Trust Cases Digest

By: Jacqueline Ann Quinto

LABANON vs LABANON 

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Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. Trusts are classified under the Civil Code as either express or implied. Such classification determines the prescriptive period for enforcing such trust. No particular form of words or conduct is necessary for the manifestation of intention to create a trust. It is possible to create a trust without using the word "trust" or "trustee". Conversely, the mere fact that these words are used does not necessarily indicate an intention to create a trust. The question in each case is whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether or not he knows the precise characteristics of the relationship which is called a trust. An express trust is created by the direct and positive acts of the parties, by some writing or deed or by words evidencing an intention to create a trust; the use of the word trust is not required or essential to its constitution, it being sufficient that a trust is clearly intended. Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L11229, March 29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all. that the prescriptive period for the enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the trustee. PIGAO vs RABANILLO

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there is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid

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by another for the purpose of having the beneficial interest of the property." The former party is referred to as the trustee, while the latter is referred to as the beneficiary. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties, while implied trusts come into being by operation of law, either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and even contrary to, any such intention. In turn, implied trusts are either resulting or constructive trusts. 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. A resulting trust is exemplified by Article 1448 of the Civil Code . . . The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust. The trust is created in order to effectuate what the law presumes to have been the intention of the parties in the circumstances that the person to whom the land was conveyed holds it as trustee for the person who supplied the purchase money. To give rise to a purchase money resulting trust, it is essential that there be:1. an actual payment of money, property or services, or an equivalent, constituting valuable consideration;2. and such consideration must be furnished by the alleged beneficiary of a resulting trust. There are recognized exceptions to the establishment of an implied resulting trust. The first is stated in the last part of Article 1448 itself. Another exception is, of course, that in which an actual contrary intention is proved. Also where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. Another exception to the establishment of an implied resulting trust under Article 1448 is when its enforcement contravenes public policy. Otherwise stated, as an exception to the law on trusts, "[a] trust or a provision in the terms of a trust is invalid if the enforcement of the trust or provision would be against public policy, even though its performance does 1

By: Jacqueline Ann Quinto

not involve the commission of a criminal or tortious act by the trustee." The parties must necessarily be subject to the same limitations on allowable stipulations in ordinary contracts, i.e., their stipulations must not be contrary to law, morals, good customs, public order, or public policy. What the parties then cannot expressly provide in their contracts for being contrary to law and public policy, they cannot impliedly or implicitly do so in the guise of a resulting trust.

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GOMEZ vs DUYAN 

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, the trust created was not merely implied as held by the Court of Appeals but belongs to the express kind. Based on the provisions of the Civil Code and jurisprudence, "Express trusts are those which the direct and positive acts of the parties create, by some writing, deed or will, or words evincing an intention to create a trust." Even if the word "trust" was not expressly used by the signatories to the 10 February 1978 Pagpapahayag and the document did not expressly state that a trust was being established by reason thereof, the establishment of an express trust cannot be discounted. Under the Civil Code, "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended." under the law on Trusts, it is not necessary that the document expressly state and provide for the express trust, for it may even be created orally, no particular words are required for its creation Petitioners cannot rely on the registration of the disputed property and the corresponding issuance of a certificate of title in their name as vesting ownership on them simply because an express trust over the property was created in favor of respondents. It has been held that a trustee who obtains a Torrens title over the property held in trust by him for another cannot repudiate the trust by relying on the registration. The law safeguards the rightful party's interest in titled land from fraud and improper technicalities by allowing such party to bring an action for reconveyance of whatever he has been deprived of as long as the property has not been transferred or conveyed to an innocent purchaser for value. 47 The action while respecting the registration decree as incontrovertible, seeks to transfer or reconvey the land from the registered owner to the rightful owner. 48 As this Court held in the case of Escobar vs. Locsin, "The Torrens system was never calculated to foment betrayal in the performance of a trust." MORALES vs CA

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A trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. The characteristics of a trust are: 1. It is a relationship; 2. It is a relationship of fiduciary character; 3. It is a relationship with respect to property, not one involving merely personal duties; 4. It involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another; and 5. It arises as a result of a manifestation of intention to create the relationship. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties, while implied trusts come into being by operation of law, either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and even contrary to. any such intention. — In turn, implied are either resulting or constructive trusts. Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines 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 because 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 defendants of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust. The trust is created in order to effectuate what the law presumes to have been the intention of the parties recovery in the circumstances that the person to whom the land was conveyed holds it as trustee for the person who supplied the purchase money. To give rise to a purchase money resulting trust, it is essential that there be: 1. an actual payment of money, property or services, or an equivalent, constituting valuable consideration; 2. and such consideration must be furnished by the alleged beneficiary of a resulting trust. There are recognized exceptions to the establishment of an implied resulting trust. The first is stated in the last part of Article 1448 itself. Thus, where A pays the purchase money and title is conveyed by absolute deed to A's child or to a person to whom A stands in loco parentis and who makes no 2

By: Jacqueline Ann Quinto

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express promise, a trust does not result, the presumption being that a gift was intended. Another exception is, of course, that in which an actual contrary intention is proved. Also where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. 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. While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated. The characteristics of a trust are:1. It is a relationship;2. it is a relationship of fiduciary character; 3. it is a relationship with respect to property, not one involving merely personal duties; 4. it involves the existence of equitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another; and 5. it arises as a result of a manifestation of intention to create the relationship. PACHECO vs ARRO

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JURIDICAL CONCEPT OF A TRUST; TRUSTEE CANNOT INVOKE STATUTE OF LIMITATIONS AGAINST "CESTUIS QUE TRUSTENT." — The juridical concept of a trust, which in a broad sense involves, arises from, or is the result of, a fiduciary relation between the trustee and the cestui que trust as regards certain property — real, personal, funds or money, or choses in action — must not be confused with an action for specific performance. When 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, a trust or a fiduciary relation between them arose, or resulted therefrom, or was created thereby. The trustee cannot invoke the statute of limitations to bar the action and defeat the right of the cestuis que trustent. RINGOR vs RINGOR

