Salao v.

Salao

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

FACTS:

The spouses Manuel Salao and Valentina Ignacio of Barrio Dampalit, Malabon, Rizal begot four children
named Patricio, Alejandra, Juan and Ambrosia. Manuel Salao died in 1885. His eldest son, Patricio, died
in 1886 survived by his only child. Valentin Salao. His widow died on May 28, 1914. After her death, her
estate was administered by her daughter Ambrosia. It was partitioned extrajudicially in a notarized
deed. 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. Prior to
the death of Valentina Ignacio her two children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a Torrens
title in their names for a forty-seven-hectare Calunuran fishpond. Juan Y. Salao, Sr. died on November 3,
1931 at the age of eighty years. His nephew, Valentin Salao, died on February 9, 1933 at the age of sixty
years according to the death certificate. The intestate estate of Valentin Salao was partitioned
extrajudicially between his two daughters, Benita Salao-Marcelo and Victorina Salao-Alcuriza. His estate
consisted of the two fishponds which he had inherited in 1918 from his grandmother, Valentina Ignacio.
Ambrosia Salao donated to her grandniece, plaintiff

Benita Salao, three lots. 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.

During the Japanese occupation and about a year before Ambrosia Salao’s death on September 14, 1945
due to senility, she donated her one-half proindiviso share in the two fishponds in question to her
nephew, Juan S. Salao, Jr. 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, Juan Y. Salao, Sr. The deed of
denotion included other pieces of real property owned by Ambrosia.

ISSUE:

WON plaintiffs have successional rights to Ambrosia’s share.

RULING:

No. The plaintiffs would not have any successional rights to Ambrosia’s share. The sole legal heir of
Ambrosia was her nephew, Juan, Jr., her nearest relative within the third degree. Valentin Salao, if living
in 1945 when Ambrosia died, would have been also her legal heir, together with his first cousin, Juan, Jr.
(Juani). Benita Salao, the daughter of Valentin, could not represent him in the succession to the estate of
Ambrosia since in the collateral line, representation takes place only in favor of the children of brothers
or sisters whether they be of the full or half blood is (Art 972, Civil Code). The nephew excludes a
grandniece like Benita Salao or great-gandnephews like the plaintiffs Alcuriza.

DEVELOPMENT BANK OF PHILIPPINES v. COA, GR No. 144516, 2004-02-11

Facts:

the Development Bank of the Philippines (DBP) Board of Governors adopted Resolution No. 794 creating
the DBP Gratuity Plan and authorizing the setting up of a retirement fund to cover the benefits due to
DBP retiring officials and... employees under Commonwealth Act No. 186, as amended... a Trust
Indenture was entered into by and between the DBP and the Board of Trustees of the Gratuity Plan
Fund, vesting in the latter the control and administration of the Fund.

The trustee, subsequently, appointed the DBP Trust Services Department

(DBP-TSD) as the investment manager thru an Investment Management Agreement, with the end in
view of making the income and principal of the Fund sufficient to meet the liabilities of DBP under the
Gratuity Plan.

the Bank established a Special Loan Program availed thru the facilities of the DBP Provident Fund and
funded by placements from the Gratuity Plan Fund. This Special Loan Program was adopted as "part of
the benefit program of the Bank to provide financial... assistance to qualified members to enhance and
protect the value of their gratuity benefits" because "Philippine retirement laws and the Gratuity Plan
do not allow partial payment of retirement benefits."

Under the Special Loan Program, a prospective retiree is allowed the option to utilize in the form of a
loan a portion of his "outstanding equity" in the gratuity fund and to invest it in a profitable investment
or undertaking

The earnings of the investment shall then be... applied to pay for the interest due on the gratuity loan
which was initially set at 9% per annum subject to the minimum investment rate resulting from the
updated actuarial study

Pursuant to the investment scheme, DBP-TSD paid to the investor-members a total of P11,626,414.25
representing the net earnings of the investments for the years 1991 and 1992.

The payments were disallowed by the Auditor under Audit Observation Memorandum... on the ground
that the distribution of income of the Gratuity Plan Fund (GPF) to future retirees of DBP is irregular and
constituted the use of public funds for private purposes
AOM No. 93-2 did "not question the authority of the Bank to set-up the [Gratuity Plan] Fund and have it
invested in the Trust Services Department of the Bank.

