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ii) constructive – no intention to create a trust is present but a trust is nevertheless created

by law to prevent unjust enrichment or oppression

G.R. No. 171286

June 2, 2014

DOLORES CAMPOS, vs. DOMINADOR ORTEGA, SR.1 and JAMES SILOS
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 reconveyance. In the action for
reconveyance, the 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 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.
An action for reconveyance resulting from fraud prescribes four years from the discovery of
the fraud, which is deemed to have taken place upon the issuance of the certificate of title
over the property, and if based on an implied or a constructive trust it prescribes ten (10)
years from the alleged fraudulent registration or date of issuance of the certificate of title
over the property.
However, an action for reconveyance based on implied or constructive trust is
imprescriptible if the plaintiff or the person enforcing the trust is in possession of the
property.23 In effect, the action for reconveyance is an action to quiet title to the property,
which does not prescribe.

G.R. No. 78173 October 26, 1992
ANDRES SUMAOANG vs. HON. JUDGE, REGIONAL TRIAL COURT, BRANCH XXXI,
GUIMBA, NUEVA ECIJA and ATTY. JORGE A. PASCUA,

The "mistakes" 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 onehalf (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.)
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.
Banco De Oro vs. Bayuga
G.R. No. L-49568 October 17, 1979

The bank has the right to terminate the loan and demand immediate payment if it
finds that the borrower has not used the funds borrowed for the agreed
purpose. 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.

Facts: Bayuga and Zaballero executed a Real Estate Mortgage in favour of Acme savings.
He used Tolentino and Zaballeros’ land as a security for a loan which purpose was for the
acquisition of real estate property in Tagaytay that was bought from Algue. Tolentino
purchased a manager’s check. The bank claimed that the borrowers did not intend to pay
the obligation to Algue which was a violation of Section 77 of RA 337 that made the bank
stopped payment of the manager’s check. With that, Respondents filed an action for specific
performance with the court granted but the bank appealed to CA and while pending appeal,
the lower court issued a rit of execution of its judgement. CA affirmed the lower court
decision.
Tolentino contended that he is not a party to the mortgage contract which was executed
only between the BANK and Bayuga; that he became a party only because he was “injured
and damaged by the bad faith of the BANK;” that he is not willing to co-sign a promissory
note in the BANK’s favor for the amount of P389,000.00, alleging that Bayuga had already
signed a promissory note in November, 1976 in the sum of P200,000.00; and that neither he
nor Bayuga had obligated himself to put up any additional collateral. Bayuga, for his part,
during the hearing, assumed a very passive role admitting that he was but an employee of
TOLENTINO who was the prime mover in the entire transaction.

Issue: Whether or not the Bank has the right to terminate the loan and demand immediate
payment.

Held: The lack of good faith and of a sense of fair play on the part of private respondents
was all too evident. ‘They were treating the release of the amount of P389,000.00 in their
favor more as a money judgment, which it is not, rather than as a loan which it is. They want
to avail of the full benefits of the loan without assumption of the corresponding obligations,
or very minimally at, that. Since receipt of the aforestated amount, they have even refused
to make any monthly amortizations even upon demand by the BANK, contending that “no
amount of the said loan is due. It will only be paid ten (10) years after the execution of the
mortgage contract as interpreted by our Courts.”

18

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. The collateral the BANK has in its favor, with a loan value of only
P157,889.76, is far from adequate to answer for the amount of P389,000.00 that is now in
the hands of private respondents. The manner of repayment by private respondents of that
amount remains nebulous. Of course, the BANK is not without fault for this sorry state of
affairs.

The special reason cited by the trial Court and upheld by the Court of Appeals, i.e., the
“substantial injustice” wrought on private respondents whose land had been mortgaged
without any centavo paid for the loan, does not exist in law. As pointed out by the BANK, the
Calamba property need not have remained subject to the mortgage, the mortgage being but
an accessory contract to the contract of loan which is the principal obligation and which has
been cancelled. The consideration of the mortgage is the same consideration of the principal
contract without which it cannot exist as an independent contract.

19

The “persuasive” factor

considered by the Court of Appeals “that the loan is intended to buy real estate property,
the price of which varies as days go by” was disproved by the fact that TOLENTINO utilized
the amount initially released to purchase a certificate of time deposit and to open bank
accounts in his name rather than pay for the Algue property.

C. Express Trusts – Arts. 1443- 1446

Art. 1443. No express trusts concerning an immovable or any interest therein may be
proved by parol evidence.
Art. 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.
Art. 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes
no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no
proof to the contrary.

i. Requisites

Mindanao Development Authority v. Court of Appeals
G.R. No. L-49087 April 5, 1982
FACTS:
Respondent Francisco Ang Bansing was the owner of a big tract of land situated in Barrio
Panacan Davao City. Ang Bansing sold a portion thereof, with an area of about 5 hectares to
Juan Cruz Yap Chuy. A cadastral survey was made and Lot 664-B-3 was designated as Lot
1846-C of the Davao Cadastre. Juan Cruz sold Lot 1846-C to the Commonwealth of the
Philippines for the amount of P6,347.50. On February 25, 1965, the President of the
Philippines issued Proclamation No. 459, transferring ownership of certain parcels of land
situated in Sasa Davao City, to the Mindanao Development Authority, now the Southern
Philippines Development Administration, subject to private rights, if any. Lot 1846-C, the
disputed parcel of land, was among the parcels of land transferred to the Mindanao
Development
Authority
in
said
proclamation.
ISSUE:
Whether or not there was an express trust between Ang Bansing and Juan Cruz over Lot
1846-C
of
Davao
Cadastre
HELD:
No express trust had been created between Ang Bansing and Juan Cruz over Lot 1846-C of
the Davao Cadastre. Herein petitioner relies mainly upon the following stipulation in the
deed of sale executed by Ang Bansing in favor of Juan Cruz to prove that an express trust
had been established with Ang Bansing as the settlor and trustee and Juan Cruz as
the cestui que trust or beneficiary. The stipulation, however, is nothing but a condition that
Ang Bansing shall pay the expenses for the registration of his land and for Juan Cruz to
shoulder the expenses for the registration of the land sold to him. The stipulation does not

categorically create an obligation on the part of Ang Bansing to hold the property in trust for
Juan Cruz. Hence, there is no express trust. Thus, the petition is denied.
Doctrine:
Implied trusts come into being by operation of law." 14 It is fundamental in the law of trusts
that certain requirements must exist before an express trust will be recognized. Basically,
these elements include a competent trustor and trustee, an ascertainable
trust res, and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but
nevertheless each of the above elements is required to be established, and, if any one of
them is missing, it is fatal to the trusts. Furthermore, there must be a present and complete
disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will
take place in the future. It is essential, too, that the purpose be an active one to prevent
trust from being executed into a legal estate or interest, and one that is not in contravention
of some prohibition of statute or rule of public policy. There must also be some power of
administration other than a mere duty to perform a contract although the contract is for a
third-party beneficiary. A declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and that the court, if called
upon so to do, may enforce, the trust."
In implied trusts, there is neither promise nor fiduciary relations, the so-called trustee does
not recognize any trust and has no intent to hold the property for the beneficiary." 24 It does
not arise by agreement or intention, but by operation of law. Thus, if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property comes. 25
If a person obtains legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the defrauded party. 26
There is also a constructive trust if a person sells a parcel of land and thereafter obtains title
to it through fraudulent misrepresentation. 27
Such a constructive trust is not a trust in the technical sense and is prescriptible; it
prescribes in 10 years.
ii. Proof
a. Immovable Property– Art. 1443 - Writing is necessary
Art. 1443. No express trusts concerning an immovable or any interest therein may be
proved by parol evidence.

G.R. No. L-21616

December 11, 1967

GERTRUDES F. CUAYCONG, ET AL., vs. LUIS D. CUAYCONG, ET AL.,

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

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

PATRICIO SINAON and MARIA, FRANCISCA and JOSE, all surnamed
SINAON, petitioners,
vs.
ANDRES SOROÑGON, ANASTACIA PARREÑO, SOLEDAD PARREÑO, ANA PARREÑO,
MARCELINA, CLARITA, RUFINO and MANUEL, all surnamed ARELLANO, SIMPLICIO
SOMBLINGO and BRIGIDA SOMBLINGO and COURT OF APPEALS, respondents.
We hold that after the Sinaons had appeared to be the registered owners of the lot for more
than forty years and had possessed it during that period, their title had become indefeasible
and their possession could not be disturbed. Any pretension as to the existence of an
implied trust should not be countenanced.
The trustors. who created the alleged trust, died a long time ago. An attempt to prove the
trust was made by unreliable oral evidence. The title and possession of the Sinaons cannot
be defeated by oral evidence which can be easily fabricated and contradicted. The
contradictory oral evidence leaves the court sometimes bothered and bewildered.
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"
(Suarez vs. Tirambulo, 59 Phil. 303; Salao vs. Salao, L-26699, March 16,1976, 70 SCRA 65,
83).
Even assuming that there was an implied trust, plaintiffs' action was clearly barred by
prescription (Salao vs. Salao, supra, p. 84).

b. Personal Property – Art. 1457 – Oral evidence may be used

ART. 1457. An implied trust may be proved by oral evidence.
Proof of implied trust.
An express trust concerning an immovable or any interest therein may not be proved by parol or
oral evidence. (Art. 1443.)
(1) An implied trust, however, whether involving realty or personalty, may be proved by oral
evidence. (Art. 1457.) Thus, where the grantor conveys land to the grantee with the
understanding that after the latter’s death the property would be returned to the grantor or his
heirs, an implied trust is created in favor of the grantor or his heirs (Art. 1453.) which may be
proved by parol evidence. (Magtulis vs. Espartero, 9 C.A. Rep. 67.)
Trustworthy oral evidence is required to prove an implied trust because oral evidence can be
easily fabricated. It cannot rest on loose, equivocal or indefinite declarations. (Salao vs. Salao,
supra.; De Leon vs. Molo-Peckson, 6 SCRA 978 [1962]; Ong Ching Po vs. Court of Appeals, 239
SCRA 341 [1994]; Morales vs. Court of Appeals, 274 SCRA 282 [1997].) 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. An implied
trust, in fine, cannot be established upon vague and inconclusive proof. (Heirs of L. Yap vs.
Court of Appeals, 312 SCRA 603 [1999].)
(2) An implied trust cannot be established contrary to the recitals of a Torrens Title, upon vague
and inconclusive proof. (Salao vs. Salao, 70 SCRA 65 [1976].) Thus, in a case, where the
supposed trustees had appeared to be the registered owners of the lot in question for more than
forty years and had possessed it during that period, and the trustors who created the alleged
trust, died a long time ago, “their title and possession cannot be defeated by oral evidence
which can be easily fabricated. Any pretension as to the existence of an implied trust should not
be countenanced.” (Sinaon vs. Sorongon, 134 SCRA 407 [1985].)
(3) The doctrine of implied trust finds no application where there are no proven facts to support
it. While an implied trust (of real and personal property) does not require the formalities of an
express trust over realty which as mandated by Article 1443 cannot be proved by oral evidence,
still there must be proof that the trustor wanted to grant one party only the beneficial ownership
of a property, although said beneficiary may have legal title in himself. (Ferrer-Lopez vs. Court
of Appeals, 150 SCRA 393 [1987].)
(4) The bare existence of confidential relation between grantor and grantee (mother-in-law and
son-in-law) does not, standing alone, raise the presumption of fraud. A deed (of sale) will not be
set aside merely because the grantor and the grantee sustained a confidential relationship where
the evidence shows no fraud or abuse of confidence. (Esquivias vs. Court of Appeals, 270 SCRA
803 [1997].)

- Salao vs. Salao, 70 SCRA 65 (1976)
Discussion about trust in the case:
"In its technical legal sense, a trust is defined as the right, enforceable solely in equity, to
the beneficial enjoyment of property, the legal title to which is vested in another, but the word
'trust' is frequently employed to indicate duties, relations, and responsibilities which are not
strictly technical trusts" (89 C.J.S. 712).
A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the beneficiary" (Art. 1440, Civil Code).
There is a fiduciary relation between the trustee and the cestui que trust as regards certain
property, real, personal, money or choses in action (Pacheco vs. Arro, 85 Phil. 505).
"Trusts are either express or implied. Express trusts are created by the intention of the trustor or
of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No
express trusts concerning an immovable or any interest therein may be proven by parol
evidence. An implied trust may be proven by oral evidence" (Ibid, 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" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs.
Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are
created by the direct and positive acts of the parties, by some writing or deed, or will, or by
words either expressly or impliedly evincing an intention to create a trust" (89 C.J.S. 72).
"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 matter of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They
are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).
"A resulting trust. is broadly defined as a trust which is raised or created by the act or
construction of law, but in its more restricted sense it is a trust raised by implication of law and
presumed to have been contemplated by the parties, the intention as to which is to be found in the
nature of their transaction, but not expressed in the deed or instrument of conveyance (89 C.J.S.
725). Examples of resulting trusts are found in articles 1448 to 1455 of the Civil Code. (See
Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179; Martinez vs. Graño

42 Phil. 35).
On the other hand, a constructive trust is -a trust "raised by construction of law, or arising by
operation of law". In a more restricted sense and as contra-distinguished from a resulting trust,
a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a
direct intension to create a trust, but by the construction of equity in order to satisfy the demands of
justice." It does not arise "by agreement or intention, but by operation of law." (89 C.J.S. 726-727).
Thus, "if property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes" (Art. 1456, Civil Code).
Or "if a person obtains legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the defrauded party". Such a
constructive trust is not a trust in the technical sense. (Gayondato vs. Treasurer of the P. I., 49
Phil. 244).

