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.