Apart from requiring the recipients of the P11,626,414.25 to refund their dividends, the Auditor
recommended that the DBP record in its books as miscellaneous income the income of the Gratuity Plan
Fund ("Fund"). The Auditor reasoned that "the Fund is still owned by the Bank, the Board of Trustees is
a mere administrator of the Fund in the same way that the Trust Services Department where the fund
was invested was a mere investor and neither can the employees, who have still an inchoate interest [i]n
the Fund be considered as rightful owner of the Fund... former DBP Chairman Alfredo C. Antonio
requested then COA Chairman Celso D. Gangan to reconsider AOM No. 93-2. Chairman Antonio alleged
that the express trust created for the benefit of qualified DBP employees under... the Trust Agreement...
dated 26 February 1980 gave the Fund a separate legal personality.

The Agreement transferred legal title over the Fund to the Board of Trustees and all earnings of the
Fund accrue only to the Fund. Thus,... Chairman Antonio contended that the income of the Fund is not
the income of DBP.

Chairman Antonio also asked COA to lift the disallowance of the P11,626,414.25 distributed as dividends
under the SLP on the ground that the latter was simply a normal loan transaction. He compared the SLP
to loans granted by other gratuity and retirement funds, like the GSIS, SSS and DBP Provident Fund.

On 6 October 1998, the COA en banc affirmed AOM No. 93-2, as follows:

The Gratuity Plan Fund is supposed to be accorded separate personality under the administration of the
Board of Trustees but that concept has been effectively eliminated when the Special Loan Program was
adopted.

The Special Loan Program earns for the GPF an interest of 9% per annum, subject to adjustment after
actuarial valuation. The investment scheme managed by the TSD accumulated more than that as
evidenced by the payment of P4,568,971.84 in 1991 and P7,057,442,41 in 1992, to... the member-
borrowers. In effect, the program is grossly disadvantageous to the government because it deprived the
GPF of higher investment earnings by the unwarranted entanglement of its resources under the loan
program in the guise of giving financial assistance to the... availing employees. xxx

Retirement benefits may only be availed of upon retirement. It can only be demanded and enjoyed
when the employee shall have met the last requisite, that is, actual retirement under the Gratuity Plan.

During employment, the prospective retiree shall only have an... inchoate right over the benefits. There
can be no partial payment or enjoyment of the benefits, in whatever guise, before actual retirement.
xxx

In its Resolution of 1 August 2000, the COA also denied DBP's second motion for reconsideration.
At any rate, the Special Loan Program is not just an ordinary and regular transaction of the Gratuity Plan
Fund, as the Bank innocently represents. xxx It is a systematic investment mix conveniently
implemented in a special loan program with the least participation... of the beneficiaries, by merely
filing an application and then wait for the distribution of net earnings.

This Commission may now draw authority from the case of Conte, et al. v. Commission on Audit (264
SCRA 19 [1996]) where the Supreme Court declared that "financial assistance" granted to retiring
employees constitute supplementary retirement or pension benefits.

The COA alleges that DBP is the actual owner of the Fund and its income, on the following grounds: (1)
DBP made the contributions to the Fund; (2) the trustees of the Fund are merely administrators; and (3)
DBP employees only have an inchoate right to the Fund.

The DBP counters that the Fund is the subject of a trust, and that the Agreement transferred legal title
over the Fund to the trustees. The income of the Fund does not accrue to DBP. Thus, such income
should not be recorded in DBP's books of account.

Issues:

whether the income of the Fund is income of DBP

Ruling:

In the present case, the DBP Board of Governors' (now Board of Directors) Resolution No. 794 and the
Agreement executed by former DBP Chairman Rafael Sison and the trustees of the Plan created an
express trust, specifically, an employees' trust. An employees' trust is a... trust maintained by an
employer to provide retirement, pension or other benefits to its employees

It is a separate taxable entity... established for the exclusive benefit of the employees.

