JURISPRUDENCE ON TRUSTS

SUPREME COURT CASES

2010-2015
1. Implied vs. constructive trust
Celerino E. Mercado vs Belen Espinocilla
Espinocilla., G.R. No. 184109, February 1, 2011

and

Ferdinand

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
relation of trustee and cestui que trust does not in fact exist, and the
holding of a constructive trust is for the trustee himself, and therefore,
at all times adverse. Prescription may supervene even if the trustee
does not repudiate the relationship.
2. Implied trust
Heirs Pedro De Guzman vs. Angelina Perona and Heirs of
Rosauro De Guzman, Bataan Development Bank and Republic
Planters Bank, G.R. No. 152266, July 2, 2010
Petitioners submission that respondents merely hold the title to
the properties in trust for their predecessor Pedro is without merit.
Pedro failed to prove by clear and convincing evidence that the
spouses Rosauro and Angelina managed, through fraud, to have the
real properties subject of this case registered in their name. In the
absence of fraud, no implied trust was established between Pedro and
the spouses Rosauro and Angelina under Article 1456 of the New Civil
Code.

3. Trust; fiduciary obligation

Republic of the Philippines v. Sandiganbayan, Eduardo M.
Cojuangco, et al., G.R. No. 166859, G.R. No. 169203, G.R. No.
180702. April 12, 2011
In seeking to establish a fiduciary obliation on the part of
Cojuangco, the Republic invokes the following provisions of the Civil
Code:
Article 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.

THERESE ZSA R. TORRES

Article 1456. If property is acquired through mistake or

fraud, the person obtaining its by force of law, considered a
trustee of an implied trust for the benefit of the person from
whom the property comes.
and the Corporation Code, as follows:
Section 31. Liability of directors, trustees or officers.
Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in directing the affairs of
the corporation or acquire any personal or pecuniary interest in
conflict with their duty as such directors, or trustees shall be
liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or members and
other persons.

When a director, trustee or officer attempts to acquire or

acquires, in violation of his duty, any interest adverse to the
corporation in respect of any matter which has been reposed in
him in confidence, as to which equity imposes a disability upon
him to deal in his own behalf, he shall be liable as a trustee for
the corporation and must account for the profits which otherwise
would have accrued to the corporation.
The conditions for the application of Articles 1455 and 1456 of
the Civil Code (like the trustee using trust funds to purchase, or a
person acquiring property through mistake or fraud), and Section 31 of
the Corporation Code (like a director or trustee willfully and knowingly
voting for or assenting to patently unlawful acts of the corporation,
among others) require factual foundations to be first laid out in
appropriate judicial proceedings. Concluding that Cojuangco breached
fiduciary duties as an officer and member of the Board of Directors of
the UCPB without competent evidence thereon would be unwarranted
and unreasonable.
For one, the Amended Complaint contained no clear factual
allegation on which to predicate the application of Articles 1455 and
1456 of the Civil Code, and Section 31 of the Corporation Code.
Although the trust relationship supposedly arose from Cojuangcos
being an officer and member of the Board of Directors of the UCPB,
the link between this alleged fact and the borrowings or advances was

