TRUST Cases
TRUST Cases
TRUST Cases
On the issue that the DBP officials and employees had no right to
the fund nor to the income earned until they actually retire, which
therefore did not qualify them to be considered cestui que trust or
beneficiary, and therefore the same should still accrue to DBP, the
Court ruled
The beneficiaries or cestui que trust of the Fund are the DBP
officials and employees who will retire x x x.
As COA correctly observed, the right of the employees to claim
their gratuities from the Fund is still inchoate. [The law], does not
allow employees to receive their gratutities until they retire.
However, this does not invalidate the trust created by DBP or the
concomitant transfer of legal title to the trustees. As far back as in
Government v. Abadilla, the Court held that it is not always
necessary that the cestui que trust should be named, or even be
in esse at the time the trust is created in his favor. It is enough
that the beneficiaries are sufficiently certain or identifiable. (at pp.
476-477.)
The Court resolved in DBP v. COA, that The Agreement
indisputably transferred legal title over the income and properties
of the Fund to the Funds trustees. Thus, COAs directive to
recored the income 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. The principal and income of the Fund together
constitute the res or subject matter of the trust. The Agreement
established the Fund precisely so that it would eventually be
sufficient to pay for the retirement benefits of DBP employees
under [the law] without additional outlay from DBP. COA itself
acknowledged the authority of DBP to set up the Fund. However,
COAs subsequent directive would divest the Fund of income, and
defeat the purpose for the Funds creation.
Xxx
The income of the Gratuity Plan Fund, held in trust for the benefit
of DBP employees eligible to retire under RA 1616, should not be
recorded in the books of account of DBP as the income of the
latter.
Ruling:
Prescription
The respondents argue in their Appellants Brief that:
x x x Although reconveyance was mentioned in the title,
reconveyance of which connotes that there was a mistake in
titling the land in question in the name of the registered owner
indicated therein, but in the allegations in the body of the
allegations in the body of the instant complaint, it clearly appears
that the nature of the cause of action of appellants, [sic] they
wanted to get back their respective shares in the subject
inheritance because they did not sell said shares to appellee
Perfecto Macababbad as the signatures purported to be theirs
which appeared in the Extrajudicial Settlement with Simultaneous
Sale of Portion of Registered Land (Lot 4144) were forged.
As appellants represented 2 of the 8 children of the deceased
original owners of the land in question who were Pedro Masirag
and Pantaleona Talauan, the sale is perfectly valid with respect to
the other 6 children, and void ab initio with respect to the
appellants.46
The respondents likewise argue that their action is one for the
annulment of the extrajudicial settlement of estate and sale
bearing their forged signatures. They contend that their action
had not yet prescribed because an action to declare an
instrument null and void is imprescriptible. In their Comment to
the petition for review, however, the respondents modified their
position and argued that the sale to the petitioners pursuant to
the extrajudicial settlement of estate and sale was void because it
was carried out through fraud; thus, the appropriate prescription
period is four (4) years from the discovery of fraud. Under this
argument, respondents posit that their cause of action had not
yet prescribed because they only learned of the extrajudicial
settlement of estate and sale in March 1999; they filed their
complaint the following month.
The petitioners, on the other hand, argue that the relevant
prescriptive period here is ten (10) years from the date of the
registration of title, this being an action for reconveyance based
on an implied or constructive trust.
We believe and so hold that the respondents amended complaint
sufficiently pleaded a cause to declare the nullity of the
extrajudicial settlement of estate and sale, as they claimed in their
amended complaint. Without prejudging the issue of the merits of
the respondents claim and on the assumption that the petitioners
already hypothetically admitted the allegations of the complaint
when they filed a motion to dismiss based on prescription, the
transfer may be null and void if indeed it is established that
respondents had not given their consent and that the deed is a
forgery or is absolutely fictitious. As the nullity of the extrajudicial
settlement of estate and sale has been raised and is the primary
issue, the action to secure this result will not prescribe pursuant
to Article 1410 of the Civil Code.
Based on this conclusion, the necessary question that next arises
is: What then is the effect of the issuance of TCTs in the name of
petitioners? In other words, does the issuance of the certificates
of titles convert the action to one of reconveyance of titled land
which, under settled jurisprudence, prescribes in ten (10) years?
