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MINDANAO DEVELOPMENT AUTHORITY VS CA

113 SCRA 429

FACTS

Francisco Ang Bansing was the owner of a big tract of land situated in Barrio

Panacan Davao City. In February 1939, Ang Bansing sold a portion thereof, with anarea of about 5 hectares to Juan Cruz Yap Chuy. The contract provided, amongothers, the following:

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

under the expenses of the said Juan Cruz Yap Chuy.After the sale, the land of Ang Bansing was surveyed and designated as Lot 664-

B, Psd-1638. Lot 664-B was further subdivided into five (5) lots. The portion sold to Juan

Cruz Yap Chuy, shortened to Juan Cruz, was designated as Lot 664B-3. June 15-17 andDecember 15, 1939, a cadastral survey was made and Lot 664-B-3 was designated as

Lot 1846-C of the Davao Cadastre. On December 23, 1939, Juan Cruz sold Lot 1846-Cto the Commonwealth of the Philippines for the amount of P6,347.50. On that sameday, Juan Cruz, as vendor, and C.B. Cam and Miguel N. Lansona as sureties, executed

a surety bond in favor of the vendee to guarantee the vendor's absolute title over theland sold.

Meanwhile, the cadastral survey plan was approved by the Director of Lands onJuly 10, 1940. In March 1941, an OCT was issued in the means of Victoriana AngBansing, Orfelina Ang Bansing and Francisco Ang Bansing as claimants of the land,

pursuant to Decree No. 745358 issued on July 29, 1940. On March 31, 1941, OCT No. 26was cancelled pursuant to a Deed of Adjudication and TCTNo. 1783 was issued in thename of Francisco Ang Bansing.

On February 25, 1965, the President of the Philippines issued Proclamation No.459, transferring ownership of certain parcels of land situated in Sasa Davao City, to the

Mindanao Development Authority, now the Southern Philippines DevelopmentAdministration, subject to private rights, if any.

Lot 1846-C, the disputed parcel of land, was among the parcels of land

transferred to the Mindanao Development Authority in said proclamation. The counselfor the Mindanao Development Authority, wrote Ang Bansing requesting the latter to

surrender the Owner's duplicate copy of TCT No. 2601 so that Lot 1846-C could beformally transferred to his client but Ang Bansing refused.

Consequently, on April 11, 1969, the MDA filed a complaint against Francisco

Ang Bansing before the CFI of Davao City, for the reconveyance of the title over Lot1846-C.

ISSUES1. WON Francisco Ang Bansing as vendor and the one who worked to secure the

title of his entire tract of land which included the portion sold by him. to Juan Cruz YapChuy acted in the capacity of and/or served as trustee for any and all parties whobecome successor-in-interest to Juan Cruz Yap Chuy

2. WON Ang Bansing was bound and obligated to give, deliver and reconvey toJuan Cruz Yap Chuy and/or his successor-in-interest the title pertaining to the portion of

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land sold and conveyed by him to Juan Cruz Yap Chuy by virtue of the deed of saleand his affidavit

HELD

1. No, an express trust had been created between Ang Banging and Juan Cruz

over Lot 1846-C of the Davao Cadastre."Trusts are either express or implied. Express trusts are created by the intention of

the trustor or of the parties. Implied trusts come into being by operation of law."It is fundamental in the law of trusts that certain requirements must exist before

an express trust will be recognized. Basically, these elements include Competent trustor and trustee, 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 any one of them is missing, it is fatal to the

trusts.

Present and complete disposition of the trust property, notwithstanding thatthe enjoyment in the beneficiary will take place in the future.

The purpose be an active one to prevent trust from being executed into alegal estate or interest, and one that is not in contravention of some

prohibition of statute or rule of public policy.

Some power of administration other than a mere duty to perform acontract although the contract is for a third-party beneficiary.

Declaration of terms which must be stated with reasonable certainty inorder that the trustee may administer, and that the court, if called upon so

to do, may enforce, the trust.

In this case, the herein petitioner relies mainly upon the following stipulation in the

deed of sale executed by Ang Bansing in favor of Juan Cruz to prove that an expresstrust had been established with Ang Bansing as the settlor and trustee and Juan Cruz as

the cestui que trust or beneficiary:That I hereby agree to work for the titling of the entire area of my land under my

own expenses and the expenses for the titling of the portion sold to me shall be

under the expenses of said Juan Cruz Yap Chuy.

