the alleged original owner of the lot
when it was not yet registered. His other four
children were Felipe, Juan, Esteban and Santiago.
The theory of respondents Sorogon, et al.,

And for the above reasons, We agree that it was

pointless to declare Benjamin Cuaycong in
default, considering that without a written
instrument as evidence of the alleged trust, the
case for the plaintiffs must be dismissed.

which they adopted in their 1968 second

amended complaint (they filed the action in
1964) is that Canuta and the Sinaons were
trustees of the lot and that the heirs of
Domingo's four children are entitled to a 4/5
share thereof.

WHEREFORE, the order of dismissal of the lower

court appealed from is hereby affirmed, without
costs. So ordered.

That theory was sustained by the trial court and

the Appellate Court. The trial court ordered the
Sinaons to convey 4/5 of Lot No. 4781 to
respondents Sorogon, et al. It decreed partition
of the lot in five equal parts. The Sinaons
appealed to this Court. The respondents did not
file any brief.

G.R. No. L-59879 May 13, 1985

PATRICIO SINAON and MARIA, FRANCISCA
and JOSE, all surnamed SINAON, petitioners,
vs.
ANDRES SOROGON, ANASTACIA PARREO,
SOLEDAD PARREO, ANA PARREO,
MARCELINA, CLARITA, RUFINO and MANUEL,
all surnamed ARELLANO, SIMPLICIO
SOMBLINGO and BRIGIDA SOMBLINGO and
COURT OF APPEALS, respondents.

We hold that after the Sinaons had appeared to

be the registered owners of the lot for more than
forty years and had possessed it during that
period, their title had become indefeasible and
their possession could not be disturbed. Any
pretension as to the existence of an implied trust
should not be countenanced.

Neil D. Hechanova for petitioners.

Benjamin P. Sorongon for respondents.

The trustors. who created the alleged trust, died

a long time ago. An attempt to prove the trust
was made by unreliable oral evidence. The title
and possession of the Sinaons cannot be
defeated by oral evidence which can be easily
fabricated and contradicted. The contradictory
oral evidence leaves the court sometimes
bothered and bewildered.

AQUINO, J.:
The issue in this case is whether an action for
reconveyance of a registered five-hectare land,
based on implied trust, would lie after the
supposed trustees had held the land for more
than forty years.

There was no express trust in this case. Express

trusts concerning real property cannot be proven
by parol evidence (Art. 1443, Civil Code). An
implied trust "cannot be established, contrary to
the recitals of a Torrens title, upon vague and

According to the documentary evidence

consisting of public documents and tax records,

32

inconclusive proof" (Suarez vs. Tirambulo, 59

Phil. 303; Salao vs. Salao, L-26699, March
16,1976, 70 SCRA 65, 83).

FRANCISCO ALMONTE, plaintiffs-appellees,

vs.
TEOFILA OLORGA, by herself and in
representation of minor CARMEN VALDEZ
and RENATO OLORGA,defendants-appellants.

Even assuming that there was an implied trust,

plaintiffs' action was clearly barred by
prescription (Salao vs. Salao, supra, p. 84).

Salvador P. Socrates for plaintiffs-appellees.

Prescription is rightly regarded as a statute of

repose whose object is to suppress fraudulent
and stale claims from springing up at great
distances of time and surprising the parties or
their representatives when the facts have
become obscure from the lapse of time or the
defective memory or death or removal of
witnesses (53 C.J.S. 903). See Teves Vda. de
Bacong vs. Teves and CA, G.R. No. 50143,
October 24, 1983, 125 SCRA 137; Ramos vs.
Ramos, L-19872, December 3, 1974, 61 SCRA
284; Gallanosa vs. Arcangel, L-29300, June 21,
1978, 83 SCRA 676 and Sinco vs. Longa 51 Phil.
507.

Perfecto de los Reyes and Clarito A. Demaala for

defendants-appellants.

It was not necessary for the Sinaons to plead

prescription as a defense because there is no
dispute as to the dates. There was no factual
issue as to prescription (Chua Lamko vs. Dioso,
97 Phil. 821, 824; Ferrer vs. Ericta, L-41767,
August 23, 1978, 84 SCRA 705).

A reading of the brief of the appellants shows

that most of the arguments advanced therein
challenge the findings of fact made by the
court a quo. As pointed out by the plaintiffsappellees, such findings are no longer reviewable
by this Court, its jurisdiction being limited to
deciding purely legal questions.

At any rate, the Sinaons invoked in the lower

court the ruling laid down in Gerona vs. De
Guzman, 120 Phil. 149, 153 that an action for
reconveyance of realty, based upon a
constructive or implied trust resulting from fraud,
may be barred by prescription. The prescriptive
period is reckoned from the issuance of the title
which operates as a constructive notice (Diaz vs.
Gorricho and Aguado, 103 Phil. 261, 266-267; J.M.
Tuason & Co., Inc. vs. Magdangal, 114 Phil. 42,
46-47; Lopez vs. Gonzaga, 119 Phil. 424, 437).

The following facts as stated in the decision

appealed from may therefore be considered
established:

MAKALINTAL, J.:
The present appeal was taken by the defendants
directly to this Court by record on appeal filed
way back in 1964. The case, however, was
submitted for decision only on September 4,
1970. In a motion dated April 25, 1973, the
defendants appellants prayed that decision
herein be expedited.

This is an action for partition filed

by the living children and
grandchildren of the late spouses
Federico Valdez, Sr. and Juanita
Batul against the heir and widow
of Federico Valdez, Jr. The action
concerns Lot No. 18, of Puerto
Princesa Cadastre, covered by
T.C.T. No. T-94 in the name of
Federico Valdez, Jr.

The supposed trust in this case, which is neither

an express nor a resulting trust, is a constructive
trust arising by operation of law (Art. 1456, Civil
Code). It is not a trust in the technical sense
(Gayondato vs. Treasurer of the P.I., 49 Phil.
244). *

Federico Valdez, Sr. died in Manila

in the year 1931 and his wife,
Juanita Batul, died in 1939. The
spouses left the following
children as their heirs: (1) Avelina
Olorga, who died in 1941, leaving
as her heir co-defendant Renato
Olorga; (2) Elisa Valdez-Almonte,
who died in 1947, leaving
Rogelio, Raquel and Raul, all
surnamed Almonte, as her heirs;
(3) the plaintiff Josefina Valdez;
(4) Federico Valdez, Jr., who died
in September, 1960, leaving as
his heirs defendants Teofila
Olorga, his wife, and Carmen
Valdez, his daughter; and (5)
Jaime Valdez, co-plaintiff herein.
In 1924, the spouses Federico
Valdez, Sr. and Juanita Batul,
bought Lot No. 18, the property

WHEREFORE, the judgment of the Court of

Appeals is reversed and the complaint is
dismissed. The receivership is terminated. The
receiver is directed to wind up his accounts. No
costs.

IMPLIED TRUST
G.R. No. L-22571 May 25, 1973
JOSEFINA VALDEZ, JAIME VALDEZ, ROGELIO
ALMONTE, RAQUEL ALMONTE and RAUL
ALMONTE, the latter two minors,
represented in this action by their father,

33

now in dispute, from Dolores M.

de Gutierrez for P500.00. In 1930,
the old Valdez family, as
vendees, occupied and lived in
the premises of Lot No. 18. After
the death of Federico Valdez, Sr.,
Juanita Batul, in the year 1936,
executed a contract of lease over
a portion of Lot No. 18 in favor of
the protestant church of Puerto
Princesa, Exhibit "A". The same
Juanita Batul leased in 1939 a
portion of Lot No. 18 to Mr.
Gregorio Quicho.

execution of the deed of sale

(Exh. "I"). It was only after the
death of Federico Valdez, Jr. that
the widow Teofila Olorga tried to
eject the plaintiffs.
As clearly stated in the
memorandum for the plaintiffs
the following facts are
undisputed:
(1) That the land in question Lot
No. 18 of the Puerto Princesa
Cadastre, was originally
purchased by the spouses
Federico Valdez, Sr. and Juanita
Batul from Dolores M. de
Gutierrez for P500.00;

The transfer of the lot in the

name of Federico, Sr., was never
done because the owner's
original certificate of title was
lost.

(2) That the parties herein,

plaintiffs and defendants alike,
are all successors-in-interest of
the spouses Federico Valdez, Sr.,
and Juanita Batul, either as
forced or compulsory heirs or in
representation thereof;

Josefina Valdez and Federico

Valdez, Jr. commissioned their
cousin Concepcion Castro to
negotiate with the Gutierrez
family (Exhibit "C") in 1948 in
order that the property in
question may be transferred to
them. It turned out that the
Gutierrez family was asking for
an additional amount of
P2,500.00 (Exh. "D").

(3) That the above-named

spouses had been in open,
public, peaceful and
uninterrupted occupation and
possession of Lot No. 18, the
property in question, since the
year 1930 or 1933;

Mrs. Castro came back to Puerto

Princess without having realized
her mission. In the same year she
went back to Manila with Federico
Valdez, Jr., and Mr. Gregorio
Quicho. The deed was executed
for the amount of P2,200.00
which was given by Mr. Gregorio
Quicho, as payment for back
rentals and payment for the
purchase of that portion of lot No.
18 which he was renting and
occupying. In executing the deed
of sale, EXHIBIT "I" , the name of
Federico Valdez, Jr. appeared as
the only vendee. This was done
pursuant to the wishes of Mr.
Quicho who advanced the
money, in order that he could
facilitate the deed of sale
between him and the Valdezes,
with the understanding that
Federico Valdez, Jr. will hold the
same in trust for his other brother
and sisters (Testimony of Mrs.
Castro).

(4) That in 1939, Mr. Gregorio

Quicho rented a portion of the lot
in question from Juanita Batul;
(5) That Mr. Quicho advanced the
amount of P2,200.00 partly as
purchase price of the portion
purchased by him, in the final
execution of the deed of sale,
Exhibit "I"; and
(6) That a part of the property in
question, Lot 18-B, is still
registered in the name of
Federico Valdez, Jr., under T.C.T.
No. T-634, cancelling T.C.T. No.
75.
The following facts, although not
admitted by the defendants, were
not disputed:
(1) That the Valdez Family, in
1930 or 1933, entered into,
possessed and occupied Lot 18,
the property in question;

When Federico Valdez, Jr. was still

living, he never attempted to
exclude the herein plaintiffs from
ownership of the land in question.
Said plaintiffs have been in open
continuous and uninterrupted
possession of the premises they
are occupying inside the lot in
question long before the

(2) That Juanita Batul, in 1936,

entered into a contract of lease
(Exh. "A") with the Baptist Church
of Puerto Princesa over a portion
of Lot 18;

34

(3) That in 1947, upon

discovering that the land in
question had not been
transferred in the name of their
parents, Josefina Valdez made
efforts to have the said land
transferred to them, and
commissioned Mrs. Castro,
together with Federico Valdez, Jr.,
to negotiate with the Gutierrez
family for the purpose, which
culminated in the execution of
the deed of sale, Exhibit "I";

evidence by the plaintiffs as

matters to be testified by Mr.
Gregorio Quicho were he present
and able to testify and which
were admitted by the defendants,
such that the presentation of Mr.
Quicho was waived by the
plaintiffs. The testimony of Mr.
Quicho which would have been
given by him if he were
presented and which were
admitted by the defendants are
as follows:

(4) That in the course of said

negotiation undertaken by Mrs.
Castro, Federico Valdez, Jr, was
brought to Manila where the deed
of sale was finally placed in his
name alone, with the express
understanding that he will hold
the same in trust for his other
brother and sisters;

(1) That a deed of sale for a

consideration of P500.00 was
executed by the spouses
Gutierrez in favor of the spouses
Federico Valdez, Sr. and Juanita
Batul, over Lot 18 of Puerto
Princesa Cadastre, the very lot in
question, in the year 1924;
(2) That Mr. Quicho rented and
occupied since 1939, a portion of
Lot 18, the lot in question, from
Juanita Batul;

(5) That the placing of the deed

of sale in the name of Federico
Valdez, Jr. alone, instead of the
"Heirs of Federico Valdez, Sr." or
"Heirs of Juanita Batul" was done
through the suggestion of Mr.
Quicho who wanted to facilitate
his own deed of sale over the
portion that he purchased;

(3) That the amount of P2,200.00

which was paid to Dolores M.
Gutierrez for the execution of the
deed of sale, Exhibit "I", was
delivered by Mr. Gregorio Quicho,
for payment of unpaid back
rentals and as advances for the
purchase of the portion of Lot 18
which he finally acquired;

(6) That at the time of the

execution of the deed of sale
(Exh. "I"), Valdez, Jr. was barely
21 years old, a sophomore
student in the high school, and
he, together with his wife, were
without any lucrative trade or
calling;

(4) That Mr. Quicho was

instrumental in having the deed
of sale executed in the name of
Federico Valdez, Jr. the portion
which he wanted to acquire.