Precedents say it does not; the action remains imprescriptible,
the issuance of the certificates of titles notwithstanding. IngjugTiro is again instructive on this point:
Article 1458 of the New Civil Code provides: "By the contract of
sale one of the contracting parties obligates himself of transfer
the ownership of and to deliver a determinate thing, and the other
to pay therefor a price certain in money or its equivalent." It is
essential that the vendors be the owners of the property sold
Facts:
Petitioner operated a hardware store in a building along Bonifacio
St., Tuguegarao, Cagayan, which stood in acommercial lot owned
by Maria Mendoza, from whom thepetitioner rented the same. In
1982, petitioner allowed respondents to manage the store. In
1984, Mendoza put the Bonifacio property for sale. Having no
funds, Petitioner allegedly entered into a verbal agreement with
respondents stipulating that the latter shall buy the property in
behalf of the petitioner and the consideration for the lot shall be
paid from the accumulated earnings of the store. On September
20, 1984, respondents returned the management of the store to
the petitioner with an inventory showing a difference of P116,
946.15. The petitioner then demanded from the respondents the
reconveyance title of the property but the latter refused. Petitioner
argues that the respondents are mere trustees of the property and
thus, are under moral and legal obligation to reconvey the
property to her. Petitioner further argues that the difference in the
inventory proves that such amount was used to pay for the
purchase price of the property. Respondents, on the other hand,
contend that they have the full ownership of the property because
they paid for it out of their own funds. The petitioner filed a case
before the RTC which rendered a judgment in favor of the
petitioner, which was later on reversed by the Court of Appeals.
Ruling:
In its technical legal sense, a trust is defined as the right,
enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another, but the word
"trust" is frequently employed to indicate duties, relations, and
responsibilities which are not strictly technical trusts.30 A person
who establishes a trust is called the trustor; one in whom
confidence is reposed is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the
beneficiary.31 There is a fiduciary relation between the trustee
and the beneficiary (cestui que trust) as regards certain property,
real, personal, money or choses in action.32
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.33 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.34 No particular words are
required for the creation of an express trust, it being sufficient
that a trust is clearly intended.35 However, in accordance with
Article 1443 of the Civil Code, when an express trust concerns an
immovable property or any interest therein, the same may not be
proved by parol or oral evidence.36
It bears stressing that petitioner has the burden of proving her
cause of action in the instant case and she may not rely on the
weakness of the defense of respondent spouses Ramos.
xxx
Therefore, the party, whether plaintiff or defendant, who asserts
the affirmative of the issue has the burden of proof to obtain a
favorable judgment. For the plaintiff, the burden of proof never
parts. For the defendant, an affirmative defense is one which is
not a denial of an essential ingredient in the plaintiffs cause of
action, but one which, if established, will be a good defense i.e.,
an avoidance of the claim.40
From the allegations of the petitioners Complaint in Civil Case
No. 3672, the alleged verbal trust agreement between petitioner
and respondent spouses Ramos is in the nature of an express
trust as petitioner explicitly agreed therein to allow the
respondent spouses Ramos to acquire title to the Bonifacio
property in their names, but to hold the same property for
petitioners benefit. Given that the alleged trust concerns an
immovable property, however, respondent spouses Ramos
counter that the same is unenforceable since the agreement was
FACTS
- Manuel Salao and Valentina Ignacio begot 4 children, Patricio,
Alejandra, Juan(Banli) and Ambrosia. Manuel died in 1885.
Patricio died in 1886 and was survivedby his son Valentin.
- When Valentina died, her estate was administered by Ambrosia.
It was partitioned extra-judicially to Alejandra, Juan, Ambrosia
and Valentin. Valentin was given land which has an appraised
value of 13,501 which exceeded Valentin's distributive share. So
in the deed of partition he was directed to pay to his co-heirs the
sum of P5,365.75
- In 1911, prior to Valentinas death, Juan and Ambrosia secured a
Torrens title for a forty-seven-hectare fishpond located at Sitio
Calunuran, Lubao, Pampanga. The Calunuran fishpond is the
bone of contention in this case
- Plaintiffs aver that Valentin Salao and Alejandra Salao also
participated in the acquisition of the said fishpond. Defendants
contend that the Calunuran fishpond consisted of lands
purchased by Juan Y. Salao, Sr. and Ambrosia Salao
- However, there can be no controversy as to the fact that after
Juan Y. Salao, Sr. and Ambrosia Salao secured a Torrens title for
the Calunuran fishpond in 1911 they exercised dominical rights
over it to the exclusion of their nephew, Valentin Salao
- On May 27, 1911 Ambrosia Salao bought for four thousand
pesos from the heirs of Engracio Santiago a parcel of swamp
land. Ambrosia Salao and Juan Salao filed an application for the
registration of that land in their names and it was granted by the
CFI. That Pinanganacan or Lewa fishpond adjoins the Calunuran
fishpond.
CASE FACTS
A US company, Star Kist Foods, Inc. USA (Star Kist) engaged
local B.P. Mata Co. Inc (Mata) in providing manning and crewing
services for their company located in the United States. Payment
is settled through telegraphic transfer involving several banks
namely Security Pacific National Bank (SEPAC) of Los Angeles as
the bank of Star Kist, Philippine National Bank (PNB) as the bank
with the agency arrangement with Star Kist, and Insular Bank of
Asia and America (IBAA) as the bank of Mata.