The above-quoted stipulation, however, is nothing but a condition that Ang

Bansing shall pay the expenses for the registration of his land and for Juan Cruz toshoulder the expenses for the registration of the land sold to him. The stipulation doesnot categorically create an obligation on the part of Ang Bansing to hold the property

in trust for Juan Cruz. Hence, there is no express trust.It is essential to the creation of an express trust that the settlor presently and

unequivocally make a disposition of property and make himself the trustee of theproperty for the benefit of another.

In case of a declaration of trust, the declaration must be clear and unequivocal

that the owner holds property in trust for the purposes named.While Ang Bansing had agreed in the deed of sale that he will work for the titling

of "the entire area of my land under my own expenses," it is not clear therefrom whether

said statement refers to the 30-hectare parcel of land or to that portion left to him afterthe sale. A failure on the part of the settlor definitely to describe the subject-matter of

the supposed trust or the beneficiaries or object thereof is strong evidence that heintended no trust.

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That no express trust had been agreed upon by Ang Bansing and Juan Cruz isevident from the fact that Juan Cruz, the supposed beneficiary of the trust, never made

any attempt to enforce the alleged trust and require the trustee to transfer the title overLot 1846-C in his name.

2. No, even granting, arguendo, that an express trust had been established, as

claimed by the herein petitioner, it would appear that the trustee had repudiated thetrust and the petitioner herein, the alleged beneficiary to the trust, did not take any

action therein until after the lapse of 23 years.Needless to say, only an implied trust may have been impressed upon the title of

Ang Banging over Lot 1846-C of the Davao Cadastre since the land in question wasregistered in his name although the land belonged to another. In implied trusts, there isneither 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 byagreement or intention, but by operation of law. Thus, if property is acquired throughmistake 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.If a person obtains legal title to property by fraud or concealment, courts of

equity will impress upon the title a so-called constructive trust in favor of the defraudedparty.

There is also a constructive trust if a person sells a parcel of land and thereafter

obtains title to it through fraudulent misrepresentation. Such a constructive trust is not atrust in the technical sense and is prescriptible; it prescribes in 10 years. Here, the 10-year

prescriptive period began on March 31, 1941, upon the issuance of Original Certificateof Title No. 26 in the names of Victoriana Ang Bansing Orfelina Ang Bansing andFrancisco Ang Banging. From that date up to April 11, 1969, when the complaint for

reconveyance was filed, more than 28 years had passed. Clearly, the action forreconveyance had prescribed.

Separate OpinionAQUINO,J., dissenting:

The defense of prescription cannot be set up in an action to recover property held in

trust for the benefit of another. Property held in trust can be recovered by the beneficiary

regardless of the lapse of time. Prescription in the case of express trusts can be invoked only from

the time the trust is repudiated

And a trustee who takes a Torrens title in his name for the land held in trust cannot

repudiate the trust by relying on the registration. That is one of the limitations upon the finality of

a decree of title

The rule, that an action for reconveyance prescribes in ten years, applies to an implied

trust, not to an express trust. So, as a general rule a trust estate (in an express trust) is exempt from

the operation of the statute of limitations. The exception is when the trustee repudiates the trust

in which case the trustee may acquire the trust estate by prescription. The repudiation must be

known to the cestui que trust and must be direct, clear, open and equivocal.

One who acquires a Torrens title in his own name to property which he is administering for

himself and his brothers and sisters as heirs in common by descent from a common ancestor

may be compelled to surrender to each of his co-heirs his appropriate share". A partition

proceeding is an appropriate remedy to enforce this right. An equitable action for

reconveyance is also a proper remedy

In any event, the real plaintiff in this case is the Republic of the Philippines and

prescription does not run against the State.

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The maxim inullum tempus occurrit regi or nullum tempus occurrit reipublicae (lapse of

time does not bar the right of the crown or lapse of time does not bar the commonwealth). The

rule is now embodied in article 1108(4) of the Civil Code.

It is a maxim of great antiquity in English law. The best reason for its existence is the great

public policy of preserving public rights and property from damage and loss through the

negligence of public officers. Thus, the right of reversion or reconveyance to the State of lands

fraudulently registered or not susceptible of private appropriation or acquisition does notprescribe

FABIAN VS FABIAN

22 SCRA 231

FACTS

Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands

Estate in Muntinlupa, Rizal. By virtue of this purchase, he was issued sale certificate 547.

He died on August 2, 1928, survived by four children, namely, Esperanza, Benita I, Benita

II,

and Silbina.On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the deceased,

executed an affidavit. On the strength of this affidavit, sale certificate 547 was assigned

to them.

