TRUST CASES

Trusts are vested with equitable considerations

GOVERNMENT v. ABADILLA, ET. AL., MUN. OF TAYABAS, ET. AL., MARIA PALAD, ET. AL.

Facts:
Subjects lots (3464, 3469, and 3470) are claimed by the mun. of tayabas and the governor of the
province on one side, and by Maria. Eufemio, Eugenio Felix, et. al. on the other. Lot 3470 is also claimed
by Dorotea Lopez. All three lots were registered, per court order, in the name of the governor in trust for a
secondary school to be established in the municipality. Claimants Palad and Lopez appealed.

The lands were originally owned by Luis Palad, a school teacher, who obtained the same by gratuitous
title in 1894. Luis executed a holographic will. He died in December 1896 without descendants, but
leaving a widow, Dorotea Lopez (married since Oct 4 1885). CFI Tayabas ordered the protocolization or
probation of the will over the opposition of Leopoldo and Policarpio Palad (collateral heirs of Luis) and of
whom appellant Palads are descendants.

The will reads:

"That the cocoanut land in Colongcolong, which I have put under cultivation, be used by my wife after my
death during her life or until she marries, which property is referred to in the inventory under No. 5 but
from this cocoanut land shall be taken what is to be lent to the persons who are to plant cocoanut trees
and that which is to be paid to them as their share of the crop if any should remain; and that she try to
earn with the product of the cocoanut trees of which those bearing fruit are annually increasing; and if the
times aforementioned should arrive, I prepare and donate it to a secondary college to be erected in the
capital of Tayabas; so this will be delivered by my wife and the executors to the Ayuntamiento of this
town, should there by any, and if not, to the civil governor of this province in order to cause the manager
thereof to comply with my wishes for the good of many and the welfare of the town.

After Luis death, Dorotea remained in possession of the land and remarried one Calixto Dolendo.
Aforesaid collateral heirs of Luis brought an action for partition of the lands against Dorotea on the ground
that by reason of her remarriage she had lost the right to their exclusive use and possession. Mun. of
Tayabas intervened claiming its right under the will. Lots 3464 and 3469 were turned over to the
municipality; 3470 remained with Dorotea, per agreement.

CFI dismissed the action on the strength of said agreement.

Appellants Palads argue that there was no trust created since no trustee and cesti que trust were named
in the will.

Issue:
Whether or not a trust was created by virtue of the will executed by Luis Palad.

Ruling:
Yes.

In order that a trust may become effective there must, of course, be a trustee and a cestui que trust, and
counsel for the appellants Palad argues that we here have neither; that there is no ayuntamiento, no
Gobernador Civil of the province, and no secondary school in the town of Tayabas.

An ayuntamiento corresponds and it may be conceded that the ordinary municipal corporation and it may
be conceded that the ordinary municipal government in these Islands falls short of being such a
corporation. But we have provincial governors who like their predecessors, the civil governors, are the
chief executives of their respective provinces. It is true that in a few details the functions and powers of
the two offices may vary somewhat, but it cannot be successfully disputed that one office is the legal
successor of the other. It might as well be contended that when under the present regime the title of the
chief executive of the Philippines was changed from Civil Governor to that of Governor-General, the latter
was not the legal successor of the former. There can therefore be but very little doubt that the governor of
the Province of Tayabas, as the successor of the civil governor of the province under the Spanish regime,
may act as trustee in the present case.

In the regard to private trusts it is not always necessary that the cestui que trust should be named, or
even be in esse at the time the trust is created in his favor. (Flint on Trusts and Trustees, section 25; citing
Frazier vs. Frazier, 2 Hill Ch., 305; Ashurst vs. Given, 5 Watts & S., 329; Carson vs. Carson, 1 Wins.
[N.C.], 24.) Thus a devise to a father in trust for accumulation for his children lawfully begotten at the time
of his death has been held to be good although the father had no children at the time of the vesting of the
funds in him as trustee. In charitable trusts such as the one here under discussion, the rule is still further
relaxed.

"Any disposition which imposes upon an heirs the obligation of periodically investing specified sums in
charitable works, such as dowries for poor maidens or scholarships for students, or in favor of the poor, or
any charitable or public educational institution, shall be valid under the following conditions:
"If the charge is imposed on real property and is temporary, the heir or heirs may dispose of the
encumbered estate, but the lien shall continue until the record thereof is canceled.
"If the charge is perpetual, the heir may capitalize it and invest the capital at interest, fully secured by first
mortgage.
"The capitalization and investment of the principal shall be made with the intervention of the civil governor
of the province after hearing the opinion of the prosecuting officer.
"In any case, if the testator should not have laid down any rules for the management and application of
the charitable legacy, it shall be done by the executive authorities upon whom this duty devolves by law."