Therese Zsa R. Torres

Page 2 of 11

not established. Nor was there evidence on the loans or borrowings,

their amounts, the approving authority, etc.
The
thrust
of
the
Republic
that
the
funds
were borrowed or lent might even preclude any consequent trust
implication. In a contract of loan, one of the parties (creditor) delivers
money or other consumable thing to another (debtor) on the condition
that the same amount of the same kind and quality shall be paid.
Owing to the consumable nature of the thing loaned, the resulting duty
of the borrower in a contract of loan is to pay, not to return, to the
creditor or lender the very thing loaned. This explains why the
ownership of the thing loaned is transferred to the debtor upon
perfection of the contract. Ownership of the thing loaned having
transferred, the debtor enjoys all the rights conferred to an owner of
property, including the right to use and enjoy (jus utendi), to consume
the thing by its use (jus abutendi), and to dispose (jus disponendi),
subject to such limitations as may be provided by law. Evidently, the
resulting relationship between a creditor and debtor in a contract of
loan cannot be characterized as fiduciary.
To say that a relationship is fiduciary when existing laws do not
provide for such requires evidence that confidence is reposed by one
party in another who exercises dominion and influence. Absent any
special facts and circumstances proving a higher degree of
responsibility, any dealings between a lender and borrower are not
fiduciary in nature. This explains why, for example, a trust receipt
transaction is not classified as a simple loan and is characterized as
fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes the
dishonesty and abuse of confidence in the handling of money or goods
to the prejudice of another regardless of whether the latter is the
owner.
Based on the foregoing, a debtor can appropriate the thing
loaned without any responsibility or duty to his creditor to return the
very thing that was loaned or to report how the proceeds were used.
Nor can he be compelled to return the proceeds and fruits of the loan,
for there is nothing under our laws that compel a debtor in a contract
of loan to do so. As owner, the debtor can dispose of the thing
borrowed and his act will not be considered misappropriation of the
thing. The only liability on his part is to pay the loan together with the
interest that is either stipulated or provided under existing laws.
4. Retirement funds; trust

Therese Zsa R. Torres

Page 3 of 11

Metropolitan Bank & trust Company, Inc. vs. The Board of Trustees
of Riverside Mills Corp. Provident and Retirement Fund, et al., G.R.
No. 176959, September 8, 2010
A trust is a fiduciary relationship with respect to property which
involves the existence of equitable duties imposed upon the holder of
the title to the property to deal with it for the benefit of another. A
trust is either express or implied. Express trusts are those which the
direct and positive acts of the parties create, by some writing or deed,
or will, or by words evincing an intention to create a trust.
Here, an express trust was created to provide retirement benefits
to the regular employees of RMC. RMC retained legal title to the Fund
but held the same in trust for the employees-beneficiaries. Employees
trusts or benefit plans are intended to provide economic assistance to
employees upon the occurrence of certain contingencies, particularly,
old age retirement, death, sickness, or disability. They give security
against certain hazards to which members of the Plan may be exposed.
They are independent and additional sources of protection for the
working group and established for their exclusive benefit and for no
other purpose. Here, while the plan provides for a reversion of the fund
to RMC, this cannot be done until all the liabilities of the plan have
been paid. And when RMC ceased operations in 1984, the fund became
liable for the payment not only of the benefits of qualified retirees at
the time of RMCs closure but also of those who were separated from
work as a consequence of the closure.

5. Implied trust
Heirs Pedro De Guzman vs. Angelina Perona and Heirs of Rosauro
De Guzman, Bataan Development Bank and Republic Planters
Bank, G.R. No. 152266, July 2, 2010
Petitioners submission that respondents merely hold the title to
the properties in trust for their predecessor Pedro is without merit.
Pedro failed to prove by clear and convincing evidence that the
spouses Rosauro and Angelina managed, through fraud, to have the
real properties subject of this case registered in their name. In the
absence of fraud, no implied trust was established between Pedro and
the spouses Rosauro and Angelina under Article 1456 of the New Civil
Code.

6. Trusts
Estate of Margarita D. Cabacungan, represented by Luz Laigo-Ali vs.
Marilou Laigo, et al. ;G.R. No. 175073. August 15, 2011

Therese Zsa R. Torres

Page 4 of 11

A trust is the legal relationship between one person having an

equitable ownership of 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. Express or direct trusts are