Resolution No. 794 shows that DBP intended to establish a trust fund to cover the retirement benefits of
certain employees

The principal and income of the Fund would be separate and distinct from the funds... of DBP

We quote the salient portions of Resolution No. 794, as follows:

In the present case, DBP, as the trustor, vested in the trustees of the Fund legal title over the Fund as
well as control over the investment of the money and assets of the Fund. The powers and duties
granted to the trustees of the Fund under the Agreement were plainly... more than just administrative,
to wit:
1. The BANK hereby vests the control and administration of the Fund in the TRUSTEES for the
accomplishment of the purposes for which said Fund is intended in defraying the benefits of the PLAN in
accordance... with its provisions, and the TRUSTEES hereby accept the trust xxx

2. The TRUSTEES shall receive and hold legal title to the money and/or property comprising the Fund,
and shall hold the same in trust for its beneficiaries, in accordance with, and for the uses and purposes
stated in the provisions of... the PLAN.

b. To invest and reinvest at any time all or any part of the Fund in any real estate (situated within the
Philippines), housing project, stocks, bonds, mortgages, notes, other securities or property which the
said TRUSTEES may deem safe and... proper, and to collect and receive all income and profits existing
therefrom;... f. To do all acts which, in their judgment, are needful or desirable for the proper and
advantageous control and management of the Fund xxx.

Clearly, the trustees received and collected any income and profit derived from the Fund, and they
maintained separate books of account for this purpose. The principal and income of the Fund will not
revert to DBP even if the trust is subsequently modified or... terminated. The Agreement states that the
principal and income must be used to satisfy all of the liabilities to the beneficiary officials and
employees under the Gratuity Plan , as follows:... hat... such termination, modification, or amendment
prior to the satisfaction of all liabilities with respect to eligible employees and their beneficiaries, does
not permit any part of the corpus or income of the Fund to be used for, or diverted to, purposes other
than for the... exclusive benefit of eligible employees and workers as provided for in the PLAN.

The resumption of the SLP did not eliminate the trust or terminate the transfer of legal title to the
Fund's trustees. The records show that the Fund's Board of Trustees approved the SLP upon the request
of the DBP Career Officials Association

The DBP Board of Directors only confirmed the approval of the SLP by the Fund's trustees.

The beneficiaries or cestui que trust of the Fund are the DBP officials and employees who will retire
under Commonwealth Act No. 186

RA 1616 requires the employer agency or government instrumentality to... pay for the retirement
gratuity of its employees who rendered service for the required number of years

As COA correctly observed, the right of the employees to claim their gratuities from the Fund is still
inchoate. RA 1616 does not allow employees to receive their gratuities until they retire. However, this
does not invalidate the trust created by DBP or the... concomitant transfer of legal title to the trustees.
As far back as in Government v. Abadilla... the Court held that "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." It is enough
that the beneficiaries are sufficiently certain or identifiable.

The Agreement indisputably transferred legal title over the income and properties of the Fund to the
Fund's trustees. Thus, COA's directive to record the income of the Fund in DBP's books of account as the
miscellaneous income of DBP constitutes grave abuse of... discretion. The income of the Fund does not
form part of the revenues or profits of DBP, and DBP may not use such income for its own benefit. The
principal and income of the Fund together constitute the res or subject matter of the trust. The
Agreement... established the Fund precisely so that it would eventually be sufficient to pay for the
retirement benefits of DBP employees under RA 1616 without additional outlay from DBP. COA itself
acknowledged the authority of DBP to set up the Fund. However, COA's subsequent... directive would
divest the Fund of income, and defeat the purpose for the Fund's creation.

GERTRUDES F. CUAYCONG, GR No. L-21616, 1967-12-11

Facts:

Eduardo Cuaycong, married to Clotilde de Leon... 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 crop Haciendas Sta. Cruz and Pusod

Hacienda Bacayan. Hacienda Bacayan is comprised of eight (8) lots... all of which are titled in the name
of Luis D. Cuaycong, son of Justo Cuaycong. Lino Cuaycong die... 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. the surviving children of Lino Cuaycong;
Gertrudes, Carmen, Paz, Carolina, Virgilio; the surviving children ofAnastacio: 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
Cuaycong[1] for conveyance of inheritance and accounting, before the Court of First Instance of Negros
Occidental... alleging 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.