Related to the issue:

The foregoing rulings are good under article 1457 of the Civil Code which, as already noted,
allows an implied trust to be proven by oral evidence. Trustworthy oral evidence is required to
prove an implied trust because, oral evidence can be easily fabricated.
iii. Creation – Art. 1444
ART. 1444. No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
Creation of an express trust.
Express trusts are those trusts intentionally created by direct and positive act of the trustor, by
some writing, deed, will, or oral declaration evincing an intention to create the trust.
They are distinguishable from implied trusts, resulting and constructive, in that the latter are

respectively founded upon an intention of the parties to a transaction implied in law, or upon
fraud or wrong irrespective of the intention of the parties concerned. (54 Am. Jur. 36.)
No particular words are required or essential for the creation of an express trust, it being
sufficient that a trust is clearly intended. (Vda. de Esconde vs. Court of Appeals, 253 SCRA 66
[1996]; see Development Bank of the Phils. vs. Commission on Audit, 422 SCRA 459 [2004];
Canezo vs. Rojas, 538 SCRA 242 [2007].)
Terminology used not controlling.
Technical or particular forms of words or phrases are not essential to the manifestation of an
intention to create a trust. It is possible to create a trust without using the word “trust” or
“trustee.” Conversely, the mere fact that the word “trust” or “trustee” is employed does not
necessarily prove an intention to create a trust.
What is important is whether the trustor or the party manifested an intention to create the kind
of relationship which in law is known as a 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 characteristic of the relationship which is called a trust (Julio vs. Dalandan, 21 SCRA 543
[1967]; Tamayo vs. Callejo, 46 SCRA 27 [1972]; Lorenzo vs. Posadas, 64 Phil. 353 [1937].), it being
sufficient that a trust is clearly intended. (Ungab-Valeroso vs. Ungab-Grado, 524 SCRA 699
[2007].)
Kinds of express trusts.
Certain trusts are created for special purposes.1 Among them are:
(1) Charitable trust or one designed for the benefit of a segment of the public or of the public in
general. It is one created for charitable, educational, social, religious, or scientific purposes, or
for the general benefit of humanity. A private trust is not for the good of the public in general or
society as a whole;
(2) Accumulation trust or one that will accumulate income to be reinvested by the trustee in the
trust for the period of time specified;
(3) Spendthrift trust or one established when the beneficiary need to be protected, because of his
inexperience or immaturity from his imprudent spending habits or simply because the
beneficiary is spendrift. Income will be paid to the beneficiary only when actually necessary.
Under some circumstances, the trustee will pay directly the creditor for obligations of the
beneficiary; and
(4) Sprinkling trust or one that gives the trustee the right to determine the income beneficiaries

who should receive income each year and the amount thereof. Income that is not distributed in
any given year is added to the corpus, as in an accumulation trust. It is a discretionary trust if it
gives the trustee the discretion to pay or not to pay the income or principal.
When trustee may sue or be sued alone.
In order that a trustee may sue or be sued alone, it is essential that his trust be express, that is, a
trust created by the direct and positive acts of the parties, by some writing, deed, or will or by
proceedings in court. (Phil. Air Lines, Inc. vs. Heald Lumber Co., 101 Phil. 1031 [1957].)
If a property is insured and the owner received the indemnity from the insurer, it is provided in
Article 22072 of the Civil Code that the insurer is deemed subrogated to the rights of the
insured against the wrongdoer. It has been held that the payment of the indemnity does not
make the insured a trustee of the insurer as in the American law, with the right to bring the
action in the name of the latter and the duty to pay to him (insurer) so much of the recovery as
corresponds to the amount he (insured) had received. This matter being statutory, the same is
governed by our own law in this jurisdiction. (Ibid.)

- Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste, 587 SCRA 417 [2009]
Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in
another. It is a fiduciary relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary. Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties. An implied trust comes
into being by operation of law.
Express trusts are created by direct and positive acts of the parties, by some writing or deed, or
will, or by words either expressly or impliedly evincing an intention to create a trust.
As such, prescription and laches will run only from the time the express trust is repudiated. The
Court has held that for acquisitive prescription to bar the action of the beneficiary against the
trustee in an express trust for the recovery of the property held in trust it must be shown that:
(a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the
cestui que trust; (b) such positive acts of repudiation have been made known to the cestui que
trust, and (c) the evidence thereon is clear and conclusive. The rule requires a clear repudiation
of the trust duly communicated to the beneficiary.

– Secuya vs. Vda. De Selma, 326 SCRA 245 (2000)
The Agreement: An Express Trust, Not a Partition
Notwithstanding its purported nomenclature, this Agreement is not one of partition, because
there was no property to partition and the parties were not co-owners. Rather, it is in the nature
of a trust agreement.

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.13 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.14
The present Agreement of Partition involves an express 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." That Maxima Caballero bound herself to give one third of Lot No. 5629
to Paciencia Sabellona upon the approval of the former's application is clear from the terms of the
Agreement. Likewise, it is evident that Paciencia acquiesced to the covenant and is thus bound to fulfill
her obligation therein.
The Repudiation of the Express Trust
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.18
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. 308719 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.

– Vda. De Esconde vs. CA, 253 SCRA 66 (1996)

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 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.
In turn, implied trusts are either resulting or constructive trusts. These two are differentiated
from each other as follows:
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.
In Diaz, et al. v. Gorricho and Aguado, the Court categorically held that while it is not a retroactive
provision of the new Civil Code, Article 1456 merely expresses a rule already recognized by our
courts prior to the Codes promulgation. This article 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.
Construing this provision of the Civil Code, in Philippine National Bank v. Court of Appeals, the
Court stated:

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a
typical trust, confidence is reposed in one person who is named a trustee for the benefit of another
who is called the cestui que trust, respecting property which is held by the trustee for the benefit of

the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by
confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any
fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends
holding the property for the beneficiary.
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.

– Medina vs. CA, 109 SCRA 437
As provided by our Civil Code, "Trusts are either express or implied. Express trusts are created
by the intention of the trusts are of the parties. Implied trusts come into being by operation of
law." (Art. 1441) "No express trusts concerning an immovable or any interest therein may be
proven by parol evidence." (Art. 1443) "An implied trust may be proven by oral evidence." (Art.
1457) 3
Applied to the 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. But if
there were merely a constructive or implied trust, the action to recover may be barred by
prescription of action or by acquisitive prescription by virtue of respondents' continuous and
adverse possession of the property in the concept of owner-buyer for thirty-three years.
The appellate court correctly held that the facts and evidence of record do not support petitioners' claim of
the creation of an express trust and imprescriptibility of their claim, ruling squarely that "the facts do not
warrant the conclusion that an express trust was created over the land in dispute. 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 g (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 win, 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 (54 Am. Jur. 48-49). Nowhere in the record is there any evidence,
and the plaintiffs do not even raise the pretention, that the original owner of the property Pedro Medina,
father of plaintiff Margarita Medina, appointed, designated or constituted Sotero Medina (the husband of
defendant Restituta Zurbito Medina) as the trustee of the land in dispute. Plaintiffs' contention that there
was an express trust must, therefore, fail."
The appellate court thus likewise correctly held, absent the existence of an express trust, that "The
legal construction most favorable to (petitioners) that can be impressed upon the facts of the
case is that a constructive or implied trust was created by operation of law upon the property in
question,"

7

but petitioners' cause of action had prescribed upon the lapse of the ten-year

period of acquisitive prescription provided by the then applicable statute (section 41 of Act
190) 8 for unregistered lands such as the land herein involved.
The period of prescription commences to run from the day the action may be brought (Article
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); the reasons a party might have had for not immediately taking judicial
action is immaterial and does not stop the running of the period (Lamko vs. Dioso No. L-6923,
October 31, 1955)." 9 Respondent court had referred to such non-action as "perhaps in deference
to the defendants who had raised and clothed her." 10
The similar case of Cuaycong vs. Cuaycong, 11 where the Court, after finding the non-existence of
an express trust applying Article 1443 of the Civil Code which bars parol evidence in proving
the alleged creation of an express trust over immovables, held that "even assuming the alleged
trust to be an implied one, the right alleged by plaintiffs would have already prescribed since
starting in 1936 when the trustor died, plaintiffs had already been allegedly refused by the
aforesaid defendants in their demands over the land, and the compliance filed only in 1961 –
more than the 1 year period of prescription for the enforcement of such rights under the trust. It
is settled that the right to enforce an implied trust in one's favor prescribes in. ten (10) years.
And even under the Code of Civil Procedure, action to recover real property such as lands
prescribes in ten years (Sec. 40, Act 190)," fully supports the correctness of the decision under
review.
iv. Effect if Trustee Declines – Art. 1445
ART. 1445. No trust shall fail because the trustee ap- pointed declines the designation, unless
the contrary should appear in the instrument constituting the trust.

Acceptance, declination, or renunciation by the trustee.
(1) In the case of an express trust, acceptance of trust by a trustee is necessary to charge him
with the office of the trustee and the administration of the trust and to vest the legal title in him.
However, his acceptance of the trust is not necessary to its existence and validity, since if he
declines the trust, the courts will appoint a trustee to fill the office that he declines. (54 Am. Jur.
107; see Sec. 3, Rule 98, Rules of Court.)
(2) One designated or appointed as trustee may decline the responsibility and thereby be free
from any legal or equitable duty or liability in the matter. Unless a contrary intention appears in
the instrument constituting the trust (Art. 1145.), declination or refusal or disqualification of a
trustee does not operate to defeat or void the trust; nor does it operate to vest legal as well as
equitable title in the beneficiary. (54 Am. Jur. 108.)
(3) Furthermore, renunciation of a trust after its acceptance can only be by resignation or
retirement with court approval or at least, with agreement of beneficiaries and on satisfaction of
all legal liabilities growing out of the acceptance of the trust. A contract to renounce, for a
pecuniary consideration, the right to act as a trustee has generally been recognized to be against
public policy. (Ibid.) When a person administering property in the character of trustee
inconsistently assumes to be holding in his own right, this operates as renunciation of the trust
and the beneficiaries in the property are entitled to maintain an action to declare their right and
remove the unfaithful trustee. (Martinez vs. Grano, 42 Phil. 35 [1921].)
v. Acceptance by Beneficiary – Art. 1446
ART. 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no
onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no
proof to the contrary.
Acceptance of trust by the beneficiary.
Acceptance of or assent to the trust by the beneficiary is essential to the creation and validity of
a trust.
The trust being beneficial to the beneficiary, his acceptance is presumed if there is no proof to
the contrary. However, if the trust imposes some onerous condition, acceptance must be shown.
Such acceptance may be express or implied.
D. Implied Trusts – Arts. 1447-1457

Art. 1447. The enumeration of the following cases of implied trust does not
exclude others established by the general law of trust, but the limitation laid
down in Article 1442 shall be applicable.
Concept of implied 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. (89
C.J.S. 724; Philippine National Bank vs. Court of Appeals, 217 SCRA 347 [1993].) Implied
trusts are not created voluntarily, but imposed by law or inferred from the conduct or
dealings of the parties. The concept of implied trusts is that from the facts and
circumstances of a given case, the existence of a trust relationship is inferred in order to
effect the presumed intention of the parties. Thus, there is no implied trust where a contrary
intention is proved. (Abellana vs. Ponce, 437 SCRA 531 [2004].)

Kinds of implied trust.
Implied trusts are ordinarily subdivided into:
(1) Resulting trust. — It is broadly defined as a trust which is raised or created by the act or
construction of law. 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 the nature of their transaction, but not expressed in the deed or instrument of
conveyance. (89 C.J.S. 725.)
This kind of trust is based on the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest. (O’laco vs. Co Cho Chit, 220 SCRA
656 [1993].) The trust is said to result in law from the act of the parties. Examples of this
kind of trust are found in Articles 1448, 1449, 1451, 1452, and 1453; and
(2) Constructive trust. — It is also a trust raised by construction of law or arising by
operation by law. In a more restricted sense, and as contra-distinguished from a resulting
trust, 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 construction of equity in order to
satisfy the demands of justice and prevent unjust enrichment. It does not arise by
agreement or intention but by operation of law 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. (Ibid.; Vda. de Esconde vs. Court of Appeals, 253 SCRA 66 [1996];
Vda. de Retuerto vs. Barz, 372 SCRA 712 [2001]; 89 C.J.S. 726-727.) “If a person obtains
legal title to property by fraud or concealment, courts of equity will Impress upon the title a
so called constructive trust in favor of the defrauded party.’’ This kind of trust is illustrated in
Articles 1450, 1454, 1455, and 1456. However, a trust will not be created when for the
purpose of evading the law prohibiting one from taking or holding real property he takes
conveyance thereof in the name of a third person. (Kiel vs. Estate of P.S. Sabert, 46 Phil. 193
[1924].) For example, a homestead applicant is required by law to occupy and cultivate the
land for his own benefi t, and not for the benefi t of someone else. Hence, a trust created in