created by the direct and positive acts of the parties, by some writing
or deed, or will, or by oral declaration in words evincing an intention to
create a trust. Implied trusts also called trusts by operation of law,
indirect trusts and involuntary trusts arise by legal implication
based on the presumed intention of the parties or on equitable
principles independent of the particular intention of the parties. They
are those which, without being expressed, are deducible from the
nature of the transaction as matters of intent or, independently of the
particular intention of the parties, as being inferred from the
transaction by operation of law basically by reason of equity.
Implied trusts are further classified into constructive trusts and
resulting trusts.
Constructive trusts, on the one hand, come about in the main by
operation of law and not by agreement or intention. They arise not by
any word or phrase, either expressly or impliedly, evincing a direct
intention to create a trust, but one which arises in order to satisfy the
demands of justice. Also known as trusts ex maleficio, trusts ex
delicto and trusts de son tort, they are construed against one who by
actual or constructive fraud, duress, abuse of confidence, commission
of a wrong or any form of unconscionable conduct, artifice,
concealment of questionable means, or who in any way against equity
and good conscience has obtained or holds the legal right to property
which he ought not, in equity and good conscience, hold and enjoy.
They are aptly characterized as fraud-rectifying trust, imposed by
equity to satisfy the demands of justice and to defeat or prevent the
wrongful act of one of the parties. Constructive trusts are illustrated in
Articles 1450, 1454, 1455 and 1456.

On the other hand, resulting trusts arise from the nature or

circumstances of the consideration involved in a transaction whereby
one person becomes invested with legal title but is obligated in equity
to hold his title for the benefit of another. This is based on the
equitable doctrine that valuable consideration and not legal title is

Therese Zsa R. Torres

Page 5 of 11

determinative of equitable title or interest and is always presumed to

have been contemplated by the parties. Such intent is presumed as it
is not expressed in the instrument or deed of conveyance and is to be
found in the nature of their transaction. Implied trusts of this nature
are hence describable as intention-enforcing trusts. Specific
examples of resulting trusts may be found in the Civil Code,
particularly Articles 1448, 1449, 1451, 1452 and 1453.
Articles 1448 to 1456 of the Civil Code enumerate cases of
implied trust, but the list according to Article 1447 is not exclusive of
others which may be established by the general law on trusts so long
as the limitations laid down in Article 1442 are observed, that is, that
they be not in conflict with the New Civil Code, the Code of Commerce,
the Rules of Court and special laws.
While resulting trusts generally arise on failure of an express
trust or of the purpose thereof, or on a conveyance to one person upon
a consideration from another (sometimes referred to as a purchasemoney resulting trust), they may also be imposed in other
circumstances such that the court, shaping judgment in its most
efficient form and preventing a failure of justice, must decree the
existence of such a trust. A resulting trust, for instance, arises where,
there being no fraud or violation of the trust, the circumstances
indicate intent of the parties that legal title in one be held for the
benefit of another. It also arises in some instances where the
underlying transaction is without consideration, such as that
contemplated in Article 1449 of the Civil Code. Where property, for
example, is gratuitously conveyed for a particular purpose and that
purpose is either fulfilled or frustrated, the court may affirm the
resulting trust in favor of the grantor or transferor, where the beneficial
interest in property was not intended to vest in the grantee.
Intention although only presumed, implied or supposed by law
from the nature of the transaction or from the facts and circumstances
accompanying the transaction, particularly the source of the
consideration is always an element of a resulting trust and may be
inferred from the acts or conduct of the parties rather than from direct
expression of conduct. Certainly, intent as an indispensable element, is
a matter that necessarily lies in the evidence, that is, by evidence,
even circumstantial, of statements made by the parties at or before
the time title passes. Because an implied trust is neither dependent
upon an express agreement nor required to be evidenced by writing,
Article 1457 of our Civil Code authorizes the admission of parole
evidence to prove their existence. Parole evidence that is required to