It is true that minor distinctions may possibly be drawn between the case before us and that presupposed
in the articles quoted, but the general principle in the same in both cases. Here the trustee, who holds the
legal title, as distinguished from the beneficial title resting in the cestui que trust, must be considered the
heir. The devise under consideration does not in terms require periodical investments of specified sums,
but it is difficult to see how this can affect the general principle involved, and unless the devise
contravenes some other provision of the Code it must be upheld.

We have been unable to find any such provision. There is no violation of any rule against perpetuities: the
devise does not prohibit the alienation of the land devised. It does not violate article 670 of the Code: the
making of the will and the continuance or quantity of the estate of the heir are not left in the discretion of a
third party. the devisee is not uncertain and the devise is therefore not repugnant to article 750 of the Civil
Code. the provincial governor can hardly be regarded as a public establishment within the meaning of
article 748 and may therefore receive the inheritance without the previous approval of the Government.

But counsel argues that assuming all this to be true the collateral heirs of the deceased would
nevertheless be entitled to the income of the land until the cestui que trust is actually in esse. We do not
think so. If the trustee holds the legal title and the devise is valid, the natural heirs of the deceased have
no remaining interest in the land except their right to the reversion in the event which has not as yet taken
place. From a reading of the testamentary clause under discussion it seems quite evident that the
intention of the testator was to have the income of the property accumulate for the benefit of the proposed
school until the same should be established.

ESPERANZA FABIAN, BENITA FABIAN and DAMASO PAPA Y FABIAN v. SILBINA FABIAN,
FELICIANO LANDSITE, TEODORA FABIAN and FRANCISCO DEL MONTE
Facts:
Pablo Fabian bought from the PH govt the subject friar lands estate in Muntinlupa, Rizal payable in
installments. By virtue of this process, he was issued a sale certificate.

On the strength of an affidavit, the sale cert. was assigned to Silbina Fabian and Teodora Fabian, niece of
the deceased Pablo.The acting director of lands sold one lot to Silbina (married to Feliciano Landrito), and
to Teodora (married to Francisco Del Monte), for the sum oP120. They took possession thereof, cultivated
it, and appropriated the produce therefrom; they declared the lot in their names for tax purposes under tax
dec. this tax dec was later cancelled, and in lieu thereof two tax decs were issued in favor of Teodora and
Silbina. Since then they have been paying real estate taxes thereon. Later Register of Deeds of Rizal
issued TCT in their names. And the same was subdivided into two equal parts issued two separate
TCTs.

Plaintiffs Esperanza, Benita, and Damaso filed acton for reconveyance against the respondent spouses,
averring that Silbina and Teodora, thru fraud perpetrated in their affidavit, made it appear that Pablo
Fabian gave them the subject lot, which is a false narration of facts because Silbina knew that she is not
the only daughter and heir of the deceased Pablo, and Teodora likewise knew all along that, asa mere
niece she was precluded from inheriting from him in the presence of the four surviving daughters; that
they succeeded fraudulently in having the lots registered in their names.

Silbina and Teodora claim that Pablo was not the owner of the said lot at the time of his death because
he had not paid in full the amortization on the lot; that they were the absolute owners thereof, having
purchased it from the govt and having exercised all the attributes of ownership thereof up to the present
and that the action for reconveyance already prescribed

CFI spouses had acquired a valid and complete title to the property by acquisitive prescription.

Issues:
1. Whether or not Pablo was the owner of the said lot at the time of his death.
2. Whether or not laches may constitute a bar to an action not enforce a constructive trust