favor of one already disqualifi ed from applying additional homestead under the Public Land
Act (Sec. 112, CA No. 141.) is null and void considering that it is in direct violation of the Act
as regards the acquisition of homestead patent. (Sollega de Romero vs. Court of Appeals,
319 SCRA 180 [1999].) A constructive trust is not a trust in a technical sense. (see Art. 1456;
Ramos vs. Ramos, 61 SCRA 284 [1974]; see Sinaon vs. Sorongon, 136 SCRA 407 [1985];
Salvatierra vs. Court of Appeals,
261 SCRA 45 [1996].) It is substantially an appropriate remedy against unjust enrichment.1
(see Sumaoang vs. Judge, RTC, 215 SCRA 136 [1992].)
While in an express trust, a beneficiary and a trustee are linked by a confidential or fiduciary
relation, in a constructive trust, there is neither a promise nor any fiduciary relation to speak
of and the so-called trustee neither accepts any trust nor intends holding the property for
the benefi ciary. (Phil. National Bank vs. Court of Appeals, 217 SCRA 347 [1993].)
Constructive trusts are illustrated in Articles 1450, 1454, 1455, and 1456.
Enumeration of cases of implied trust not exclusive.
The enumeration of cases of implied trust in Chapter 3 is not exclusive. (Art. 1447.) It is
intended to be illustrative of situations in which implied trust is needed in order to correct a
wrong or prevent an unjust enrichment.
(1) It has been held that the registration of a land under the
Torrens System in the name of another does not bar evidence to show that the property is
only being held in trust for the nonregistered owner. (Special Services Corporation vs. Centro
La Paz, 121 SCRA 748 [1983].)
(2) Similarly, although no specifi c provision can be cited to apply, an implied trust is
created when the certificate of registration of a vehicle is placed in the name of a person
although the price thereof was not paid by him but by another. (Chiao Liong
Tan vs. Court of Appeals, 228 SCRA 75 [1993].)
(3) Even though a mortgagee who exercises the power of sale contained in a
mortgage is not strictly considered a trustee in a purely equitable sense, he is deemed a
custodian as far as concerns the surplus of the proceeds of the foreclosure sale and
regarded a trustee thereof for the benefi t of the mortgagor or owner of the equity of
redemption. (Sulit vs. Court of Appeals, 268 SCRA 441 [1997].)
(4) An implied trust is created between the principal and the agent who willfully
violated the trust reposed in him by the principal by buying for himself the property he was
supposed to buy for the principal who designated and appointed him to negotiate with the
owner. The agent is duty-bound to execute a deed of conveyance of the property upon
payment by the principal of the purchase price without interest. (Policarpio vs.Court of
Appeals, 269 SCRA 344 [1997].) So, a constructive trust may also arise by abuse of confi
dence, in order to satisfy the demands of justice. (Arlegui vs. Court of Appeals, 378 SCRA
322 [2002].)
(5) In consonance with the trust fund doctrine in corporation law, the assets of the
corporation as represented by its capital stock are regarded as “trust funds’’ to be

maintained unimpaired for the payment of corporate creditors in the sense that there can be
no distribution of such assets among the stockholders without provision being first made for
the payment of corporate debts.
(6) Included in the regulatory responsibilities of the Insurance Commissioner under
Section 414 of the Insurance Code (Pres. Decree No. 1460, as amended.) is the duty to hold
the security deposits under Sections 191 and 203 of the Code, for the benefi t of all policy
holders. Section 192 thereof specifi cally confers custody over the securities upon the
Commissioner, with whom these investments are required to be deposited. An implied trust
(Art. 1441.) is created by law for the benefi t of all claimants under
subsisting insurance contracts issued by the insurance company. (Republic vs. Del Monte
Motors, Inc., 534 SCRA 53 [2006].)
Implied trust founded upon equity.
“The doctrine of implied trusts is founded upon equity. The principle is applied in the
American legal system to numerous cases where an injustice would result if the legal estate
or title were to prevail over the equitable right of the benefi ciary. A number of instances of
implied trusts are enumerated in the [new] Civil Code, but this enumeration does not
exclude other cases established by the general law of trusts” (Report of the
Code Commission, p. 60.) insofar as they are not in confl ict with the Civil Code, the Code of
Commerce, the Rules of Court, and special laws.
The consequences of an implied trust are, principally, that the implied trustee shall deliver
the possession and reconvey title to the property to the benefi ciary of the trust, and to pay
to the latter the fruits and other net profi ts received from such property during the period of
wrongful holding and otherwise, to adjust the equities between the trustee holding the legal
title and the benefi ciary of the trust. (Sumaoang vs. Judge, RTC, supra.)
While the principle of undue enrichment or quasi-contract is not new, having been
incorporated in the Spanish Civil Code, the provisions on trusts are fairly recent, having been
introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be
found in the Spanish Civil Code, the framers of our present Civil Code incorporated implied
trusts on top of quasi-contracts, both of which embody the principle of equity above strict
legalism.2 (Phil. National Bank vs. Court of Appeals,
217 SCRA 347 [1993].) The doctrine of implied trust if based on an illegal contract cannot be
invoked. (Homena vs. Casa, 157 SCRA 232 [1988].) Being founded in equity, trust can never
result from acts violative of the law. (Deluao vs. Casteel, 29 SCRA 350 [1969]; Art. 1442.)

Distinctions between express trusts and implied trusts.
The following may be mentioned:
(1) Creation of trust. — Express trusts are created by the intention of the trustor or
parties, while implied trusts come into being by operation of law. (Art. 1441.) Express trusts

are 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 or imposed by operation of law, independently
of the particular intention of the parties. Thus, if the intention to establish a trust is clear, it
is express; if such intention is to be taken from the circumstances or other matters indicative
of such intent, then it is implied (Cuaycong vs. Cuaycong, 21 SCRA 1192 [1967].);
(2) Proof of trust. — An express trust concerning an immovable or any interest therein
cannot be proved by parol evidence, while an implied trust concerning an immovable or any
interest therein may be proved by oral evidence (Art. 1457.); and
(3) Repudiation of trust. — In order that laches or acquisitive prescription may bar an
action to enforce an express trust, an express repudiation made known to the beneficiary is
required, while laches constitutes a bar to actions to enforce an implied trust even where
there is no repudiation, unless there is concealment of the fact giving rise to the trust. (Diaz
vs. Gorricho and Aguado, 103 Phil. 261 [1958]; Heirs of Candelaria vs. Romero, 109 Phil. 500
[1960]; Fabian vs. Fabian, 22 SCRA 231 [1968].) An express trust does not prescribe except
when the trustee repudiates the trust.
While no time limit is imposed for the enforcement of rights under an express trust,
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.
(Secuya vs. Vda. de Selma, 326 SCRA 244 [2000].)
Implied trust converted to express trust.
An implied trust may be converted to an express trust by the recognition by the implied
trustee of the right to the property of the owner.
(1) Trustee acknowledged in a public instrument sale of land by his parents to beneficiary. —
In a case, where the plaintiff sought a reconveyance of a parcel of land he bought from
defendant’s parents but which was inadvertently included in the certificate of title covering
defendant’s land, more than ten years from the issuance of said title, the Supreme Court
took the stand that if such erroneous inclusion initially created an implied trust, the trust
was converted into an express trust when subsequently the defendant explicitly
acknowledged in a public instrument the sale of said land by his parents and bound himself
further, to defend plaintiff’s title against any claims whatsoever; it having been created by
the will of the parties, no particular words being required for the creation of an express trust,
it being sufficient that a trust is clearly intended — and hence, was no longer subject to the
statute of limitations until and unless repudiated. (Tamayo vs. Callejo, 46 SCRA 27 [1972].)
(2) Trustee directed his tenant to pay rentals to beneficiary and allowed latter to take
possession. — In a decision that had become final and executory, the trial court declared
that the defendant had the right to redeem the property in question and ordered the plaintiff
to make the resale of the property in favor of the defendant. It was held that such
declaration created an implied trust for the defendant to redeem, subject to the payment of
the redemption price. Where pursuant to the decision, the plaintiff directed the tenant to pay
his rentals to the defendant instead of to him, meaning the defendant had a right to said

rentals, and allowed the latter to take possession of the property when the tenant left the
same, such acts should be construed as a recognition by the plaintiff of the fact that the
property though still in his name, was to be held in trust for the defendant, to be conveyed
to the latter upon payment of the purchase price. The trust became an express one. (see
Geronimo and Isidro vs. Nava and Aquino, 105 Phil. 145 [1959].)

Acquisition of property through prescription.
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. (Vda. de Esconde vs. Court of Appeals, 253 SCRA 66 [1996]; Lopez vs. Court of
Appeals, 574 SCRA 26 [2008].) An action for reconveyance will not prescribe as long as the
property stands in the name of the trustee. To allow prescription would be to permit a
trustee to acquire title against the principal and the true owner. (Intestate Estate of
Alexander T. Ty vs. Court of Appeals, 356 SCRA 661 [2001].)
The settled rule in constructive implied trusts is that 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. (Ibid.) In resulting trusts, the
rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust.
Once the resulting trust is repudiated, however, it is converted into a constructive trust and
is subject to prescription. (O’laco vs. Co Cho Chit, 220 SCRA 656 [1993]; Vda. de Esconde vs.
Court of Appeals, supra; Aznar Brothers Realty Co. vs. Aying, 458 SCRA 496 [2005]; Lopez vs.
Court of Appeals, supra.)
(1) By trustee. — It is a well-settled rule that the possession of a trustee is, in law,
possession of the cestui que trust and, therefore, it cannot be a good ground for title by
prescription. (Lagura vs. Levantino, 71 Phil. 566 [1941].) Co-ownership is a form of trust and
every co-owner is a trustee for the other. (Castrillo vs. Court of Appeals, 10 SCRA 249
[1964]; Sotto vs. Teves, 86 SCRA 154 [1978]; Bargayo vs. Camumot, 40 Phil. 857
[1920].) No prescription shall run in favor of a co-owner against his co-owners or co-heirs as
long as he expressly or impliedly recognizes the co-ownership. (Delima vs. Court of Appeals,
201 SCRA 641 [1991].) There should be a clear repudiation of coownership duly
communicated to the other co-owners.
The express trusts disable the trustee from acquiring for his own benefi t the property
committed to his management or custody, at least while he does not openly repudiate the
trust and makes such repudiation known to the benefi ciary. For this reason, the rules on
adverse possession do not apply to “continuing and subsisting (i.e., unrepudiated) trusts.”
(Fabian vs. Fabian, 20 SCRA 231 [1968].)
The trustee may claim title by prescription founded on adverse possession where it appears
that:
(a) he has performed open and unequivocal acts of repudiation amounting to an
ouster of the cestui que trust or the other co-owners;

(b) such positive acts of repudiation have been made known to the cestui que trust
or the other co-owners;
(c) the evidence thereon should be clear and conclusive or convincing (Ramos vs.
Ramos, 61 SCRA 284 [1974]; Valdez vs. Olorga, 51 SCRA 71 [1973]; Lagura vs. Levantino, 71
Phil. 566 [1941]; Salinas vs. Tuazon and Roman, 55 Phil. 729 [1931];
Salvador vs. Court of Appeals, 243 SCRA 239 [1995]; Sta. Ana vs. Panlasegue, 500 SCRA 476
[2006].); and
(d) the period fixed by law has prescribed. (See Arts. 1132, 1134, 1137.) The period
will commence to run from and after said repudiation and the knowledge thereof by the
cestui que trust. (Salinas vs. Tuazon and Roman, supra.)
(2) By third persons. — Though the statute of limitations does not run between
trustee and cestui que trust as long as the trust relation subsists, it does run between the
trust and third persons. Thus, a third person who holds actual, open, public, and continuous
possession of a land, adversely to the trust, acquires title to the land by prescription as
against such trust. (Government vs. Abadilla, 46 Phil. 642 [1924].)
Acts amounting to repudiation of trust.
Acts which may be adverse to strangers may not be sufficiently adverse to the cestui que
trust. A mere silent possession of the trustee unaccompanied with acts amounting to an
ouster of the cestui que trust cannot be construed as an adverse possession. (Lagura vs.
Levantino, supra.) His mere receipts of rents and profi ts from the property, the erection of
fences and buildings adapted for the cultivation of the land held in trust, and the payment of
land taxes, do not by themselves serve as proof of exclusive ownership. (Huang vs. Court of
Appeals, 236 SCRA 420 [1994]; Salvador vs. Court of Appeals, 243 SCRA 239 [1995].)
An action to compel the trustee to convey property registered in his name for the benefit of
the cestui que trust does not prescribe unless the trustee repudiates the trust. (Viloria vs.
Court of Appeals, 309 SCRA 529 [1999].) A denial of the trust made by a trustee to one who
at the time of such repudiation is a minor, does not have the effect of abrogating the trust
relation. (Castro vs. Castro, 57 Phil. 675 [1933].) In Pangan vs. Court of Appeals (166 SCRA
375 [1988].), the Supreme Court had occasion to lay down specific acts which areconsidered
as acts of repudiation:
(a) Filing by a trustee of an action in court against the trustor to quiet title to
property, or for recovery of ownership thereof, held in possession by the former, may
constitute an act of repudiation of the trust reposed on him by the latter.
(b) The issuance of the certifi cate of title would constitute an open and clear
repudiation of any trust, and in the lapse of more than 20 years, open and adverse
possession as owner would certainly suffi ce to vest title by prescription.
(c) An action for the reconveyance of land based on implied or constructive trust
prescribes within 10 years. And it is from the date of the issuance of such title that the
effective assertion of adverse title for purposes of the statute of limitations is counted.