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Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and positive acts of the settlor or the trustor — by some writing, deed, or will, or oral declaration. 45 It is created not necessarily by some written words, but by the direct and positive acts of the parties. No particular words are required, it being sufficient that a trust was clearly intended. 46 Unless

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required by a statutory provision, such as the Statute of Frauds, a writing is not a requisite for the creation of a trust. What is crucial is the intention to create a trust. While oftentimes the intention is manifested by the trustor in express or explicit language, such intention may be manifested by inference from what the trustor has said or done, from the nature of the transaction, or from the circumstances surrounding the creation of the purported trust. Under the doctrine of partial performance recognized in this jurisdiction, the objection to the oral character of a trust may be overcome or removed where there has been partial performance of the terms of the trust as to raise an equity in the promisee. 52 A trustee may perform the provisions of the trust, and if he does, the beneficiary is protected in benefits that he has received from such performance. 53 Thus, when a verbal contract has been completed, executed or partially consummated, its enforceability will not be barred by the Statute of Frauds, which applies only to an executory agreement. TY vs TY

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Where a trust is to be established by oral proof, the testimony supporting it must be sufficiently strong to prove that the right of the alleged beneficiary with as much certainty as if a document were shown. A trust cannot be established, contrary to the recitals of a Torrens title, upon vague and inconclusive proof. 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. While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated SEVERINO vs SEVERINO

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The principal's right of action to compel a reconveyance is not extinguished through the registration of the land in favor of the agent; though the final decree of registration may not be reopened after the expiration of one year from the date of its entry, there appears to be no reason why the agent should not be compelled, through a suit in equity, to make such reparation as may lie within his power for the breach of trust committed by him, and as long as the land stands registered in his name such reparation may take the form of a conveyance or transfer of the title to the cestui que trust, i.e., the principal. 3

By: Jacqueline Ann Quinto 

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— There is a strong presumption in favor of the regularity and validity of a registered title, and in order to maintain an action to compel the transfer of the title to a cestui que trust, proof of the fiduciary relations and of the breach of trust must be clear and convincing. "A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled from acquiring for his own benefit the property committed to his custody for management. This rule is entirely independent of the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the trustee. It is to avoid the necessity of any such inquiry that the rule takes so general a form. The rule stands on the moral obligation to refrain from placing one's self in positions which ordinarily excite conflicts between selfinterest and integrity. It seeks to remove the temptation that might arise out of such a relation to serve one's selfinterest at the expense of one's integrity and duty to another, by making it impossible to profit by yielding to temptation. It applies universally to all who come within its principle." GASTON vs REPUBLIC PLANTERS BANK

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PRESIDENTIAL DECREE 388; STABILIZATION FUND; NOT IMPLIED TRUST CREATED IN FAVOR OF SUGAR PRODUCERS. — No implied trust in favor of the sugar producers either can be deduced from the imposition of the levy. "The essential idea of an implied trust involves a certain antagonism between the cestui que trust and the trustee even when the trust has not arisen out of fraud nor out of any transaction of a fraudulent or immoral character (65 CJ 222). It is not clearly shown from the statute itself that the PHILSUCOM imposed on itself the obligation of holding the stabilization fund for the benefit of the sugar producers. It must be categorically demonstrated that the very administrative agency which is the source of such regulation would place a burden on itself SUMAOANG vs RTC JUDGE

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OBLIGATIONS AND CONTRACTS; IMPLIED TRUST; MISTAKE OR FRAUD GIVING RISE THERETO MAY BE THAT OF A THIRD PERSON AND NOT THAT OF TRUSTEE; CASE AT BAR. — We believe and so hold that respondent Atty. Pascua, under the circumstances of this case, must be regarded as holding the title of the property acquired by him at public sale under an implied trust in favor of petitioner and his brothers, to the extent of one-half (1/2) of that property. Among the species of implied trusts recognized by our Civil Code is that set forth in Article 1456: "If property is acquired through mistake or

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fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes." The "mistake" or "fraud" that results in an implied trust being impressed upon the property involved, may be the mistake or fraud of a third person, and need not be a mistake or fraud committed directly by the trustee himself under the implied trust. Accordingly, in the instant case, an implied trust was established upon the land acquired by Atty. Pascua even though the operative mistake was a mistake of respondent trial judge. Respondent Judge may be seen to have intended to convey only one-half (1/2) of the land involved as attorney's fees to Atty. Pascua. Atty. Pascua, however, took advantage of the Judge's mistake in order to acquire all the 21.3445 hectares for himself. Atty. Pascua obviously knew that under his contract with his clients, he was entitled to ask only for one-half (1/2) of the land. When he purchased the entire land at public auction for P110,000.00 (leaving his clients still owing him P1,500.00), the amount and character of his attorney's fees became unreasonable and unconscionable and constituted unjust enrichment at the expense of his clients. PRINCIPLES OF GENERAL LAW OF TRUSTS CONSISTENT WITH EXISTING LAWS INCORPORATED IN OUR CIVIL LAW; CONSTRUCTIVE TRUST CREATED AS MEANS OF ACCORDING RELIEF AND NOT BASED ON EXPRESSED, IMPLIED OR PRESUMED INTENT. — The conclusion we reach in this case rests not only on Article 1456 of the Civil Code but also on the principles of the general law of trusts which, through Article 1442 of the Civil Code, have been adopted or incorporated into our civil law, to the extent that such principles are not inconsistent with the Civil Code and other statutes and the Rules of Court. In Roa, Jr. v. Court of Appeals, where petitioner had retained property the beneficial ownership of which belonged to the private respondents, the Supreme Court affirmed the decision of the Court of Appeals directing petitioner to convey title to that property to private respondents. The Supreme Court rested its decision on the principles of the general law of trusts which, the Court held, included the following general principles embedded in American law and jurisprudence: "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 questionable means, or who in any way against equity and good conscience, 4