The acting Director of Lands, on behalf of the Government, sold lot 164 to Silbina

Fabian Teodora Fabian. The vendees spouses forthwith took physical possession thereof,

cultivated it, and appropriated the produce. In that same year, they declared the lot in

their names for taxation purposes. In 1937 the RD of Rizal issued a TCT over lot 164 in their

names. They later subdivided the lot into 2 equal parts.

The plaintiffs filed the present action for reconveyance against the defendants

spouses, averring that Silbina and Teodora, through fraud perpetrated in their affidavitaforesaid. That by virtue of this affidavit, the said defendants succeeded in having the

sale certificate assigned to them and thereafter in having lot 164 covered by said

certificate transferred in their names; and that by virtue also of these assignment and

transfer, the defendants succeeded fraudulently in having lot 164 registered in their

names. They further allege that the land has not been transferred to an innocent

purchaser for value. A reconveyance thereof is prayed for.

In their answer, the defendants spouses claim that Pablo Fabian was not the

owner of lot 164 at the time of his death on August 2, 1928 because he had not paid in

full the amortizations on the lot; that they are the absolute owners thereof, having

purchased it from the Government, and from that year having exercised all theattributes of ownership thereof up to the present; and that the present action for

reconveyance has already prescribed. The dismissal of the complaint is prayed for.

The lower court rendered judgment declaring that the defendants spouses had

acquired a valid and complete title to the property by acquisitive prescription, and

accordingly dismissed the complaint. The latters motion for reconsideration was

thereafter denied. Hence, the present recourse.

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ISSUES

1. Was Pablo Fabian the owner of lot 164 at the time of his death, in the face of thefact, admitted by the defendants-appellees, that he had not then paid the entire

purchase price thereof?

2. May laches constitute a bar to an action to enforce a constructive trust?3. Has title to the land vested in the appellees through the mode of acquisitiveprescription?

HELD:

1. Yes. Lot 164 was a part of the Friar Lands Estate of Muntinlupa, Rizal; its sale to

Pablo Fabian was therefore governed by Act 1120, otherwise known as the Friar Lands

Act. While under section 15 of the said Act, title to the land sold is reserved to the

Government until the purchaser makes full payment of all the required instalments and

the interest thereon, this legal reservation refers to the bare, naked title. The equitable

and beneficial title really went to the purchaser the moment he paid the first instalment

and was given a certificate of sale. The reservation of the title in favor of the

Government is made merely to protect the interest of the Government so as to

preclude or prevent the purchaser from encumbering or disposing of the lot purchased

before the payment in full of the purchase price. Outside of this protection the

Government retains no right as an owner. For instance, after issuance of the sales

certificate and pending payment in full of the purchase price, the Government may

not sell the lot to another. It may not even encumber it. It may not occupy the land to

use or cultivate; neither may it lease it or even participate or share in its fruits. In other

words, the Government does not and cannot exercise the rights and prerogatives of

owner. And when said purchaser finally pays the final instalment on the purchase price

and is given a deed of conveyance and a certificate of title, the title at least in equity,

retroacts to the time he first occupied the land, paid the first instalment and was issued

the corresponding certificate of sale. In other words, pending the completion of the

payment of the purchase price, the purchaser is entitled to all the benefits and

advantages which may accrue to the land as well as suffer the losses that may befall it.

That Pablo Fabian had paid five annual instalments to the Government, and in fact

been issued a sale certificate in his name, are conceded. He was therefore the owner

of lot 164 at the time of his death. He left four daughters, namely, Esperanza, Benita I,

Benita II and Silbina to whom all his rights and interest over lot 164 passed upon his

demise.In case a holder of a certificate dies before the giving of the deed and does not

leave a widow, then the interest of the holder of the certificate shall descend and

deed shall issue to the person who under the laws of the Philippine Islands would have

taken had the title been perfected before the death of the holder of the certificate,

upon proof of the holders thus entitled of compliance with all the requirements of the

certificate.

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The assignment and sale of the lot to the defendants Silbina and Teodora were

therefore null and void. To the extent of the participation of the appellants, application

must be made of the principle that if property is acquired through fraud, the person

obtaining it is considered a trustee of an implied trust for the benefit of the person from

whom the property comes.