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.

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 issuance in his name of certificates of title covering said properties. As the two
haciendas were the subject of transactions between the spouses and Justo and Luis Cuaycong, Eduardo
told Justo and Luis... o 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. That as far back as 1936
Lino demanded from Justo and Luis his share and especially after Eduardo's and Clotilde's death

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.

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... bar of causes of... action
by the statute of limitations... 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.

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... 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, stating that such a default declaration would be... of no purpose.

Issues:

whether the trust is express or implied.

Ruling:

Said arguments are untenable, even... considering the whole complaint. The intention of the trustor to
establish the alleged trust may be seen in paragraphs 5 and 6 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. the right alleged by plaintiffs would have already prescribed since starting in
1936 when the trustor died, plaintiffs had already been allegedly refused by the aforesaid... defendants
in their demands over the land, and the complaint was filed only in 1961 - more than the 10-year period
of prescription for the enforcement of such rights under the trust. It is settled that the right to enforce
an implied trust in... one's favor prescribes in ten (10) years.

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.
had an understanding and made arrangements with defendant Luis D. Cuayong and his father, Justo
Cuayong, that it was their (Eduardo's and Clotilde's) wish desire, that Hdas. 'Sta. Cruz'... and 'Pusod'
above-referred to, should be divided between the brothers and sister of Eduardo Cuayong, namely,
Justo, Meliton, Lino, and Basilisa, all surnamed Cuayong, and his wife,... Clotilde de Leon;... to effectuate
their, wish and desire had directed his brothers... and sister to pay his wife the sum of P75, 000.00, the
value of the two haciendas above- mentioned being P150, 000.00, and the divide the same among
themselves share and share alike; or at all events, should his brothers and sisters fail to do that, they
should divide only the... one-half (1/2) portions proindiviso thereof appertaining to him (Eduardo) in the
said conjugal properties;"

Principles:

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."

G.R. No. 97995 January 21, 1993

Philippine National Bank vs. Court of Appeals and B.P. Mata and Co., Inc

Facts:

B.P. Mata & Co is a private corporation engaged in providing goods and services to shipping companies.
It has acted as manning or crewing agent for several firms, one of which is Star Kist Foods Inc. As part of
their agreement, Mata makes advances for the crew’s several expenses.

Security Pacific National Bank transmitted a cable message to PNB to pay the amount of US$14,000 to
Mata by crediting PNB’s account with the Insular Bank of Asia and America, as per order of Star Kist.
However, the former bank promptly sent another message to PNB with the instructions that only the
amount of US$1,400 should be given to Mata. With it, Star Kist sent a check to Mata for the amount of
US$1,400 through the Insular Bank of Asia and America.

However, 14 days afer, PNB effected another payment in the amount of US$14,000, purporting to be
another transmittal of reimbursement from Star Kist.

More than six years later, PNB requested Mata for refund of US$14,000 after it discovered its error.
PNB filed a case for collection and refund of $14,000 against Mata, arguing that based on a constructive
trust under Article 1456 of Civil Code, it has a right to recover the said amount it erroneously credited to
Mata.

RTC dismissed the complaint, ruling that the case falls squarely under Article 2154 on solutio indebiti
and not under Article 1456 on constructive trust.

Appellate court affirmed such decision, adding that while Mata is duty bound to return the amount paid
by mistake, PNB’s demand for the return of US$14,000 cannot prosper because of prescription under
Article 1145, stating that actions upon a quasi-contract must be commenced within 6 years.

Issue:

Whether or not PNB was correct in arguing that based on constructive trust, it can still collect the
amount from Mata even after more than 6 years have already lapsed.

Held:

PNB was correct in stating that based on constructive trust, he may claim the $14,000 it erroneously
sent to Mata. In fact, he can opt to invoke solution indebiti or constructive trust to claim it. However,
the action to enforce an implied trust is already barred by laches.

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.

On the other hand, Article 2154 states: 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.

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.

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. Implied trusts are those
which, without being expressed, are deducible from the nature of the transaction as matters of intent or
which are superinduced on the transaction by operation of law as matters of equity, independently of
the particular intention of the parties.
In turn, implied trusts are subdivided into resulting and constructive trusts. 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. Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code. 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.