By: Jacqueline Ann Quinto

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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. 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.' 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 the respondent court said, 'It behooves upon the courts to shield fiduciary relations against every manner of chicanery or detestable design cloaked by legal technicalities.' " A constructive trust, in general usage in the United States, is not based on an expressed intent that it shall exist, or even on an implied or presumed intent. A constructive trust is created by a court of equity as a means of affording relief. Constructive trusts constitute a remedial device "through which preference of self is made subordinate to loyalty to others." In particular, fraud on the part of the person holding or detaining the property at stake is not essential in order that an implied trust may spring into being. In the words of Judge Cardozo, in Beatty v. Guggenheim Exploration Co.: "[w]hen property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee." The consequences of an implied trust are, principally, that the implied trustee shall deliver the possession and reconvey title to the property to the beneficiary of the trust, and to pay to the latter the fruits and other net profit received from such property during the period of wrongful or unconscionable holding, and otherwise to adjust the equities between the trustee holding the legal

title and the beneficiaries of the trust. Applying the provisions of Article 1456 of the Civil Code and the foregoing principles of the general law of trusts, we treat the present so-called "petition for Annulment of the Decision of the CFI, etc." as a "Petition for Reconveyance" and, accordingly, require private respondent Atty. Pascua to reconvey or cause the reconveyance of one-half (1/2) of the 21.3445 hectares of land here involved, plus one-half (1/2) of all profits (net of expenses and taxes) which Atty. Pascua may have derived from or in respect of such land during the time he has held the same, to petitioner and his brothers, Vitaliano and Pedro Sumaoang. BDO vs BAYUGA 

The unfairness and inequity of this posture to the banking business is too evident to require elaboration. Funds of a bank are, in a sense, held in trust. There are the interests of depositors to be protected. MINDANAO DEV. AUTHORITY vs CA

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— It is fundamental in the law of trusts that certain requirements must exist before an express trust will be recognized. Basically, these elements include a competent trustor and trustee, an ascertainable trust res. and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the above elements is required to be established, and, if anyone 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 to do so, may enforce, the trus CLEAR AND UNEQUIVOCAL LANGUAGE NECESSARY TO CREATE TRUST. — 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 De Leon vs. Packson, 11 Phil. 1267, a trust must he proven by clear, satisfactory and convincing evidence; it cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations. 5

By: Jacqueline Ann Quinto 

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REPUDIATION THEREOF RENDERS TRUST, PRESCRIPTIBLE; CASE AT BAR. — But, even granting arguendo, that an express trust had been established, it would appear that the trustee had repudiated the trust and the petitioner 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, petitioner admitted that "after the last war she 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." 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 alleged beneficiary over the land in question after the repudiation of the trust by the trustee, had already prescribed. IMPLIED TRUST; CASE AT BAR. — An implied trust may have been impressed upon the title of Ang Bansing 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 trust, 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. 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 (Article 1456, Civil Code). PRESCRIPTIBLE; CASE AT BAR. — Such constructive trust is not a trust in the technical sense and prescribes in 10 years. 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 Victoria Ang Bansing, Orfelina Ang Bansing, and Francisco Ang Bansing. 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. NOT PRESCRIPTIBLE. — There being an express trust in this case, the equitable action to compel the trustee to reconvey the land registered in his name in trust for the benefit of the cestui que trust does not prescribe ESTOPPEL; STATE NOT ESTOPPED BY NEGLIGENCE OF PUBLIC OFFICERS. — The government officials concerned were negligent in not intervening in the land registration

proceeding or in not promptly asking Ang Bansing to reconvey the disputed lot to the Commonwealth or to the Republic of the Philippines. Such negligence does not prejudice the State. The negligence or omissions of public officers as to their public duties will not work an estoppel against the State CUAYCNG vs CUAYCONG 

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Civil Code defines an express trust as one created by the intention of the trustor or of the parties, and an implied trust as one that comes into being by operation of law (Art. 1141). Express trusts are those created by the direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust. On the other hand, implied trusts are those which, without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. Thus, if the intention to establish a trust is clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other matters indicative of such intent, then the trust is implied. EXPRESS TRUST OF AN IMMOVABLE; WRITTEN EVIDENCE REQUIRED; CASE AT BAR. — From the provisions of paragraph 8 of the complaint herein, it is clear that plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor expressly told the defendants of his intention to establish the trust. Under Article 1443 of the Civil Code, such an express trust over an immovable may not be proved by parole evidence. Since the complaint did not mention the written instrument of the alleged trust and since the complaint was not amended as per instruction of the Judge below, then the complaint was properly dismissed. . ARTICLE 1453; WHEN APPLICABLE. — Article 1453, one of the cases of implied trust, would apply if the person conveying the property did not expressly state that he was establishing the trust, unlike the case at bar where he was alleged to have expressed such intent. IMPLIED TRUST; PERIOD OF PRESCRIPTION. — 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 defendants in their demands over the land, and the complaint was filed only in 1961 - more than the 10 - year period of such 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 10 years. And even under the Code of Civil Procedure, action to recover real property such as lands prescribes in ten years (Sec. 40, Act 190). 6

By: Jacqueline Ann Quinto

SINAON vs SORONGAN 

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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 inconclusive proof" 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

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SALAO vs SALAO 

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— 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. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards the property for the benefit of the another person is know as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary. There is a fiduciary relation between the trustee and the cestui que trust as regards certain property, real, personal, money or chooses in action. KINDS OF; EXPRESS AND IMPLIED TRUSTS, DISTINGUISHED. — "Trusts are either express or implied. Express trusts are created by the intention of the trust or or of the parties. Implied trusts come into being by operation of law." (Art. 1441, Civil Code). "No express trust concerning an immovable or any interest therein may be proven by parol evidence. An implied trust may be proven by oral evidence" (Arts. 1443 and 1457). "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Art. 1444). "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. 722). "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" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722). RESULTING AND CONSTRUCTIVE TRUST DISTINGUISHED. — A resulting trust is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention as to which is to be found in