(7) That Josefina Valdez and her

co-plaintiffs had been in
continuous, public, peaceful and
uninterrupted possession and
occupation of the premises in
question long before the death of
Valdez, Jr.;

The legal point raised by the appellants is that

since the land in question was sold to the late
Federico Valdez, Jr. in 1948 and the Transfer
Certificate of Title, so he alleges, was issued in
his name in 1950, the action had already
prescribed when it was filed more than ten (10)
years thereafter, or in 1962; that furthermore,
from the date of the sale up to the time his death
in 1960 he exercised exclusive ownership of the
land. In other words the appellants claim both
extinctive and acquisitive prescription.

(8) That Valdez, Jr. never

asserted, nor attempted to
assert, during his lifetime, sole
and exclusive ownership of the
premises in question, against the
herein plaintiffs; and

Both claims are belied by the facts as found by

the court a quo, which held: (1.) that when the
deed of sale was executed and the name of
Federico Valdez, Jr. was made to appear therein
as the only vendee, "this was done pursuant to
the wishes of Mr. Quicho who advanced the
money, in order that he could facilitate the deed
of sale between him and the Valdezes, With the
understanding that Federico Valdez, Jr. will hold
the same in, trust for his other brother and
sisters;" and (2) that when 'Federico Valdez, Jr.
was still living, "he never attempted to exclude

(9) That during the lifetime of

Valdez, Jr. he sold a portion of the
land in question and leased other
portions thereof to private
parties, but he did so with the
consent and approval of her elder
sister, Josefina Valdez.
In this connection we have to
consider also the offer of

35

the herein plaintiffs from ownership of the land in

question, (and) said plaintiffs have been in
continuous and uninterrupted possession of the
premises they are occupying inside the lot in
question long before the execution of the deed of
sale (Exh. "I"), (and) it was only after the death of
Federico Valdez, Jr. (in 1960) that the widow,
Teofila Olorga, tried to eject the plaintiffs."

After a careful examination of the evidence of

record in this case we are satisfied that the
material findings of fact by the trial court are fully
sustained thereby, and that upon the facts as
proven that court properly granted the relief
afforded by the decree from which this appeal
was taken.
From the facts proven at the trial it appears that
a number of Chinese merchants raised a fund by
voluntary subscription with which they purchased
a valuable tract of land and erected a large
building to be used as a sort of club house for the
mutual benefit of the subscribers to the fund. The
subscriber organized themselves into an irregular
association, which had no regular articles in the
commercial registry or elsewhere. The
association not having any existence as a legal
entity, it was agreed to have the title to the
property placed in the name of one of the
members, the defendant, Cho Jan Ling, who on
his part accepted the trust, and agreed to hold
the property as the agent of the members of the
association. After the club building was
completed with the funds of the members of the
association, Cho Jan Ling collected some P25,000
in rents for which he failed and refused to
account, and upon proceedings being instituted
to compel him to do so, he set up title in himself
to the club property as well as to the rents
accruing therefrom, 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.

Given the antecedents of the property and the

fact that its acquisition by Federico Valdez, Jr. was
for the benefit not of himself alone but also of his
brother and sisters, although for purposes of
convenience he was made to appear as the sole
vendee, the juridical relation that arose among
them was one of co-ownership, with the
plaintiffs-appellees actually in possession of a
portion of the property. Under Article 494 of the
Civil Code, "No prescription shall run in favor of a
co-owner or co-heir against his co-owners or coheirs so long as he expressly or impliedly
recognizes the co-ownership." Insofar as the
aspect of extinctive prescription referred to in
this article is concerned, it is but a restatement of
Article 1965 of the Spanish Civil Code, which
provides: "As between co-heirs, co-owners, or
proprietors of adjacent estates, the action to
demand the partition of the inheritance or of the
thing held in common, or the survey of the
adjacent properties, does not prescribe." And
from the standpoint of acquisitive prescription, or
prescription of ownership, this Court has held in
numerous decisions involving fiduciary relations
such as those occupied by a trustee with respect
to the cestui que trust that as a general-rule the
former's possession is not adverse and therefore
cannot ripen into a title by prescription. Adverse
possession in such a case requires, the
concurrence of the following-circumstances: (a)
that the trustee has performed unequivocal acts
of repudiation amounting to an ouster of
the cestui que trust; (b) that such, positive acts
of repudiation have been made known to
the cestui que trust and (c) that the evidence
thereon should be clear and conclusive. * These
circumstances are not present in this case.

The decree of the trial court provides for the

conveyance of the club house and the land on
which it stands from the defendant, Cho Jan Ling,
in whose name it is registered, to the members of
the association, and further makes provision for
an accounting by him for rents had and received.
Accepting the truth of the above-set-out
summary of the facts proven at the trial, we think
appellant's assignments of error are entitled to
but scant consideration, in so far as they are
based on alleged abuses of discretion by the trial
court in improvidently appointing a receiver
pending these proceedings, and in permitting
amendments to the original complaint, chiefly for
the purpose of bringing in the proper parties to
this action. Even if he admitted that the court
erred in appointing a receiver at the institution of
these proceedings and in retaining him after he
had been appointed, this alleged error in no wise
affected the real merits of the case; and in the
light of the facts set out above it will be hardly be
contended that the appellants have suffered any
damage for which they should have redress,
merely because, during the pendency of this
action and without awaiting the final decree
compelling them to disgorge, the court took
under its own guardian care certain funds and
property which they unjustly sought to retain,
although its retention by them involved a flagrant
breach of trust on their part. So, too, even if we
were to admit, which we do not, that the trial

In view of the foregoing considerations the

judgment appealed from is hereby affirmed. With
costs.
G.R. No. L-5333

March 25, 1911

UY ALOC, ET AL., plaintiffs-appellees,

vs.
CHO JAN LING, ET AL., defendants-appellants.
W.H. Bishop and Gibbs and Gale for appellants.
Kincaid and Hurd for appellees.
CARSON, J.:

36

judge was too liberal in his allowance of

amendments to the complaint filed in this
proceeding, we are nevertheless unable to see
that any real or substantial right of the appellants
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 and an
unusually large number of amendments of the
pleadings appear to have been necessary for the
proper development of the facts and in order to
bring in all the parties interested, 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."

cancelled. In the case at bar 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.

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. The
attempt on the part of the appellants to escape
the logical and manifestly just consequences of
the conclusions of facts set out in the opinion of
the trial judge by pointing this court to the
doctrine laid down in its decisions in the case
of Martinez vs. Martinez (1 Phil. Rep., 647) and
the case of Compaia General de Tabacos vs.
Topio (4 Phil. Rep., 33), can not and should not
succeed. It is at most an attempt to substitute for
the plain dictates of reason and equity certain
technical propositions of law laid down in those
cases which have no proper application to the
facts proven in this case. The Martinez case
turned on the lack of proof of the existence of the
relationship of principal and agent or of trustee
and cestui que trust between the parties, in
addition to proof that the funds with which the
property was purchased had been furnished by
another than him who secured its registry in his
own name. In that case at bar we think that the
evidence clearly discloses not only that the funds
with which the property in question was
purchased were furnished by the members of the
association, but that Cho Jan Ling, in whose name
it was registered, received and holds the property
as the agent and trustee of the association; that
on at least one occasion he admitted the
beneficial ownership to be in the association; and
that while the legal registered title is in his name
the beneficial ownership is in the association. Nor
has the doctrine laid down in the Topio case any
direct bearing upon the facts proven and the
relief sought and granted in this case. The Topio
case turned on the determination of the question
of the legal title of the grantor of the conveyance
inscribed in the land registry, and the further
question of the right of the holder of a duly
registered title to be secured in his right of
possession as against third persons who do not
claim through him, until and unless the
inscription of his title has been judicially

EUSEBIA ESCOBAR, plaintiff-appellant,

vs.
RAMON LOCSIN, in his capacity as special
administrator of the intestate estate of
Juana Ringor,defendant-appellee.

Without prejudice to the filing of a more extended

opinion hereafter by any of the members of the
court, if it be deemed advisable or necessary so
to do, the decree entered by the court below
should be affirmed with costs of this instance
against the appellants. It is so ordered.
G.R. No. L-48309

January 30, 1943

Eugenio S. Estayo for appellant.

Mariano Santa Romana for appellee.
BOCOBO, J.:
The complain in this case, which prays for the
reconveyance of lot No. 692 of the Cuyapo
cadastre in Nueva Ecija, alleges that the plaintiff
is the owner of said lot; and that in the course of
the cadastral proceedings, plaintiff being
illiterate, asked Domingo Sumangil to claim the
same for her (plaintiff) but Sumangil committed a
breach of trust by claiming the lot for himself, so
it was adjudicated in favor of Sumangil. The
defendant is the special administrator of the
estate of Juana Ringor, to whom the parcel of
land in question was assigned by partition in the
intestate estate of Domingo Sumangil and
Honorata Duque.
The Court of First Instance of Nueva Ecija found
that the plaintiff is the real owner of the lot which
she had acquired in 1914 by donation propter
nuptias from Pablo Ringor; that plaintiff had since
that year been in possession of the land; and that
the same had been decreed in the cadastral
proceedings in favor of Domingo Sumangil. The
trial court, while recognizing that the plaintiff had
the equitable title and the defendant the legal
title, nevertheless dismissed the complaint
because the period of one year provided for in
section 38 of the Land Registration Act (No. 496)
for the review of a decree had elapsed, and the
plaintiff had not availed herself of this remedy.
The trial court plainly erred. The complaint did
not seek the review of the decree or the
reopening of the cadastral case, but the

37

enforcement of a trust. Hence, section 38 of Act

No. 496 does not apply. The estate of Juana
Ringor as the successor in interest of the trustee,
Domingo Sumangil, is in equity bound to execute
a deed of conveyance of this lot to the cestui que
trust, the plaintiff-appellant. The remedy herein
prayed for has been upheld by this Court in
previous cases, one of which is Severino vs.
Severino (44 Phil., 343, year 1923) in which it
was said among other things:

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.
The judgment appealed from is hereby reverse,
and the defendant is ordered to convey that lot in
question to the plaintiff within fifteen days from
the entry of final judgment herein; and upon his
failure or refusal to do so, this judgment shall
constitute sufficient authorization for the Register
of Deeds of Nueva Ecija, in lieu of a deed of
conveyance, to transfer the certificate of title for
said lot No. 692 to the plaintiff Eusebia Escobar.
The defendant shall pay the costs of both
instances. So ordered.