Ruling:
1. Yes. The equitable and beneficial title really went to the purchaser the moment he paid the first
installment and was given a certificate of sale. The reservation of the title in favor of the Government
is made merely to protect the interest of the Government so as to preclude. or prevent the purchaser
from encumbering or disposing of the lot purchased before the payment in full of the purchase price.
Outside of this protection the Government retains no right as an owner. For instance, after issuance of
the sales certificate and pending payment in full of the purchase price, the Government may not sell
the lot to another. It may not even encumber it. It may not occupy the land to use or cultivate; neither
may it lease it or even participate or share in its fruits. In other words, the Government does not and
cannot exercise the rights and prerogatives of owner. And when said purchaser finally pays the final
installment on the purchase price and is given a deed of conveyance and a certificate of title, the title,
at least in equity, retroacts to the time he first occupied the land, paid the first installment and was
issued the corresponding certificate of sale. In other words, pending the completion of the payment of
the purchase price, the purchaser is entitled to all the benefits and advantages which may accrue to
the land as well as suffer the losses that may befall it.That Pablo Fabian had paid five annual
installments to the Government, and in fact been issued sale certificate 547 in his name, are
conceded. He was therefore the owner of lot 164 at the time of his death. He left four daughters,
namely, Esperanza, Benita I, Benita II and Silbina, to whom all his rights and interest over lot 164
passed upon his demise."In case a holder of a certificate dies before the giving of the deed and does
not leave a widow, then the interest of the holder of the certificate shall descend and deed shall issue
to the person who under the laws of the Philippine Islands would have taken had the title been
perfected before the death of the holder of the certificate, upon proof of the holders thus entitled of
compliance with all the requirements of the certificate." The assignment and sale of the lot to the
 defendants Silbina and Teodora were therefore null and void as to that portion sold to Teodora, and as
well as to that portion which lawfully devolved in favor of the appellants. To the extent of the
participation of the appellants, application must be made of the principle that if property is acquired
through fraud, the person obtaining it is considered a trustee of an implied trust for the benefit of the
person from whom the property comes.

1. Yes. In Diaz, et al. vs. Gorricho, et al., 103 Phil. 264-265 (1958), this Court, speaking through Mr.
Justice J.B.L. Reyes, declared in no uncertain terms that laches may bar an action brought to enforce
a constructive trust such as the one in the case at bar. "Article 1456 of the new Civil Code, while not
retroactive in character, merely expresses a rule already recognized by our courts prior to the Code's
promulgation (see Gayondato vs. Insular Treasurer, 49 Phil. 244), Appellants are, however, in error in
believing that like express trust, such constructive trusts may not be barred by lapse of time. The
American law on trusts has always maintained a distinction between express trusts created by the
intention of the parties, and the implied or constructive trusts that are exclusively created by law, the
latter not being trusts in their technical sense (Gayondato vs. Insular Treasurer, supra). The express
trusts disable the trustee from acquiring for his own benefit the property committed to his
management or custody, at least while he does not openly repudiate the trust, and makes such
repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil
Procedure (Act 190) declared that the rules on adverse possession does not apply to 'continuing and
subsisting' (i.e., unrepudiated) trusts."But in constructive trusts, . . . the rule is that laches constitutes a
bar to actions to enforce the trust, and repudiation is not required, unless there is a concealment of
the facts giving rise to the trust.The assignment of sale certificate 547 was effected on October 5,
1928, and the actual transfer of lot 164 was made on the following November 14. It was only on July
8, 1960, 32 big years later, that the appellants for the first time came forward with their claim to the
land. The record does not reveal, and it is not seriously asserted, that the appellees concealed the
facts giving rise to the trust. Upon the contrary, paragraph 13 of the stipulation of facts of the parties
states with striking clarity "that defendants herein have been in possession of the land in question
since 1928 up to the present publicly and continuously under claim of ownership; they have cultivated
it, harvested and appropriated the fruits for themselves." Six years later, in Gerona, et al vs. De
Guzman, et al., L- 19060, May 29, 1964, the factual setting attending which is substantially similar to
that obtaining in the case at bar, this Court, in an excellently-phrased decision penned by Chief
Justice, then Associate Justice, Roberto Concepcion, unequivocally reaffirmed the rule, overruling
previous decisions to the contrary, that "an action for reconveyance of real property based upon a
constructive or implied trust. resulting from fraud, may be barred by the statute of limitations," and
further that "the action therefore may be filed within four years from the discovery of the fraud," the
discovery in that case being deemed to have taken place when new certificates of title were issued
exclusively in the names of the respondents therein. The following is what Justice Concepcion,
speaking for the Court, said:"[A]lthough, as a general rule, an action for partition among co-heirs does
not prescribe, this is true only as long as the defendants do not hold the property in question under an
adverse title (Cordova vs. Cordova, L-9936, January 14, 1948). The statute of limitations operates, as
in other cases, from the moment such adverse title is asserted by the possessor of the property
(Ramos vs. Ramos, 45 Phil., 362; Bargayo vs. Camumot, 40 Phil., 857; Castro vs. Echarri, 20 Phil.,
23).Upon the undisputed facts in the case at bar, not only had laches set in when the appellants
instituted their action for reconveyance in 1960, but as well their right to enforce the constructive trust
had already prescribed. It logically follows from the above disquisition that acquisitive prescription has
likewise operated to vest absolute title in the appellees, pursuant to the provisions of section 41 of Act
190 that."Ten years actual adverse possession by any person claiming to be the owner for that time of
any land or interest in land, uninterruptedly continued for fen years by occupancy, descent, grants, or
otherwise, in whatever way such occupancy may have commenced or continued, 6 shall vest in every
actual occupant or possessor of such land a full and complete title . . ." (emphasis ours)