2. Laches may bar an action brought to enforce a constructive trust such as the

one in the case at bar. Illuminating are the following excerpts from a decision penned

by Mr. Justice Reyes:

But in constructive trusts, . . . the rule is that laches constitutes a bar to actions to

enforce the trust, and repudiation is not required, unless there is a concealment

of the facts giving rise to the trust

The assignment of sale certificate was effected in October 1928; and the actual

transfer of lot 164 was made on the following November 14. It was only on July 8, 1960,

32 big years later, that the appellants for the first time came forward with their claim to

the land. The record does not reveal, and it is not seriously asserted, that theappellees concealed the facts giving rise to the trust. Upon the contrary, paragraph 13

of the stipulation of facts of the parties states with striking clarity that defendants herein

have been in possession of the land in question since 1928 up to the present publicly

and continuously under claim of ownership; they have cultivated it, harvested and

appropriated the fruits for themselves.

3. It is already settled in this jurisdiction that an action for reconveyance of real

property based upon a constructive or implied trusts, resulting from fraud, may be

barred by the statute of limitations. the discovery in that case being deemed to have

taken place when new certificates of title were issued exclusively in the names of the

respondents therein.

Although, as a general rule, an action for partition among co-heirs does not

prescribe, this is true only as long as the defendants do not hold the property in question

under an adverse title. The statute of limitations operates, as in other cases, from the

moment such adverse title is asserted by the possessor of the property

Inasmuch as petitioners seek to annul the aforementioned deed of extra -

judicial settlement upon the ground of fraud in the execution thereof,the action

therefor may be filed within four(4) years from the discovery of the fraud. Upon the

undisputed facts in the case at bar, not only had laches set in when the appellants

instituted their action for, reconveyance in 1960, but as well their right to enforce the

constructive trust had already prescribed.

It logically follows from the above disquisition that acquisitive prescription has

likewise operated to vest absolute title in the appellees, pursuant to the provisions of

section 41 of Act 190 that:

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Ten years actual adverse possession by any person claiming to be the owner for

that time of any land or interest in land, uninterruptedly continued forten

years by occupancy, descent, grants, or otherwise, in whatever way such

occupancy may have commenced or continued,shall vest in every actual

occupant or possessor of such land a full and complete title

MORALES VS COURT OF APPEALS

274 SCRA 280

FACTS

Civil Case No. 265 involving was an action for recovery of possession of land anddamages with a prayer for a writ of preliminary mandatory injunction filed by private

respondents herein, spouses Ranulfo Ortiz, Jr. and Erlinda Ortiz, against Rodolfo Morales.On 30 November 1988 Rodolfo Morales passed away. The trial court allowed his

substitution by his heirs, Roda, Rosalia, Cesar and Priscila. It then ruled in favor of theplaintiffs.

On this particular issue, the Plaintiffs' evidence has established that before thePlaintiffs paid the purchase price of the premises in question, they talked with thedefendant about the intended sale and the latter even encouraged them to purchase

it and that he will vacate the premises as soon as the payment is made The defendant,however, despite his encouragement and notice from his uncle to vacate the subjectpremises reneged on his words and refused to vacate or demolish his beauty shop

inside the premises in question unless he is paid P35,000.00 for it although it is valued atless than P5,000.00.

Later, as the plaintiffs were about to undertake urgent repairs on the dilapidated

residential building and make it as their residence, they found out that the defendantrather than vacate the premises, had already occupied the said residential building

and admitted lodgers to it (id., p. 24) and claimed ownership thereof, to the damage,prejudice and injury and mental anguish of the plaintiffs. So, the plaintiffs, as the true

and lawful owners of the premises in question, filed the instant case incurring expensesin the process as they hired the services of a lawyer to protect their interests from thewillful and wrongful acts or omissions of the defendant.

The Court of Appeals affirmed the decision of the trial court.

ISSUE

WON Celso Avelino purchase the land in question from the Mendiolas on 8 July 1948 asa mere trustee for his parents and siblings

HELD

No.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 dutiesand 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;

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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. In turn, implied trusts are either resulting or

constructive trusts. Resulting trusts are based on the equitable doctrine that valuableconsideration and not legal title determines the equitable title or interest and arepresumed always to have been contemplated by the parties. 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 intentionagainst 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.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, theevidence must be trustworthy and received by the courts with extreme caution, and

should not be made to rest on loose, equivocal or indefinite declarations. Trustworthyevidence is required because oral evidence can easily be fabricated.

In the instant case, petitioners' theory is that Rosendo Avelino owned the money

for the purchase of the property and he requested Celso, his son, to buy the propertyallegedly in trust for the former. The fact remains, however, that title to the property wasconveyed to Celso. Accordingly, the situation is governed by or falls within the

exception under the third sentence of Article 1448:. . . However, if the person to whom the title is conveyed is a child, legitimate orillegitimate, of the one paying the price of the sale, no trust is implied by law, it

being disputably presumed that there is a gift in favor of the child.