Turning to our own Land Registration Act.

we find no indication there of an intention
to cut off, through the issuance of a
decree of registration, equitable rights or
remedies such as those here in question.
On the contrary, section 70 of the Act
provides:

G.R. No. 58010. March 31, 1993.

Registered lands and ownership therein,
shall in all respects be subject to the
same burdens and incidents attached by
law to unregistered land. Nothing
contained in this Act shall in any way be
construed to relieve registered land or
the owners thereof from any rights
incident to the relation of husband and
wife, or from liability to attachment on
mesne process or levy on execution, or
from liability to any lien of any
description established by law on land
and the buildings thereon, or the interest
of the owner in such land or buildings, or
to change the laws of descent, or the
rights of partition between coparceners,
joint tenants and other cotenants, or the
right to take the same by eminent
domain, or to relieve such land from
liability to be appropriated in any lawful
manner for the payment of debts, or to
change or affect in any other way any
other rights or liabilities created by law
and applicable to unregistered land,
except as otherwise expressly provided in
this Act or in the amendments hereof.

EMILIA O'LACO and HUCO LUNA, petitioners, vs.

VALENTIN CO CHO CHIT, O LAY KIA and COURT OF
APPEALS, respondents.
Sergio L. Guadiz for petitioners.
Norberto J . Quisumbing & Associates for private
respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; ACTIONS;
CONDITION PRECEDENT TO FILING OF SUIT
BETWEEN MEMBERS OF THE SAME FAMILY;
EFFECT OF FAILURE TO COMPLY WITH
CONDITION. Admittedly, the present action is
between members of the same family since
petitioner Emilia O'Laco and respondent O Lay
Kia are half-sisters. Consequently, there should
be an averment in the compliant that earnest
efforts toward a compromise have been made,
pursuant to Art. 222 of the New Civil Code, or a
motion to dismiss could have been filed under
Sec. 1, par. (j), Rule 16 of the Rules of Court. For,
it is well-settled that the attempt to compromise
as well as the inability to succeed is a condition
precedent to the filing of a suit between
members of the same family. Hence, the defect in
the complaint is assailable at any stage of the
proceedings, even on appeal, for lack of cause of
action.

SEC. 102 of the Act, after providing for

actions for damages in which the Insular
Treasurer, as the custodian of the
Assurance Fund is a party, contains the
following proviso:
Provided, however, That nothing in this
Act shall be construed to deprive the
plaintiff of any action which he may have
against any person for such loss or
damage or deprivation of land or of any
estate or interest therein without joining
the Treasurer of the Philippine
Archipelago as a defendant therein.

2. ID.; ID.; AMENDMENT TO COMPLAINT; WHEN

PROPER; AMENDMENT TO CONFORM TO
EVIDENCE. Plaintiff may be allowed to amend
his complaint to correct the defect if the
amendment does not actually confer jurisdiction
on the court in which the action is filed, i.e., if the
cause of action was originally within that court's
jurisdiction. In such case, the amendment is only
to cure the perceived defect in the complaint,
thus may be allowed. In the case before Us, while
respondent-spouses did not formally amend their
complaint, they were nonetheless allowed to
introduce evidence purporting to show that
earnest efforts toward a compromise had been
made, that is, respondent O Lay Kia importuned
Emilia O'Laco and pressed her for the transfer of

That an action such as the present one is

covered by this proviso can hardly admit
of doubt.
A trust such as that which was created
between the plaintiff and Domingo Sumangil is
sacred and inviolable. The Courts have therefore

38

the title of the Oroquieta property in the name of

spouses O Lay Kia and Valentin Co Cho Chit, just
before Emilia's marriage to Hugo Luna. But,
instead of transferring the title as requested,
Emilia sold the property to the Roman Catholic
Archbishop of Manila. This testimony was not
objected to by petitioner-spouses. Hence, the
complaint was deemed accordingly amended to
conform to the evidence, pursuant to Sec. 5, Rule
10 of the Rules of Court which reads "Sec. 5.
Amendment to conform to or authorize
presentation of evidence. When issues not
raised by the pleadings are tried by express or
implied consent of the parties, they shall be
treated in all respects, as if they had been raised
in the pleadings . . ." Indeed, if the defendant
permits evidence to be introduced without
objection and which supplies the necessary
allegations of a defective complaint, then the
evidence is deemed to have the effect of curing
the defects of the complaint. The insufficiency of
the allegations in the complaint is deemed ipso
facto rectified.

be established by oral evidence. However, 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 were proven by an authentic
document. It cannot be established upon vague
and inconclusive proof. After a thorough review of
the evidence on record, We hold that a resulting
trust was indeed intended by the parties under
Art. 1448 of the New Civil Code which states
"Art. 1448. There is an implied trust when
property is sold, and the legal estate is granted
to one party but the price is paid by another for
the purpose of having the beneficial interest of
the property. The former is the trustee, while the
latter is the beneficiary . . ." As stipulated by the
parties, the document of sale, the owner's
duplicate copy of the certificate of title, insurance
policies, receipt of initial premium of insurance
coverage and real estate tax receipts were all in
the possession of respondent-spouses which they
offered in evidence. As emphatically asserted by
respondent O Lay Kia, the reason why these
documents of ownership remained with her is
that the land in question belonged to her. Indeed,
there can be no persuasive rationalization for the
possession of these documents of ownership by
respondent-spouses for seventeen (17) years
after the Oroquieta property was purchased in
1943 than that of precluding its possible sale,
alienation or conveyance by Emilia O'Laco,
absent any machination or fraud. This continued
possession of the documents, together with other
corroborating evidence spread on record,
strongly suggests that Emilia O'Laco merely held
the Oroquieta property in trust for respondentspouses.

3. CIVIL LAW; OBLIGATIONS AND CONTRACTS;

TRUSTS; EXPRESS TRUST; DEFINED; IMPLIED
TRUST; DEFINED. By definition, trust relations
between parties may either be 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
express, are deducible from the nature of the
transaction as matters of intent, or which are
superinduced on the transaction by operation of
law as matters of equity, independently of the
particular intention of the parties.

6. ID.; ID.; ID.; CONSTRUCTIVE TRUST SUBJECT

TO PRESCRIPTION; RESULTING TRUST
IMPRESCRIPTIBLE; RESULTING TRUST
CONVERTED TO CONSTRUCTIVE TRUST BY
REPUDIATION; REQUISITES; PRESCRIPTIVE
PERIOD FOR ACTION FOR RECONVEYANCE BASED
ON CONSTRUCTIVE TRUST. As differentiated
from constructive trusts, where the settled rule is
that prescription may supervene, in resulting
trust, the rule of imprescriptibility may apply for
as long as the trustee has not repudiated the
trust. Once the resulting trust is repudiated,
however, it is converted into a constructive trust
and is subject to prescription. A resulting trust is
repudiated if the following requisites concur: (a)
the trustee has performed unequivocal acts of
repudiation amounting to an ouster of the cestui
qui trust; (b) such positive acts of repudiation
have been made known to the cestui qui trust;
and, (c) the evidence thereon is clear and
convincing. In Tale v. Court of Appeals the Court
categorically ruled that an action for
reconveyance based on an implied or
constructive trust must perforce prescribe in ten
(10) years, and not otherwise, thereby modifying
previous decisions holding that the prescriptive
period was four (4) years. So long as the trustee
recognizes the trust, the beneficiary may rely
upon the recognition, and ordinarily will not be in
fault for omitting to bring an action to enforce his
rights. There is no running of the prescriptive
period if the trustee expressly recognizes the

4. ID.; ID.; ID.; IMPLIED TRUSTS; RESULTING

TRUST; BASIS THEREOF; CONSTRUCTIVE TRUST;
BASIS THEREOF. Implied trust may either be
resulting or constructive trusts, both coming into
being by operation of law. Resulting trusts are
based on the equitable doctrine that valuable
consideration and not legal title determines the
equitable title or interest and are presumed
always to have been contemplated by the
parties. They arise from the nature or
circumstances of the consideration involved in a
transaction whereby one person thereby
becomes invested with legal title but is obligated
in equity to hold his legal title for the benefit of
another. On the other hand, constructive trusts
are created by the construction of equity in order
to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or
abuse of confidence, obtains or holds the legal
right to property which he ought not, in equity
and good conscience, to hold.
5. ID.; ID.; ID.; EXPRESS TRUSTS CONCERNING
IMMOVABLES NOT PROVED BY PAROL EVIDENCE;
IMPLIED TRUST IN REAL PROPERTY ESTABLISHED
BY PAROL EVIDENCE; PROOF REQUIRED; CASE AT
BAR. Unlike express trusts concerning
immovables or any interest therein which cannot
be proved by parol evidence, implied trusts may

39

resulting trust. Since the complaint for breach of

trust was filed by respondent-spouses two (2)
months after acquiring knowledge of the sale, the
action therefore has not yet prescribed.

spouses merely for safekeeping; that when she

asked for the return of the documents evidencing
her ownership, respondent-spouses told her that
these were misplaced or lost; and, that in view of
the loss, she filed a petition for issuance of a new
title, and on 18 August 1944 the then Court of
First Instance of Manila granted her petition.

DECISION
BELLOSILLO, J p:

On 20 September 1976, finding no trust relation

between the parties, the trial court dismissed the
complaint together with the counterclaim.
Petitioners and respondents appealed.

History is replete with cases of erstwhile close

family relations put asunder by property
disputes. This is one of them. It involves halfsisters each claiming ownership over a parcel of
land. While petitioner Emilia O'Laco asserts that
she merely left the certificate of title covering the
property with private respondent O Lay Kia for
safekeeping, the latter who is the former's older
sister insists that the title was in her possession
because she and her husband bought the
property from their conjugal funds. To be resolved
therefore is the issue of whether a resulting trust
was intended by them in the acquisition of the
property. The trial court declared that there was
no trust relation of any sort between the sisters.
1 The Court of Appeals ruled otherwise. 2 Hence,
the instant petition for review on certiorari of the
decision of the appellate court together with its
resolution denying reconsideration. 3

On 9 April 1981, the Court of Appeals set aside

the decision of the trial court thus
". . . We set aside the decision of the lower court
dated September 20, 1976 and the order of
January 5, 1977 and another one is hereby
entered ordering the defendants-appellees to pay
plaintiffs-appellants jointly and severally the sum
of P230,000.00 representing the value of the
property subject of the sale with assumption of
mortgage to the Roman Catholic Archbishop of
Manila with legal interest from the filing of the
complaint until fully paid, the sum of P10,000.00
as attorney's fees, plus costs."
On 7 August 1981, the Court of Appeals denied
reconsideration of its decision, prompting
petitioners to come to this Court for relief.

It appears that on 31 May 1943, the Philippine

Sugar Estate Development Company, Ltd., sold a
parcel of land, Lot No. 5, Block No. 10, Plan Psu10038, situated at Oroquieta St., Sta. Cruz,
Manila, with the Deed of Absolute Sale naming
Emilia O'Laco as vendee; thereafter, Transfer
Certificate of Title No. 66456 was issued in her
name.