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical trust,
confidence is reposed in one person who is named a trustee for the benefit of another who is called the
cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust.
A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation.
While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called
trustee neither accepts any trust nor intends holding the property for the beneficiary.

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.

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.

Still applying American case law, quasi-contractual 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.

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.

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

It is wrong 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.
PNB cannot claim the US$14,000 it erroneously paid private respondent under a constructive trust.
Although 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, 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.

While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable
delay. 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.

DIAZ VS. GORRICHO AND AGUADO G.R. L-11229

FACTS:

2 lots originally belonged to the conjugal partnership of Francisco Diaz and Maria Sevilla, the OCTs under
their name. Francisco died and was survived by wife and 3 children.

Appellee Gorricho filed an action against Maria in the CFI of Manila, and a writ of attachment was issued
upon the shares of Maria in said lots. Thereafter, said parcels were sold at public auction and purchased
by Gorricho. Maria failed to redeem within one year, whereupon the acting provincial sheriff executed a
final deed of sale in favor of Gorricho. In said final deed, however, the sheriff conveyed to Gorricbo the
whole of the 2 parcels instead of only the half-interest of Maria therein. Pursuant to said deed, Gorricho
obtained a TCT in her name and has been possessing said land is as owner ever since.

Then, Maria died. Her 3 children filed the action in CFI of Nueva Ecija against Gorricho and her husband
Aguado to compel them to execute in their favor a deed of reconveyance over an undivided one-half
interest over the lots in question (the share therein of their deceased father illegally conveyed by the
provincial sheriff to Gorricho), which defendants were allegedly holding in trust for them. Defendants
answered denying the allegations of the complaint and alleging, as a special defense, that plaintiffs’
action has long prescribed.
After trial, the court below rendered judgment, holding that while a constructive trust in plaintiffs’ favor
arose when defendant Gorricho took advantage of the error of the provincial sheriff in conveying to her
the whole of the parcels in question and obtained title in herself, the action of plaintiffs was, however,
barred by laches and prescription. From this judgment, plaintiffs appealed.

The principal contention of appellants is that their father’s half of the disputed property was acquired by
Gorricho through an error of the provincial sheriff; that having been acquired through error, it was
subject to an implied trust, as provided by Article 1456 of the new Civil Code; and therefore, since the
trust is continuing and subsisting, the appellants may compel reconveyance of the property despite the
lapse of time, specially, because prescription does not run against titles registered under Act 496

ISSUE: WON laches constitutes a bar to actions to enforce a constructive trust

HELD: The judgment appealed from is affirmed

YES

Article 1456 of the new Civil Code, while not retroactive in character, merely expresses a rule already
recognized by our courts prior to the Code’s promulgation. Appellants are, however, in error in believing
that like express trusts, such constructive trusts may not be barred by lapse of time. The American law
on trusts has always maintained a distinction between express trusts created by intention of the parties,
and the implied or constructive trusts that are exclusively created by law, the latter not being trusts in
their technical sense.

The express trusts disable the trustee from acquiring for his own benefit the property committed to his
management or custody, at least while he does not openly repudiate the trust, and makes such
repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure
declared that the rules on adverse possession do not apply to “continuing and subsisting” (i.e.,
unrepudiated) trusts.

In constructive trusts, as pointed out by the court below, the rule is that laches constitutes a bar to
actions to enforce the trust, and repudiation is not required, unless there is concealment of the facts
giving rise to the trust

The reason for the difference in treatment is obvious. In express trusts, the delay of the beneficiary is
directly attributable to the trustee who undertakes to hold the property for the former, or who linked to
the beneficiary by confidential or fiduciary relations. The trustee’s possession is, therefore, not adverse
to the beneficiary, until and unless the latter is made aware that the trust has been repudiated. But in
constructive trusts (that are imposed by law), there is neither promise nor fiduciary relation; the so-
called trustee does not recognize any trust and has no intent to hold for the beneficiary; therefore, the
latter is not justified in delaying action to recover his property. It is his fault if he delays; hence, he may
be estopped by his own laches.
Of course the equitable doctrine of estoppel by laches requires that the one invoking it must show, not
only the unjustified inaction, but that some unfair injury would result to him unless the action is held
barred. This requirement the appellees have not met, and they are thereby bereft of the protection of
this rule.