As found by the trial court and affirmed by the Court of Appeals, establishedpositive acts of Celso Avelino indicating, without doubt, that he considered the

property he purchased from the Mendiolas as his exclusive property. He had its taxdeclaration transferred in his name, caused the property surveyed for him by theBureau of Lands, and faithfully paid the realty taxes. Finally, he sold the property to

private respondents.

DBP VS COA

422 SCRA 465

FACTS

DBP is a government financial institution with an original charter, Executive Order

No. 81,5 as amended by Republic Act No. 8523. COA is a constitutional body with the

mandate to examine and audit all government instrumentalities and investment ofpublic funds.

In February 1980, the DBP Board of Governors adopted Resolution No. 794creating the DBP Gratuity Plan and authorizing the setting up of a retirement fund to

cover the benefits due to DBP retiring officials and employees and it was madeeffective on June 17, 1967 and covered all employees of the Bank as of May 31, 1977.Its control was vested to a Trust Indenture. The trustee, subsequently, appointed the DBP

Trust Services Department (DBP-TSD) as the investment manager thru an Investment

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Management Agreement, with the end in view of making the income and principal ofthe Fund sufficient to meet the liabilities of DBP under the Gratuity Plan.

In 1983, the Bank established a Special Loan Program availed thru the facilities ofthe DBP Provident Fund and funded by placements from the Gratuity Plan Fund.

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 andto 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 at9% per annum subject to the minimum investment rate resulting from the updated

actuarial study. The excess or balance of the interest earnings shall then be distributedto the investor-members.

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 years1991 and 1992. The payments were disallowed by the Auditor under Audit ObservationMemorandum No. 93-2 dated March 1, 1993, on the ground that the distribution of

income of the Gratuity Plan Fund (GPF) to future retirees of DBP is irregular andconstituted the use of public funds for private purposes which is specifically proscribed

under the law.DBPChairman Antonio alleged that the express trust created for the benefit of

qualified DBP employees under the Trust Agreement gave the Fund a separate legal

personality. The Agreement transferred legal title over the Fund to the Board of Trusteesand 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.The COA en banc affirmed AOM No. 93-2, stating: 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 LoanProgram was adopted.

ISSUESWON the income of the Fund is income of DBP

HELD

A trust is a "fiduciary relationship with respect to property which involves the

existence of equitable duties imposed upon the holder of the title to the property todeal with it for the benefit of another." A trust is either express or implied. Express trusts

are those which the direct and positive acts of the parties create, by some writing ordeed, or will, or by words evincing an intention to create a trust.

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, pensionor other benefits to its employees. It is a separate taxable entity established for theexclusive benefit of the employees.

Resolution No. 794 shows that DBP intended to establish a trust fund to cover theretirement benefits of certain. The principal and income of the Fund would be separate

and distinct from the funds of DBP:2. Trust Agreementdesigned for in-house trustees of three (3) to be appointed

by the Board of Governors and vested with control and administration of the

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funds appropriated annually by the Board to be invested in selective investments

so that the income and principal of said contributions would be sufficient to meet

the required payments of benefits as officials and employees of the Bank retire

under the Gratuity Plan;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.Clearly, the trustees received and collected any income and profit derived from

the Fund, and they maintained separate books of account for this purpose. Theprincipal 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 beused to satisfy all of the liabilities to the beneficiary officials and employees under theGratuity Plan.

The Agreement indisputably transferred legal title over the income andproperties of the Fund to the Funds trustees. Thus, COAs directive to record theincome of the Fund in DBPs 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. Theprincipal and income of the Fund together constitute theres or subject matter of the

trust. The Agreement established the Fund precisely so that it would eventually besufficient 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 theFund. However, COAs subsequent directive would divest the Fund of income, and

defeat the purpose for the Funds creation.

SALAO VS SALAO

70 s 65

FACTSAfter the death of Valentina Ignacio, her estate was administered by her

daughter Ambrosia. It was partitioned extrajudically and the deed was signed by herfour legal heirs namely her 3 children (Alejandra, Juan, and Ambrosia) and ValentinSalao, in representation of his deceased father, Patricio. The Calunuran fishpond is the

property in contention in this case. Prior to the death of Valentina Ignacio, her childrenJuan and Ambrosia secured a torrens title in their names a 47 ha. fishpond located at

Sitio Calunuran, Lubao, Pampanga. A decree was also issued in the names of Juan andAmbrosia for the Pinanganacan fishpond which adjoins the Calunuran fishpond. A yearbefore Ambrosias death, she donated her one-half share in the two fishponds in

question to her nephew, Juan Salo Jr. He was already the owner of the other half of the

fishponds having inherited it from his father, Juan Salao Sr. After Ambrosia died, the heirsof Valentin Salao, Benita Salao and the children of Victorina Salao, filed a complaintagainst Juan Salao Jr. for the reconveyance to them of the Canluran fishpond asValentin Salaos supposed one third share in the 145 ha. of fishpond registered in the

names of Juan Salao Sr. and Ambrosia Salao.Defendants argument: Valentin Salao did not have any interest in the two

fishponds and that the sole owners thereof were his father and his aunt Ambrosia, as

shown in the Torrens titles and that he was the donee of Ambrosias one-half share.