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the nature of their transaction, but not expressed in the deed or instrument of conveyance (89 C. J. S.725). 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 contradistinguished from a resulting trust, a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct intention to create a trust, but by the constructions of equity in order to satisfy the demands of justice." It does not arise "by agreement or intention, but by operation of law." PROOF OF; PAROL EVIDENCE CANNOT BE AVAILED OF TO PROVE AN EXPRESS TRUST CONCERNING REALTY; CASE AT BAR. — 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. It is legally indefensible because the terms of Art. 1443 of the Civil Code are peremptory and unmistakable; parol evidence cannot be used to prove an express trust concerning realty. 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. 10. ID.; ID.; IMPLIED TRUST MAY BE PROVEN BY ORAL EVIDENCE. — Article 1457 of the Civil Code 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. 11. ID.; NO TRUST CREATED OVER QUESTIONED PROPERTY. — 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 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 as being held in trust by the heirs of Juan Y. Salao, Sr. for the heirs of Valentin Salao. 12. ID.; RECONVEYANCE OF PROPERTY HELD IN TRUST; PLAINTIFFS ACTION BARRED BY PRESCRIPTION OR LACHES. — 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 years. The Calunuran fishpond was registered in 1911. The written extrajudicial demand for its reconveyance was made by the plaintiffs in 1951. 7

By: Jacqueline Ann Quinto

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Their action was filed in 1952 or after the lapse of more than forty bears from the date of registration. The plaintiffs and their predessor-in-interest, Valentin Salao slept on their rights, if they had any rigths at all. 13. ID.; ID.; ID.; RULING ON THE VALIDITY OF DONATION UNNECESSARY. — Where the Court has reached the conclusion that the plaintiffs are not entitled to the reconveyance of the Calunuran fishpond, it is no longer necessary to pass upon the validity of the donation made by Ambrosia Salao to Juan S. Salao, Jr. of her half-share in the two fishponds. Plaintiffs have no right and personality to assail that donation.

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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.

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NO LIMIT TO ENFORCE RIGHTS BUT MAY BE BARRED BY PRESCRIPTION. — While no time limit is imposed for the enforcement of rights under express trusts, prescription may, however, bar a beneficiary's action for recovery, if a repudiation of the trust is proven by clear and convincing evidence and made known to the beneficiary. REPUDIATED WHERE HEIRS SOLD SUBJECT PROPERTY TO ANOTHER. — There was a repudiation of the express trust when the heirs of Maxima Caballero failed to deliver or transfer the property to Paciencia Sabellona, and instead sold the same to a third person not privy to the Agreement. In the memorandum of incumbrances of TCT No. 3087 issued in the name of Maxima, there was no notation of the Agreement between her and Paciencia. Equally important, the Agreement was not registered; thus, it could not bind third persons. Neither was there any allegation that Silvestre Aro, who purchased the property from Maxima's heirs, knew of it. Consequently, the subsequent sales transactions involving the land in dispute and the titles covering it must be upheld, in the absence of proof that the said transactions were fraudulent and irregular. SALES; PRIVATE DEED CANNOT BIND THIRD PERSONS. — While a sale of a piece of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons, if it is not embodied in a public instrument and recorded in the Registry of Property. IEHTaA LAND TITLES AND DEEDS; TORRENS SYSTEM OF LAND REGISTRATION; PARTIES PROTECTED. — A party who has actual knowledge of facts and circumstances that would move a reasonably cautious man to make an inquiry will not be protected by the Torrens system. (Sandoval v. Court of Appeals)

LABISTE vs LABISTE 

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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 23 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 25 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." 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 It has been held that a trustee who obtains a Torrens title over property held in trust by him for another cannot 27 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. SECUYA vs VDA DE SELMA

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VDA DE ESCONDE vs CA 

Trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter. Trusts are either express or implied. An express trust is created by the direct and positive acts 8

By: Jacqueline Ann Quinto

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of the parties, by some writing or deed or will or by words evidencing an intention to create a trust. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. On the other hand, implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties. CONSTRUCTIVE TRUST; DEEMED ESTABLISHED IF BY MISTAKE A PROPERTY IS ENTIRELY ALLOTED TO ONE OF THE HEIRS; CASE AT BENCH. — In the case at bench, petitioner Catalina Buan vda. de Esconde, as mother and legal guardian of her children, appears to have favored her elder son, private respondent, in allowing that he be given Lot No. 1700 in its entirety in the extrajudicial partition of the Esconde estate to the prejudice of her other children. Although it does not appear on record whether Catalina intentionally granted private respondent that privileged bestowal, the fact is that, said lot was registered in private respondent's name. After the TCT No. 394 was handed to him by his mother, private respondent exercised exclusive rights of ownership therein to the extent of even mortgaging the lot when he needed money. If, as petitioners insist, a mistake was committed in allotting Lot No. 1700 to private respondent, then a trust relationship was created between them and private respondent. However, private respondent never considered himself a trustee. If he allowed his brother Benjamin to construct or make improvements thereon, it appears to have been out of tolerance to a brother. Consequently, if indeed, by mistake, private respondent was given the entirety of Lot No. 1700, the trust relationship between him and petitioners was a constructive, not resulting, implied trust. Petitioners, therefore, correctly questioned private respondent's exercise of absolute ownership over the property. Unfortunately, however, petitioners assailed it long after .; RULE THAT REPUDIATION OF THE TRUST IS ESSENTIAL FOR PRESCRIPTION TO SUPERVENE, NOT APPLICABLE THERETO; CASE AT BENCH. — The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting implied trusts. However, in constructive implied trusts, prescription may supervene even if the trustee does not repudiate the relationship. Necessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period. Since the action for the annulment of private respondent's title to Lot No. 1700 accrued during the effectivity of Act No. 190, Section 40 of Chapter III

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thereof applies. . . . Thus, in Heirs of Jose Olviga v. Court of Appeals, (G.R. No. 104813, October 21, 1993, 227 SCRA 330, 334-335) the Court ruled that the ten-year prescriptive period for an action for reconveyance of real property based on implied or constructive trust which is counted from the date of registration of the property, applies when the plaintiff is not in possession of the contested property. In this case, private respondent, not petitioners who instituted the action, is in actual possession of Lot No. 1700. Having filed their action only on June 29, 1987, petitioners' action has been barred by prescription. APPLICABILITY OF LACHES DOCTRINE TO IMPLIED TRUSTS. — Laches has also circumscribed the action for, whether the implied trust is constructive or resulting, this doctrine applies. HEIRS OF PEDRO MEDINA vs CA

