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O’ Laco vs Co Cho Chit

Breach of Trust; Half-Sisters; Resulting and Constructive Trusts. Facts: Emila is the
half sister of O Lay Kia who is, as is her husband Co Cho Chit, a Chinese national
and cannot own property in the Philippines. O lay kia bought a piece of land and had
it named under her sister, Emilia. Emilia on the other hand sold the property to the
Church without the knowledge of her sister. When O Lay Kia found out, they
immediately filed a case for breach of contract. Issue: WoN there was a trust
relationship between the sisters. Held: Yes. ”… trust relations between parties may
either be express or implied. Express trusts are those which are created by the
direct and positive acts of the parties, by some writing or deed, or will, or by words
evincing an intention to create a trust. Implied trusts are those which, without being
express, are deducible from the nature of the transaction as matters of intent, or
which are superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. Implied trusts may either be
resulting or constructive trusts, both coming into being by operation of law.

Resulting trusts are based on the equitable doctrine that valuable consideration and
not legal title determines the equitable title or interest and are presumed always to
have been contemplated by the parties. They arise from the nature or
circumstances of the consideration involved in a transaction whereby one person
thereby becomes invested with legal title but is obligated in equity to hold his legal
title for the benefit of another. On the other hand, constructive trusts are created
by the construction of equity in order to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to intention against one who, by fraud,
duress or abuse of confidence, obtains or holds the legal right to property which he
ought not, in equity and good conscience, to hold.”

In this case, the court cited five instances that prove a trust relationship. First, sps
O Lay Kia were in possession of all the pertinent documents of the sale from the
beginning until the end of the transaction. Second, there is a previous case of
similar facts involving O lay kia and her brother on a different parcel of land decided
in her favor. Third, the circumstances leading to Emilia acquiring a title to the land
was dubius. Fourth, until the sale to the church, Emilia actually recognized the trust
(by promising to take care of the transfer to the actual owners as soon as she is
able.) A resulting trust is repudiated if the following requisites concur: (a)
the trustee has performed unequivocal acts of repudiation amounting to
an ouster of the cestui qui trust; (b) such positive acts of repudiation have
been made known to the cestui qui trust; and, (c) the evidence thereon is
clear and convincing. And finally, fifth, Emilia actually had no source of income to
show how it was possible for her to purchase the land.