ELOY MIGUEL and DEMETRIO MIGUEL v. CA, ANACLETA VDA. DE REYES

Facts:
During the Spanish regime Eloy Miguel, then single and resident of Laoag, Ilocos Norte, went to Isabela
and stayed with his relative Juan Felipe in barrio Ingud norte. there he spotted an uncultivated parcel of
land, 1 hectare which he occupied and cleared and planted with corn. After the revolution, he returned to
Laoag and got married. He returned to Ingud with his family and resettled there, cultivated the land and
planted rich and declared the same for tax purposes, and paid realty taxes thereon.

Leonor Reyes (husband of Anacleta) was a notary public that time. He used to visit barrio Ingud looking
for documents to notarize. He the net Eloy Miguel and offered the latter for an expeditious process of
titling his land to his name. Reyes prepared and filed a homestead application in the name of Eloy Miguel
and promised to work for the early approval of the application. reyes gave the receipt for the filing fee of
the application to Eloy but withheld the tax receipts and tax dec, assuring miguel that he would return
them as soon as the homestead patent was issued in Miguels name; he likewise advised Migue to stop
paying the and taxes until the patent was issued.

After a long wait Miguel inquired from Reyes about the status of his application. the latter promised to
send him a letter-tracer (blank) on which he affixed his thumb mark. WWII broke out and Miguel did not
hear of and about his homestead application. Reyes died during the Japanese occupation.

For the services rendered and still to be rendered by Leonor Reyes in preparing the homestead
application and in securing the issuance of the correspondent patent, Miguel gave the former 1/5 of his
yearly harvest from the land. After the death of Leonor Reyes, Miguel continued to deliver an equal
number of cavanes of palay to the former's widow, Anacleta M. Vda. de Reyes, who likewise promised to
help him secure the necessary homestead patent.

Demetrio, son of Eloy, declared the 14 hectares of land ceded to him by his father for taxation purposes in
his name.

However, unknown to Eloy and Demetrio, Leonor Reyes filed sales application in the name of his wife,
Anacleta covering the same parcel of land occupied and cultivated by the Miguels. The application was
duly acknowledged by the Bureau of Lands.

Upon discovery, the Miguels filed a protest with the Bureau against the sales application of Anacleta.
Director of lands conducted an investigation > hearing of the protest -> but notwithstanding the
protest the Miguels discovered that the sales patent and original certificate of the lands in dispute were
granted and issued to Anacleta.

The Miguels filed a complaint with the CFI against Anacleta and the Director and Register of Deeds for
the annulment of the sales patent and the cancellation of original certificate of title.

CFI dismissed the Moguls did not have locus standi and the complaint was prematurely filed for not
having exhausted all administrative remedies.

The Miguels commenced reconveyance of the title to them.

CFI found that Eloy Miguel "has always been, and up to this time, in physical possession of the whole
tract of land in question under claim of ownership thru occupancy, he having occupied and cultivated the
land since the Spanish regime;" that he was a homestead applicant way back in 1932 for the land
possessed by him; that there exists a trust relationship between the Miguels and the private respondent
and her deceased husband, Leonor Reyes, a notary public, with respect to the same property, without
which relationship Eloy Miguel would himself have personally attended to his own application; and that,
through fraud and misrepresentations, Leonor Reyes caused the filing and approval of an application and
the issuance by the Bureau of Lands of a sales patent covering the property in the name of his wife, the
private respondent, with out the consent and knowledge of the Miguels. The lower court's, however, held
that reconveyance is not proper because the land in question is not the private property of the Miguels
since time immemorial but remains a part of the public domain, and instead declared that Eloy Miguel
"should be given priority to acquire the land under the homestead provisions of the Public Land Law.