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EXPRESS TRUSTS; REQUIRED PROOF THEREOF. — The existence of an express trust according to law and to established jurisprudence, cannot be proven by mere parol evidence and cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations. Although no particular words are required for the creation of an express trust, a clear intention to create a trust must be shown (Article 1444, Civil Code of the Philippines); and the proof of fiduciary relationship must be clear and convincing (Quiogue vs. Arambulo, 45 O.G. 305; Espinosa vs. Tumulak, CA-G.R. No. 30075-R, June 26, 1964). Express trusts are those intentionally created by the direct and positive act of the trustor, by some writing, deed or will, or oral declaration (54 Am. Jur. 33-34). 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 .; DOCUMENTARY EVIDENCE PRESENTED BY PETITIONERS DID NOT SUPPORT CREATION OF EXPRESS TRUST. — Respondents' possession of the Spanish title issued in the late Pedro Medina's name may just be the consequence of the sale of the land by Narciso (to whom it had been adjudicated in the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by no means an evidence of an express trust created for the benefit of petitioners. Neither is the deed of partition (which apparently excluded Pedro Medina) entered into earlier any indication of an express creation of a trust. In fact, these documents are adverse to petitioners' cause, and are evidences of transfer of ownership of the land from one owner/owners to another or others and they in fact negate the creation or existence of an express trust. 9

By: Jacqueline Ann Quinto 

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.; TESTIMONY OF RESPONDENT THAT SHE ADMINISTERED THE PROPERTY DID NOT CREATE EXPRESS TRUST. — The testimony of Sotero's widow, Restituta Zurbito, to the effect that her husband and then later she herself "administered" the land does not support petitioners' claim of an express trust. There is no showing that the term "administration'' as used by said respondent in her testimony is by reason of an appointment as such on behalf of another owner or beneficiary, such an to support the existence of an express trust. On the contrary, it appears clear from the context of her testimony that her use of the term "administer" was in the concept of an owner-buyer "administering" and managing his/her property\ BENEFICIARY'S RIGHT OF ACTION TO RECOVER PROPERTY HELD IN TRUST IS IMPRESCRIPTIBLE; CASE AT BAR. — If an express trust had been constituted upon the occupancy of the property by respondents in favor of the petitioners, prescription of action would not lie, the basis of the rule being that the possession of the trustee is not adverse to the beneficiary. 6. ID.; ID.; ID.; IMPLIED TRUST; BENEFICIARY'S CAUSE OF ACTION BASED ON CONSTRUCTIVE TRUST MAY BE LOST BY ACQUISITIVE PRESCRIPTION; CASE AT BAR. — Even assuming that, in the absence of an express trust, a constructive trust was created upon the property in question by operation of law in favor of petitioners, their cause of action had already prescribed upon the lapse of the ten-year period of acquisitive prescription provided by the then applicable statute (Section 41 of Act 190) foe unregistered lands like the subject land. When petitioners filed the present action in 1957, thirty-three (33) years had already elapsed since the land in question was sold to Sotero Medina on June 29, 1924. 7. ID.; PRESCRIPTION; STATUTE OF LIMITATIONS; ACTION FOR RECONVEYANCE PRESCRIBES IN TEN YEARS; PRESCRIPTIVE PERIOD COMMENCES TO RUN FROM DISCOVERY OF FRAUD; CASE AT BAR. — Petitioners' action to recover was likewise time-barred considering that the ten-year period under the statute of limitation within which petitioners could file an action for recovery of real property commenced to run in 1933 when petitioner Margarita Medina was informed that the land in dispute belonged to her father Pedro Medina for in that year she could have brought an action for reconveyance. The period of prescription commences to run from the day the action may be brought (Art. 1150, Civil Code of the Philippines), and in an action based on fraud, as is the basis of the present action, the period of prescription begins from the discovery of the fraud (IV Tolentino's Civil Code of the Philippines 40, citing Anuran vs. Aquino, 38 Phil. 29 and Solatorio vs. Solatorio, 52 Phil. 444).

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8. ID.; OBLIGATIONS AND CONTRACTS; TRUSTS; IMPLIED TRUST; PRESCRIPTIVE PERIOD TO ENFORCE IS TEN YEARS. — It is settled that the right to enforce an implied trust in one's favor prescribes in ten (10) years. PARINGIT vs PARINGIT

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an implied trust prescribes within 10 years from the time 31 the right of action accrues. But when did the right of action based on the implied trust accrue in this case? A right of action implies the existence of a cause of action and a cause of action has three elements: a) the existence of a right in plaintiff’s favor; b) defendant’s obligation to respect such right; and c) defendant’s act or omission that violates the plaintiff’s right. Only when the last element occurs or takes place can it be said in law 32 that a cause of action has arisen. In an implied trust, the beneficiary’s cause of action arises when the trustee repudiates the trust, not when the trust was created as Felipe and his wife would have 33 it. The spouses of course registered the lot in their names in January 1987 but they could not be said to have repudiated the implied trust by that registration. Their purchase of the land and registration of its title in their names are not incompatible with implied trust. It was understood that they did this for the benefit of Julian and all the children MIGUEL OSORIO PENSION FOUNDATION vs CA

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The law expressly allows a co-owner (first co-owner) of a parcel of land to register his proportionate share in the name of his co-owner (second co-owner) in whose name the entire land is registered. The second co-owner serves as a legal trustee of the first co-owner insofar as the proportionate share of the first co-owner is concerned. The first co-owner remains the owner of his proportionate share and not the second co-owner in whose name the entire land is registered The trustor-beneficiary is not estopped from proving its ownership over the property held in trust by the trustee when the purpose is not to contest the disposition or encumbrance of the property in favor of an innocent third-party purchaser for value. Certainly, the Torrens system was not established to foreclose a trustor or beneficiary from proving its ownership of a property titled in the name of another person when the rights of an innocent purchaser or lienholder are not involved. More so, when such other person, as in the present case, admits its being a mere trustee of the trustor or beneficiary. The registration of a land under the Torrens system does not create or vest title, because registration is not one of 10