Therese Zsa R. Torres

Page 6 of 11

establish the existence of an implied trust necessarily has to be

trustworthy and it cannot rest on loose, equivocal or indefinite
declarations.
As a trustee of a resulting trust, therefore, Roberto, like the
trustee of an express passive trust, is merely a depositary of legal title
having no duties as to the management, control or disposition of the
property except to make a conveyance when called upon by the cestui
que trust. Hence, the sales he entered into with respondents are a
wrongful conversion of the trust property and a breach of the trust.
7. Trusts; agency; trust pursuit rule; when prescription begins to
run
Estate of Margarita D. Cabacungan, represented by Luz Laigo-Ali
vs. Marilou Laigo, et al.; G.R. No. 175073. August 15, 2011
There is a fundamental principle in agency that where certain
property entrusted to an agent and impressed by law with a trust in
favor of the principal is wrongfully diverted, such trust follows the
property in the hands of a third person and the principal is ordinarily
entitled to pursue and recover it so long as the property can be traced
and identified, and no superior equities have intervened. This principle
is actually one of trusts, since the wrongful conversion gives rise to a
constructive trust which pursues the property, its product or proceeds,
and permits the beneficiary to recover the property or obtain damages
for the wrongful conversion of the property. Aptly called the trust
pursuit rule, it applies when a constructive or resulting trust has once
affixed itself to property in a certain state or form.
Hence, a trust will follow the property through all changes in its
state and form as long as such property, its products or its proceeds,
are capable of identification, even into the hands of a transferee other
than a bona fide purchaser for value, or restitution will be enforced at
the election of the beneficiary through recourse against the trustee or
the transferee personally. This is grounded on the principle in property
law that ownership continues and can be asserted by the true owner
against any withholding of the object to which the ownership pertains,
whether such object of the ownership is found in the hands of an
original owner or a transferee, or in a different form, as long as it can
be identified. Accordingly, the person to whom is made a transfer of
trust property constituting a wrongful conversion of the trust property
and a breach of the trust, when not protected as a bona fide purchaser
for value, is himself liable and accountable as a constructive trustee.

Therese Zsa R. Torres

Page 7 of 11

The liability attaches at the moment of the transfer of trust property

and continues until there is full restoration to the beneficiary. Thus, the
transferee is charged with, and can be held to the performance of the
trust, equally with the original trustee, and he can be compelled to
execute a reconveyance.
This scenario is characteristic of a constructive trust imposed by
Article 1456 of the Civil Code, which impresses upon a person
obtaining property through mistake or fraud the status of an implied
trustee for the benefit of the person from whom the property comes.
Petitioner, in laying claim against respondents who are concededly
transferees who professed having validly derived their ownership from
Roberto, is in effect enforcing against respondents a constructive trust
relation that arose by virtue of the wrongful and fraudulent transfer to
them of the subject properties by Roberto.
It is settled that an action for reconveyance based on a
constructive implied trust prescribes in 10 years likewise in accordance
with Article 1144 of the Civil Code. Yet not like in the case of a resulting
implied trust and an express trust, prescription supervenes in a
constructive implied trust even if the trustee does not repudiate the
relationship. In other words, repudiation of said trust is not a condition
precedent to the running of the prescriptive period.
As to when the prescriptive period
run, Crisostomo v. Garcia elucidated as follows:

commences

to

When property is registered in anothers name, an implied

or constructive trust is created by law in favor of the true owner.
The action for reconveyance of the title to the rightful owner
prescribes in 10 years from the issuance of the title. 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.
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.