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Plaintiffs argument: Their action is to enforce a trust which defendant Juan SalaoJr. allegedly violated. The existence of trust was not definitely alleged in the plaintiffs

complaint but in their appellants brief.The RT ruled that there was no community of property among Juan, Ambrosia

and Valentin when the Calunuran and the Pinanganacan lands were acquired; that

co

ownership over the real properties of Valentina Ignacio existed among her heirsafter her death in 1914; that the co ownership was administered by Ambrosia and

that it subsisted up to 1918 when her estate was partitioned among her three childrenand her grandson, Valentin Salao. It rationalized that Valentins omission during his

lifetime to assail the Torrens titles of Juan and Ambrosia signified that he was not a co-owner of the fishponds. It did not give credence to the testimonies of plaintiffs

witnesses because their memories could not be trusted and because no strong

evidence supported the declarations. Moreover, the parties involved in the allegedtrust were already dead.

The judgment appealed to CA but the amounts involved exceeded two

hundred thousand pesos, the CA elevated the case to the SC.

ISSUE

WON massive oral evidence sufficient to prove an implied trust, resulting or constructive,regarding the two fishponds

HELD

The SC affirmed lowercourts decision.Plaintiffs pleading and evidence cannot berelied upon to prove an implied trust. The trial courts firm conclusion that there was no

community of property during the lifetime of Valentina Ignacio or before 1914 is

substantiated by defendants documentary evidence. There was no resulting trust in thiscase because there never was any intention on the part of Juan, Ambrosia and

Valentin to create any trust. There was no constructive trust because the registration of

the 2 fishponds in the names of Juan and Ambrosia was not vitiated by fraud ormistake. 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 Salao Sr. forthe heirs of Valentin Salao. And even assuming that there was an implied trust, plaintiffsaction is clearly barred by prescription when it filed an action in 1952 or after the lapse

of more than 40 years from the date of registration.

PNB VS CA

217 SCRA 347

FACTSPrivate Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation

engaged in providing goods and services to shipping companies. Since 1966, it hasacted as a manning or crewing agent for several foreign firms, one of which is Star KistFoods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the

crew's medical expenses, National Seaman's Board fees, Seaman's Welfare fund, andstandby fees and for the crew's basic personal needs. Subsequently, Mata sends

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monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sendinga telegraphic transfer through banks for credit to the latter's account.

Against this background, on February 21, 1975, Security Pacific National Bank(SEPAC) of Los Angeles which had an agency arrangement with Philippine National

Bank (PNB), transmitted a cable message to the International Department of PNB to

pay the amount of US$14,000 to Mata by crediting the latter's account with the InsularBank of Asia and America (IBAA), per order of Star Kist. Upon receipt of this cabled

message on February 24, 1975, PNB's International Department noticed an error andsent a service message to SEPAC Bank. The latter replied with instructions that the

amount of US$14,000 should only be for US$1,400.On the basis of the cable message dated February 24, 1975 Cashier's Check No.

269522 in the amount of US$1,400 (P9,772.95) representing reimbursement from Star Kist,

was issued by the Star Kist for the account of Mata on February 25, 1975 through theInsular Bank of Asia and America (IBAA).

However, fourteen days after or on March 11, 1975, PNB effected another

payment through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60)purporting to be another transmittal of reimbursement from Star Kist, private

respondent's foreign principal.Six years later, PNB requested Mata for refund of US$14,000 (P97,878.60) after it

discovered its error in effecting the second payment.

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000against Mata arguing that based on a constructive trust under Article 1456 of the Civil

Code, it has a right to recover the said amount it erroneously credited to respondentMata.

The RTC rendered judgment dismissing the complaint ruling that the instant case

falls squarely under Article 2154 onsolutio indebiti and not under Article 1456 onconstructive trust. This was affirmed by the CA.