By: Jacqueline Ann Quinto

the modes of acquiring ownership. A TCT is merely an evidence of ownership over a particular property and its issuance in favor of a particular person does not foreclose the possibility that the property may be coowned by persons not named in the certificate, or that it may be held in trust for another person by the registered owner 

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DURAN vs CA 

GRIMM vs ESTATE OF PARSONS The Court of Appeals erred in holding that an implied trust was created and resulted by operation of law in view of petitioner's marriage to respondent. Save for the exception provided in cases of hereditary succession, respondent's disqualification from owning lands in the Philippines is absolute. Not even an ownership in trust is allowed. Besides, where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. 13 To hold otherwise would allow circumvention of the constitutional prohibition. HERBON vs PALAD

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complete strangers in so far as the intent of the parties to the contract is concerned.

The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; and (b) such consideration must be furnished by the alleged beneficiary of a resulting trust. As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements. 24 While implied trusts may be proved by oral evidence, 25 the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated. 26 Thus, in order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document. 27 An implied trust, in fine, cannot be established upon vague and inconclusive proof. 28 In the present case, the parol evidence offered to prove the existence of an implied trust is lean, frail and far from convincing. The testimonies of Bayani and Maria that Benjamin, instead of Gonzalo, paid for Jacinto's shares in Lot 421 are vague and contain no specificities. 29 Their testimonies do not show that the payment was intended to establish a trust relationship. Said witnesses are

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Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties, while implied trusts come into being by operation of law, either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and even contrary to, any such intention. In turn, implied trusts are either resulting or constructive trusts. 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. 9 [Emphasis supplied] DELFIN vs BILLONES

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When one's property is registered in another's name without the former's consent, an implied trust is created by law in favor of the true owner. Implied trusts are those which, without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. Meanwhile, constructive trusts are created in order to satisfy the demands of justice and prevent unjust enrichment. They arise against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. 28 An action for reconveyance based upon an implied or constructive trust prescribes in ten (10) years from the registration of the deed or from the issuance of the title, registration being constructive notice to all persons. 29 However, an action for reconveyance based on fraud is imprescriptible where the plaintiff is in possession of the property subject of the acts. 11

By: Jacqueline Ann Quinto 

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A contract or conduct apparently honest and lawful must be treated as such until it is shown to be otherwise by either positive or circumstantial evidence. 31 A duly executed contract carries with it the presumption of validity. The party who impugns its regularity has the burden of proving its simulation. 32 A notarized document is executed to lend truth to the statements contained therein and to the authenticity of the signatures. Notarized documents enjoy the presumption of regularity which can be overturned only by clear and convincing evidence Fraud may be, and often is, proved by or inferred from circumstances, and the circumstances proved may in some cases raise a presumption of its existence. However, while fraud may be proved by circumstances or presumed from them, it cannot be demonstrated by mere construction, but must be proven in all cases. 42 Respondents indeed failed to prove that fraud attended the execution of the Extra-Judicial Partition and Deed of Absolute Sale. Their bare and unsupported allegations are not enough to overthrow the presumption of the validity of said agreement or to raise the presumption of fraud. Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated. 44 Public documents are (i) the written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the Philippines, or of a foreign country; (ii) documents acknowledged before a notary public except last wills and testaments; and (iii) public records, kept in the Philippines, of private documents required by law to be entered therein. 45 Public documents may be proved by the original copy, an official publication thereof, or a certified true copy thereof; 46 and when a copy of a document or record is attested for the purpose of evidence, the attestation by the officer having legal custody of the record must state that the copy is a correct copy of the original, or a specific part thereof, as the case may be. 47 A duly-registered death certificate is considered a public document and the entries found therein are presumed correct, unless the party who contests its accuracy can produce positive evidence establishing otherwise. 48 Nevertheless, this presumption is disputable and is satisfactory only if uncontradicted, and may be overcome by other evidence to the contrary. COMILANG vs BURCENA

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The trust created under the first sentence of Article 1448 is sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual payment of money, property or services, or an equivalent, constituting valuable consideration; and (b) such consideration must be furnished by the alleged beneficiary of a resulting trust. 12 Respondents have shown that the two elements are present in the instant case. Dominga was merely a trustee of the respondents in relation to the subject property. Therefore, Dominga could not have validly donated the subject property to petitioner, as expressly provided in Article 736 of the Civil Code, thus: Art. 736. Guardians and trustees cannot donate the property entrusted to them. Truly, nobody can dispose of that which does not belong to him. 13 OCO vs LIMBARING

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EVIDENCE; BURDEN OF PROOF; EXISTENCE OF TRUST. — Noting the need to prove the existence of a trust, this Court has held thus: "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. While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated." PRESUMPTION OF A GIFT IN FAVOR OF THE CHILD, NOT A TRUST IN FAVOR OF THE PARENT. — That [respondent] should be deemed a trustor on the basis merely of having paid the purchase price is plainly contradicted by the presumption based on Article 1448 of the Civil Code "that there is a gift in favor of the child," not a trust in favor of the parent. TRUSTS; DEFINITION OF TRUST.. — Trust is the legal relationship between one person who has equitable ownership of a property and another who owns the legal title to the property. The trustor is the one who establishes the trust; the beneficiary, the person for whose benefit the trust was created; and the trustee, the one in whom, by conferment of a legal title, confidence has been reposed as regards the property of the beneficiary. KINDS; EXPRESS TRUSTS; IMPLIED TRUSTS. — Trusts may be either express or implied. Express trusts are those created by direct and positive acts of the parties, such as by some writing, deed or will; or by words either expressly or impliedly evidencing an intention to create a 12

By: Jacqueline Ann Quinto

trust. Implied trusts are those that, without being expressed, are deducible from the nature of the transaction as matters of intent; or that are superinduced in the transaction by operation of law as a matter of equity, independently of the particular intention of the parties.