We are of the opinion that the judgment of dismissal should be upheld, because the appellants’ cause of
action to attack the sheriff’s deed and cancel the TCTs issued to the appellees accrued from the year of
issuance and recording, 1937, and appellants have, allowed fifteen (15) years to elapse before taking
remedial action, notwithstanding the appellees’ public assertion of title during this entire period, to
extinguish appellant’s action. Under the old Code of Civil Procedure, in force at the time, the longest
period extinctive prescription was only ten years.

G.R. No. L-17809 December 29, 1962

RESURRECCION DE LEON, ET AL., vs. EMILIANA MOLO-PECKSON, ET AL.,

FACTS:

1. In 1941, Mariano Molo y Legaspi died leaving a will wherein he bequeathed his entire estate to
his wife, Juana Juan. On May 11, 1948, Juana Juan in turn executed a will naming therein many devisees
and legatees, one of whom is 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 Molo-Peckson
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.

2. 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: 1)that the following
lots should be sold at ONE (1) PESO TO — JUSTA DE LEON and RESURRECCION DE LEON, several parcels
of land located at Calle Tolentino , share and share alike or half and half of TEN (10) LOTS described in
TCT 28157. 2.) 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.

3. On August 9, 1956, however, the same defendants, executed another document in which they
revoked the so-called mutual agreement mentioned above

4. 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

Hence this case.

CFI: 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:

1. The defendants, jointly and severally to free the said ten (10) parcels of land from the mortgage lien in
favor of DBP, and 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;

2. 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

ISSUE: 1. WON there the Dec. 5, 1950 document created an express trust in favor of the appellees YES

2. WON the mutually agreement creating the trust can be revoked without the consent of the
trustee? NO

Ruling:

1. 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 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. 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 in trust for the appellees. Appellants obligingly complied with
this duty by executing the document under consideration.

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 mandate of their conscience to comply
with "the obligations repeatedly told to Emiliana Molo Peckson," one of appellants, before their death,
epitomized in the "verbal wish of the late Don Mariano Molo y Legaspi and the late Doña Juana
Francisco Juan y Molo" to convey after their death said ten parcels of 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 and voluntary deed."1awphi1.netIndeed, it is to be supposed that appellants understood and
comprehended the legal import of said documents when they executed it more so when both of them
had studied in reputable centers of learning, one being a pharmacist and the other a member of the bar.

2. 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. It cannot be revoked by the creator alone, nor by the trustee.
Here, there is no such reservation.
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 date the
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.

SOLEDAD CAÑEZO vs. CONCEPCION ROJAS (G.R. No. 148788, November 23, 2007 )

FACTS:

The subject property is an unregistered land with an area of 4,169 square meters
situated at Naval, Biliran. In a complaint on 1997, petitioner Soledad Cañezo alleged that
she bought such parcel of land in 1939 from Crisogono Limpiado, although the sale was
not reduced into writing. Thereafter, she immediately took possession of the property. In
1948, she and her husband left for Mindanao and entrusted the said land to her father,
Crispulo Rojas, who took possession of, and cultivated the property. In 1980, she found
out that the respondent,Concepcion Rojas, her stepmother, was in possession of the
property and was cultivating the same. She also discovered that the tax declaration over
the property was already in the name of his father.
Respondent asserted that it was her husband who bought the property from
Limpiado,which accounts for the tax declaration being in Crispulo’s name.After the
hearing, MTC rendered a decision in favor of the petitioner, making her the real and
lawful owner of the land. Respondent appealed to the RTC of Naval, Biliran, which
reversed the MTC decision on the ground that the action had already prescribed and
acquisitive prescription had set in. However, acting on petitioner’s motion for
reconsideration, the RTC amended its original decision and held that the action had not
yet prescribed considering that the petitioner merely entrusted the property to her father.
The ten-year prescriptive period for the recovery of a property held in trust would
commence to run only from the time the trustee repudiates the trust. The RTC found no
evidence on record showing that Crispulo Rojas ever ousted the petitioner from the
property.
Petitioner filed a petition for review with the CA, which reversed the amended
decision of the RTC. The CA held that, assuming that there was a trust between the
petitioner and her father over the property, her right of action to recover the same would
still be barred by prescription since 49 years had already lapsed since Crispulo adversely
possessed the contested property in 1948.Hence, this petition for review.