ISSUES1. WON there exists and implied trust or a case of solution indebiti

2. WON petitioner may still claim the US$14,000 it erroneously paid privaterespondent under a constructive trust

HELD

Undoubtedly, the instant case fulfills the indispensable requisites ofsolutio

indebiti as defined in Article 2154 that something (in this case money) has beenreceived when there was no right to demand it and (2) the same was unduly deliveredthrough mistake. There is a presumption that there was a mistake in the payment "if

something which had never been due or had already been paid was delivered; but he

from whom the return is claimed may prove that the delivery was made out of liberalityor for any other just cause."

In the case at bar, a payment in the corrected amount of US$1,400 throughCashier's Check No. 269522 had already been made by PNB for the account of Mata

on February 25, 1975. Strangely, however, fourteen days later, PNB effected anotherpayment through Cashier's Check No. 270271 in the amount of US$14,000, this time

purporting to be another transmittal of reimbursement from Star Kist, privaterespondent's foreign principal.

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While the principle of undue enrichment orsolutio indebiti, is not new, havingbeen incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish

Civil Code entitled "Obligations incurred without contract," 19the chapter on Trusts isfairly recent, having been introduced by the Code Commission in 1949. Although the

concept of trusts is nowhere to be found in the Spanish Civil Code, the framers of our

present Civil Code incorporated implied trusts, which includes constructive trusts, on topof quasi-contracts, both of which embody the principle of equity above strict legalism.

Further reflection on these concepts reveals that a constructive "trust" is as mucha 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 anyintention on their part but in order to prevent unjust enrichment, thus giving rise to

certain obligations not within the contemplation of the parties.

While petitioner may indeed opt to avail of an action to enforce a constructivetrust or the quasi-contract ofsolutio indebiti, it has been deprived of a choice, for

prescription has effectively blocked quasi-contract as an alternative, leaving onlyconstructive trust as the feasible option.

2. The SC ruled in the negative. Although we are aware that only seven (7) yearslapsed after petitioner erroneously credited private respondent with the said amount

and that under Article 1144, petitioner is well within the prescriptive period for theenforcement of a constructive or implied trust, we rule that petitioner's claim cannot

prosper since it is already barred by laches. It is a well-settled rule now that an action toenforce an implied trust, whether resulting or constructive, may be barred not only byprescription but also by laches.

While prescription is concerned with the fact of delay, laches deals with theeffect 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 theCable 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 atthat, which regularly publishes its balanced financial statements annually or morefrequently, 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.

LOPEZ VS CA

574 SCRA 26

FACTS

The instant petition stemmed from an action for reconveyance instituted bypetitioner Richard B. Lopez in his capacity as trustee of the estate of the late Juliana

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Lopez Manzano (Juliana) to recover from respondents several large tracts of landsallegedly belonging to the trust estate of Juliana.

The decedent, Juliana, was married to Jose Lopez Manzano (Jose). Their uniondid not bear any children. Juliana was the owner of several properties, among them,

the properties subject of this dispute. The disputed properties totaling more than 1,500

hectares consist of six parcels of land, which are all located in Batangas. They were theexclusive paraphernal properties of Juliana together with a parcel of land situated in

Mindoro known as Abra de Ilog and a fractional interest in a residential land.On 23 March 1968, Juliana executed a notarial will, whereby she expressed that

she wished to constitute a trust fund for her paraphernal properties, denominatedas Fideicomiso de Juliana Lopez Manzano (Fideicomiso), to be administered by herhusband. If her husband were to die or renounce the obligation, her nephew, Enrique

Lopez, was to become administrator and executor of the Fideicomiso. Two-thirds (2/3)of the income from rentals over these properties were to answer for the education ofdeserving but needy honor students, while one-third 1/3 was to shoulder the expenses

and fees of the administrator. As to her conjugal properties, Juliana bequeathed theportion that she could legally dispose to her husband, and after his death, said

properties were to pass to herbiznietos or great grandchildren.She died on 12 August 1968, before the petition for probate could be heard.Jose filed a report which included a proposed project of partition. In the report,

Jose explained that as the only compulsory heir of Juliana, he was entitled by operationof law to one-half (1/2) of Juliana's paraphernal properties as his legitime, while the

other one-half (1/2) was to be constituted into the Fideicomiso.The probate court issued an order approving the project of partition. As to the

properties to be constituted into the Fideicomiso, the probate court ordered that the

certificates of title thereto be cancelled, and, in lieu thereof, new certificates be issuedin favor of Jose as trustee of the Fideicomiso covering one-half (1/2) of the properties

listed under paragraph 14 of the project of partition; and regarding the other half, to be

registered in the name of Jose as heir of Juliana. The properties which Jose had allegedas registered in his and Juliana's names, including the disputed lots, were adjudicated

to Jose as heir, subject to the condition that Jose would settle the obligations chargedon these properties. The probate court, thus, directed that new certificates of title beissued in favor of Jose as the registered owner thereof in its Order dated 15 September

1969.Jose died on 22 July 1980, leaving a holographic will disposing of the disputed

properties to respondents. The will was allowed probate and the RTC ordered thetransfer of the disputed properties to the respondents as the heirs of Jose.