(d) The prescriptive period may only be counted from the time petitioners repudiated
the trust relation in 1955 upon the fi ling of the complaint for recovery of possession against
private respondents so that the counterclaim of the private respondents contained in their
amended answer wherein they asserted absolute ownership of the disputed realty by reason
of the continuous and adverse possession of the same is well within the 10-year prescriptive
period.
(e) There is clear repudiation of a trust when one who is an apparent administrator of
property causes the cancellation of the title thereto in the name of the apparent benefi
ciaries and gets a new certifi cate of title in his own name.
(f) It is only when the defendants, alleged co-owners of the property in question,
executed a deed of partition and on the strength thereof obtained the cancellation of the
title in the name of their predecessor and the issuance of a new one wherein they appear as
the new owners of a defi nite area each, thereby in effect denying or repudiating the
ownership of one of the plaintiff’s over his alleged share in the entire lot, that the statute of
limitations started to run for the purposes of the action instituted by the latter seeking a
declaration of the existence of the co-ownership and of their rights thereunder. (see
Salvador vs. Court of Appeals, supra.)
Prescriptibility of action for reconveyance based on implied trust.
(1) Period of prescription. — An action for reconveyance is a legal remedy granted to a
rightful owner of land wrongfully or erroneously registered under the Torrens System in the
name of another to compel the latter to reconvey the land to him even after one (1) year
from the issuance of the decree of registration, for such action does not seek to set aside the
decree which is respected as incontrovertible and no longer open to review, but instead
seeks to transfer or reconvey the land wrongfully or erroneously registered in another
person’s name from said registered owner to the rightful owner or to one with a better right.
(Esconde vs. Borlongay, 152 SCRA 603 [1987]; Tomas vs.
Court of Appeals, 185 SCRA 627 [1990]; Caro vs. Sucaldito, 458 SCRA 595 [2005].)
It is now well-settled that an action for reconveyance to enforce an implied trust in one’s
favor prescribes in ten (10) years3 (Amerol vs. Bagumbaran, 154 SCRA 396 [1987];
Cuaycong vs. Cuaycong, 21 SCRA 1192 [1967]; Carantes vs. Court of Appeals, 76 SCRA 514
[1977]; Jaramil vs. Court of Appeals, 78 SCRA 420 [1977]; Vda. de Nacalaban vs. Court of
Appeals, 80 SCRA 428 [1977]; Armamento vs. Guerrero, 96 SCRA 178 [1980]; Amansec vs.
Melendez, 98 SCRA 639 [1980]; Heirs of Maria R. Vda. De Vega vs. Court of Appeals, 199
SCRA 168 [1991]; Tale vs. Court

Art. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the purpose of
having the beneficial interest of the property. The former is the trustee, while the
latter is the beneficiary. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, 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.

Sale to a party but price paid by another.
(1) General rule. — A resulting trust arises in favor of a person from whom a
consideration comes for a conveyance of property, whether realty or personalty, to another.
The presumption is that he who pays for a thing intends a benefi cial interest therein for
himself. (Huang vs. Court of Appeals, 236 SCRA 420 [1994]; Intestate Estate of A.T. Ty vs.
Court of Appeals, 356 SCRA 661 [2001].) The trust created is sometimes referred to as a
purchase money resulting trust. It 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 held it as trustee for the person who supplied purchase money. It is
essential that (a) there be an actual payment of money, property, or service, or an
equivalent constituting valuable consideration 10Article 1448 was held not applicable where
the transaction took place before the Civil Code became effective on August 30, 1950.
(Banawa vs. Miraseo, 97 SCRA 517 [1980].) (54 Am. Jur. 158-159.) and (b) such
consideration must be furnished by the alleged benefi ciary of a resulting trust. The trust
created is sometimes referred to as a purchase money resulting trust. (Morales vs. Court of
Appeals, 274 SCRA 282 [1997], citing 76 Am. Jur. 2d, Trusts, Secs. 179-180 [1992]; Camilang
vs. Burcena, 482 SCRA 342 [2006]; Herbon vs. Polad, 495 SCRA 544 [2006].)
The trust is rebuttable by proof of a contrary intention of the person from whom the
consideration comes, and such proof may be by parol evidence. The trust results only in
favor of one advancing the consideration, and not in favor of one for whose benefit the
purchase may have been made. (54 Am. Jur. 158.)
(2) Exceptions. — However, no trust is implied if the person to whom the legal estate
is conveyed is a child, legitimate or illegitimate, of the payor, because it is presumed that a
gift or donation was intended in favor of the child. This presumption of a gift is rebuttable by
proof of a contrary intention, and on such rebuttal, a resulting trust arises. (see Ibid., 160.)
The reason for the presumption lies in the fact that the trustee may be under a disability.
Besides, it is unnatural that a parent could convey in a roundabout manner his property to
his direct heirs (children) as trustee if he could do it directly by way of gift.
The parties must necessarily be subject to the same limitations on allowable stipulations in
ordinary contracts. What the parties then cannot expressly provide in their contracts for
being contrary to law, morals, good customs, public order, or public policy (Art. 1306.), they
cannot impliedly or implicitly do so in the guise of a resulting trust. Thus, if the purpose of
the payor of the consideration in having title placed in the name of another was to evade
some rule of law, the courts will not assist the payor in achieving his improper purpose (e.g.,
an alien or applicant who is ineligible to hold title to land, who used a person as a dummy)
by enforcing a resulting trust for him in accordance with the “clean hands’’ doctrine. The
trust is invalid if its enforcement would be against public policy, even though its
performance does not involve the commission of a criminal or tortious act by the trustee.
However, the court, on equitable grounds, may allow the payor to recover what he had paid
with legal interest. (Ramos vs. Court of Appeals, 232 SCRA 348 [1994]; Pigao vs. Rabanillo,
488 SCRA 546 [2006].)

Art. 1449. There is also an implied trust when a donation is made to a
person but it appears that although the legal estate is transmitted to the donee,
he nevertheless is either to have no beneficial interest or only a part thereof.

Art. 1450. If the price of a sale of property is loaned or paid by one person
for the benefit of another and the conveyance is made to the lender or payor to
secure the payment of the debt, a trust arises by operation of law in favor of the
person to whom the money is loaned or for whom its is paid. The latter may
redeem the property and compel a conveyance thereof to him.

Art. 1451. When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established by implication of
law for the benefit of the true owner.
Legal title to land inherited by heir placed in name of another.
Succession is a mode of acquisition by virtue of which the property, rights, and obligations to
the extent of the value of the inheritance, of a person are transmitted through his death to
another or others either by his will or by operation of law.
(Art. 774.) The rights to the succession are transmitted from the moment of the death of the
decedent. (Art. 777.) Where a person who has acquired land by inheritance causes the legal
title to be placed in the name of another, a resulting trust is presumed in law in favor of the
true owner, the heir.
(see Custodio vs. Casiano, 9 SCRA 841 [1963].) Here, the heir himself by his voluntary
action, causes the registration of his legal title under the name of another person. (Pilapil vs.
Heirs of M.R. Briones, 484 SCRA 308 [2006].) Where, through fraudulent representations or
by pretending to be the sole heir of the deceased, an heir succeeded in having the original
title of a land in the name of the deceased cancelled and a new one issued in his name
thereby enabling him to possess the land and get its produce, there is created what is called
“constructive trust” in favor of the defrauded. (Baysa vs. Baysa, [C.A.] 53 O.G. 728, Oct. 2,
1957.)
No trust relationship can exist over a property in favor of an heir as benefciary where it
appears that the deceased predecessor had no title to the property in question. (De la Cruz
vs. De la Cruz, 130 SCRA 666 [1984].)

Art. 1452. If two or more persons agree to purchase property and by
common consent the legal title is taken in the name of one of them for the benefit
of all, a trust is created by force of law in favor of the others in proportion to the
interest of each.

Art. 1453. When property is conveyed to a person in reliance upon his
declared intention to hold it for, or transfer it to another or the grantor, there is
an implied trust in favor of the person whose benefit is contemplated.
Conveyance under a promise to hold for, or transfer to another.
The trust established by virtue of this article is based on the promise or representation of the
grantee to hold the property conveyed for, or transfer it to another or the grantor. The
grantee is estopped from asserting ownership in himself by denying his representation as
against the person for whose benefi t the implied trust is created.
The rule in Article 1453 is founded upon equity, particularly where on the faith of the
agreement or understanding, the grantee is enabled to gain an advantage in the purchase of
the property or where the consideration or part thereof has been furnished by or for another.
Thus, it has been held that where property is taken by a person under an agreement to hold
it for or convey it to another or to the grantor, or on certain conditions, a trust results for the
benefi t of such other or his heirs, which equity will enforce according to the agreement. (89
C.J.S. 960; Heirs of Candelaria vs. Romero, 109 Phil. 500 [1960]; Rosario vs. Court of
Appeals, 310 SCRA 464 [1999].)
Likewise, a person who, before consolidation of property in the purchaser under a contract of
sale with pacto de retro, agrees with the vendors to buy the property and administer it until
all debts constituting an encumbrance thereon shall have been paid after which the property
shall be turned back to the original owners, is bound by such agreement; and upon buying
the property under these circumstances, such person becomes in effect a trustee and is
bound to administer the property in this character. (Martinez vs. Grano, 42 Phil. 35 [1921].)
Article 1453 would apply if the person conveying the property did not expressly state that he
was establishing the trust. (Cuaycong vs. Cuaycong, 21 SCRA 1192 [1967].)

Art. 1454. If an absolute conveyance of property is made in order to secure
the performance of an obligation of the grantor toward the grantee, a trust by
virtue of law is established. If the fulfillment of the obligation is offered by the
grantor when it becomes due, he may demand the reconveyance of the property
to him.

Art. 1455. When any trustee, guardian or other person holding a fiduciary
relationship uses trust funds for the purchase of property and causes the
conveyance to be made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the funds belong.

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.
Acquisition of property through mistake or fraud.

(1) Constructive trust created. — Article 1456 illustrates a constructive trust. Where a
party acquires through mistake or fraud a legal title to property to which another has a
better right, there is created by law what is termed in jurisprudence as “constructive trust”
in favor of the aggrieved party who is truly entitled to it or his successors-in-interest, and
grants to the latter the right to recover his or their title over the property by way of
reconveyance while the same has not yet passed to an innocent purchaser for value, in
keeping with the primary principle of law and equity that one should not unjustly enrich
himself at the expense of another.13 According to the Supreme Court (in Diaz vs. Gorricho,
103 Phil. 261 [1958].), Article 1456 merely expresses a rule recognized in Gayondato vs.
Insular Treasurer. (49 Phil. 244 [1926].)
The presence of fraud or mistake creates an implied trust for the benefi t of the rightful and
legal owner giving him the right to seek reconveyance of the property. All that must be
alleged in the complaint are two (2) facts: (a) that the plaintiff was the owner of the
property; and (b) that the defendant had illegally dispossessed him of the same. (Heirs of A.
Kionisala vs. Heirs of H. Dacut, 378 SCRA 206 [2002]; Heirs of M. Sanjoyo vs. Heirs of M.
Quijano, 449 SCRA 15 [2005]; Mendezabel vs. Apao, 483 SCRA 587 [2006].)
Applying the rule in Article 1456,14 the Supreme Court, held that a buyer of a parcel of land
at a public auction to satisfy a judgment against a widow, acquired only 1/2 interest on the
land corresponding to the share of the widow and the other half belonging to the heirs of her
husband became impressed with a constructive trust in behalf of said heirs. (Noel vs. Court
of Appeals, 240 SCRA 78 [1995]; see Salvatierra vs. Court of Appeals, 260 SCRA 45 [1996].)
A purchaser in bad faith is, by Article 1456, considered a trustee of an implied trust for the
benefi t of the true owner of the property. That being the case, he may not successfully set
up prescription as a defense. (Francisco vs. Magbitang, 173 SCRA 382 [1989].) Under the
Article, 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. (see Sumaoang
vs. Judge, RTC, 215 SCRA 136 [1992].)
(2) Not trust in the technical sense. — The use of the word “trust” in Article 1456 is
not basically accurate. The law has styled such a situation a “trust” and the person obtaining
the property a “trustee” for want of a better term as such person has no title to the property
and really holds it for the true owner. (Gayondato vs. Treasurer, supra; Sevilla vs. De los
Angeles, 97 Phil. 875 [1955]; Manlicon vs. De Vera, 86 Phil. 115 [1950]; Gemora vs. F.M.
Yaptico and Co., 52 Phil. 161 [1928]; Ramos vs. Ramos, 61 SCRA 284 [1974].) “But as courts
are agreed in administering the same remedy in a certain class of frauds as are
administered in fraudulent breaches of trusts, and as courts and the profession have
concurred in calling such frauds as constructive frauds, there can be no misapprehension in
continuing the same phraseology while a change might lead to confusion and
misunderstanding.’’ (Estate of the Late M. Jacob vs. Court of Appeals, 283 SCRA 474 [1998].)
The trust alluded to, as just pointed out, is constructive trust arising by operation of law. It is
not trust in the technical sense (Gonzales vs. Intermediate Appellate Court, 204 SCRA
106 [1991].) for in a typical trust, confi dence is reposed in one person for the benefi t of
another respecting property which is held by the former for the benefi t of the latter.15 (see

Art. 1440; Phil. National Bank vs. Court of Appeals, 217 SCRA 347 [1993].)
It is created as a means of affording relief to the innocent, and constitutes a remedial device
“through which preference of self is made subordinate to loyalty to others.’’ (Sumaoang vs.
Judge, RTC, supra.)
(3) Remedy of owner under the torrens system. — The sole remedy of the landowner
whose property has been wrongfully or erroneously registered under the torrens system in
another’s name is, after one year from the date of the decree of registration, not to set aside
the decree but, respecting it as incontrovertible and no longer open to review, to bring an
ordinary action in the ordinary court of justice for reconveyance or, if the property has
passed into the hands of an innocent purchaser for value, for damages. (Aban vs. Cedeña,
[Unrep.] 103 Phil. 1153 [1958]; Director of Lands vs. Register of Deeds of Rizal, 92 Phil. 826
[1953]; see Armamento vs. Guerrero, 96 SCRA 178 [1980]; Gomez vs. Duyan, 453 SCRA 708
[2005]; Ceervantes vs. Court of Appeals, 503 SCRA 451 [2006]; see Sec. 53, Pres. Decree
No. 1529 [Property Registration Decree].)
The principle that a trustee who takes a torrens title in his name cannot repudiate the trust
by relying on the registration, is a well-known exception to the principle of conclusiveness of
a certifi cate of title. (Adriano vs. Court of Appeals, 328 SCRA
738 [2000].) The benefi ciary has the right to enforce the trust, notwithstanding the
irrevocability of the torrens title, and the trustee and his successors-in-interest are bound to
execute the deed of reconveyance. After all, the torrens system was never designed to
shield and protect one who had committed fraud or misrepresentation and thus holds title in
bad faith. (Mun. of Victorias vs. Court of Appeals, 149 SCRA 32 [1987]; Amerol vs.
Bagumbaran, 154 SCRA 396 [1987]; Adille vs. Court of Appeals, 157 SCRA 455, 546 [1988].)
It does not create or vest title but only confi rms and records title already existing and
vested. Where one does not have any rightful claim over a real property, the torrens system
of registration can confi rm or record nothing. (Rosario vs. Court of Appeals, 310 SCRA 464
[1999].) Where a party is in actual possession of the property, the action to enforce the trust
and recover the property and thereby quiet title thereto, is imprescriptible. (Heirs of
Clemente Ermac vs. Heirs of Vicente Ermac, 403 SCRA 291 [2003].)