February 24, 1975: PNB issued a Cashiers Check amounting to
$1,400 for the account of Mata representing payment for services
rendered by Mata to Star Kist.
March 11, 1975: PNB effected another payment amounting to
$14,000, which was said to be another payment made by Star Kist.
Prior February 24, the PNB International Department received
notice for payment for $14,000 to Mata but they returned the
missive to SEPAC Bank noting an error. It was cleared by SEPAC
Bank that the notice should only be for $1,400 and NOT $14,000.
May 31, 1981: PNB requested Mata for refund of $14,000, which
was mistakenly paid to them.
February 4, 1982: PNB filed a civil case for collection and refund
of $14,000 against Mata using Article 14561 as basis for their
argument.
II. DECISION OF THE COURTS
Regional Trial Court
The RTC dismissed the complaint stating that the case falls under
Article 21542 instead of Article 1456. They ruled that the trust
code does not apply in this case by using the technical definition
of trust that is a right of property, real or personal, held by one
party for the benefit of another, that there is a fiduciary relation
between a trustee and a cestui que trust as regards certain
property, real, personal, money or chooses in action.
Court of Appeals
PNB elevated the case to the Court of Appeals wherein said court
affirmed the decision of the lower court. The appellate court also
added that the case would not prosper due to the prescription
provided in Article 1145 that states:
Art. 1145. The following actions must be commenced within six
years:
(1) Upon an oral contract;
(2) Upon a quasi-contract. (n)
Supreme Court
The Supreme Court applied both Art. 1456 which is on
constructive trust and Art. 2154 which is on solutio indebiti to the
case.
They determined that there is constructive trust involved
enforcing Art. 1456. A constructive trust is a form of implied trust.
Implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of the
intent or which are superinduced on the transaction by operation
of the law as matters of equity, independently of the particular
intention of the parties. Constructive trusts occur when there is
neither a promise nor any fiduciary relation to speak of and the
so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. Following the aforementioned
definitions, there is trust involved. There was no expression or
contract stipulating that Mata and PNB have a fiduciary
relationship, however, the point that there was a transaction that
would infer such an arrangement (payment), constructive trust
has been established.
The Supreme Court also adapted Art. 2154 for the case clearly
falls in this article. Mata received money, which had not right to
demand it, and there was also a mistake of delivery.
. However, due to the prescription of Art. 2154, quasi-contract can
no longer be an alternative leaving constructive trust as the
applicable option.
As for the issue whether or not PNB can still claim the $14,000,
the Supreme Court ruled that it couldnt be possible. Even though
the case is still within the prescription period, the petitioner
cannot do so because they were proved to be negligent in
exercising their legal right. It took them seven years to realize
their error and for a big bank such as PNB, that is very
remarkable. Banks are subject to audits and an error such as that
should have been spotted within the year. The bank should,
therefore, bear the cost of their own negligence.
***In Philippine National Bank v. Court of Appeals, 217 SCRA 347
(1993), the Court described a typical trust (as distinguished
from a constructive trust under Article 1456 of the Civil Code) as
one wherein confidence is reposed in one person who is named
a trustee for the benefit of another who is called the cestui que
trust, respecting property which is held by the trustee for the
benefit of the cestui que trust. A constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary
relation. While in an express trust, a beneficiary and a trustee are
linked by confidential or fiduciary relations; in a constructive
trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust or
intends holding the property for the beneficiary.
In addition, PNB distinguished between the obligations of the
trustee in an express trust from that in a constructive trust:
Under American Law, a court of equity does not consider a
constructive trustee for all purposes as though he were in reality
a trustee; although it will force him to return the property, it will
not impose upon him the numerous fiduciary obligations
ordinarily demanded from a trustee of an express trust. It must be
borne in mind that in an express trust, the trustee has active
duties of management while in a constructive trust, the duty is
merely to surrender the property.
Facts:
Juliana averred that she and her father have been in open,
continuous, exclusive and notorious possession and in the
concept of an owner of the land since 1921; that theyve been
paying taxes; that the title held by Estrada was registered in 1947
but it only took them to initiate an action in 1967 therefore laches
has set in.
Ruling:
Prescription cannot be invoked against JULIANA for the reason
that as lawful possessor and owner of the Disputed Portion, her
cause of action for reconveyance which, in effect, seeks to quiet
title to the property, falls within settled jurisprudence that an
action to quiet title to property in ones possession is
imprescriptible. 5 Her undisturbed possession over a period of
fifty two (52) years gave her a continuing right to seek the aid of a
Court of equity to determine the nature of the adverse claim of a
third party and the effect on her own title. 6
Besides, under the circumstances, JULIANAs right to quiet title,
to seek reconveyance, and to annul OCT. No. 63 accrued only in
1966 when she was made aware of a claim adverse to her own. It
was only then that the statutory period of prescription may be
said to have commenced to run against her