Petitioners contend that the present action

should have been dismissed. They argue that the
complaint fails to allege that earnest efforts
toward a compromise were exerted considering
that the suit is between members of the same
family, and no trust relation exists between them.
Even assuming ex argumenti that there is such a
relation, petitioners further argue, respondents
are already barred by laches.

On 17 May 1960, private respondent-spouses

Valentin Co Cho Chit and O Lay Wa learned from
the newspapers that Emilia O'Laco sold the same
property to the Roman Catholic Archbishop of
Manila for P230,000.00, with assumption of the
real estate mortgage constituted thereon. 4

We are not persuaded. Admittedly, the present

action is between members of the same family
since petitioner Emilia O'Laco and respondent O
Lay Kia are half-sisters. Consequently, there
should be an averment in the complaint that
earnest efforts toward a compromise have been
made, pursuant to Art. 222 of the New Civil Code,
6 or a motion to dismiss could have been filed
under Sec. 1, par. (j), Rule 16, of the Rules of
Court. 7 For, it is well-settled that the attempt to
compromise as well as the inability to succeed is
a condition precedent to the filing of a suit
between members of the same family. 8 Hence,
the defect in the complaint is assailable at any
stage of the proceedings, even on appeal, for
lack of cause of action. 9

On 22 June 1960, respondent-spouses Valentin

Co Cho Chit and O Lay Kia sued petitionerspouses Emilia O'Laco and Hugo Luna to recover
the purchase price of the land before the then
Court of First Instance of Rizal, respondentspouses asserting that petitioner Emilia O'Laco
knew that they were the real vendees of the
Oroquieta property sold in 1943 by Philippine
Sugar Estate Development Company, Ltd., and
that the legal title thereto was merely placed in
her name. They contend that Emilia O'Laco
breached the trust when she sold the land to the
Roman Catholic Archbishop of Manila. Meanwhile,
they asked the trial court to garnish all the
amounts still due and payable to petitionerspouses arising from the sale, which was granted
on 30 June 1960. 5

But, plaintiff may be allowed to amend his

complaint to correct the defect if the amendment
does not actually confer jurisdiction on the court
in which the action is filed, i.e., if the cause of
action was originally within that court's
jurisdiction. 10 In such case, the amendment is
only to cure the perceived defect in the
complaint, thus may be allowed.

Petitioner-spouses deny the existence of any

form of trust relation. They aver that Emilia
O'Laco actually bought the property with her own
money; that she left the Deed of Absolute Sale
and the corresponding title with respondent-

40

In the case before Us, while respondent-spouses

did not formally amend their complaint, they
were nonetheless allowed to introduce evidence
purporting to show that earnest efforts toward a
compromise had been made, that is, respondent
O Lay Kia importuned Emilia O'Laco and pressed
her for the transfer of the title of the Oroquieta
property in the name of spouses O Lay Kia and
Valentin Co Cho Chit, just before Emilia's
marriage to Hugo Luna. 11 But, instead of
transferring the title as requested, Emilia sold the
property to the Roman Catholic Archbishop of
Manila. This testimony was not objected to by
petitioner-spouses. Hence, the complaint was
deemed accordingly amended to conform to the
evidence, 12 pursuant to Sec. 5, Rule 10 of the
Rules of Court which reads

confidence, obtains or holds the legal right to

property which he ought not, in equity and good
conscience, to hold. 22
Specific examples of resulting trusts may be
found in the Civil Code, particularly Arts. 1448,
1449, 1451,1452 and 1453, 23 while constructive
trusts are illustrated in Arts. 1450, 1454, 1455
and 1456. 24
Unlike express trusts concerning immovables or
any interest therein which cannot be proved by
parol evidence, 25 implied trusts may be
established by oral evidence. 26 However, 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 were proven by an authentic
document. 27 It cannot be established upon
vague and inconclusive proof. 28

"SECTION 5. Amendment to conform to or

authorize presentation of evidence. When
issues not raised by the pleadings are tried by
express or implied consent of the parties, they
shall be treated in all respects, as, if they had
been raised in the pleadings . . ." (emphasis
supplied).

After a thorough review of the evidence on

record, We hold that a resulting trust was indeed
intended by the parties under Art. 1448 of the
New Civil Code which states

Indeed, if the defendant permits evidence to be

introduced without objection and which supplies
the necessary allegations of a defective
complaint, then the evidence is deemed to have
the effect of curing the defects of the complaint.
13 The insufficiency of the allegations in the
complaint is deemed ipso facto rectified. 14

"ARTICLE 1448. There is an implied trust when

property is sold, and the legal estate is granted
to one party but the price is paid by another for
the purpose of having the beneficial interest of
the property. The former is the trustee, while the
latter is the beneficiary . . ." (emphasis supplied).
First. As stipulated by the parties, the document
of sale, the owner's duplicate copy of the
certificate of title, insurance policies, receipt of
initial premium of insurance coverage and real
estate tax receipts ware all in the possession of
respondent spouses which they offered in
evidence. As emphatically asserted by
respondent O Lay Kia, the reason why these
documents of ownership remained with her is
that the land in question belonged to her. 29

But the more crucial issue before Us is whether

there is a trust relation between the parties in
contemplation of law.
We find that there is. By definition, trust relations
between parties may either be express or
implied. 15 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. 16
Implied trusts are those which, without being
express, are deducible from the nature of the
transaction as matters of intent, or which are
superinduced on the transaction by operation of
law as matters of equity, independently of the
particular intention of the parties.17 Implied
trusts may either be resulting or constructive
trusts, both coming into being by operation of
law. 18

Indeed, there can be no persuasive

rationalization for the possession of these
documents of ownership by respondent-spouses
for seventeen (17) years after the Oroquieta
property was purchased in 1943 than that of
precluding its possible sale, alienation or
conveyance by Emilia O'Laco, absent any
machination or fraud. This continued possession
of the documents, together with other
corroborating evidence spread on record,
strongly suggests that Emilia O'Laco merely held
the Oroquieta property in trust for respondentspouses.

Resulting trusts are based on the equitable

doctrine that valuable consideration and not legal
title determines the equitable title or interest 19
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. 20 On the other hand,
constructive trusts are created by the
construction of equity in order to satisfy the
demands of justice 21 and prevent unjust
enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of

Second. It may be worth to mention that before

buying the Oroquieta property, respondentspouses purchased another property situated in
Kusang-Loob, Sta. Cruz, Manila, where the
certificate of title was placed in the name of
Ambrosio O'Laco, older brother of Emilia, under
similar or identical circumstances. The testimony
of former counsel for respondent-spouses, then
Associate Justice Antonio G. Lucero of the Court
of Appeals, is enlightening

41

"Q In the same conversation he told you how he

would buy the property (referring to the
Oroquieta property), he and his wife?

18 August 1944, by the then Court of First

Instance of Manila. These orders were recorded in
the Primary Entry Book of the Register of Deeds
of Manila at the same time, 2:35 o'clock in the
afternoon of 1 September 1944, in consecutive
entries, Entries Nos. 246117-18. 35 This
coincidence lends credence to the position of
respondent-spouses that there was in fact a
conspiracy between the siblings Ambrosio and
Emilia to defraud and deprive respondents of
their title to the Oroquieta and Kusang-Loob
properties.

"A Yes, Sir, he did.

"Q What did he say?
xxx xxx xxx
"A He said he and his wife has (sic) already
acquired by purchase a certain property located
at Kusang-Loob, Sta. Cruz, Manila. He told me he
would like to place the Oroquieta Maternity
Hospital in case the negotiation materialize(s) in
the name of a sister of his wife (O'Laco)"
(emphasis supplied). 30

Fourth. Until the sale of the Oroquieta property to

the Roman Catholic Archbishop of Manila,
petitioner Emilia O'Laco actually recognized the
trust. Specifically, when respondent spouses
learned that Emilia was getting married to Hugo,
O Lay Kia asked her to have the title to the
property already transferred to her and her
husband Valentin, and Emilia assured her that
"would be arranged (maaayos na)" after her
wedding. 36 Her answer was an express
recognition of the trust, otherwise, she would
have refused the request outright. Petitioners
never objected to this evidence; nor did they
attempt to controvert it.

On the part of respondent-spouses, they

explained that the reason why they did not place
these Oroquieta and Kusang-Loob properties in
their name was that being Chinese nationals at
the time of the purchase they did not want to
execute the required affidavit to the effect that
they were allies of the Japanese. 31 Since O Lay
Kia took care of Emilia who was still young when
her mother died, 32 respondent-spouses did not
hesitate to place the title of the Oroquieta
property in Emilia's name.

Fifth. The trial court itself determined that

"Valentin Co Cho Chit and O Lay Kia had some
money with which they could buy the property."
37 In fact, Valentin was the Chief Mechanic of the
Paniqui Sugar Mills, was engaged in the buy and
sell business, operated a gasoline station, and
owned an auto supply store as well as a ten-door
apartment in Caloocan City. 38 In contrast, Emilia
O'Laco failed to convince the Court that she was
financially capable of purchasing the Oroquieta
property. In fact, she opened a bank account only
in 1946 and likewise began filing income tax
returns that same year, 39 while the property in
question was bought in 1943. Respondentspouses even helped Emilia and her brothers in
their expenses and livelihood. Emilia could only
give a vague account on how she raised the
money for the purchase of the property. Her
narration of the transaction of sale abounds with
"I don't know" and "I don't remember." 40

Quite significantly, respondent-spouses also

instituted an action for reconveyance against
Ambrosio O'Laco when the latter claimed the
Kusang-Loob property as his own. A similar
stipulation of facts was likewise entered, i.e.,
respondent-spouses had in their possession
documents showing ownership of the KusangLoob property which they offered in evidence. In
that case, the decision of the trial court, now final
and executory, declared respondent-spouses as
owners of the Kusang-Loob property and ordered
Ambrosio O'Laco to reconvey it to them. 33
Incidentally, Ambrosio O'Laco thus charged
respondent spouses Valentin Co Cho Cit and O
Lay Kia before the Anti-Dummy Board, docketed
as Case No. 2424, for their acquisition of the
Kusang-Loob and Oroquieta properties. 34 He
claimed that respondent-spouses utilized his
name in buying the Kusang-Loob property while
that of petitioner O'Laco was used in the
purchase of the Oroquieta property. In effect,
there was an implied admission by Ambrosio that
his sister Emilia, like him, was merely used as a
dummy. However, the Anti-Dummy Board
exonerated respondent-spouses since the
purchases were made in 1943, or during World
War II, when the Anti-Dummy Law was not
enforceable.

Having established a resulting trust between the

parties, the next question is whether prescription
has set in.
As differentiated from constructive trusts, where
the settled rule is that prescription may
supervene, in resulting trust, the rule of
imprescriptibility may apply for as long as the
trustee has not repudiated the trust. 41 Once the
resulting trust is repudiated, however, it is
converted into a constructive trust and is subject
to prescription.

Third. The circumstances by which Emilia O'Laco

obtained a new title by reason of the alleged loss
of the old title then in the possession of
respondent-spouses cast serious doubt on the
veracity of her ownership. The petitions
respectively filed by Emilia O'Laco and Ambrosio
O'Laco for the Oroquieta and the Kusang-Loob
properties were both granted on the same day,

A resulting trust is repudiated if the following

requisites concur: (a) the trustee has performed
unequivocal acts of repudiation amounting to an
ouster of the cestui qui trust; (b) such positive
acts of repudiation have been made known to the
cestui qui trust; and, (c) the evidence thereon is
clear and convincing. 42

42

In Tale v. Court of Appeals 43 the Court

categorically ruled that an action for
reconveyance based on an implied or
constructive trust must perforce prescribe in ten
(10) years, and not otherwise, thereby modifying
previous decisions holding that the prescriptive
period was four (4) years.

MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the
Decision promulgated on May 11, 1976 by
respondent Court of Appeals 1 in CA-G.R. No.
56582-R, entitled "Centro La Paz (Samahang
Espiritista sa Lunduyang La Paz) a Chapter of
Union Espiritista Cristiana de Filipinas, Inc. vs.
The Sheriff of Manila and the Special Services
Corporation." The Union Espiritista Cristiana de
Filipinas, Inc., is a semi-religious and charitable
organization. 2

Neither the registration of the Oroquieta property

in the name of petitioner Emilia O'Laco nor the
issuance of a new Torrens title in 1944 in her
name in lieu of the alleged loss of the original
may be made the basis for the commencement
of the prescriptive period. For, the issuance of the
Torrens title in the name of Emilia O'Laco could
not be considered adverse, much less fraudulent.
Precisely, although the property was bought by
respondent-spouses, the legal title was placed in
the name of Emilia O'Laco. The transfer of the
Torrens title in her name was only in consonance
with the deed of sale in her favor. Consequently,
there was no cause for any alarm on the part of
respondent-spouses. As late as 1959, or just
before she got married, Emilia continued to
recognize the ownership of respondent-spouses
over the Oroquieta property. Thus, until that
point, respondent-spouses were not aware of any
act of Emilia which would convey to them the
idea that she was repudiating the resulting trust.
The second requisite is therefore absent. Hence,
prescription did not begin to run until the sale of
the Oroquieta property, which was clearly an act
of repudiation.

The antecedental facts follow:

On October 10, 1972, judgment was rendered in
favor of petitioner Special Services Corporation
by the Court of First Instance, Branch IV, Manila,
against one Alejandro Estudillo in the amount of
P94,727.52, more or less, in an action for
Replevin with Sum of Money (Civil Case No.
85819). A writ of execution was thereafter issued
but which has remained unsatisfied.
By virtue of an alias writ of execution issued on
December 15, 1972, the Sheriff of Manila caused
the annotation of a notice of levy on Transfer
Certificate of Title No. 51837, in respect of the
rights, interest and participation of said Alejandro
Estudillo, one of the registered owners indicated
in said title. That title covers two parcels of land
situated in Sampaloc, Manila, consisting of three
hundred forty eight (348) square meters and
registered in the names of Alejandro Estudillo,
married to Primitiva Victoria; Joaquina de la Rosa,
widow; Pedro Paguio, married to Amor Jose and
Maximo Victoria, married to Juliana Roberto, all
Chapter members.

But immediately after Emilia sold the Oroquieta

property which is obviously a disavowal of the
resulting trust, respondent-spouses instituted the
present suit for breach of trust. Correspondingly,
laches cannot lie against them.

The public auction sale of Estudillo's rights and

interests in said properties was scheduled on July
23, 1973.

After all, so long as the trustee recognizes the

trust, the beneficiary may rely upon the
recognition, and ordinarily will not be in fault for
omitting to bring an action to enforce his rights.
44 There is no running of the prescriptive period
if the trustee expressly recognizes the resulting
trust. 45 Since the complaint for breach of trust
was filed by respondent-spouses two (2) months
after acquiring knowledge of the sale, the action
therefore has not yet prescribed.

On June 27, 1973, Alejandro Estudillo filed a

"Motion to Dissolve and/or Cancel the Notice of
Levy" alleging that he and the other registered
owners indicated on the title merely held in trust
the properties and improvements thereon in
favor of respondent Centro La Paz (Samahang
Espiritista Sa Lunduyang La Paz) a Chapter of
Union Espiritista Cristiana de Filipinas, Inc.
(hereinafter referred to as CENTRO, for brevity),
as evidenced by "Acknowledgments" executed by
them on October 20, 1961 and October 2, 1971.
Estudillo further alleged that CENTRO's
ownership was also evidenced by letters dated
February 15, 1963, November 29, 1963 and
August 8, 1966 sent to the City Assessor by him
and Crispulo Romero, President of CENTRO, long
before the filing of the replevin case on
December 28, 1971 praying for the revocation of
tax assessments on said properties as the same,
were used for religious purposes. 3

WHEREFORE, the Petition for Review on Certiorari

is DENIED. The Decision of the Court of Appeals
of 9 April 1981, which reversed the trial court, is
AFFIRMED. Costs against petitioners.
G.R. No. L-44100 April 28, 1983
SPECIAL SERVICES
CORPORATION, petitioner,
vs.
CENTRO LA PAZ (SAMAHANG ESPIRITISTA
SA LUNDUYANG LA PAZ), A CHAPTER OF
UNION ESPIRITISTA CRISTIANA DE
FILIPINAS, INC., respondents.

On July 21, 1973, CENTRO submitted a third party

claim to the Sheriff of Manila likewise averring
exclusive ownership of the properties in
question . 4

43

On July 23, 1973, "Centro La Paz (Samahang

Espiritista sa Lunduyang La Paz) a Chapter of
Union Espiritista Cristiana de Filipinas, Inc.," as
plaintiff, instituted Civil Case No. 91412 for
Damages and Preliminary Injunction against
herein petitioner and the Sheriff of Manila with
the Court of First Instance, Branch IV, Manila, the
same Court which rendered judgment in the
replevin case. CENTRO reiterated ownership of
the properties in question and emphasized that
the registered owners thereof had publicly
acknowledged their possession of said properties
in the concept of trustees. 5

interest and/or participation in

the property in dispute, attest to
plaintiff's ownership of the
property in question. The Deed of
Donation dated March 13, 1957
(Exh. A), Deed of Absolute Sale
(Exh. E) executed by Joaquina
dela Rosa in favor of Alejandro
Estudillo, Pedro Paguio and
Maximo Victoria of the same
property covered by the Deed of
Donation, Exhibit A; Deed of Sale
(Exh. F) of two parcels in dispute
described under T.C.T. No. 51837
executed by Sta. Mesa Realty,
Inc. in favor of Alejandro
Estudillo, Joaquina dela Rosa,
Pedro Q. Paguio and Maximo
Victoria, Deed of
Acknowledgment dated October
30, 1961 (Exh. G) also executed
by the same Estudillo de la Rosa
and Victoria acknowledging that
the property described under the
aforementioned T.C.T. No. 51837,
together with the improvements
thereon are being possessed by
them only as trustees; another
Deed of Acknowledgment
executed on October 22, 1971,
jointly by Amor Jose, widow of
Paguio and the latter's daughters,
Sumilang Paguio and Filipina
Paguio (co-registered owner of
Estudillo) likewise declaring that
their possession of the said
property is merely that of
trustees and not as owners; the
petitions for revocation of tax
assessments Nos. 3187 and 3188
(Exhs. I and J); the petition to
exempt said parcels from
taxation, being owned by a
religious organization (Exh. K)
and the follow-up letters
addressed to the City Assessor of
Manila, dated February 15, 1963
(Exh. L), December 29,1963 (Exh.
M) and May 29, 1962 (Exh N)
respectively, plus the Deed of
Sale (Exh. 0) executed by
Estudillo, heirs of dela Rosa and
Paguio of the two parcels in favor
of Centro La Paz, indubitably
point to one and inescapable
conclusion that the plaintiff is
really the true and lawful owner
of the property in dispute and
that persons registered therein as
its owners, are merely trustees of
the plaintiff.

In its "Opposition to Petition for Preliminary

Injunction and Answer," petitioner averred that a
Torrens Title issued in favor of an owner is
conclusive of all matters stated therein and that
the "Acknowledgments" of the registered owners
not being annotated on Transfer Certificates of
Title No. 51837 could not bind anyone. 6
On August 27, 1973, a writ of preliminary
injunction was issued by the lower Court
enjoining the public auction sale of Estudillo's
interest in the properties in
question, 7 conditioned upon CENTRO's posting a
bond of P30,000.00.
In a judgment rendered on August 30, 1974, the
Court a quo decreed in the dispositive portion:
IN VIEW OF THE FOREGOING
CONSIDERATIONS, judgment is
hereby rendered in favor of the
plaintiff, against the defendants,
enjoining the latter from
proceeding with the public
auction sale of the real property,
pursuant to the notice of sale on
execution of real property, with
costs against the defendant.
The writ of preliminary injunction
issued in connection with this
case is, as it is hereby made
permanent.
Defendant's counterclaim is, as it
is hereby ordered dismissed for
lack of merit.
SO ORDERED.

The lower Court held that by a preponderance of

evidence CENTRO had established that it was
"really and true and lawful owner of the property
in dispute, and that the persons registered
therein as its owners are merely trustees of the
plaintiff," thus:

While it may be true that the

declaration of Estudillo
subsequent to the levy upon his
interest in the aforesaid property
may be self-serving, which could
be for the purpose of avoiding
liability, his declaration and that
of his co-owners, however, taking

The evidence on hand clearly

preponderates in favor of the
plaintiff. The series of documents
executed even as early as 1957,
long before the issue of whether
Alejandro Estudillo really has an

44

place years before the instant

controversy, could hardly be said
to have been motivated by a
similar purpose (to evade
responsibility) since at that time,
none as yet exist in favor of the
defendant nor anybody elm
against the Estudillo. (Record on
Appeal, pp. 54-55) 9

FILIPINAS, INC., 'which is a duly

registered corporation or entity
with the Office of the Securities
and Exchange Commission, is a
Juridical Person with the right to
sue and be sued;
xxx xxx xxx

10

In the Memorandum of CENTRO before the Trial

Court, the following allegation also appears:

Faced with that adverse judgment, petitioner

appealed to respondent Appellate Court, which
affirmed the Court a quo's Decision on May 11,
1976, and subsequently denied reconsideration.

That the plaintiff is a Chapter of

the UNION ESPIRITISTA
CRISTIANA DE FlLIPINAS, INC., a
semi-religious and charitable
organization duly registered with
the Securities and Exchange
Commission as per Certificate of
Registration No. 15147, dated
March 19, 1959, ... 11

Petitioner then availed of the instant Petition,

raising the following issues:
l) Whether or not Centro La Paz
which is merely a Chapter of
Union Espiritista de Filipinas, Inc.
has a juridical personality of its
own in accordance with the
provisions of our laws;

And in the Decision of the Trial Court, it found:

The evidence for the plaintiff
disclosed that it is a chapter of
the Union Espiritista Christiana
de Filipinas, Inc., a semi-religious
and charitable organization duly
registered with the Securities and
Exchange Commission per
Certificate of Registration No.
15147 dated March 19, 1959.

