EXPRESS TRUST

PNB v. Aznar, et al
G.R. No. 171805, May 30, 2011

RISCO ceased operation due to business reverses. To rehabilitate RISCO,

respondents contributed P212,720.00 which was used in the purchase of the
three parcels of land, and titles were issued in the name of RISCO. The amount
contributed by respondents was constituted as liens and encumbrances on the
aforementioned properties as annotated in the titles of said lots. Such
annotation was made pursuant to the Minutes of the Special Meeting of the
Board of Directors of RISCO (Minutes).
Thereafter, various subsequent
annotations were made on the same titles, including the Notice of Attachment
and Writ of Execution both dated August 3, 1962 in favor of herein defendant
PNB. Eventually, a Certificate of Sale was issued in favor of PNB, being the
lone and highest bidder of the three parcels of land. Thereafter, a Final Deed of
Sale dated May 27, 1991 in favor of the PNB was also issued and a new
certificate of title was issued in the name of PNB on August 26, 1991.
Respondents alleged that the subsequent annotations in favor of PNB on
the titles are subject to the prior annotation of their liens and encumbrances.
Petitioner PNB on the other hand countered that respondents, as mere
stockholders of RISCO, do not have any legal or equitable right over the
properties of the corporation.
On November 18, 1998, the trial court ruled against PNB on the basis
that there was an express trust created over the subject properties whereby
RISCO was the trustee and the stockholders, Aznar, et al., were the
beneficiaries or the cestui que trust.
Upon PNBs appeal, the CA on September 29, 2005 set aside the
judgment of the RTC. It opined that the monetary contributions made by
Aznar, et al., to RISCO can only be characterized as a loan secured by a lien on
the subject lots, rather than an express trust.
ISSUE: Maweather or not the Minutes created an express trust, constituting
RISCO as the trustee and Aznar,et al., as the beneficiaries (cestui que trust)

No, the Minutes did not give rise to an express trust; rather, it created a
contract of loan.
From the use of the word "lien" in the Minutes, the SC finds that the
money contributed by respondents was in the nature of a loan, secured by
their liens and interests duly annotated on the titles. The annotation of their
lien serves only as collateral and does not in any way vest ownership of
property to plaintiffs.
On the other hand, 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, sometimes referred to as direct trusts, are intentionally
created by the direct and positive acts of the settlor or the trustor - by some
writing, deed, or will or oral declaration. It is created not necessarily by some
written words, but by the direct and positive acts of the parties. This is in
consonance with Article 1444 of the Civil Code, which states that "[n]o
particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended."
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. A careful
scrutiny of the plain and ordinary meaning of the terms used in the Minutes
does not offer any indication that the parties thereto intended that Aznar, et
al., become beneficiaries under an express trust and that RISCO serve as
trustor.

IMPLIED TRUST

Iglesia Filipina Independiente v. Heirs of Bernardino Taeza

G.R. No. 179597, February 3, 2014

The petitioner Iglesia Filipina Independiente (IFI), a duly registered

religious corporation, was the owner of a parcel of land situated at Tuguegarao,
Cagayan. On February 5, 1976, the petitioner through its then Supreme
Bishop Rev. Macario Ga (Ga) sold a portion of the lot to respondent Bernardino
Taeza (Taeza). In January 1990, a complaint for annulment of sale was filed by
IFI through Supreme Bishop Most Rev. Tito Pasco, against the respondent. On
November 6, 2001, the RTC rendered judgment in favor of the petitioner IFI. It
held that the deed of sale executed by and between Ga and the respondent
Taeza is null and void. On June 30, 2006, the CA reversed and set aside the
RTC Decision, ruling that petitioner, being a corporation sole, validly
transferred ownership over the land in question through its Supreme Bishop,
who was at the time the administrator of all properties and the official
representative of the church. It further held that "[t]he authority of the then
Supreme Bishop Rev. Ga to enter into a contract and represent the petitioner
cannot be assailed, as there are no provisions in its constitution and canons
giving the said authority to any other person or entity."

ISSUES:

(1) Whether an implied trust was created when respondent acquired the
parcel of land by virtue of the sale thereof.

(2) 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?

1. Yes. Since respondent acquired the parcel of land by mistake, an implied

constructive trust was created by virtue of Article 1456 of the Civil Code.

When the Supreme Bishop executed the contract of sale of petitioner's lot
despite the opposition made by the laymen's committee, he acted beyond his
powers,

violating

IFIs

canons.

Respondents'

predecessor-in-interest,

Bernardino Taeza, had already obtained a transfer certificate of title in his

name over the property in question. Since the person supposedly transferring
ownership was not authorized to do so, the property had evidently been
acquired by mistake.

In Vda. de Esconde v. Court of Appeals, the Court affirmed the trial

court's ruling that the applicable provision of law in such cases is Article 1456
of the Civil Code which states that "[i]f 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."

In Aznar Brothers Realty Company v. Aying, the Court clarified the

concept of trust involved in said provision, to wit: 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 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: 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.

2. No. Although respondent acquired the subject lot by mistake wherein an

implied constructive trust was created, the 10-year prescriptive period
has not yet set in.

The Court held in the same case of Aznar, 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, the Court explained the basis for the prescriptive period, to wit:

x x x 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--vis 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, x x x.