Art. 1457. An implied trust may be proved by oral evidence.
Proof of implied trust.
An express trust concerning an immovable or any interest therein may not be proved by
parol or oral evidence. (Art. 1443.)
(1) An implied trust, however, whether involving realty or personalty, may be proved
by oral evidence. (Art. 1457.) Thus, where the grantor conveys land to the grantee with the
understanding that after the latter’s death the property would be returned to the grantor or
his heirs, an implied trust is created in favor of the grantor or his heirs (Art. 1453.) which
may be proved by parol evidence. (Magtulis vs. Espartero, 9 C.A. Rep. 67.) Trustworthy oral
evidence is required to prove an implied trust because oral evidence can be easily
fabricated. It cannot rest on loose, equivocal or indefi nite declarations. (Salao vs. Salao,

supra.; De Leon vs. Molo-Peckson, 6 SCRA 978 [1962]; Ong Ching Po vs. Court of Appeals,
239 SCRA 341 [1994]; Morales vs. Court of Appeals, 274 SCRA 282 [1997].) 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. An implied trust, in fine, cannot be established upon vague and inconclusive
proof. (Heirs of L. Yap vs. Court of Appeals, 312 SCRA 603 [1999].)
(2) An implied trust cannot be established contrary to the recitals of a Torrens Title,
upon vague and inconclusive proof. (Salao vs. Salao, 70 SCRA 65 [1976].) Thus, in a case,
where the supposed trustees had appeared to be the registered owners of the lot in question
for more than forty years and had possessed it during that period, and the trustors who
created the alleged trust, died a long time ago, “their title and possession cannot be
defeated by oral evidence which can be easily fabricated. Any pretension as to the existence
of an implied trust should not be countenanced.” (Sinaon vs. Sorongon, 134 SCRA 407
[1985].)
(3) The doctrine of implied trust finds no application where there are no proven facts
to support it. While an implied trust (of real and personal property) does not require the
formalities of an express trust over realty which as mandated by Article
1443 cannot be proved by oral evidence, still there must be proof that the trustor wanted to
grant one party only the beneficial ownership of a property, although said beneficiary may
have legal title in himself. (Ferrer-Lopez vs. Court of Appeals, 150 SCRA 393 [1987].)
(4) The bare existence of confi dential relation between grantor and grantee (motherin-law and son-in-law) does not, standing alone, raise the presumption of fraud. A deed (of
sale) will not be set aside merely because the grantor and the grantee sustained a
confidential relationship where the evidence shows no fraud or abuse of confidence.
(Esquivias vs. Court of Appeals, 270 SCRA 803 [1997].)

SPS. FELIPE and JOSEFA PARINGIT, petitioner, vs. MARCIANA P. BAJIT, ADOLIO
PARINGIT and ROSARIO PARINGIT ORDOÑO, respondents.
FACTS:
During their lifetime, spouses Julian and Aurelia Paringit leased a lot in Sampaloc, Manila
(the lot) from Terocel Realty, Inc. (Terocel Realty). They built their home there and raised five
children. Aurelia died on November 6, 1972.
For having occupied the lot for years, Terocel Realty offered to sell it to Julian. Julian sought
the help of his children so he can buy the property but only his son Felipe and wife Josefa
had the financial resources he needed at that time. To bring about the purchase, on January
16, 1984 Julian executed a deed of assignment of leasehold right in favor of Felipe and his
wife that would enable them to acquire the lot. On April 12, 1984 Felipe and his wife paid the

last installment and the realty company executed a Deed of Absolute Sale in their favor and
turned over the title to them.
In 1985, due to issues among Julian’s children regarding the ownership of the lot, Julian
executed an affidavit clarifying the nature of Felipe and his wife’s purchase of the lot. He
claimed that it was bought for the benefit of all his children.
Expressing their concurrence with what their father said in his affidavit, Felipe’s siblings
(Marciana, et. al.), except Florencio, signed the same.
Marciana, et al continued to occupy the lot with their families without paying rent. This was
the situation when their father Julian died on December 21, 1994.
In 1995. Felipe and his wife sent a demand letter to Marciana, et al asking them to pay
rental arrearages for occupying the property from March 1990 to December 1995 at the rate
of P2,400.00 a month, totaling P168,000.00. Marciana, et al refused to pay believing that
they had the right to occupy the house and lot, it being their inheritance from their parents.
On March 11, 1996 Felipe and his wife filed an ejectment suit against them. The suit
prospered, resulting in the ejectment of Marciana, et al and their families from the property.
Shortly after, Felipe and his wife moved into the same.

Marciana, et al filed the present action against Felipe and his wife for annulment of title and
reconveyance of property.
In his answer, Felipe denied knowledge of the agreement among the siblings that the
property would devolve to them all. Josefa, his wife, claimed that she signed the affidavit
only because Marciana, et al were going to get mad at her had she refused. She also claimed
that she signed the document only to prove having received it.
RTC rendered a decision, finding the evidence of Marciana, et al insufficient to prove by
preponderance of evidence that Felipe and his wife bought the subject lot for all of the
siblings.
CA rendered judgment reversing the decision of the RTC and ordering Felipe and his wife to
reconvey to Marciana, et al their proportionate share in the lot upon reimbursement of what
the spouses paid to acquire it plus legal interest.
ISSUE: Whether or not CA erred in finding that Felipe and his wife purchased the subject lot
under an implied trust for the benefit of all the children of Julian
CIVIL LAW: Implied Trust on sale of land
HELD:
The CA found that Felipe and his wife’s purchase of the lot falls under the rubric of the
implied trust provided in Article 1450 of the Civil Code.
Implied trust under Article 1450 presupposes a situation where a person, using his own
funds, buys property on behalf of another, who in the meantime may not have the funds to
purchase it. Title to the property is for the time being placed in the name of the trustee, the

person who pays for it, until he is reimbursed by the beneficiary, the person for whom the
trustee bought the land. It is only after the beneficiary reimburses the trustee of the
purchase price that the former can compel conveyance of the property from the latter.

CIVIL LAW: Prescription on implied trust
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 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.
At any rate, even assuming that Felipe and his wife’s registration of the lot in their names in
January 1987 constituted a hostile act or a violation of the implied trust, Marciana, et al had
10 years or until January of 1997 within which to bring their action. Here, they filed such
action in July 1996 well within the period allowed them.
Finally, the CA ordered Marciana, et al to reimburse Felipe and his wife the individual
siblings’ proportionate share in theP55,500.00 that the spouses paid the realty company.

MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED, petitioner, vs. COURT
OF APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.
The Facts
Petitioner, a non-stock and non-profit corporation, was organized for the purpose of holding
title to and administering the employees' trust or retirement funds (Employees' Trust Fund)
established for the benefit of the employees of Victorias Milling Company, Inc. (VMC). 5
Petitioner, as trustee, claims that the income earned by the Employees' Trust Fund is tax
exempt under Section 53 (b) of the National Internal Revenue Code (Tax Code).
Petitioner alleges that on 25 March 1992, petitioner decided to invest part of the Employees'
Trust Fund to purchase a lot 6 in the Madrigal Business Park (MBP lot) in Alabang,
Muntinlupa. Petitioner bought the MBP lot through VMC. 7 Petitioner alleges that its
investment in the MBP lot came about upon the invitation of VMC, which also purchased two
lots. Petitioner claims that its share in the MBP lot is 49.59%. Petitioner's investment
manager, the Citytrust Banking Corporation (Citytrust), 8 in submitting its Portfolio Mix
Analysis, regularly reported the Employees' Trust Fund's share in the MBP lot. 9 The MBP lot
is covered by Transfer Certificate of Title No. 183907 (TCT 183907) with VMC as the
registered owner. 10

Petitioner claims that since it needed funds to pay the retirement and pension benefits of
VMC employees and to reimburse advances made by VMC, petitioner's Board of Trustees
authorized the sale of its share in the MBP lot. 11

On 14 March 1997, VMC negotiated the sale of the MBP lot with Metropolitan Bank and Trust
Company, Inc. (Metrobank) for P81,675,000, but the consummation of the sale was withheld.
12 On 26 March 1997, VMC eventually sold the MBP lot to Metrobank. VMC, through its Vice
President Rolando Rodriguez and Assistant Vice President Teodorico Escober, signed the
Deed of Absolute Sale as the sole vendor.
Since Lot 1 has been sold for P81,675,000.00 (gross of 7.5% withholding tax and 3% broker's
commission, MJOPFI's share in the proceeds of the sale is P40,500,000.00 (gross of 7.5%
withholding tax and 3% broker's commission. However, MJO Pension Fund is indebted to VMC
representing pension benefit advances paid to retirees amounting to P21,425,141.54,
thereby leaving a balance of P14,822,358.46 in favor of MJOPFI. Check for said amount of
P14,822,358.46 will therefore be issued to MJOPFI as its share in the proceeds of the sale of
Lot 1. The check corresponding to said amount will be deposited with MJOPFI's account with
BPI Asset Management & Trust Group which will then be invested by it in the usual course of
its administration of MJOPFI funds.

Petitioner claims that it is a co-owner of the MBP lot as trustee of the Employees' Trust Fund,
based on the notarized Memorandum of Agreement presented before the appellate courts.
Petitioner asserts that VMC has confirmed that petitioner, as trustee of the Employees' Trust
Fund, is VMC's co-owner of the MBP lot. Petitioner maintains that its ownership of the MBP
lot is supported by the excerpts of the minutes and the resolutions of petitioner's Board
Meetings. Petitioner further contends that there is no dispute that the Employees' Trust Fund
is exempt from income tax. Since petitioner, as trustee, purchased 49.59% of the MBP lot
using funds of the Employees' Trust Fund, petitioner asserts that the Employees' Trust Fund's
49.59% share in the income tax paid (or P3,037,697.40 rounded off to P3,037,500) should be
refunded.
The Issues
1.Whether petitioner or the Employees' Trust Fund is estopped from claiming that the
Employees' Trust Fund is the beneficial owner of 49.59% of the MBP lot and that VMC merely
held 49.59% of the MBP lot in trust for the Employees' Trust Fund.
2.If petitioner or the Employees' Trust Fund is not estopped, whether they have sufficiently
established that the Employees' Trust Fund is the beneficial owner of 49.59% of the MBP lot,
and thus entitled to tax exemption for its share in the proceeds from the sale of the MBP lot.
The Ruling of the Court
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. Article 1452 of the Civil Code provides:

Art. 1452.If two or more persons agree to purchase a property and by
common consent the legal title is taken in the name of one of them for the
benefit of all, a trust is created by force of law in favor of the others in
proportion to the interest of each. (Emphasis supplied)
For Article 1452 to apply, all that a co-owner needs to show is that there is "common
consent" among the purchasing co-owners to put the legal title to the purchased property in
the name of one co-owner for the benefit of all. Once this "common consent" is shown, "a
trust is created by force of law." The BIR has no option but to recognize such legal trust
as well as the beneficial ownership of the real owners because the trust is created by force
of law. The fact that the title is registered solely in the name of one person is not conclusive
that he alone owns the property.
Thus, this case turns on whether petitioner can sufficiently establish that petitioner, as
trustee of the Employees' Trust Fund, has a common agreement with VMC and VFC that
petitioner, VMC and VFC shall jointly purchase the MBP lot and put the title to the MBP lot in
the name of VMC for the benefit petitioner, VMC and VFC.
We rule that petitioner, as trustee of the Employees' Trust Fund, has more than sufficiently
established that it has an agreement with VMC and VFC to purchase jointly the MBP lot and
to register the MBP lot solely in the name of VMC for the benefit of petitioner, VMC and VFC.
The registration of a land under the Torrens system does not create or vest title, because
registration is not one of 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 co-owned by persons not named in the
certificate, or that it may be held in trust for another person by the registered owner. 35
No particular words are required for the creation of a trust, it being sufficient that a trust is
clearly intended. 36 It is immaterial whether or not the trustor and the trustee know that the
relationship which they intend to create is called a trust, and whether or not the parties
know the precise characteristic of the relationship which is called a trust because what is
important is whether the parties manifested an intention to create the kind of relationship
which in law is known as a trust. 37
The fact that the TCT, Deed of Absolute Sale and the Remittance Return were in VMC's name
does not forestall the possibility that the property is owned by another entity because
Article 1452 of the Civil Code expressly authorizes a person to purchase a
property with his own money and to take conveyance in the name of another.
In this case, the notarized Memorandum of Agreement and the certified true copies of the
Portfolio Mix Analysis prepared by Citytrust clearly prove that petitioner invested
P5,504,748.25, using funds of the Employees' Trust Fund, to purchase the MBP lot. Since the
MBP lot was registered in VMC's name only, a resulting trust is created by operation of
law. A resulting trust is based on the equitable doctrine that valuable consideration and not
legal title determines the equitable interest and is presumed to have been contemplated by

the parties. 39Based on this resulting trust, the Employees' Trust Fund is considered the
beneficial co-owner of the MBP lot.
Petitioner has sufficiently proven that it had a "common consent" or agreement with VMC
and VFC to jointly purchase the MBP lot. The absence of petitioner's name in the TCT does
not prevent petitioner from claiming before the BIR that the Employees' Trust Fund is the
beneficial owner of 49.59% of the MBP lot and that VMC merely holds 49.59% of the MBP lot
in trust, through petitioner, for the benefit of the Employees' Trust Fund.
The BIR has acknowledged that the owner of a land can validly place the title to the land in
the name of another person. In BIR Ruling [DA-(I-012) 190-09] dated 16 April 2009, a certain
Amelia Segarra purchased a parcel of land and registered it in the names of Armin Segarra
and Amelito Segarra as trustees on the condition that upon demand by Amelia Segarra, the
trustees would transfer the land in favor of their sister, Arleen May Segarra-Guevara. The
BIR ruled that an implied trust is deemed created by law and the transfer of the land to the
beneficiary is not subject to capital gains tax or creditable withholding tax.

ESTATE OF EDWARD MILLER GRIMM vs. ESTATE OF CHARLES PARSONS
Facts:
Grimm and Parsons are 2 0f the 3 original partners of G – P and company. Both of them own
shares on MGCC. Later on Grimm desires to assign his playing rights to Yoshida and to make
it possible Grimm needs to transfer some of his shares to Parsons and make Yoshida an
assignee of the company. But after the transfer but before they were able to inform the
MGCC about the company the MGCC board accommodated Yoshida even not being an
assignee, by then Parson wrote a letter to MGCC that the name of the shares to be retained
in his name but he recognizes Grimm as the real owner, but on the other hand Grimm also
emphasizes that he is still the original owner. But on the demise of Grimm the Partnership
was continued by the Parsons and the other partner and adding up the sons of Parsons. And
time came when Parsons also died. The issues arise when the Estate of Grimm is claiming
back the shares and transfer it to their name. But the Estate of Parsons claimed that it was
theirs and it was entrusted to the G – P and company as beneficiary of Parson, where by this
time the Grimm is not already a part owner as part of dissolution of the old Partnership. The
CA also decided in favor of the Parsons because the estate Grimm failed to present evidence
to prove that Grimm really bought the property in question.
Issue: Who is the real owner?
Ruling:
Trust is the legal relationship between one 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. Trust relations between parties may be express, as when the trust is created
by the intention of the trustor. 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. Implied trust comes into existence 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. Judging
from their documented acts immediately before and subsequent to the actual transfer on
September 7, 1964 of MC No. 590, Parsons, as transferee, and Grimm, as transferor,
indubitably contemplated a trust arrangement.
And lest it be overlooked, Parsons had previously acknowledged Grimm to be the owner of
MC No. 1088, after his earlier repeated declarations that the transfer of the replaced MC No.
580 was temporary. Parsons was thus in contextually in estoppel to deny, thru the Letter of
Trust aforementioned, hypothetically assuming its authenticity, Grimm’s ownership of the
replacement certificate.

Muller vs. Muller
GR No. 149615, August 29, 2006
Petitioner Elena Buenaventura Muller and respondent Helmut Muller were married in
Hamburg,Germany. The couple resided in Germany at a house owned by respondent’s
parents but decided to move and reside permanently in the Philippines. Respondent had
inherited the house in Germany from his parents which he sold and used the proceeds for
the purchase of a parcel of land in Antipolo, Rizal at the cost of P528,000.00 and the
construction of a house amounting to P2,300,000.00. The Antipolo property was registered
in the name of petitioner.
Due to incompatibilities and respondent’s alleged womanizing, drinking, and maltreatment,
the spouses eventually separated. Respondent filed a petition for separation of properties
before the Regional Trial Court of Quezon City. The trial court rendered a decision which
terminated the regime of absolute community of property between the petitioner and
respondent. It also decreed the separation of properties between them and ordered the
equal partition of personal properties located within the country, excluding those acquired
by gratuitous title during the marriage. With regard to the Antipolo property, the court held
that it was acquired using paraphernal funds of the respondent. However, it ruled that
respondent cannot recover his funds because the property was purchased in violation of
Section 7, Article XII of the Constitution.
Respondent appealed to the Court of Appeals. Respondent claims that he is not praying for
transfer of ownership of the Antipolo property but merely reimbursement; that the funds
paid by him for the said property were in consideration of his marriage to petitioner; that the
funds were given to petitioner in trust; and that equity demands that respondent should be
reimbursed of his personal funds. The Court of Appeals ruled in favor of the respondent and
modified the trial court’s Decision.
Issue:
Whether respondent is entitled to reimbursement of the funds used for the acquisition of the
Antipolo property.

Held:
Section 7, Article XII of the 1987 Constitution states: Save in cases of hereditary succession,
no private lands shall be transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain. Aliens, whether
individuals or corporations, are disqualified from acquiring lands of the public domain.
Hence, they are also disqualified from acquiring private lands. The primary purpose of the
constitutional provision is the conservation of the national patrimony.
Respondent was aware of the constitutional prohibition and expressly admitted his
knowledge thereof to this Court. He declared that he had the Antipolo property titled in the
name of petitioner because of the said prohibition. His attempt at subsequently asserting or
claiming a right on the said property cannot be sustained.
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. To hold otherwise would
allow circumvention of the constitutional prohibition.
To allow reimbursement would in effect permit respondent to enjoy the fruits of a property
which he is not allowed to own. Thus, it is likewise proscribed by law.
ALBERTO HERBON, MARGARITO HERBON AND GABINO HERBON, petitioners, vs. LEOPOLDO
T. PALAD AND HELEN P. CAYETANO, respondents.
Facts:
In his lifetime, Gonzalo Palad (Gonzalo) was a co-owner of a parcel of agricultural land
located in Poblacion, Bagac, Bataan, otherwise known as Lot 421, with an area of 32,944
square meters and covered by Transfer Certificate of Title (TCT) No. 4408 of the Register of
Deeds of Bataan. 2 The extent of his co-ownership in Lot 421 is 1/4 and 1/14. The other coowners of Lot 421 and their respective shares were: Jacinto Palad (Jacinto), 1/4 and 1/14;
Spouses Juan Banzon and Elena Gutierrez, 1/14; Francisco Palad, 1/14; Lorenzo Palad, 1/14;
Ramon Nojadera, 1/28; Ana Nojadera, 1/28; Modesta Nojadera (Modesta), 1/28; and,
Concordia Nojadera (Concordia), 1/28. 3 Gonzalo's share in Lot 421 was conjugal property,
having been acquired during his marriage with one Alejandra Nava (Alejandra). 4 Adelaida, 5
Benjamin, 6 and Ignacio, respondents' father, were their children.
Sometime during the Japanese Occupation, Alejandra died. On September 14, 1949, Gonzalo
contracted a second marriage with Remedios Torres (Remedios). 7 Remedios, a widow, had
three children from her previous marriage, herein petitioners. The union of Gonzalo and
Remedios bore no children. On November 16, 1983, Gonzalo died. About a decade later, or
on November 9, 1992, Remedios died. Thereafter, petitioners took possession of a portion of
Lot 421 and despite respondents' demands to vacate and turn over possession of the
property, petitioners refused to do so. When respondents brought the matter to conciliation
before the Office of the Barangay Captain of Ibaba, Bagac, Bataan, the matter was not

amicably settled. 8 Hence, on January 4, 1994, respondents filed a complaint against
petitioners for recovery of possession of real property with damages. 9

On March 2, 1994, petitioners filed their Answer with Counterclaim claiming that they have a
right to possess and occupy a portion of Lot 421 as heirs of Remedios. 10
During the trial, respondents presented oral evidence to show that Gonzalo expressed his
intentions regarding the disposition of his properties, which included his share in Lot 421 and
a 173-square meter lot in Pag-asa, Bagac, Bataan (Pag-asa property); that Gonzalo intended
that the Pag-asa property would be given to Remedios and the same would be left to her
granddaughter, Merlita Herbon Espiritu (Merlita), 11 eldest daughter of petitioner Gabino
Herbon; that Gonzalo's share in Lot 421 should be left to Ignacio; that the Pag-asa property
has already been transferred to Merlita in accordance with the wishes of Gonzalo; that it was
the Palad tradition that land inherited by members of the clan shall be disposed only to the
clan and to no other person. IASTDE
On the other hand, petitioners presented a Deed of Absolute Sale dated December 9, 1957
executed by Jacinto selling his shares in Lot 421 to Gonzalo, Adelaida and Ignacio, 12 as well
as a Deed of Absolute Sale dated December 16, 1957 executed by sisters Modesta and
Concordia selling their separate shares in Lot 421 in favor of Gonzalo, Adelaida and Ignacio.
13 They submit that since the shares were acquired during the marriage of Gonzalo and
Remedios, said shares form part of the conjugal property and Remedios was entitled to a
part thereof as her conjugal share. Moreover, as surviving heir of Gonzalo, Remedios
inherited Gonzalo's shares in Lot 421.
As rebuttal witnesses, Bayani M. Palad (Bayani) and Maria A. Gallego (Maria) testified that
Benjamin, Gonzalo's son, paid for Jacinto's shares in the Deed of Absolute Sale dated
December 9, 1957. Concordia Jornal, also a rebuttal witness, testified that she is the
Concordia Nojedera mentioned in the TCT but disowned the Deed of Absolute Sale dated
December 16, 1957 and her purported signature therein.
Issue:
Whether or not there is an implied trust
Held:
no.
On the matter of implied trust, Article 1448 of the Civil Code provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of
the property. The former is the trustee, while the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child, legitimate or illegitimate, 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. (Emphasis supplied)

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. 23
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 complete strangers in so far as the intent of the parties
to the contract is concerned. TSIEAD
The hornbook rule on interpretation of contracts gives primacy to the intention of the
parties, which is the law among them. Ultimately, their intention is to be deciphered from
the language used in the contract, not from the unilateral post facto assertions of one of the
parties, or even third parties who are strangers to the contract. And when the terms of the
agreement, as expressed in such language, are clear, they are to be understood literally, just
as they appear on the face of the contract. 30
In this case, the Deed of Absolute Sale dated December 9, 1957 executed by Jacinto is clear
and unequivocal as to who are the vendees, namely: Gonzalo, Adelaida and Ignacio. No
amount of extrinsic aids are required and no further extraneous sources are necessary in
order to ascertain the parties' intent, determinable as it is, from the document itself. 31 The
Court is thus convinced that the deed expresses truly the parties' intent as against the oral
testimony that Benjamin paid the consideration of the sale.
Without any doubt, oral testimony as to a certain fact, depending as it does exclusively on
human memory, is not as reliable as written or documentary evidence. 32 As Judge Limpkin
of Georgia once said, "I would sooner trust the smallest slip of paper for truth than the
strongest and most retentive memory ever bestowed on mortal man." 33 Indeed, spoken
words could be notoriously unreliable as against a written document that speaks a uniform
language. 34
As to the Deed of Absolute Sale dated December 16, 1957, executed by Modesta and
Concordia, the rule is settled that the notarization of a document carries considerable legal
effect. Notarization of a private document converts such document into a public one, and
renders it admissible in court without further proof of its authenticity 35 and is entitled to full
faith and credit upon its face. 36 A notarized document carries the evidentiary weight
conferred upon it with respect to its due execution, 37 and documents acknowledged before
a notary public have in their favor the presumption of regularity. 38 It must be sustained in

full force and effect so long as he who impugns it does not present strong, complete, and
conclusive proof of its falsity or nullity on account of some flaws or defects provided by law.
39 In this case, respondents failed to present such required proof. IHAcCS
Mere denial by Concordia that she signed the deed 40 cannot prevail over the positive
presumption enjoyed by a notarial document. Negative and self-serving, denial deserves no
weight in law when unsubstantiated by clear and convincing evidence. No other witness or
evidence was presented to corroborate Concordia's testimony. Settled is the rule that forgery
cannot be presumed; it must be proved by clear, positive and convincing evidence. 41

- Duran vs. CA, 488 SCRA 438 (2006)
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]
The burden of proving the existence of a trust is generally on the party asserting its
existence. Such proof must be clear and must satisfactorily show the existence of the
trust and its elements. While oral evidence may be presented to prove the
existence of an implied trust, such evidence must be trustworthy because oral evidence
can easily be fabricated. Further, the evidence must be received by the courts with

extreme caution. The existence of an implied trust should not be made to rest on loose,
equivocal and indefinite declarations. 10