2) Whether or not Centro La Paz,

as claimed by it and the
respondent Court of Appeals, can
validly be conferred upon
ownership of Transfer Certificate
of Title No. 51837 by virtue of
documents executed allegedly in
its favor.
We affirm the judgment appealed from.

xxx xxx xxx

For one thing, the issues now raised were not

directly litigated in the Court below. For another,
it is evident from the Complaint that the plaintiff
was the mother organization, thus:

12

Evident from all the foregoing is that although it

was CENTRO that was actively prosecuting the
case, in substance, it was representing the
mother organization, the Union Espiritista
Cristiana de Filipinas, Inc., which is the real party
in interest and is itself named in the Complaint. It
is an organization that is duly registered with the
Securities and Exchange Commission, and thus
possessed of a juridical personality to sue and be
sued. 13

Centro La Paz (Samahang

Espiritista sa Lunduyang La Paz),
A Chapter of Union Espiritista
Cristiana de Filipinas, Inc.,
Plaintiff.
Paragraph 1 of the Complaint likewise reads:

As found by both the Trial Court and respondent

Appellate Court, the evidence sufficiently
establishes that the registered owners of the
parcels of land covered by TCT 51837, all of
whom are members of CENTRO, hold the
properties in trust for CENTRO by virtue of the
indubitable documents executed even before the
institution of suit. In the same manner that the
real property, registered solely in the name of a
husband, can be proven to be conjugal property
with his wife, the fact of registration in the name
of Alejandro Estudillo and others does not bar
evidence to show that the registered owners hold
the properties in trust for CENTRO. 14

1. That the plaintiff is a juridical

person duly organized and
existing under and by virtue of
the laws of the Republic of the
Philippines, a semi-religious and
charitable organization, with a
right to sue and be sued, ...
In the Offer of Evidence filed before the Trial
Court, the purpose of presenting Exhibit "A", the
Deed of Donation dated March 13, 1957, was "to
establish or prove the following":

Admittedly, the trust was not registered in

accordance with section 65 of Act 496 (the
former Land Registration Law). The absence of
said registration, however, cannot be taken
against CENTRO inasmuch as, if the public

(a) That the plaintiff "CENTRO LA

PAZ" as a chapter of the
association of spiritista
commonly known as 'UNION
ESPIRITISTA CRISTIANA DE

45

auction sale had actually been held, with

petitioner as the successful buyer, petitioner
could not have been considered a purchaser for
value and in good faith at said sale since it had
knowledge of CENTRO's claim, particularly when
the latter had filed a third-party-claim with the
Sheriff of Manila before the scheduled auction
sale, which knowledge was equivalent to
registration of the several "Acknowledgments" in
the Registry of Deeds.15

Isuzu Motor Center for a price of over

P100,000.00; that he sent his brother to pay for
the van and the receipt for payment was placed
in his (petitioner's) name because it was his
money that was used to pay for the vehicle; that
he allowed his brother to use the van because
the latter was working for his company, the CLT
Industries; and that his brother later refused to
return the van to him and appropriated the same
for himself.

The conclusion follows that inasmuch as Estudillo

has no interest in the properties in question,
there is nothing that petitioner can levy upon.
The power of a Court in the execution of its
judgment extends only over properties
unquestionably belonging to the judgment
debtor. 16

On the other hand, private respondent testified

that CLT Industries is a family business that was
placed in petitioner's name because at that time
he was then leaving for the United States and
petitioner is the remaining Filipino in the family
residing in the Philippines. When the family
business needed a vehicle in 1987 for use in the
delivery of machinery to its customers, he asked
petitioner to look for a vehicle and gave him the
amount of P5,000.00 to be deposited as down
payment for an Isuzu Elf Van which would be
available in about a month. After a month, he
himself paid the whole price out of a loan of
P140,000.00 which he obtained from his friend
Tan Pit Sin. Inasmuch as the receipt for the
downpayment was placed in the name of
petitioner and since he was still on good terms
with him, private respondent allowed the
registration of the vehicle in petitioner's name. It
was also their understanding that he would keep
the van for himself because CLT Industries was
not in a position to pay him. Hence, from the time
of the purchase, he had been in possession of the
vehicle including the original registration papers
thereof, but allowing petitioner from time to time
to use the van for deliveries of machinery.

WHEREFORE, the judgment of respondent Court

of Appeals (now Intermediate Appellate Court)
affirming that of the Trial Court, which enjoined
petitioner "from proceeding with the public
auction sale of the properties in question,
pursuant to the notice of sale on execution of real
property" and made the writ of preliminary
injunction permanent, is hereby affirmed.
G.R. No. 106251 November 19, 1993
CHIAO LIONG TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON
MANUEL T. MURO, Presiding Judge, RTC of
Manila, Branch 54 and TAN BAN
YONG, respondents.
Joaquin M. Arao for petitioner.

Tan Pit Sin who had known private respondent

since 1968, not only because they were
classmates but also because of their business
dealings with each other, confirmed that private
respondent borrowed from him P140,000.00 in
March, 1987 to buy an Isuzu Elf van. In fact, he
had borrowed said vehicle for a few times.

Macavinta & Sta. Ana Law Offices for private

respondent.

NOCON, J.:

Gina Lu, an employee of the Balintawak Isuzu

Motors, testified that private respondent paid the
balance of the purchase price of the Isuzu Elf van
in the amount of P133,000.00 but the receipt was
issued in the name of Chiao Liong Tan to make
the records consistent because it was the latter
who made the deposit of P5,000.00. Thereafter,
the Isuzu Elf van was released to him.

Petitioner seeks in this petition the reversal of the

Court of Appeals' decision dated May 15, 1992 in
CA-G.R. CV No. 29982 affirming the unfavorable
decision of the trial court 1 in his suit for replevin
and damages.
Petitioner Chiao Liong Tan claims to be the owner
of a motor vehicle, particularly described as Isuzu
Elf van, 1976 Model with Motor No. 44999-2 and
Chassis No. 9646780 which he purchased in
March, 1987. As owner thereof, petitioner says he
has been in possession, enjoyment and utilization
of the said motor vehicle until it was taken from
him by his older brother, Tan Ban Yong, the
private respondent herein.

After hearing, the trial court found for private

respondent. The dispositive portion of the
decision reads as follows:
WHEREFORE, judgment is hereby
rendered declaring defendant Tan
Ban Yong to be the owner of and
entitled to the possession of the
vehicle described in par. 2 of the
Complaint, and the plaintiff is
hereby ordered to deliver
possession thereof to the said
defendant or in the alternative if
such delivery cannot be made, to

Petitioner relies principally on the fact that the

Isuzu Elf van is registered in his name under
Certificate of Registration No. 1501909. He
claims in his testimony before the trial court that
the said vehicle was purchased from Balintawak

46

the sum of P138,000.00 as the

value of the vehicle taking into
account the depreciation of the
vehicle but offset by the inflation
rate; in either alternative, plaintiff
is also ordered to pay to said
defendant consequential
damages of P20,000.00 for the
latter having been deprived of
the possession and use of the
vehicle and to pay the costs. All
amounts adjudged herein, except
costs, shall bear interest at the
legal rate from the date of this
decision, until delivery of the
vehicle or the alternative
payment of the value thereof as
well as payment of consequential
damages is paid; the interest
applies to the value of the vehicle
if return thereof is delayed. No
cost. 2

purchase price of the motor vehicle himself to

Gina Lu of the Balintawak Isuzu Motors, is
corroborated by the above-mentioned persons
themselves. Tan Pit Sin not only confirmed the
loan but also stated that the same was paid in
three (3) months; P50,000.00 on the first
payment; another P50,000.00 on the second
payment and P40,000.00 on the last
payment. 4 Gina Lu, who testified at the instance
of petitioner, declared that the downpayment of
P5,000.00 was paid by petitioner and so the
receipt for the same was issued in his name but
the balance of P133,000.00 was paid by private
respondent and to make the record consistent,
she issued the receipt in the name of petitioner
again.
In contrast to the clear and categorical
averments of private respondent and the
witnesses in this case negating petitioner's
ownership of the motor vehicle in question,
petitioner's averments before the trial court and
this Court are not only disparate but conflicting.
In his testimony below, petitioner averred that he
used his own money to purchase the motor
vehicle by paying the sum of
P100,000.00, 5 which testimony is negated by his
admission on page 5 of his petition 6 before this
Court that private respondent borrowed money
from Tan Pit Sin with which to purchase the
subject motor vehicle. Then, in his pleading
before the court below, particularly in his reply to
the answer of private respondent, petitioner
alleged that the motor vehicle was intended for
his exclusive use and not to service the family
business. 7 And yet , in his petition before this
Court, he claimed that the subject motor vehicle
was purchased for CLT Industries, which he solely
owned and accordingly, registered in the latter's
name. 8 On top of these entangled averments,
petitioner did not have in his possession the
Certificate of Registration of the motor vehicle
and the official receipt of payment for the same,
thereby lending credence to the claim of private
respondent who has possession thereof, that he
owns the subject motor vehicle.

Finding no merit in the appeal, the respondent

Court of Appeals affirmed the decision of the trial
court. Undaunted by his successive failures,
petitioner comes to us and raised the following
error allegedly committed by the respondent
Court of Appeals, to wit:
1. . . . in finding the testimonies
of private respondent's witnesses
credible;
2. . . . in disregarding the
Certificate of Registration of the
subject motor vehicle as proof of
ownership by the petitionerappellant. 3
Since the Court of Appeals merely affirmed the
trial court's assessment of the credibility of the
witnesses that testified before it, petitioner is in
effect questioning the factual findings of said
court and its appraisal of their testimony which
this Court cannot review, its jurisdiction being
limited to questions of law. The considerable
weight given to the findings of the trial court is
not without any reason. It had the opportunity to
observe the demeanor of witnesses which is
usually not reflected in the transcript of records.
The profundity of the conclusions thus reached is
just the result of such observance. When the
Court of Appeals affirmed said findings, it goes to
show that no misapprehension of facts was
committed as said Court has the power to
scrutinize said factual findings under existing
rules of procedure.

A certificate of registration of a motor vehicle in

one's name indeed creates a strong presumption
of ownership. For all practical purposes, the
person in whose favor it has been issued is
virtually the owner thereof unless proved
otherwise. In other words, such presumption is
rebuttable by competent proof.
The New Civil Code recognizes cases of implied
trust other than those enumerated
therein. 9 Thus, although no specific provision
could be cited to apply to the parties herein, it is
undeniable that an implied trust was created
when the certificate of registration of the motor
vehicle was placed in the name of the petitioner
although the price thereof was not paid by him
but by private respondent. 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

In concluding that the testimonies of Tan Ban

Yong, Tan Pit Sin and Gina Lu cast doubt on the
petitioner's ownership of the motor vehicle in
question, both the trial court and the Court of
Appeals attached significance to their respective
interlocking accounts on how the motor vehicle
was acquired, complete with the financing source
and mode of repayment. Respondent Tan Ban
Yong's declaration that he borrowed P140,000.00
from Tan Pit Sin and paid the balance of the

47

another especially between brothers, does not

lose that character simply because of what
appears in a legal document.

sufficiently flexible to authorize a settlement of

all equities between the parties, arising from or
growing out of the main controversy. 17Thus, in an
action for replevin where the defendant is
adjudged entitled to possession, he need not go
to another forum to procure relief for the return
of the replevied property or secure a judgment
for the value of the property in case the adjudged
return thereof could not be had. Appropriately,
the trial court rendered an alternative judgment.

Even under the Torrens System of land

registration, this Court in some instances did
away with the irrevocability or indefeasibility of a
certificate of title to prevent injustice against the
rightful owner of the property. 10
It is true that the judgment 11 in a replevin suit
must only resolve in whom is the right of
possession. Primarily, the action of replevin is
possessory in character and determined nothing
more than the right of possession. However,
when the title to the property is distinctly put in
issue by the defendant's plea and by reason of
the policy to settle in one action all the
conflicting claims of the parties to the possession
of the property in controversy, the question of
ownership may be resolved in the same
proceeding.