ISSUE:
Whether or not there is an existence of trust over the property – express or
implied – between the petitioner and her father
HELD:
NONE. A trust is the legal relationship between one person having an
equitableownership of property and another person owning the legal title to such
property, the equitableownership of the former entitling him to the performance of certain
duties and the exercise of certain powers by the latter. Trusts are either express or
implied. Express trusts are those whichare created by the direct and positive acts of the
parties, by some writing or deed, or will, or bywords evincing an intention to create a
trust. Implied trusts are those which, without beingexpressed, are deducible from the
nature of the transaction as matters of intent or, independently,of the particular intention
of the parties, as being superinduced on the transaction by operation of law basically by
reason of equity.
As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust
and its elements. The presence of the following elements must be proved: (1) a trustor or
settlor who executes the instrument creating the trust; (2) a trustee, who is the person
expressly designated tocarry out the trust; (3) the trust res, consisting of duly identified
and definite real properties; and(4) the cestui que trust, or beneficiaries whose identity
must be clear.
Accordingly, it was incumbent upon petitioner to prove the existence of the trust
relationship. And petitioner sadly failed to discharge that burden.The existence of express
trusts concerning real property may not be established by parol evidence. It must be
proven by some writing or deed. In this case, the only evidence to support the claim that
an express trust existed between the petitioner and her father was the self-serving
testimony of the petitioner.Although no particular words are required for the creation of
an express trust, a clear intention to create a trust must be shown; and the proof of
fiduciary relationship must be clear and convincing. The creation of an express trust must
be manifested with reasonable certainty and cannot be inferred from loose and vague
declarations or from ambiguous circumstances susceptible of other interpretations.In the
case at bench, an intention to create a trust cannot be inferred from the petitioner’s
testimony and the attendant facts and circumstances.
The petitioner testified only to the effect that her agreement with her father was that
she will be given a share in the produce of the property. This allegation, standing alone as
it does, is inadequate to establish the existence of a trust because profit-sharing per se,
does not necessarily translate to a trust relation.In light of the disquisitions, we hold that
there was no express trust or resulting trust established between the petitioner and her
father. Thus, in the absence of a trust relation, we can only conclude that Crispulo’s
uninterrupted possession of the subject property for 49 years,coupled with the
performance of acts of ownership, such as payment of real estate taxes, ripened into
ownership.Petition denied. Decision of the CA affirmed

107 Heirs of Tranquilino Labiste v. Heirs of Jose Labiste

G.R. No. 162033 May 8, 2009

TOPIC: Definition and Essential Characteristic of Express Trusts

PONENTE: TINGA, J.:

FACTS:

1. On 29 September 1919, the late Epifanio Labiste on his own and on behalf of his brothers and
sisters who were the heirs of Jose Labiste, purchased from the Bureau of Lands Lot No. 1054 of the
Banilad Friar Lands Estate, with an area of 13,308 square meters, located at Guadalupe, Cebu City for
P36.00.

2. Subsequently, then Bureau of Lands Director Jorge B. Vargas executed Deed of Conveyance No.
12536 selling and ceding Lot No. 1054 to Epifanio and his brothers and sisters who were the heirs of
Jose.

3. After full payment of the purchase price but prior to the issuance of the deed of conveyance,
Epifanio executed an Affidavit (Affidavit of Epifanio) in Spanish affirming that he, as one of the heirs of
Jose, and his uncle and petitioners’ predecessor-in-interest, Tranquilino Labiste then co-owned Lot No.
1054 because the money that was paid to the government came from the two of them.

4. Tranquilino and the heirs of Jose continued to hold the property jointly.

5. Lot No. 1054. On 2 May 1928, Engineer Espiritu Bunagan, Deputy Public Land Surveyor,
subdivided Lot No. 1054 into two lots: Lot No. 1054-A for Tranquilino and Lot No. 1054-B for Epifanio.
The subdivision plan prepared by Engr. Bunagan was approved by Jose P. Dans, Acting Director of Lands.