Petitioner instituted an action for reconveyance of parcels of land with sum of

money before the RTC of Balayan, Batangas against respondents. The complaint

essentially alleged that Jose was able to register in his name the disputed properties,which were the paraphernal properties of Juliana, either during their conjugal union orin the course of the performance of his duties as executor of the testate estate ofJuliana and that upon the death of Jose, the disputed properties were included in the

inventory as if they formed part of Jose's estate when in fact Jose was holding themonly in trust for the trust estate of Juliana.

The RTC dismissed the action on the ground of prescription of action. The CAdenied the appeal.

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ISSUES

1. WON an implied trust was constituted over the disputed properties when Jose,

the trustee, registered them in his name2. WON petitioner's action for reconveyance has prescribed.

HELD

1. Evidently, Juliana's testamentary intent was to constitute an express trust over her

paraphernal properties which was carried out when the Fideicomiso was established inS.P. No. 706. However, the disputed properties were expressly excluded from

the Fideicomiso. The probate court adjudicated the disputed properties to Jose as thesole heir of Juliana. If a mistake was made in excluding the disputed properties fromthe Fideicomiso and adjudicating the same to Jose as sole heir, the mistake was not

rectified as no party appeared to oppose or appeal the exclusion of the disputedproperties from the Fideicomiso. Moreover, the exclusion of the disputed properties fromthe Fideicomiso bore the approval of the probate court. The issuance of the probate

court's order adjudicating the disputed properties to Jose as the sole heir of Julianaenjoys the presumption of regularity.

On the premise that the disputed properties were the paraphernal properties ofJuliana which should have been included in the Fideicomiso, their registration in thename of Jose would be erroneous and Jose's possession would be that of a trustee in

an implied trust. Implied trusts are those which, without being expressed, are deduciblefrom 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 theparticular intention of the parties.

The disputed properties were excluded from the Fideicomiso at the outset. Jose

registered the disputed properties in his name partly as his conjugal share and partly ashis inheritance from his wife Juliana, which is the complete reverse of the claim of the

petitioner, as the new trustee, that the properties are intended for the beneficiaries of

the Fideicomiso. Furthermore, the exclusion of the disputed properties fromthe Fideicomiso was approved by the probate court and, subsequently, by the trial

court having jurisdiction over the Fideicomiso. The registration of the disputed propertiesin the name of Jose was actually pursuant to a court order. The apparent mistake in theadjudication of the disputed properties to Jose created a mere implied trust of the

constructive variety in favor of the beneficiaries of the Fideicomiso.

2. The right to seek reconveyance based on an implied or constructive trust is notabsolute. It is subject to extinctive prescription.An action for reconveyance based onimplied or constructive trust prescribes in 10 years. This period is reckoned from the date

of the issuance of the original certificate of title or transfer certificate of title. Since such

issuance operates as a constructive notice to the whole world, the discovery of thefraud is deemed to have taken place at that time.In the instant case, the ten-year prescriptive period to recover the disputed

property must be counted from its registration in the name of Jose on 15 September

1969, when petitioner was charged with constructive notice that Jose adjudicated thedisputed properties to himself as the sole heir of Juana and not as trustee of the

Fideicomiso.It should be pointed out also that Jose had already indicated at the outset that

the disputed properties did not form part of the Fideicomiso contrary to petitioner's

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claim that no overt acts of repudiation may be attributed to Jose. It may not be amissto state that in the project of partition submitted to the probate court, Jose had

indicated that the disputed properties were conjugal in nature and, thus, excludedfrom Juliana's Fideicomiso. This act is clearly tantamount to repudiating the trust, at

which point the period for prescription is reckoned.

In any case, the rule that a trustee cannot acquire by prescription ownershipover property entrusted to him until and unless he repudiates the trust applies only 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 said trust is not a condition precedent to the running of theprescriptive period. Thus, for the purpose of counting the ten-year prescriptive periodfor the action to enforce the constructive trust, the reckoning point is deemed to be on

15 September 1969 when Jose registered the disputed properties in his name.