Therese Zsa R. Torres

Page 8 of 11

From the foregoing, it is clear that an action for reconveyance

under a constructive implied trust in accordance with Article 1456 does
not prescribe unless and until the land is registered or the instrument
affecting the same is inscribed in accordance with law, inasmuch as it
is what binds the land and operates constructive notice to the world. In
the present case, however, the lands involved are concededly
unregistered lands; hence, there is no way by which Margarita, during
her lifetime, could be notified of the furtive and fraudulent sales made
in 1992 by Roberto in favor of respondents, except by actual notice
from Pedro himself in August 1995. Hence, it is from that date that
prescription began to toll. The filing of the complaint in February 1996
is well within the prescriptive period. Finally, such delay of only six
months in instituting the present action hardly suffices to justify a
finding of inexcusable delay or to create an inference that Margarita
has allowed her claim to stale by laches.
8. Trusts; implied trust; action for reconveyance; prescription;
laches.
Estate of Margarita D. Cabacungan, represented by Luz Laigo-Ali vs.
Marilou Laigo, et al. ; G.R. No. 175073. August 15, 2011
The invocation of the rules on limitation of actions relative to a
resulting trust is not in point because the resulting trust relation
between Margarita and Roberto had been extinguished by the latters
death. A trust, it is said, terminates upon the death of the trustee,
particularly where the trust is personal to him. Besides, prescription
and laches, in respect of this resulting trust relation, hardly can impair
petitioners cause of action. On the one hand, in accordance with
Article 1144 of the Civil Code, an action for reconveyance to enforce an
implied trust in ones favor prescribes in ten years from the time the
right of action accrues, as it is based upon an obligation created by
law. It sets in from the time the trustee performs unequivocal acts of
repudiation amounting to an ouster of the cestui que trust which are
made known to the latter. In this case, it was the 1992 sale of the
properties to respondents that comprised the act of repudiation which,
however, was made known to Margarita only in 1995 but nevertheless
impelled her to institute the action in 1996 still well within the
prescriptive period. Hardly can be considered as act of repudiation
Robertos open court declaration which he made in the 1979 adoption
proceedings involving respondents to the effect that he owned the
subject properties, nor even the fact that he in 1977 had entered into a
lease contract on one of the disputed properties which contract had

Therese Zsa R. Torres

Page 9 of 11

been subject of a 1996 decision of the Court of Appeals. These do not

suffice to constitute unequivocal acts in repudiation of the trust.
9. Trusts; implied trust
Philippine National Bank vs. Ciriaco Jumamoy and Heirs of Antonio
Go Pace, represented by Rosalia Pace; G.R. No. 169901, August 3,
2011
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. An
action for reconveyance based on implied trust prescribes in 10 years
as it is an obligation created by law, to be counted from the date of
issuance of the Torrens title over the property. This rule, however,
applies only when the plaintiff or the person enforcing the trust is not
in possession of the property.
10.

Trust; action for reconveyance based on trust

Estrella Tiongco Yared, etc. vs. Jose B. Tiongco, et al.; G.R. No.
161360. October 19, 2011

An action for reconveyance can indeed be barred by prescription.

In a long line of cases decided by this Court, we ruled that an action for
reconveyance based on implied or constructive trust must perforce
prescribe in ten years from the issuance of the Torrens title over the
property.
However, there is an exception to this rule. In the case of Heirs
of Pomposa Saludares v. Court of Appeals, the Court reiterating the
ruling in Millena v. Court of Appeals,heldthat there is but one instance
when prescription cannot be invoked in an action for reconveyance,
that is, when the plaintiff is in possession of the land to be reconveyed.
In Heirs of Pomposa Saludares, this Court explained that the Court in a
series of cases, has permitted the filing of an action for reconveyance
despite the lapse of more than ten years from the issuance of title to
the land and declared that said action, when based on fraud, is
imprescriptible as long as the land has not passed to an innocent buyer
for value. But in all those cases, the common factual backdrop was
that the registered owners were never in possession of the disputed
property. The exception was based on the theory that registration
proceedings could not be used as a shield for fraud or for enriching a
person at the expense of another.
Therese Zsa R. Torres

Page 10 of 11

In the case of Sandoval v. Court of Appeals, the Court defined an

innocent purchaser for value as one who buys property of another,
without notice that some other person has a right to, or interest in,
such property and pays a full and fair price for the same, at the time of
such purchase, or before he has notice of the claim or interest of some
other persons in the property. He is one who buys the property with the
belief that the person from whom he receives the thing was the owner
and could convey title to the property. A purchaser cannot close his
eyes to facts which should put a reasonable man on his guard and still
claim that he acted in good faith.
And while it is settled that every person dealing with a property
registered under the Torrens title need not inquire further but only has
to rely on the title, this rule has an exception. The exception is when
the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry or when the
purchaser has some knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation. The
presence of anything which excites or arouses suspicion should then
prompt the vendee to look beyond the certificate and investigate the
title of the vendor appearing on the face of said certificate. One who
falls within the exception can neither be denominated an innocent
purchaser for value nor a purchaser in good faith and hence does not
merit the protection of the law.

Therese Zsa R. Torres

Page 11 of 11