WHEREFORE, the questioned decision being in

accordance with the law, the instant petition for
review is hereby DENIED for lack of merit.
G.R. No. L-32749 January 22, 1988
SABAS H. HOMENA and ILUMINADA
JUANEZA, plaintiffs-appellants,
vs.
DIMAS CASA AND MARIA CASTOR and the
REGISTER OF DEEDS FOR THE PROVINCE OF
COTABATO,defendants-appellees.

Procedure-wise, the Court observes that the

action by petitioner as plaintiff in the trial court
was only one for Replevin and Damages. Since
replevin is only a provisional remedy where the
replevin plaintiff claims immediate delivery of
personal property pending the judgment of the
trial court in a principal case, 12 the petitioner
should have filed in the trial court as a main case
an action to recover possession of the Isuzu Elf
van which was in the possession of the private
respondent. Logically, the basis of petitioner's
cause of action should have been his ownership
of said van.In the State of California, from whose
Code of Procedure 13 we copied our rule on
replevin, their old replevin rule which allowed the
immediate delivery of the chattel at the
commencement of the action upon application
with bond by the replevin plaintiff had already
been struck down as early as July 1, 1971 in the
case of Blair v. Pitchess. 14 As in fact, on June 12,
1972 when the United States Supreme Court
struck down as unconstitutional the Florida and
Pennsylvania replevin statutes in Fuentes v.
Shevin, 15 most of the states, on their own,
changed their replevin statutes to include a
mandatory preliminary hearing before the writ
could be issued, similar to our mandatory
preliminary hearing before the writ of preliminary
injunction can be issued. 16

YAP, J.:
This is an appeal from the order of the Court of
Flint Instance of Cotabato dated January 4,1968
dismissing plaintiffs-appellants' complaint and
from its order dated May 8,1968, denying their
motion for reconsideration.
The complaint, filed by plaintiffs-appellants
against the spouses Dimas Casa and Maria
Castor, the defendants-appellees herein, was for
alleged unlawful acts of dispossession disturbing
plaintiffs peaceful, continuous, open,
uninterrupted adverse and public possession of
the property in question. In their complaint,
plaintiffs also sought to annull the original
certificate of title issued by the Register of Deeds
for the province of Cotabato in favor of defendant
spouses pursuant to a Homestead Patent on the
ground that said patent was obtained by
defendant spouses through fraud and
misrepresentation by stating, among others, in
their application, that the lot was not claimed
and occupied by another person. Plaintiffs
alleged that on June 15, 1967, they purchased
from the defendants two (2) hectares of the
aforementioned parcel of land, it being agreed in
the deed of sale that the said portion would be
reconveyed to plaintiffs after the five-year
prohibitory period, as provided for in the
Homestead Patent Law, shall have elapsed, and
that defendants failed to abide by said
agreement.

If that had been the case in this jurisdiction, then

the trial judge would have discovered right away
at the preliminary hearing that private
respondent should have immediately staked his
claim of ownership and that would have created
serious doubts about petitioner's claim of
ownership. Most likely, the writ would not have
been issued and the complaint would have been
dismissed motu proprio by the trial court upon
the discovery that the petitioner did not have a
principal case therein. As it is, the complaint
proceeded its course to the detriment of private
respondent.

The defendants moved to dismiss the complaint,

based on the following grounds: (1) the complaint
is barred by prescription, since thirteen years had
elapsed from the issuance of the homestead
patent before the action was filed; (2) plaintiff
has no cause of action, since the deed of sale
executed on June 15, 1952 or prior to the
approval of the application and issuance of the

Finally, although a "replevin" action is primarily

one for the possession of personality, yet it is

48

homestead patent was null and void and

inoperative to convey the land in question, which
was at that time still public land; and (3) plaintiff
is not the proper party to institute the action to
annul the homestead patent.

circumvent and violate the law. As parties to a

void contract, the plaintiffs have no rights which
they can enforce and the court can not lend itself
to its enforcement. Plaintiffs can neither invoke
the doctrine of implied trust based on an illegal
contract. The issue of prescription or laches
becomes irrelevant in a case such as this, where
plaintiffs clearly have no cause of action.

In their opposition to the motion to dismiss,

plaintiffs averred that they were not assailing the
validity of the patent as a whole, but only with
respect to that portion of two (2) hectares owned
by them which defendants, through fraud, were
able to register in their name. Because of such
fraud, the action of the plaintiffs cannot be
deemed to have prescribed, since such action
can be brought within four (4) years from
discovery of the fraud. Moreover, the defense of
prescription can not be set up in an action to
recover property held in trust by a person for
another. On January 4, 1968, the court a quo
issued the questioned order dismissing the
complaint. The plaintiffs appealed the case to the
Court of Appeals, assigning the following errors:

WHEREFORE, the petition is hereby DENIED and

the orders appealed from are AFFIRMED.
G.R. No. L-12149
1960

September 30,

HEIRS OF EMILIO CANDELARIA,

ETC., plaintiff-appellant,
vs.
LUISA ROMERO, ET AL., defendants-appellees.
Vicente P. Fernando for appellants.
P.L. Meer for appellees.

1. The lower court erred in

holding that the allegations in the
complaint do not conform with
the terms and conditions of the
contract as to amount to a
justifiable cause of action.

GUTIERREZ DAVID, J.:

This is an appeal from an order dismissing
plaintiff's complaint for reconveyance of real
property with damages. The dismissal was
ordered on a mere motion to dismiss before
answer was filed.

2. The lower court erred in

holding that the plaintiffsappellants have no personality to
bring the present action as they
do not seek the land for
themselves but for the
government.

The complaint, which was filed on December 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; that
Lucas paid the first two installments
corresponding to his lot, but faced with the
inability of meeting the subsequent installments
because of sickness which caused him to be
bedridden, he sold his interest therein to his
brother Emilio, who then reimbursed him the
amount he had already paid, and thereafter
continued payment of the remaining installments
until the whole purchase price had been fully
satisfied; "that although Lucas Candelaria had no
more interest over the lot, the subsequent
payments made by Emilio Candelaria until fully
paid were made in the name of Lucas Candelaria,
with the understanding that the necessary
documents of transfer will be made later, the
reason that the transaction being from brother to
brother"; that in 1918 a transfer certificate of title
for said lot was issued by the register of deeds of
Manila in the name of "Lucas Candelaria married
to Luisa Romero"; that Lucas held the title to said
lot merely in trust for Emilio and that this fact
was acknowledged not only by him but also by
the defendants (his heirs) on several occasions;
that Lucas' possession of the lot was merely
tolerated by Emilio and his heirs; that from the
time Emilio bought the lot from his brother, Lucas
had been collecting all its rents for his own use as
financial aid to him as a brother in view of the
fact that he was bedridden without any means of
livelihood and with several children to support,

3. The lower court erred in

holding that the present action
based on fraud is barred by the
statute of limitations.
4. Finally, the lower court erred in
holding that the deed of sale is
not lawful as the same was made
to circumvent the provisions of
the Public Land Act.
The Court of Appeals certified the case to this
Court as it involved only questions of law.
We find no merit in the petition. The lower court
committed no reversible error in dismissing the
complaint.
Basically, the plaintiffs' supposed cause of action
rests upon the deed of sale executed by
defendants in their favor on June 15, 1962
wherein the latter sold a two-hectare portion of
the homestead which they were applying for to
the plaintiffs on the understanding that the
actual conveyance of the said portion to plaintiffs
would be made only after the lapse of the fiveyear period during which, under the Public Land
Act, the homestead owner was prohibited from
transferring his rights. The agreement is clearly
illegal and void ab initio; it is intended to

49

although from 1926, when Emilio was confined at

the Culion Leper Colony up to his death on
February 5, 1936, Lucas had been giving part of
the rents to Fortunata Bautista, the second wife
of Emilio, in accordance with the latter's wishes;
that Lucas died in August, 1942, survived by the
present defendants, who are his spouse Luisa
Romero and several children; and that said
defendants are still in possession of the lot,
having refused to reconvey it to plaintiff despite
repeated demands.

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 abovequoted 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.

Instead of answering the complaint, the

defendants filed a motion to dismiss, alleging,
among other things, that plaintiff's cause of
action is unenforceable under the new Civil Code
and that the action has already prescribed. And
the court having upheld the motion, plaintiff took
this appeal.1awphl.nt

Constructive or implied trusts may, of course, be

barred by lapse of time. The rule in such trusts is
that laches constitutes a bar to actions to enforce
the trust, and repudiation is not required, unless
there is a concealment of the facts giving rise to
the trust. (Diaz, et al. vs. Gorricho, et al., 103
Phil., 261; 54 Off. Gaz. [37] 8429.) Continuous
recognition of a resulting trust, however,
precludes any defense of laches in a suit to
declare and enforce the trust. (See 581, 54 Am
Jur. pp. 448-450.) The beneficiary of a resulting
trust may, therefore, without prejudice to his
right to enforce the trust, prefer the trust to
persist and demand no conveyance from the
trustee. It being alleged in the complaint that
Lucas held the title to the lot in question merely
in trust for Emilio and that this fact was
acknowledged not only by him but also by his
heirs, herein defendants which allegation is
hypothetically admitted we are not prepared to
rule that plaintiff's action is already barred by
lapse of time. On the contrary, we think the
interest of justice would be better served if she
and her alleged co-heirs were to be given an
opportunity to be heard and allowed to present
proof in support of their claim.

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, and that since
Transfer Certificate of Title No. 9584 covering the
land in question had been issued to Lucas
Candelaria way-back in 1918 or 38 years before
the filing of the complaint, the action has already
prescribed.
The trust alleged to have been created, in our
opinion, is an implied trust. As held, in effect, by
this Court in the case of Martinez vs. Grao (42
Phil., 35), where property is taken by a person
under an agreement to hold it for, or convey it to
another or the grantor, a resulting or implied
trust arises in favor of the person for whose
benefit the property was intended. This rule,
which has been incorporated in the new Civil
Code in Art. 1453 thereof, is founded upon equity.
The rule is the same in the United States,
particularly where, on the faith of the agreement
or the understanding, the grantee is enabled to
gain an advantage in the purchase of the
property or where the consideration or part
thereof has been furnished by or for such other.
Thus, it has been held that where the grantee
takes the property under an agreement to
convey another on certain conditions, a trust
results for the benefit of such other or his heirs,
which equity will enforce according to the
agreement. (89 C.J.S. 960.) It is also the rule
there that an implied trust arises where a person
purchases land with his own money and takes a
conveyance thereof in the name of another. In
such a case, the property is held on a resulting
trust in favor of the one furnishing the
consideration for the transfer, unless a different
intention or understanding appears. The trust
which results under such circumstances does not
arise from contract or agreement of the parties,
but from the facts and circumstances, that is to
say, it results because of equity and arises by
implication or operation of law. (See 89 C.J.S.
964-968.)

Wherefore, the order of dismissal appealed from

is hereby reversed and the case remanded to the
court a quofor further proceedings. So ordered
without costs.
G.R. No. 97995 January 21, 1993
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS AND B.P. MATA AND
CO., INC., respondents.
Roland A. Niedo for petitioner.
Benjamin C. Santos Law Office for respondent.

ROMERO, J.:

In the present case, the complaint expressly

alleges that "although Lucas Candelaria had no

50

Rarely is this Court confronted with a case calling

for the delineation in broad strokes of the
distinctions between such closely allied concepts
as the quasi-contract called "solutio indebiti"
under the venerable Spanish Civil Code and the
species of implied trust denominated
"constructive trusts," commonly regarded as of
Anglo-American origin. Such a case is the one
presented to us now which has highlighted more
of the affinity and less of the dissimilarity
between the two concepts as to lead the legal
scholar into the error of interchanging the two.
Presented below are the factual circumstances
that brought into juxtaposition the twin
institutions of the Civil Law quasi-contract and
the Anglo-American trust.