"Moreover, a situation of trust has been created in the instant case between the plaintiff and the
defendant-appellant's deceased husband upon whom the plaintiff Eloy Miguel relied through his (Reyes')
representations that the corresponding title to said land would be secured in favor of the plaintiff Eloy
Miguel. The evidence likewise shows that the defendant Vda. de Reyes promised the plaintiff to continue
the work begun by her late husband with the ultimate result of securing the raid homestead patent and
title in favor of the plaintiff Eloy Miguel. Inasmuch as the said promise was violated by the defendant who
secretly worked toward the acquisition of the said land for her own self, fraudulently and stealthily, no
prescription can run as against plaintiffs' right to claim ownership of the said property."

Issue:
Whether or not reconveyance is proper since the trust relationship existing between Eloy Miguel and the
Reyes spouses was breached by the latter.

Ruling:
Yes.

Assuming the respondent Court to be correct a legion of cases there are which can be cited in favor of the
petitioners' position. Since the law of trust has been more frequently applied in England and in the United
States than it has been in Spain, we may draw freely upon American precedents in determining the
effects of trusts, especially so because the trusts known to American and English equity jurisprudence are
derived from the fidei commissa of the Roman Law and are based entirely upon civil law principles. 7
Furthermore, because the case presents problems not directly covered by statutory provisions by Spanish
or local precedents, resort for their solution must be had to the underlying principles of the law on the
subject. Besides, our Civil Code itself directs the adoption of the principles of the general law of trusts,
insofar as they are not in conflict with said Code, the Code of Commerce, the Rules of Court and special
laws.

In holding that the eases cited by the petitioners in their motion for reconsideration (i.e., Republic of the
Philippines v. Carle Heirs, supra, and Roco, et al. v. Gimeda, supra) are inapplicable, the respondent
Court advances the theory that an action for reconveyance based on constructive trust will prosper only if
the properties involved belong to the parties suing for and entitled to reconveyance. This is not entirely
accurate. In Fox v. Simons 9 the plaintiff employed the defendant to assist him in obtaining oil leases in a
certain locality in Illinois, the former paying the latter a salary and his expenses. The defendant acquired
some leases for the plaintiff and others for himself. Whereupon, the plaintiff brought suit to compel the
defendant to assign the leases which he had acquired for himself. The court found for the plaintiff, holding
that it was a breach of the defendant's fiduciary duty to purchase for himself the kind of property which he
was employed to purchase for the plaintiff.

It is to be observed that in Fox v. Simons, supra, the plaintiff was not the original owner of the oil leases.
He merely employed the defendant to obtain them for him. but the latter obtained some for the plaintiff
and some for himself. Yet, despite the absence of this former-ownership circumstance, the court there did
not hesitate to order the defendant to assign or convey the leases he obtained for himself to the plaintiff
because of the breach of fiduciary duty committed by said defendant. Indeed, there need only be a
fiduciary relation and a breach of fiduciary duty before reconveyance may be adjudged. In fact, a fiduciary
may even be chargeable as a constructive trustee of property which he purchases for himself, even
though he has not undertaken to purchase it for the beneficiary, if in purchasing it he was improperly
competing with the beneficiary.

Parenthetically, a fiduciary relation arises where one man assumes to act as agent for another and the
other reposes confidence in him, although there is no written contract or no contract at all. If the agent
violates his duty as fiduciary, a constructive trust arises. It is immaterial that there was no antecedent
fiduciary relation and that it arose contemporaneously with the particular transaction.

In the case at bar, Leonor Reyes, the private respondent's husband, suggested that Eloy Miguel file a
homestead application over the land and offered his services in assisting the latter to secure a homestead
patent. Eloy Miguel accepted Leonor Reyes' offer of services, thereby relying on his word and reposing
confidence in him. And in payment for the services rendered by Leonor Reyes in preparing and filing the
homestead application and those still to be rendered by him in securing the homestead patent, Eloy
Miguel delivered to Reyes 1/5 of his yearly harvest from the said land. When Leonor Reyes died, the
petitioners continued to deliver the same percentage of their annual harvest to the private respondent
who undertook to continue assisting the former to secure a homestead patent over said land. However, in
breach of their fiduciary duty and through fraud, Leonor Reyes and the private respondent filed a sales
application and obtained a sales patent and ultimately an original certificate of title over the same parcel
of land. Therefore, following the ruling in Fox v. Simons, supra, the private respondent can be compelled
to reconvey or assign to the petitioners the parcel of land in the proportion of nine hectares in favor of
Eloy Miguel and 14 hectares in favor of Demetrio Miguel respectively.