decree of registration is respected as incontrovertible but what is sought instead is the transfer of the property wrongfully or erroneously registered in another’s name 30 to its rightful owner or to one with a better right. If the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property

CUENCO vs CUYEGKENG 

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Trust relations between parties may either be express or implied. 16 Express trusts are created by the direct and positive acts of the parties, indicated through some writing, deed, will, or words evidencing an intention to create a trust. 17 On the other hand, implied trusts are those that, "without being express, are deducible from the nature of the transaction as matters of intent[;] or which are superinduced on the transaction by operation of law as a matter of equity, independently of the particular intention of the parties. Implied trusts may either be resulting or constructive trusts, both coming into being by operation of law." 18 Resulting trusts are presumed to have been contemplated by the parties and are based on the equitable doctrine that valuable consideration, not legal title, determines the equitable title or interest. 19 These trusts arise from the nature of or the circumstances involved in a transaction, 20 whereby legal title becomes vested in one person, who is obligated in equity to hold that title for the benefit of another. ACcTDS Constructive trusts are "created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold." The principle of estoppel in pais applies when — by one's acts, representations, admissions, or silence when there is a need to speak out — one, intentionally or through culpable negligence, induces another to believe certain facts to exist; and the latter rightfully relies and acts on such belief, so as to be prejudiced if the former is permitted to deny the existence of those facts PASINO vs MONTERROYO

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Under the principle of constructive trust, registration of property by one person in his name, whether by mistake or fraud, the real owner being another person, impresses upon the title so acquired the character of a constructive trust for the real owner, which would justify an action for 29 reconveyance. In the action for reconveyance, the

RODRIGO vs ANCILLA 

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In this case, Lot 434 was originally registered in the names of respondent's parents, Ramon Daomilas and Lucia Nagac, under OCT No. 428. The OCT evidencing this ownership, however, was borrowed by Vicente Sauza. In furtherance of his plan to defraud the spouses out of their land, Vicente Sauza, through misrepresentation, tricked the spouses into signing a deed of transfer. Afterwards, he twice attempted to secure a transfer of the certificate of title to his name but in both instances failed. The foregoing circumstances lead to only one conclusion: petitioners are holding Lot 434 merely as trustees under an implied trust for respondent. "An implied trust is one that, without being express, is deducible from the nature of the transaction as a matter of intent or which is superinduced on the transaction by operation of law as a matter of equity, independently of the particular intention of the parties." 18 The law itself creates the obligation of the trustees to convey the property and the title thereof in favor of the true owner. 19 Lastly, the action for reconveyance has not prescribed. An action for reconveyance based on implied or constructive trust prescribes in 10 years. 20 This period is reckoned from the date of issuance of the transfer certificate of title which operates as constructive notice to the whole world. Here, TCT No. T-3062 in the name of Vicente Sauza was issued on January 13, 1971. Thus, respondent's suit for reconveyance filed on December 28, 1979 was well within the prescribed period. Clearly, prescription did not attach. CRISOSTOMO vs GARCIA

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In the case at bar, respondent's action which is for Reconveyance and Cancellation of Title is based on an implied trust under Art. 1456 of the Civil Code since he averred in his complaint that through fraud petitioners were able to obtain a Certificate of Title over the property. He does not seek the annulment of a voidable contract whereby Articles 1390 and 1391 of the Civil 13

By: Jacqueline Ann Quinto

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Code would find application such that the cause of action would prescribe in four years. Art. 1456 of the Civil Code provides: Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Thus, it was held that when a party uses fraud or concealment to obtain a certificate of title of property, a constructive trust is created in favor of the defrauded party. 36 Constructive trusts are "created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold." 37 When property is registered in another's name, an implied or constructive trust is created by law in favor of the true owner. 38 The action for reconveyance of the title to the rightful owner prescribes in 10 years from the issuance of the title. 39 An action for reconveyance based on implied or constructive trust prescribes in ten years from the alleged fraudulent registration or date of issuance of the certificate of title over the property. 40 It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake, giving rise to an implied trust under Art. 1456 of the Civil Code, is 10 years pursuant to Art. 1144. This ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust, which repudiation takes place when the adverse party registers the land. 41 Clearly, the applicable prescriptive period is ten years under Art. 1144 and not four years under Arts. 1389 and 1391. 42 SANJORJO vs QUIJANO The basic rule is that after the lapse of one (1) year, a decree of registration is no longer open to review or attack although its issuance is attended with actual fraud. This does not mean, however, that the aggrieved party is without a remedy at law. If the property has not yet passed to an innocent purchaser for value, an action for reconveyance is still available. The decree becomes incontrovertible and can no longer be reviewed after one (1) year from the date of the decree so that the only remedy of the landowner whose property has been wrongfully or erroneously registered

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in another's name is to bring an ordinary action in court for reconveyance, which is an action in personam and is always available as long as the property has not passed to an innocent third party for value. If the property has passed into the hands of an innocent purchaser for value, the remedy is an action for damages. The petitioners' action for reconveyance may not be said to have prescribed, for, basing the present action on implied trust, the prescriptive period is ten years. 25 The questioned titles were obtained on August 29, 1988 and November 11, 1988, in OCT Nos. OP-38221 and OP39847, respectively. The petitioners commenced their action for reconveyance on September 13, 1993. Since the petitioners' cause of action is based on fraud, deemed to have taken place when the certificates of title were issued, 26 the complaint filed on September 13, 1993 is, therefore, well within the prescriptive period. VAGILIDAD vs VAGILIDAD

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An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property CERVANTES vs CA

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In connection, and in relation to the issue of prescription, since the land in question was evidently obtained by private respondent through fraudulent machinations 18 by means of which a free patent and title were issued in his name, he is deemed to have held it in trust for the benefit of petitioner who was prejudiced by his actions. The Civil Code provides: The remedy of reconveyance, which has its basis on Section 53 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, and the foregoing article of the Civil Code, is available to petitioner as alleged and prayed for in his pleading. SHEIDC An action for reconveyance based on an implied trust prescribes in ten years from the issuance of the Torrens title over the property. 19 Here, private respondent's certificate of title was issued on April 6, 1977. Petitioner 14