On February 4, 1982, 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. 1
After trial, the Regional Trial Court of Manila
rendered judgment dismissing the complaint
ruling that the instant case falls squarely under
Article 2154 on solutio indebiti and not under
Article 1456 on constructive trust. The lower
court 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; that there is a
fiduciary relation between a trustee and a cestui
que trust as regards certain property, real,
personal, money or choses in action." 2

Private Respondent B.P. Mata & Co. Inc. (Mata), is

a private corporation engaged in providing goods
and services to shipping companies. Since 1966,
it has acted as a manning or crewing agent for
several foreign firms, one of which is Star Kist
Foods, Inc., USA (Star Kist). As part of their
agreement, Mata makes advances for the crew's
medical expenses, National Seaman's Board fees,
Seaman's Welfare fund, and standby fees and for
the crew's basic personal needs. Subsequently,
Mata sends monthly billings to its foreign
principal Star Kist, which in turn reimburses Mata
by sending a telegraphic transfer through banks
for credit to the latter's account.

In affirming the lower court, the appellate court

added in its opinion that 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. 3 Consequently, recipient is duty
bound to return the amount paid by mistake. But
the appellate court concluded that petitioner's
demand for the return of US$14,000 cannot
prosper because its cause of action had already
prescribed under Article 1145, paragraph 2 of the
Civil Code which states:

Against this background, on February 21, 1975,

Security Pacific National Bank (SEPAC) of Los
Angeles which had an agency arrangement with
Philippine National Bank (PNB), transmitted a
cable message to the International Department
of PNB to pay the amount of US$14,000 to Mata
by crediting the latter's account with the Insular
Bank of Asia and America (IBAA), per order of
Star Kist. Upon receipt of this cabled message on
February 24, 1975, PNB's International
Department noticed an error and sent a service
message to SEPAC Bank. The latter replied with
instructions that the amount of US$14,000
should only be for US$1,400.

The following actions must be

commenced within six years:
xxx xxx xxx
(2) Upon a quasi-contract.
This is because petitioner's complaint
was filed only on February 4, 1982,
almost seven years after March 11, 1975
when petitioner mistakenly made
payment to private respondent.

On the basis of the cable message dated

February 24, 1975 Cashier's Check No. 269522 in
the amount of US$1,400 (P9,772.95)
representing reimbursement from Star Kist, was
issued by the Star Kist for the account of Mata on
February 25, 1975 through the Insular Bank of
Asia and America (IBAA).

Hence, the instant petition

for certiorari proceeding seeking to annul the
decision of the appellate court on the basis that
Mata's obligation to return US$14,000 is
governed, in the alternative, by either Article
1456 on constructive trust or Article 2154 of the
Civil Code on quasi-contract. 4

However, fourteen days after or on March 11,

1975, 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.

Article 1456 of the Civil Code provides:

If property is acquired through
mistake or fraud, the person
obtaining it is, by force of law,
considered a trustee of an
implied trust for the benefit of
the person from whom the
property comes.

Six years later, or more specifically, on May 13,

1981, PNB requested Mata for refund of
US$14,000 (P97,878.60) after it discovered its
error in effecting the second payment.

On the other hand, Article 2154 states:

51

If something is received when

there is no right to demand it,
and it was unduly delivered
through mistake, the obligation to
return it arises.

In the case at bar, Mata, in receiving the

US$14,000 in its account through IBAA, had no
intent of holding the same for a supposed
beneficiary or cestui que trust, namely PNB. But
under Article 1456, the law construes a trust,
namely a constructive trust, for the benefit of the
person from whom the property comes, in this
case PNB, for reasons of justice and equity.

Petitioner naturally opts for an interpretation

under constructive trust as its action filed on
February 4, 1982 can still prosper, as it is well
within the prescriptive period of ten (10) years as
provided by Article 1144, paragraph 2 of the Civil
Code. 5

At this juncture, a historical note on the codal

provisions on trust and quasi-contracts is in
order.

If it is to be construed as a case of payment by

mistake or solutio indebiti, then the prescriptive
period for quasi-contracts of six years applies, as
provided by Article 1145. As pointed out by the
appellate court, petitioner's cause of action
thereunder shall have prescribed, having been
brought almost seven years after the cause of
action accrued. However, even assuming that the
instant case constitutes a constructive trust and
prescription has not set in, the present action has
already been barred by laches.

Originally, under the Spanish Civil Code, there

were only two kinds of quasi
contracts: negotiorum gestio andsolutio indebiti.
But the Code Commission, mindful of the position
of the eminent Spanish jurist, Manresa, that "the
number of quasi contracts may be indefinite,"
added Section 3 entitled "Other QuasiContracts." 15
Moreover, even as Article 2142 of the Civil Code
defines a quasi-contract, the succeeding article
provides that: "The provisions for quasi-contracts
in this Chapter do not exclude other quasicontracts which may come within the purview of
the preceding article." 16

To recall, trusts are either express or implied.

While express trusts are created by the intention
of the trustor or of the parties, implied trusts
come into being by operation of law. 6 Implied
trusts are those which, without being expressed,
are deducible from the nature of the transaction
as matters of intent or which are superinduced
on the transaction by operation of law as matters
of equity, independently of the particular
intention of the parties. 7

Indubitably, the Civil Code does not confine itself

exclusively to the quasi-contracts enumerated
from Articles 2144 to 2175 but is open to the
possibility that, absent a pre-existing
relationship, there being neither crime nor quasidelict, a quasi-contractual relation may be forced
upon the parties to avoid a case of unjust
enrichment. 17 There being no express consent, in
the sense of a meeting of minds between the
parties, there is no contract to speak of.
However, in view of the peculiar circumstances or
factual environment, consent is presumed to the
end that a recipient of benefits or favors resulting
from lawful, voluntary and unilateral acts of
another may not be unjustly enriched at the
expense of another.

In turn, implied trusts are subdivided into

resulting and constructive trusts. 8 A resulting
trust is a trust raised by implication of law and
presumed always to have been contemplated by
the parties, the intention of which is found in the
nature of the transaction, but not expressed in
the deed or instrument of
conveyance. 9 Examples of resulting trusts are
found in Articles 1448 to 1455 of the Civil
Code. 10 On the other hand, a constructive trust is
one not created by words either expressly or
impliedly, but by construction of equity in order
to satisfy the demands of justice. An example of
a constructive trust is Article 1456 quoted
above. 11

Undoubtedly, the instant case fulfills the

indispensable requisites of solutio indebiti as
defined in Article 2154 that something (in this
case money) has been received when there was
no right to demand it and (2) the same was
unduly delivered through mistake. There is a
presumption that there was a mistake in the
payment "if something which had never been
due or had already been paid was delivered; but
he from whom the return is claimed may prove
that the delivery was made out of liberality or for
any other just cause." 18

A deeper analysis of Article 1456 reveals that it is

not a trust in the technical sense 12 for in a
typical trust, confidence is reposed in one person
who is named a trustee for the benefit of another
who is called the cestui que trust, respecting
property which is held by the trustee for the
benefit of the cestui que trust. 13 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 socalled trustee neither accepts any trust nor
intends holding the property for the beneficiary. 14

In the case at bar, a payment in the corrected

amount of US$1,400 through Cashier's Check No.
269522 had already been made by PNB for the
account of Mata on February 25, 1975. Strangely,
however, fourteen days later, PNB effected
another payment through Cashier's Check No.
270271 in the amount of US$14,000, this time
purporting to be another transmittal of

52

reimbursement from Star Kist, private

respondent's foreign principal.

Returning to the instant case, while petitioner

may indeed opt to avail of an action to enforce a
constructive trust or the quasi-contract of solutio
indebiti, it has been deprived of a choice, for
prescription has effectively blocked quasicontract as an alternative, leaving only
constructive trust as the feasible option.

While the principle of undue enrichment

or solutio indebiti, is not new, having been
incorporated in the subject on quasi-contracts in
Title XVI of Book IV of the Spanish Civil Code
entitled "Obligations incurred without
contract," 19the chapter on Trusts is fairly recent,
having been introduced by the Code Commission
in 1949. Although the concept of trusts is
nowhere to be found in the Spanish Civil Code,
the framers of our present Civil Code
incorporated implied trusts, which includes
constructive trusts, on top of quasi-contracts,
both of which embody the principle of equity
above strict legalism. 20

Petitioner argues that the lower and appellate

courts cannot indulge in semantics by holding
that in Article 1456 the recipient commits the
mistake while in Article 2154, the recipient
commits no mistake. 26 On the other hand,
private respondent, invoking the appellate
court's reasoning, would impress upon us that
under Article 1456, there can be no mutual
mistake. Consequently, private respondent
contends that the case at bar is one of solutio
indebiti and not a constructive trust.

In analyzing the law on trusts, it would be

instructive to refer to Anglo-American
jurisprudence on the subject. Under American
Law, a court of equity does not consider a
constructive trustee for all purposes as though he
were in reality a trustee; although it will force him
to return the property, it will not impose upon
him the numerous fiduciary obligations ordinarily
demanded from a trustee of an express trust. 21 It
must be borne in mind that in an express trust,
the trustee has active duties of management
while in a constructive trust, the duty is merely to
surrender the property.

We agree with petitioner's stand that under

Article 1456, the law does not make any
distinction since mutual mistake is a possibility
on either side on the side of either the grantor
or the grantee. 27 Thus, it was error to conclude
that in a constructive trust, only the person
obtaining the property commits a mistake. This is
because it is also possible that a grantor, like PNB
in the case at hand, may commit the mistake.
Proceeding now to the issue of whether or not
petitioner may still claim the US$14,000 it
erroneously paid private respondent under a
constructive trust, we rule in the negative.
Although we are aware that only seven (7) years
lapsed after petitioner erroneously credited
private respondent with the said amount and that
under Article 1144, petitioner is well within the
prescriptive period for the enforcement of a
constructive or implied trust, we rule that
petitioner's claim cannot prosper since it is
already barred by laches. It is a 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. 28

Still applying American case law, quasicontractual obligations 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. 22
Further reflection on these concepts reveals that
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. 23

While prescription is concerned with the fact of

delay, laches deals with the effect of
unreasonable delay. 29 It is amazing that it took
petitioner almost seven years before it
discovered that it had erroneously paid private
respondent. Petitioner would attribute its mistake
to the heavy volume of international transactions
handled by the Cable and Remittance Division of
the International Department of PNB. Such
specious reasoning is not persuasive. It is
unbelievable for a bank, and a government bank
at that, which regularly publishes its balanced
financial statements annually or more frequently,
by the quarter, to notice its error only seven
years later. As a universal bank with worldwide
operations, PNB cannot afford to commit such
costly mistakes. Moreover, as between parties
where negligence is imputable to one and not to
the other, the former must perforce bear the
consequences of its neglect. Hence, petitioner
should bear the cost of its own negligence.

Although we are not quite in accord with the

opinion that "the trusts known to American and
English equity jurisprudence are derived from
the fidei commissa of the Roman Law," 24 it is
safe to state that their roots are firmly grounded
on such Civil Law principles are expressed in the
Latin maxim, "Nemo cum alterius detrimento
locupletari potest,"25 particularly the concept of
constructive trust.

53

WHEREFORE, the decision of the Court of Appeals

dismissing petitioner's claim against private
respondent is AFFIRMED.

54