O’Laco v.

Co Cho Chit
March 31, 1993
Effects of Family Relationship
Bellosillo, J:

Doctrine:

Facts:
 A lot in Manila was sold by Philippine Sugar Estate Development Company in 1943
with the Deed of Absolute name to Emilia O’Laco and a new title issued in her name.

 In 1960, Co Cho Chit and his wife, O Lay Kia, also Emilia’s older half-sister, sued
Emilia O’Laco and her husband for selling the same parcel of land to the
Catholic Archbishop of Manila and for recovery of the sold lot claiming that
they were the real owners of the property and the legal title was only place in the
name of Emilia. They claimed that Emilia breached the trust when she sold
the lot to the Archbishop of Manila.

 Emilia answered that she bought the property with her own money, and that she
only left the Deed of Absolute Sale and the title to Co Cho Chit and her sister for
safekeeping. When she asked that the documents be returned to her, her sister and
Co Cho Chit claimed that they were misplaced or lost, and in view of the loss, she
asked for the issuance of a new title from the CFI of Manila which was granted to
her.

 RTC found no trust relation between parties and dismissed the complaint. Court of
Appeals set aside the decision of the trial court and ordered O’Laco to pay the sum
representing the value of the property sold to the Archbishop of Manila.

Issue:
 Whether or not O Lay Kia and Co Cho Chit’s complaint fails to allege that earnest
efforts towards a compromise were exerted considering the suit is between family
member.
 Whether or not trust relation exists between the parties involved.

Ratio:
 NO, the complaint made by O Lay Kia and Co Cho Chit is valid.
o The case is a case between family members since O Lay Kia and Emilia O’Laco
are half-sisters. As such, earnest efforts towards a compromise need to
have been made pursuant to NCC 222 (in the Family Code, it is Art. 151)
before the complaint may be filed before the court, or a motion to dismiss
could have been filed under Sec. 1, par. (j), Rule 16 of the Rules of
Court. The attempt to compromise and its inability to succeed is a
condition precedent to the filing of a suit between family members.

o However, the plaintiff may be allowed to amend his original complaint to

correct the defect if the amendment does not actually confer jurisdiction on
the court and only to cure the perceived defect in the complaint. As such, if
the original complaint did not include proof of the conditional
precedent of failed efforts towards a compromise amongst family
 members, the plaintiff may be able to amend his or her complaint to
include such proof.

o In this case, O Lay Kia and Co Cho Chit were able to introduce further
evidence showing earnest efforts towards a compromise had been made,
even if they did not formally file an amendment. They were able to prove that
O Lay Kia pressed her sister Emilia for the transfer of the title of the property
to her and Co Cho Chit just before Emilia got married, but instead, Emilia
decided to sell the property to the Archbishop.

 YES, there is a trust relation between the parties.

o Trust may be express or implied. Express trusts are created by direct or
positive acts by the parties, such as through writing or deed, or by direct
words with the intention to create a trust. Implied trusts are those which
may not be express but are deducible from the nature of the
transaction as matter of intent. Implied trusts may be resulting trusts,
which are based on the equitable doctrine that valuable consideration and
NOT LEGAL TITLE determines equity, or constructive trusts, which are
created by construction of equity in order to satisfy the demands of the
intention against one who, by fraud, obtains legal right to a property which he
ought not hold.

o In this case, the Court held that there was a resulting trust intended by
the parties pursuant to NCC 1448 based on 5 grounds:
 O Lay Kia and Co Cho Chit were in possession of all necessary
documents with regards to the subject property for 17 years which
strongly suggest that O’Laco merely held the property in trust for them
by using her name on the title.
 An almost the same case had already been decided previously on
another property owned by O Lay Kia but this time, under the name of
her half-brother and Emilia’s sister, Ambrosio O’Laco. Court eventually
held that O Lay Kia and Co Cho Chit were the rightful owners of the
said property and the reason the title was under Ambrosio’s name was
because they were still Chinese Nationals at the time. This was
affirmed by Ambrosio when he filed a complaint against O Lay Kia and
Co Cho Chit based on the Anti-Dummy law; a case which was
eventually dismissed.
 Cicrumstances when Emilia attained her new title was doubtful
because it was granted on the same day a new title was also granted
to Ambrosio. The Court held that this showed a conspiracy by the
siblings to defraud and deprive O Lay Kia and Co Cho Chit.
 Until the sale of the property to the Archbishop, Emilia actually
recognized O Lay Kia’s ownership. When O Lay Kia wanted the title to
be named to her and her husband before Emilia gets married, Emilia
assured her that it would be arranged after the wedding.
 There was proof shown that Co Cho Chit had the capacity to acquire
the properties given that he was the Chief Mechanic in Paniqui Sugar
Mills and was engaged in several businesses. Emilia, on the other
hand, failed to prove her financial capacity to acquire property.