By: Jacqueline Ann Quinto

previously initiated a similar case, Civil Case No. 1505, against respondent on September 8, 1981 which had the effect of suspending the prescriptive period until it was dismissed by the Court of First Instance of Palawan on October 21, 1981. The present case was later on filed on May 18, 1987. Clearly, the present action is not barred by prescription.

an action for reconveyance to prosper that the property should not have passed to the hands of an innocent purchaser for value." The same rule applies to mortgagees, like petitioner. The evidence before us, however, indicates that petitioner is not a mortgagee in good faith. To be sure, an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagor's title. Nonetheless, especially in the case of a banking institution, a mortgagee must exercise due diligence before entering into said contract. Judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who are the real owners thereof. Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands. Petitioner here was already aware that a person other than the registered owner was in actual possession of the land when it bought the same at the foreclosure sale. A person who deliberately ignores a significant fact which would create suspicion in an otherwise reasonable man is not an innocent purchaser for value. "It is a well-settled rule that a purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor."

HEIRS OF PRES MARCOS vs PCGG A constructive trust, otherwise known as 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 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. 20 It is a resulting obligation created by law and actions thereon prescribe after ten (10) years as provided by Article 1144 of the Civil Code. 21 

In the instant case, even if we consider the petitioners' right of action for recovery of the shares as having accrued only on November 3, 1990, when Benedicto entered into a compromise agreement with the Republic of the Philippines surrendering the shares in question, or even on the latter period of September 10, 1993, wherein this Court upheld the validity of the compromise agreement, the ten (10)-year prescriptive period has already elapsed. The petitioners, through their belated filing of numerous motions of extensions to file their reply instead of manifesting a willingness to abide by the ruling of the Sandiganbayan on the proper docket fees to be paid, have clearly slept on their rights. Prescription has already set in, thereby barring their right of action. DBP vs CA

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ACTION FOR RECONVEYANCE PROPER AGAINST MORTGAGEE/BUYER WHO IS NOT IN GOOD FAITH. — Section 38 of the Land Registration Act provides that a certificate of title is conclusive and binding upon the whole world. Consequently, a buyer need not look behind the certificate of title in order to determine who is the actual owner of the land. However, this is subject to the right of a person deprived of land through fraud to bring an action for reconveyance, provided that it does not prejudice the rights of an innocent purchaser for value and in good faith. "It is a condition sine qua non for

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PRESCRIPTION OF ACTIONS; ACTION FOR RECONVEYANCE BASED ON IMPLIED TRUST PRESCRIBES IN 10 YEARS FROM THE DATE OF ISSUANCE OF DECREE OF REGISTRATION; NOT APPLICABLE WHEN THERE IS ACTUAL POSSESSION OF THE LAND. — Generally, an action for reconveyance based on an implied or constructive trust, such as the instant case, prescribes in 10 years from the date of issuance of decree of registration. However, this rule does not apply when the plaintiff is in actual possession of the land. LUNA vs CO CHO CHIT — 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. IMPLIED TRUSTS; RESULTING TRUST; BASIS THEREOF; CONSTRUCTIVE TRUST; BASIS THEREOF. — Implied trust 15

By: Jacqueline Ann Quinto

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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. Unlike express trusts concerning immovables or any interest therein which cannot be proved by parol evidence, implied trusts may 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.

of the property, as the defendants are in the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. As it is, before the period of prescription may start, it must be shown that (a) the trustee had 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 positive. OLVIGA vs CA 

TALE vs CA 

PRESCRIPTION OF ACTIONS; ACTION FOR RECONVEYANCE BASED ON FRAUD; RULE. — We hold that the prescriptive period for an action for reconveyance based on fraud is ten (10) years. The issue on the prescriptive period for such an action has been thoroughly discussed in the case of Amerol v. Bagumbaran (154 SCRA 396, 407 [1987]). Significantly, Justice Paras who penned Esconde v. Barlongay (152 SCRA 602), which formed a basis for the four-year rule of the questioned decision, and Justices Yap, MelencioHerrera, Padilla, and Sarmiento who concurred in the July 31, 1987 decision constituted the same Second Division which promulgated the ten-year rule in Amerol v. Bagumbaran (supra) on September 10, 1987. DE CABRERA vs CA

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we observed that an action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property, but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession

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With regard to the issue of prescription, this Court has ruled a number of times before that an action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property (Vda. de Portugal vs. IAC, 159 SCRA 178). But this rule applies only when the plaintiff is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, doe not prescribe. Actually the action for conveyance was one to quiet title, i.e., to remove the cloud cast upon appellee's ownership by the refusal of the appellants to recognize the sale made by their predecessors. This action accrued only when appellants initiated their suit to recover the land in 1954. Furthermore, it is an established rule of American jurisprudence (made applicable in this jurisdiction by Art. 480 of the New Civil Code) that actions to quiet title to property in the possession of the plaintiff are imprescriptible ACTUAL POSSESSOR OF A PIECE OF LAND CLAIMING TO BE OWNER THEREOF MAY WAIT UNTIL HIS POSSESSION IS DISTURBED OR HIS TITLE IS ATTACKED; REASON THEREFOR. — In Faja vs. Court of Appeals, 75 SCRA 441, 446, this Court likewise reiterated the ruling that: ". . . There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed 16

By: Jacqueline Ann Quinto

possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. No better situation can be conceived at the moment for Us to apply this rule on equity than that of herein petitioners whose mother, Felipa Faja, was in possession of the litigated property for no less than 30 years and was suddenly confronted with a claim that the land she had been occupying and cultivating all these years, was titled in the name of a third person. We hold that in such a situation the right to quiet title to the property, to seek its reconveyance and annul any certificate of title covering it, accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor." In the case at bar, private respondents and their predecessors-in-interest were in actual possession of the property since 1950. Their undisturbed possession gave them the continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of petitioners, who in 1988 disturbed their possession. 

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