Here, the present action was filed on January 19, 1990, while the
transfer certificates of title over the subject lots were issued to respondents'
predecessor-in-interest, Bernardino Taeza, only on February 7, 1990.

Clearly, therefore, petitioner's complaint was filed well within the prescriptive
period stated above, and it is only just that the subject property be returned to
its rightful owner.

IMPLIED TRUST

REPUBLIC OF THE PHILIPPINES v. SANDIGANBAYAN

G.R. No. 166859, April 12, 2011

This case revolves around the multiple disputes over the Coconut Levy
Funds (ill-gotten wealth). Among the several respondents named in the instant
case, Eduardo M. Cojuangco, Jr. was the subject of concern, being an officer of
the UCPB. The said corporation was able to acquire a number of shares of San
Miguel Corporation (SMC). Allegedly, UCPB was able to acquire SMC shares
using ill-gotten wealth. As such, the Republic filed several petitions before the
Supreme Court questioning the decisions rendered by the Sandiganbayan.
With respect to the issue on trust, the Republic alleges that Cojuangco violated
his fiduciary duties. The Republic invokes the following pertinent statutory
provisions of the Civil Code, to wit:
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.
Article 1456. If property is acquired through mistake or fraud, the person
obtaining it 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.

ISSUES: Did Cojuangco breach his "fiduciary duties" as an officer and member
of the Board of Directors of the UCPB? Did his acquisition and holding of the
contested SMC shares come under a constructive trust in favor of the
Republic?

No. The answers to such queries are in the negative.

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. Hence,
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.
Thus, the Sandiganbayan could not fairly find that Cojuangco had
committed breach of any fiduciary duties as an officer and member of the
Board of Directors of the UCPB. 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 not established. Nor was there
evidence on the loans or borrowings, their amounts, the approving authority,
etc. As trial court, the Sandiganbayan could not presume his breach of
fiduciary duties without evidence showing so, for fraud or breach of trust is
never presumed, but must be alleged and proved.
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.135 The only liability on his part is to pay the loan
together with the interest that is either stipulated or provided under existing
laws.

IMPLIED TRUST

Estate of Cabacungan v. Laigo

G.R. No. 175073, August 15, 2011

Sometime in 1968, Margarita Cabacungans son, Roberto Laigo, Jr.,

applied for a non-immigrant visa to the US, and to support his application, he
allegedly asked Margarita to transfer the tax declarations of the properties in
his name. Margarita executed an Affidavit of Transfer of Real Property whereby
the subject properties were transferred by donation to Roberto. In July 1990,
Roberto sold a parcel of land to the spouses Mario and Julia Campos. Then in
August 1992, he sold the other lots in Paringao to Marilou and to Pedro (his
adoptive children).
It was only in August 1995 that Margarita came to know of the sales.
Margarita admitted having accommodated Robertos request for the transfer of
the properties to his name, but pointed out that the arrangement was only for
the specific purpose of supporting his U.S. visa application. She emphasized
that she never intended to divest herself of ownership over the subject lands
and, hence, Roberto had no right to sell them to respondents and the Spouses
Campos. She likewise alleged that the sales, which were fictitious and
simulated considering the gross inadequacy of the stipulated price, were
fraudulently entered into by Roberto. She imputed bad faith to Pedro, Marilou
and the Spouses Campos as buyers of the lots, as they supposedly knew all
along that Roberto was not the rightful owner of the properties. Hence, she
principally prayed that the sales be annulled; that Robertos tax declarations
be cancelled; and that the subject properties be reconveyed to her.
On July 2, 2001, the trial court dismissed the complaint and ruled that
the 1968 Affidavit of Transfer operated as a simple transfer of the subject
properties from Margarita to Roberto. It found no express trust created between
Roberto and Margarita by virtue merely of the said document as there was no
evidence of another document showing Robertos undertaking to return the
subject properties. This was likewise affirmed by the CA.
ISSUES:

(1) Whether there was an implied trust arising from the transfer of property
to Roberto
(2) Whether respondent can be compelled to reconvey the property to the
petitioner

1.

Yes, there was. It was in the nature of a resulting trust.

It is deducible from the presentation of evidence in the trial court that

the inscription of Robertos name in the Affidavit of Transfer as Margaritas
transferee is not for the purpose of transferring ownership to him but only to
enable him to hold the property in trust for Margarita. Indeed, in the face of the
credible and straightforward testimony of the two witnesses, Luz and Hilaria,
the probative value of the ownership record forms in the names of respondents,
together with the testimony of their witness from the municipal assessors
office who authenticated said forms, are utterly minimal to show Robertos
ownership. It suffices to say that respondents did not bother to offer evidence
that would directly refute the statements made by Luz and Hilaria in open
court on the circumstances underlying the 1968 Affidavit of Transfer.
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.
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 "purchase-money 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 establish the existence of an
implied trust necessarily has to be trustworthy and it cannot rest on loose,
equivocal or indefinite declarations.

2.
Yes, because the respondents defenses of good faith and
prescription are inapplicable in this case.
Those who purchase unregistered lands may not raise good faith as a
defense, as this would only apply to purchase of registered lands from an
alleged registered owner. As to prescription, 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 (6) 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.