Topic – Implied trust arising from mortgage contracts

Juan vs. Yap, Sr., G.R. No. 182177, March 30, 2011
CARPIO, J.:

FACTS:
The case is a petition for petition for review to assail the ruling of the Court of Appeals which found
petitioner Richard Juan as a trustee of an implied trust over a mortgage contract in favor of respondent
Gabriel Yap, Sr.The facts of the case were as follows:
 In July 1995, the spouses Maximo and Dulcisima Cañeda (Cañeda spouses) mortgaged to
petitioner Richard Juan (petitioner), two parcels of land to be able to secure a loan of P1.68M,
payable in one year. Petitioner here is the employee and nephew of respondent, Gabriel Yap, Sr.
 In June 1998, when the payment of the loan obligation was not met, Juan sought extrajudicial
foreclosure of the properties, which resulted in petitioner as the highest bidder at P2.2M.
 In February 1999, Yap and the Cañeda spouses executed a memorandum of agreement (MOA),
wherein the Cañeda spouses acknowledged respondent as their “real mortgagee-creditor x  x  x
while Richard Juan [petitioner] as merely a trustee” of respondent. In the said MOA, Yap also
allowed the Cañeda spouses to redeem the foreclosed properties for P1.2M. The parties also
agreed further to initiate judicial action “either to annul or reform the [Contract] or to compel
Richard Juan to reconvey the mortgagee’s rights” to Yap as trustor.
 Three days later, the Cañeda spouses and respondent then sued petitioner in the RTC to declare
Yap as trustee of petitioner, Juan as opposed to the Contract, annul the latter’s bid for the
foreclosed properties, declare the Contract “superseded or novated” by the MOA, and require
petitioner to pay damages, attorney’s fees and the costs. In his answer, petitioner, Juan, insisted
on his rights over the mortgaged properties and also counterclaimed for damages and attorney’s
fees and the turn-over of the owner’s copy of the titles for the mortgaged properties.
 The RTC in this case ruled in favor of petitioner, Juan in declaring him the “true and real”
mortgagee-creditor, ordering respondent to pay moral damages and attorney’s fees, and
requiring respondent to deliver the titles in question to petitioner. Upon appeal, the CA however
reversed the RTC’s decision and instead declared Yap, as the contract’s mortgagee, thus ordering
petitioner to release the redemption payment to Yap and pay the same damages and attorney’s
fees.
ISSUE/S:
Was there an implied trust between petitioner and respondent, therefore binding the former to merely
hold the beneficial title over the mortgaged properties in trust for respondent?

RULING:
Yes.

An implied trust arising from mortgage contracts is not among the trust relationships the Civil Code
enumerates. However, the Code also provides that such listing “does not exclude others established by
the general law on trust.” Under the general principles on trust, equity converts the holder of property
right as trustee for the benefit of another if the circumstances of its acquisition makes the holder ineligible
“in x x x good conscience [to] hold and enjoy [it]. In fact, the court mentions of similar unconventional
implied trusts such as those involving the execution of sales contracts indicating the buyer who is distinct
from the provider of the purchase money. Hence, the court sees no reason to bar the recognition of the
same obligation or trust in mortgage contracts, in falling as under standards for the creation of an implied
trust.

The court based is resolution on the parol evidence on the part of the respondent. It held that:
In the first place, the Cañeda spouses acknowledged respondent as the lender from whom they
borrowed the funds secured by the Contract. They did so in the MOA and Dulcisima Cañeda reiterated the
concession on the stand. True enough, when the Cañeda spouses sought an extension of time within
which to settle their loan, they directed their request not to petitioner but to respondent who granted the
extension. Petitioner, therefore, was a stranger to the loan agreement, the principal obligation the
Contract merely secured.
Secondly, Solon, the notary public who drew up and notarized the Contract, testified that he placed
petitioner’s name in the Contract as the mortgagee upon the instruction of respondent. Respondent
himself explained that he found this arrangement convenient because at the time of the Contract’s
execution, he was mostly abroad and could not personally attend to his businesses in the country.
Respondent disclosed that while away, he trusted petitioner, his nephew by affinity and paid employee, to
“take care of everything.”
Lastly, it was respondent, not petitioner, who shouldered the payment of the foreclosure expenses.
Petitioner’s failure to explain this oddity, coupled with the fact that no certificate of sale was issued to him
(despite tendering the highest bid) for his non-payment of the commission, undercuts his posturing as the
real mortgagee-creditor.
Wherefore in view of the foregoing, the court moved to deny the petition and affirmed the decision
of the RTC.

By Alena Icao-Anotado pg. 1