In this case, both the trial court and the Court of Appeals declared that
preponderance of evidence, in credibility and number, exists in favor of private
respondents. DTaSIc
The Court of Appeals quoted the testimonies of private respondents Jorge Olivar,
Praxedes Gantuangco and Emilio Dichos all to the effect that they had an agreement
with Antonina Oporto to purchase the subject property but that, upon petitioner
JesusDuran's expression of his desire to have the purchase price lowered, they gave
their authority for the latter to negotiate the reduction of the purchase price for the
property. Unfortunately, Jesus Duran breached the trust reposed upon him by leading
private respondents to believe that he intended to work towards the group's objective
and concealing the fact that he had already purchased the property for himself at a
reduced price.
In contrast, all that petitioners offered in evidence was petitioner Demetria Duran's
statement that there could not have been any such transaction because she was always
with her husband. Jesus Duran, who was in the best position to rebut private
respondents' claims, did not even take the witness stand and no justifiable reason was
given to explain his absence.
We find no reason to disturb the evaluation of the trial court and
the Court of Appeals of the credibility of the testimonies ofprivate respondents'
witnesses. It is a settled rule that the assessment of the credibility of witnesses is a
domain best left to the trial court judge because of his unique opportunity to observe
their deportment and demeanor on the witness stand, a vantage point denied appellate
tribunals. And when his findings have been affirmed by the Court of Appeals, these are
generally binding and conclusive upon this Court. 11

There is no showing that the trial court and the Court of Appeals overlooked matters
which, if taken under advisement, would have altered the outcome of the case. Their
factual findings regarding the agreement between the parties and legal conclusion that
a constructive trust was created and later breached by Jesus Duran are substantially
supported by the evidence on record and, for this reason, must stand. IDESTH
Petitioners' theory that Jesus Duran was not constituted as an agent because private
respondents did not entrust money to him for the negotiations has no merit. By his own
admission, Jesus Duran volunteered and was authorized by private respondents to
represent them in the negotiations for the sale of the property. Whether the designation
was as a spokesman or as an agent is immaterial. His actions thereafter should have
been in representation of, not only himself, but also private respondents as dictated by
the principle of equity, which lies at the core of constructive trust.
- Delfin vs. Billones, 485 SCRA 38 (2006)
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. 27 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. 30|||

- Comilang vs. Burcena, 482 SCRA 342 (2006)
FACTS
Respondents, together with their mother, Dominga, filed a complaint for annulment of
document with damages against petitioner. The complaint alleges that: respondents are the
owners of a parcel of land located in Ilocos Sur and the house built thereon; respondents
acquired the subject property through their earnings while working abroad; the subject property

was declared for taxation purposes in Dominga’s name as administrator thereof; petitioner
caused the execution of a Deed of Donation over said property by taking advantage of
Dominga’s blindness, old age and physical infirmity; the said Deed of Donation is null and void
because: (a) Dominga had no right to donate the same since she is not its owner, (b) Dominga
did not give her consent and was misled to the execution of such document, (c) granting
Dominga had authority to donate, the donation is void because the property donated is the only
property declared in her name and therefore she could not have reserved for herself in full
ownership sufficient property to support herself; petitioner is in possession of the subject
property, depriving respondents of its ownership and enjoyment of its fruits.

ISSUE
Whether or not implied trust arise dove the subject property

RULING
In holding that an implied trust exists between respondents and Dominga in relation to
the subject property and therefore Dominga had no right to donate the same to petitioner, the
CA merely clarified the RTC’s findings.

Article 1448 of the Civil Code on implied trust provides:
Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one
party but the price is paid by another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, 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.

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. 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.

- Spouses Oco vs. Limbaring, 481 SCRA 348 (2006)
Trust Relationship
To show material interest, respondent argues that a trust was created when he
purchased the properties from Sabas Limbaring in favor of his daughters. As trustor, he
allegedly stands to be benefited or injured by any decision in the case. 43
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. 44 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. 45
Trusts may be either express or implied. 46 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 trust. Implied trusts are those
that, without being expressed, are deducible from the nature of the transaction as
matters of intent; or that are super-induced in the transaction by operation of law as a
matter of equity, independently of the particular intention of the parties. 47
Respondent has presented only bare assertions that a trust was created. 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." 48
On this point, the Civil Code states as follows:

"ART. 1448. There is an implied trust when property is sold, and the legal
estate is granted to one party but the price is paid by another for the
purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, 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." ESDcIA
Under the last sentence of Article 1448, respondent's alleged acts — paying the price of
the subject properties and, in the titles, naming his children as owners — raise the
presumption that a gift was effected in their favor. Respondent failed to rebut this
presumption. Absent any clear proof that a trust was created, he cannot be deemed a
real party in interest. 49 That he 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.

- Miguel Cuenco vs. Concepcion Cuenco vda. De Manguerra, 440 SCRA 252
Implied Trust
Petitioner then contends that no constructive or implied trust exists between the
parties. aETDIc
A trust is a legal relationship between one having an equitable ownership in a property
and another having legal title to it. 15
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.
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." 21
A review of the records shows that indeed there is an implied trust between the parties.
Although Lot 903-A was titled in Miguel's name, the circumstances surrounding the
acquisition and the subsequent partial dispositions of this property eloquently speak of
the intent that the equitable or beneficial ownership of the property should belong to
Mariano and his heirs. CTIDcA
First, Lot 903-A was one half of the one-hectare portion of Lot 903 given as attorney's
fees by a client of the law firm of PartnersMiguel and Mariano Cuenco. It constituted the
latter's share in the attorney's fees and thus equitably belonged to him, as correctly
found by the CA. That Lot 903-A had been titled in the name of Miguel gave rise to an
implied trust between him and Mariano, specifically, the former holds the property in
trust for the latter. In the present case, it is of no moment that the implied trust arose
from the circumstance — a share in the attorney's fees — that does not categorically fall
under Articles 1448 to 1456 of the Civil Code. The cases of implied trust enumerated
therein "does not exclude others established by the general law of trust." 22
Second, from the time it was titled in his name in 1938, 23 Lot 903-A remained
undivided and untouched 24 by Miguel. Only on February 3, 1947, did
Lourdes Cuenco, 25 upon the instruction of Mariano, have it surveyed and subdivided

into six almost equal portions — 903-A-1 to 903-A-6. Each portion was specifically
allocated to each of the six children of Mariano with his first wife. 26
Third, Miguel readily surrendered his Certificate of Title 27 and interposed no
objection 28 to the subdivision and the allocation of the property to Mariano's six
children, including Concepcion.
Fourth, Mariano's children, including Concepcion, 29 were the ones who shouldered the
expenses incurred for the subdivision of the property.
Fifth, after the subdivision of the property, Mariano's children — including
Concepcion 30 — took possession of their respective portions thereof.
Sixth, the legal titles to five portions of the property were transferred via
a gratuitous deed of conveyance to Mariano's five children, following the allocations
specified in the subdivision plan prepared for Lourdes Cuenco. 31
With respect to Lot 903-A-6 in particular, the existence of Concepcion's equitable
ownership thereof is bolstered, not just by the above circumstances, but also by the fact
that respondent fenced the portion allocated to her and planted trees thereon. 32
More significantly, she also paid real property taxes on Lot 903-A-6 yearly, from 1956
until 1969 33 — the year when she was dispossessed of the property. "Although tax
declarations or realty tax payments of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of possession in the concept of owner,
for no one in his right mind would be paying taxes for a property that is not in his actual
or at least constructive possession." 34 Such realty tax payments constitute proof that
the holder has a claim of title over the property. HSEIAT
Tellingly, Miguel started paying real property taxes on Lot 903-A-6 only on April 4,
1964, 35 after the death of Mariano. 36 This fact shows that it was only in that year that
he was emboldened to claim, the property as his own and to stop recognizing
Mariano's, and subsequently Concepcion's, ownership rights over it. It was only by then

that the one who could have easily refuted his claim had already been silenced by
death. Such a situation cannot be permitted to arise, as will be explained below.

ii. Constructive – Arts. 1450, 1454, 1455, 1456
Constructive trust. — It is also a trust raised by construction of law or arising by operation by
law. In a more restricted sense, and as contra-distinguished from a resulting trust, 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 construction of equity in order to satisfy the demands of justice and
prevent unjust enrichment. It does not arise by agreement or intention but by operation of law
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. (Ibid.; Vda. de Esconde vs.
Court of Appeals, 253 SCRA 66 [1996]; Vda. de Retuerto vs. Barz, 372 SCRA 712 [2001]; 89
C.J.S. 726-727.) “If a person obtains legal title to property by fraud or concealment, courts of
equity will impress upon the title a so- called constructive trust in favor of the defrauded party.’’
This kind of trust is illustrated in Articles 1450, 1454, 1455, and 1456.
However, a trust will not be created when for the purpose of evading the law prohibiting one
from taking or holding real property he takes conveyance thereof in the name of a third person.
(Kiel vs. Estate of P.S. Sabert, 46 Phil. 193 [1924].) For example, a homestead applicant is
required by law to occupy and cultivate the land for his own benefit, and not for the benefit of
someone else. Hence, a trust created in favor of one already disqualified from applying
additional homestead under the Public Land Act (Sec. 112, CA No. 141.) is null and void
considering that it is in direct violation of the Act as regards the acquisition of homestead patent.
(Sollega de Romero vs. Court of Appeals, 319 SCRA 180 [1999].)
A constructive trust is not a trust in a technical sense. (see Art. 1456; Ramos vs. Ramos, 61
SCRA 284 [1974]; see Sinaon vs. Sorongon, 136 SCRA 407 [1985]; Salvatierra vs. Court of
Appeals, 261 SCRA 45 [1996].) It is substantially an appropriate remedy against unjust
enrichment.1 (see Sumaoang vs. Judge, RTC, 215 SCRA 136 [1992].)
While in an express trust, a beneficiary and a trustee are linked by a confidential or fiduciary
relation, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of
and the so-called trustee neither accepts any trust nor intends holding the property for the
beneficiary. (Phil. National Bank vs. Court of Appeals, 217 SCRA 347 [1993].)
Constructive trusts are illustrated in Articles 1450, 1454, 1455, and 1456.

- Iglesia Filipina Independiente v. Heirs of Bernardino Taeza, G.R. No. 179597
(February 3, 2014)

The concept of constructive trusts was further elucidated in the same
case, as follows:
. . . . implied trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of intent or
which are superinduced on the transaction by operation of law as
matters of equity, independently of the particular intention of the
parties. In turn, implied trusts are either resulting or constructive
trusts. These two are differentiated from each other as
follows: cHaCAS
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 of 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. (Italics supplied)
A constructive trust having been constituted by law between respondents as trustees
and petitioner as beneficiary of the subject property, may respondents acquire
ownership over the said property? The Court held in the same case of Aznar, 21 that
unlike in express trusts and resulting implied trusts where a trustee cannot acquire by
prescription any property entrusted to him unless he repudiates the trust, in
constructive implied trusts, the trustee may acquire the property through

prescription even if he does not repudiate the relationship. It is then incumbent
upon the beneficiary to bring an action for reconveyance before prescription bars the
same.
In Aznar, 22 the Court explained the basis for the prescriptive period, to wit:
. . . under the present Civil Code,we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456,Civil Code), so
is the corresponding obligation to reconvey the property and the
title thereto in favor of the true owner. In this context, and vis-àvis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years
from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx xxx xxx
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.
It has also been ruled that the ten-year prescriptive period begins to
run from the date of registration of the deed or the date of the
issuance of the certificate of title over the property, . . . . 23
||| (Iglesia Filipina Independiente v. Heirs of Taeza, G.R. No. 179597, [February 3, 2014])

G.R. No. 159494

July 31, 2008

ROGELIO, GEORGE, LOLITA, ROSALINDA, and JOSEPHINE, all surnamed
PASIÑO, represented by their father and attorney-in-fact JOSE
PASIÑO Petitioners,
vs.
DR. TEOFILO EDUARDO F. MONTERROYO, ROMUALDO MONTERROYO, MARIA
TERESA MONTERROYO, and STEPHEN MONTERROYO, Respondents.
Held: Principle of Constructive Trust Applies
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 reconveyance.29 In the action for
reconveyance, the 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 to its rightful owner or to one with a better right.30 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.31
In the case before us, respondents were able to establish that they have a better
right to Lot No. 2139 since they had long been in possession of the property in the
concept of owners, by themselves and through their predecessors-in-interest.
Hence, despite the irrevocability of the Torrens titles issued in their names and even
if they are already the registered owners under the Torrens system, petitioners may
still be compelled under the law to reconvey the property to respondents.32
PASINO v MONTERROYO
FACTS: Lot No. 2139, with an area of 19,979 square meters, located at Panuliran,
Abuno, Iligan City, was part of a 24-hectare land occupied, cultivated and cleared by
Laureano Pasiño. The 24-hectare land formed part of the public domain which was
later declared alienable and disposable. Laureano filed a homestead application
over the entire 24-hectare land. The Bureau of Forestry wrote Laureano and
informed him that the tract of land covered by his application was not needed for
forest purposes. The Director of Lands issued an Order approving Laureano’s
homestead application and stating that Homestead Entry No. 154651 was recorded
in his name for the land applied for by him. After Laureano died, the Director of
Lands issued an Order for the issuance of a homestead patent in favor of Laureano,
married to Graciana Herbito. Laureano’s heirs did not receive the order and
consequently, the land was not registered under Laureano’s name or under that of
his heirs. The property was thereafter covered by a tax declaration in the name of
Laureano with Graciana as administrator. A Cadastral Survey was conducted in