6. Subsequently, the heirs of Tranquilino purchased the 1/2 interest of the heirs of Jose9 over Lot
No. 1054 for P300.00, as evidenced by the Calig-onan sa Panagpalit10 executed by the parties in the
Visayan dialect. The heirs of Tranquilino immediately took possession of the entire lot.

7. When World War II broke out, the heirs of Tranquilino fled Cebu City and when they came back
they found their homes and possessions destroyed. The records in the Office of the Register of Deeds,
Office of the City Assessor and other government offices were also destroyed during the war. Squatters
have practically overrun the entire property, such that neither petitioners nor respondents possess it.

8. In October 1993, petitioners learned that one of the respondents,Asuncion Labiste, had filed a
petition for reconstitution of title over Lot No. 1054. Petitioners opposed the petition at first but by a
compromise agreement between the parties, petitioners withdrew their opposition to expedite the
reconstitution process.

9. Under the compromise agreement, petitioners were to be given time to file a complaint so that
the issues could be litigated in an ordinary action and the reconstituted title was to be deposited with
the Clerk of Court for a period of sixty (60) days to allow petitioners to file an action for reconveyance
and to annotate a notice of lis pendens. T

10. The Register of Deeds of Cebu City issued the reconstituted title, TCT No. RT-7853,12 in the
name of "Epifanio Labiste, married to Tomasa Mabitad, his brothers and sisters, heirs of Jose Labiste".
However, respondents did not honor the compromise agreement.
11. The RTC in a Decision ruled in favor of petitioners. The RTC found that they are genuine and
authentic as ancient documents and that they are valid and enforceable.Moreover, it held that the
action had not prescribed as the complaint was filed about a year after the reconstitution of the title by
respondents.

12. On appeal, the Court of Appeals, while affirming petitioners’ right to the property, nevertheless
reversed the RTC’s decision on the ground of prescription and laches. It affirmed the RTC’s findings that
the Affidavit and the Calig-onan sa Panagpalit are genuine and authentic, and that the same are valid
and enforceable documents.

ISSUE(S):

1. W/N the petitioners’ action has been barred by latches

HELD:

1. No. The Court of Appeals erred in applying the rules on prescription and the principle of
laches because what is involved in the present case is an express trust.

RATIO:

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It
is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or implied. An express trust is created
by the intention of the trustor or of the parties. An implied trust comes into being by operation of law.

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or
by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the
Civil Code, "[n]o particular words are required for the creation of an express trust, it being sufficient that
a trust is clearly intended."

The Affidavit of Epifanio is in the nature of a trust agreement. Epifanio affirmed that the lot brought in
his name was co-owned by him, as one of the heirs of Jose, and his uncle Tranquilino. And by
agreement, each of them has been in possession of half of the property. Their arrangement was
corroborated by the subdivision plan prepared by Engr. Bunagan and approved by Jose P. Dans, Acting
Director of Lands.

As such, prescription and laches will run only from the time the express trust is repudiated. The Court
has held that for acquisitive prescription to bar the action of the beneficiary against the trustee in an
express trust for the recovery of the property held in trust it must be shown that: (a) the trustee has
performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such
positive acts of repudiation have been made known to the cestui que trust, and (c) the evidence thereon
is clear and conclusive.
Respondents cannot rely on the fact that the Torrens title was issued in the name of Epifanio and the
other heirs of Jose. It has been held that a trustee who obtains a Torrens title over property held in trust
by him for another cannot repudiate the trust by relying on the registration. The rule requires a clear
repudiation of the trust duly communicated to the beneficiary. The only act that can be construed as
repudiation was when respondents filed the petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause of action has not yet prescribed, laches
cannot be attributed to them.

However, to recover the other half of the property covered by the private Calig-onan sa Panagpalit and
to have it registered on the title of the property, petitioners should have filed an action to compel
respondents, as heirs of the sellers in the contract, to execute a public deed of sale. A conveyance of
land made in a private document does not affect its validity.