Iligan City, and the surveyor found that a small creek divided the 24-hectare parcel
of land into two portions, identified as Lot No. 2138 and Lot No. 2139. Petitioners
(Rogelio, George, Lolita, Rosalinda and Josephine, all surnamed Pasiño) claimed that
Laureano’s heirs, headed by his son Jose, continuously possessed and cultivated
both lots. Jose’s co-heirs executed a Deed of Quitclaim renouncing their rights and
interest over the land in favor of Jose. Jose secured a title in his name for Lot No.
2138. Later, Jose alienated Lot No. 2139 in favor of his children (petitioners in this
case) who simultaneously filed applications for grant of Free Patent Titles over their
respective shares of Lot No. 2139 before the Land Management Bureau of the
Department of Environment and Natural Resources. The DENR granted petitioners’
applications and issued Original Certificate of Titles in favor of them. Petitioners
alleged that their possession of Lot No. 2139 was interrupted when respondents
forcibly took possession of the property. Respondents (Dr. Teofilo Eduardo F.
Monterroyo, later substituted by his heirs Romualdo, Maria Teresa and Stephen, all
surnamed Monterroyo) alleged that they had been in open, continuous, exclusive
and notorious possession of Lot No. 2139, by themselves and through their
predecessors-ininterest. They alleged that Rufo Larumbe sold Lot No. 2139 to Petra
Teves. Petra thereafter executed a deed of sale over Lot No. 2139 in favor of Vicente
Teves. Later, Vicente executed a pacto de retro sale over the land in favor of Arturo
Teves. Arturo then sold Lot No. 2139 in favor of respondents’ father, Dr. Monterroyo,
by virtue of an oral contract. He Arturo executed a Deed of Confirmation of Absolute
Sale of Unregistered Land in favor of Dr. Monterroyo’s heirs
ISSUE W/N petitioners are rightful owners and possessors of Lot No. 2139.
HELD NO. The preponderance of evidence favors respondents as the possessors of
Lot No. 2139 for over 30 years, by themselves and through their predecessors-ininterest. Respondents were able to present the original Deed of Absolute Sale
executed by Larumbe in favor of Petra. Respondents also presented the succeeding
Deeds of Sale showing the transfer of Lot No. 2139 from Petra to Vicente and from
Vicente to Arturo and the Deed of Confirmation of Absolute Sale of Unregistered
Real Property executed by Arturo in favor of respondents. Respondents also
presented a certification executed by P/Sr. Superintendent Julmunier Akbar Jubail,
City Director of Iligan City Police Command and verified from the Log Book records
by Senior Police Officer Betty Dalongenes Mab-Abo confirming that Andres
Quinaquin made a report that Jose, Rogelio and Luciana Pasiño, Lucino Pelarion and
Nando Avilo forcibly took his copra. This belied petitioners’ allegation that they were
in possession of Lot No. 2139 and respondents forcibly took possession of the
property. Considering that petitioners’ application for free patent titles was filed only
when Lot No. 2139 had already become private land ipso jure, the Land
Management Bureau had no jurisdiction to entertain petitioners’ application. 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 reconveyance. In the action for reconveyance, the
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
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
(Rodrigo v. Ancilla, G.R. No. 139897, [June 26, 2006], 525 PHIL 590-598)
Held: The remedy of a landowner whose property has been wrongfully or
erroneously registered in another's name is an action for reconveyance, or an action
for damages if the property has passed onto the hands of an innocent purchaser for
value. Paragraph 3, Section 53 of PD 1529 provides that in all cases of registration
procured by fraud, the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice, however, to the rights of any
innocent holder for value of the decree of registration.
To be read in conjunction with the foregoing provision is Article 1456 of the Civil
Code which provides that "[i]f the 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."
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.
G.R. No. 164787

January 31, 2006

MARLENE
CRISOSTOMO
&
JOSE
FLORITO M. GARCIA, JR., Respondent.

G.

CRISOSTOMO, Petitioners, vs.

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 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
Applying the law and jurisprudential declaration above-cited to the allegations of
fact in the complaint, it can clearly be seen that respondent has a period of 10
years from the registration of the title within which to file the action. Since the title
was registered in the name of the petitioners on 16 November 1993, respondent
had a period of 10 years from the time of the registration within which to file the
complaint. Since the complaint was filed on 20 June 2002, the action clearly has not
prescribed and was timely-filed.
[G.R. No. 140457. January 19, 2005]

HEIRS OF MAXIMO SANJORJO, namely, VICENTE SANJORJO, MACARIA
SANJORJO, DOMINGO SANJORJO, ALFREDO CASTRO, and SPOUSES SANTOS
AND LOLITA INOT, petitioners, vs. HEIRS OF MANUEL Y. QUIJANO, namely,
ROSA Q. LEDESMA, MILAGROS Q. YULIONGSIU, ALAN P. QUIJANO AND
GWENDOLYN P. ENRIQUEZ, and VICENTE Z. GULBE, respondents.
On the second issue, we agree with the petitioners that their action against the
private respondents for the reconveyance of Lots 374 and 379, covered by OCT No.
OP-38221 issued on September 6, 1988 and OCT No. OP-39847 issued on February
11, 1989, respectively, was not barred by Section 32 of P.D. No. 1529, which reads:
SEC. 32. Review of decree of registration; Innocent purchaser for value. The decree
of registration shall not be reopened or revised by reason of absence, minority, or
other disability of any person adversely affected thereby, nor by any proceeding in
any court for reversing judgments, subject, however, to the right of any person,
including the government and the branches thereof, deprived of land or of any
estate or interest therein by such adjudication or confirmation of title obtained
by actual fraud, to file in the proper Court of First Instance a petition for reopening
and review of the decree of registration not later than one year from and after the
date of the entry of such decree of registration, but in no case shall such petition be
entertained by the court where an innocent purchaser for value has acquired the
land or an interest therein, whose rights may be prejudiced. Whenever the phrase
innocent purchaser for value or any equivalent phrase occurs in this Decree, it shall
be deemed to include an innocent lessee, mortgagee, or other encumbrancer for
value.[18]
We agree with the ruling of the CA that the torrens title issued on the basis of the
free patents became as indefeasible as one which was judicially secured upon the
expiration of one year from date of issuance of the patent.[19] The order or decision
of the DENR granting an application for a free patent can be reviewed only within
one year thereafter, on the ground of actual fraudvia a petition for review in the
Regional Trial Court (RTC) provided that no innocent purchaser for value has
acquired the property or any interest thereon. However, an aggrieved party may
still file an action for reconveyance based on implied or constructive trust, which
prescribes in ten years from the date of the issuance of the Certificate of Title over
the property provided that the property has not been acquired by an innocent
purchaser for value. Thus:
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 in anothers 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. In
this case, the disputed property is still registered in the name of respondent
Demetrio Caringal, so that petitioner was correct in availing himself of the
procedural remedy of reconveyance.[20]
An action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner.[21] All that must be alleged in
the complaint are two (2) facts which, admitting them to be true, would entitle the
plaintiff to recover title to the disputed land, namely, (1) that the plaintiff was the
owner of the land and, (2) that the defendant had illegally dispossessed him of the
same.[22] The body of the pleading or complaint determines the nature of an
action, not its title or heading.[23] In their complaint, the petitioners clearly
asserted that their predecessors-in-interest have long been the absolute and
exclusive owners of the lots in question and that they were fraudulently deprived of
ownership thereof when the private respondents obtained free patents and
certificates of title in their names.[24] These allegations certainly measure up to the
requisite statement of facts to constitute an action for reconveyance.
Article 1456 of the New Civil Code provides that a person acquiring property
through fraud becomes by operation of law a trustee of an implied trust for the
benefit of the real owner of the property. The presence of fraud in this case created
an implied trust in favor of the petitioners, giving them the right to seek
reconveyance of the property from the private respondents. However, because of
the trial courts dismissal order adverted to above, the petitioners have been unable
to prove their charges of fraud and misrepresentation.
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 OP-39847, 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.

E. Prescription – see also Art. 1144
Article 1144. The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;

(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
i. Action for Reconveyance
- Vagilidad vs. Vagilidad, 507 SCRA 94 G.R. No. 161136
WILFREDO T. VAGILIDAD and LOLITA A. VAGILIDAD, Petitioners, - versus - SANDOVAL
-GUTIERREZ, DOROTHY VAGILIDAD, Respondents. November 16, 2006
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 wellsettled 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
Facts: A parcel of land, Lot No. 1253, situated in Atabay, San Jose, Antique,
measuring 4,280 square meters, was owned by Zoilo Labiao. Sometime in 1931,
ZOILO died. Subsequently, on May 12, 1986, Loreto Labiao (hereafter LORETO), son
of ZOILO, sold to Gabino Vagilidad Jr. (hereafter GABINO JR.) a portion of Lot No.
1253 (hereafter Lot 1253-B), measuring 1,604 square meters as evidenced by the
Deed of Absolute Sale executed by LORETO.
In view of the death of ZOILO, his children, LORETO, Efren Labiao (hereafter EFREN)
and
Priscilla Espanueva (hereafter
PRISCILLA)
executed
an
Extrajudicial
x x x Settlement of Estate dated January 20, 1987, adjudicating the entire Lot No.
1253, covering 4,280 square meters, to LORETO. On January 29, 1987, Transfer
Certificate of Title (TCT) No. T-16693 was issued in favor of LORETO, EFREN and
PRISCILLA, but on even date, TCT No. T-16693 was cancelled and TCT No. T-16694,
covering the said property, was issued in the name of LORETO alone.
On July 31, 1987, GABINO JR., as petitioner, filed a Petition for the Surrender of TCT
No. T-16694, covering Lot No. 1253, with the Regional Trial Court of San Jose City,
Sixth Judicial Region, against LORETO, docketed as Cadastral Case No. 87-731-A.
The plaintiff alleged that, being the owner of x x x Lot No. 1253-B, under TCT No. T16694, by virtue of the sale that took place on May 12, 1986, he is entitled to ask
for the surrender of the owners copy of TCT No. T-16694 to the Register of Deeds of
Antique in order to effect the transfer of title to the name of the petitioner. However,
as per motion of both counsels since the parties seemed to have already reached an
amicable settlement without the knowledge of their counsels, the trial court
issued an Order dated March 21, 1994 sending the case to the archives.
On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he bought
from LORETO as per Tax Declaration No. 1038 where the property was specified as
Lot No. 1253-B. GABINO JR. thereafter sold the same lot to Wilfredo Vagilidad
(hereafter WILFREDO) as per Deed of Absolute Sale dated December 7, 1989. On

even date, Deed of Absolute Sale of a Portion of Land involving the opt-described
property was also executed by LORETO in favor of WILFREDO. The aforementioned
deeds, which were both executed on December 7, 1989 [and] notarized by Atty.
Warloo Cardenal[,] [appear] to have been given the same entry number in his
notarial books as both contained the designation Document No. 236, Page No. 49,
Book No. XI, Series of 1989.
WILFREDO obtained another loan from Development Bank of the Philippines (DBP
for brevity) in the amount of P200,000.00 and mortgaged Lot No. 1253-B as
collateral of the xxx loan and the transaction was inscribed at the back of TCT No.
18023 as Entry No. 196268. The said loan was paid and, consequently, the
mortgage was cancelled as Entry No. 202500.
On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter
DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document,
Reconveyance and Damages, with the Regional Trial Court of Antique, Sixth Judicial
Region, Branch 11, against spouses WILFREDO and Lolita Vagilidad (hereafter
LOLITA). The plaintiffs claimed that they are the lawful owners of Lot No. 1253-B
which was sold to him by LORETO in 1986.
They likewise raised that when GABINO SR. died, defendant WILFREDO requested
GABINO
JR.
to
transfer
the
ownership
of
Lot
No.
1253-B
in
defendant WILFREDOs name for loaning purposes with the agreement that the land
will be returned when the plaintiffs need the same. They added that, pursuant to
the mentioned agreement, plaintiff GABINO JR., without the knowledge and consent
of his spouse, DOROTHY, executed the Deed of Sale dated December 7, 1989 in
favor of defendant WILFREDO receiving nothing as payment therefor. They pointed
out that after defendant WILFREDO was able to mortgage the property, plaintiffs
demanded the return of the property but the defendants refused to return the same.
The plaintiffs claimed that the same document is null and void for want of
consideration and the same does not bind the non-consenting spouse.
ISSUES:
1. W/O THE DOCTRINE OF DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION
OF THE TORRENS TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL
2. W/O THE DOCTRINE OF DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION
OF THE TORRENS TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL
HELD:
SC deny the petition.
1. The trial court itself comprehensively traced the origin of Lot No. 1253-B. It
clearly demonstrated that the subject parcel was originally part of the registered lot
of ZOILO. It also showed how the subject parcel was eventually bounded by Lot No.

1253-A on the West and by Lot No. 1253-C on the East, as the lot would be later
described in the Deed of Absolute Sale of Portion of Land.
2. In the case at bar, although the TCT of WILFREDO became indefeasible after the
lapse of one year from the date of registration, the attendance of fraud in its
issuance created an implied trust in favor of GABINO, JR. under Article 1456 of the
Civil Code. Being an implied trust, the action for reconveyance of the subject
property therefore prescribes within a period of ten years from February 15, 1990.
Thus, when respondents filed the instant case with the court a quo on September
26, 1995, it was well within the prescriptive period.

WITHOUT 6TH PART - MARIANE