TRUSTS

G.R. No. L-16962 February 27, 1962 TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA and ANTONIO, all surnamed PEREZ Y TUASON, ANTONIO M. PEREZ, judicial-guardian-appellant, vs. J. ANTONIO ARANETA, trustee-appellee. Trustor: Angela Tuason Trustee: Antonio Araneta Beneficiary: Benigno, Angela, Antonio (grandchildren of decedent) Judicial guardian of the grandchildren: Antonio Perez Facts: Sometime in 1948, Angela S. Tuason died leaving a will. In conformity with this provision of said will, the present trusteeship proceedings was instituted and certain properties of the estate of the deceased were turned over in 1950 to J. Antonio Araneta, as trustee for the benefit of Benigno, Angela and Antonio, all surnamed Perez y Tuason, the grandchildren of the decedent. Portions of said properties constituting the trust were sold. Thus, the judicial guardian and father of said minors filed a motion in the trusteeship proceedings alleging that said proceeds of the sale represent profits or income of the trusteeship to which said minors are entitled and praying that the trustee be accordingly instructed to deliver said sum to the movant. Contention of PEREZ: The proceeds of the sale is a profit or income as it was included as profit in the statements of profits and losses attached to the corresponding income tax returns. Issue: whether or not the aforesaid sum of P98,828.88 is a profit or income which should be turned over to the guardian of said minors according to the provisions of the will Held: NO. Rationale: To begin with, the issue as to whether or not the minors are entitled to the delivery of said sum of P98,828.88 is a matter dependent exclusively upon the conditions upon which the trust had been established , as provided in the above quoted paragraph of the will of the decedent, which in turn depends upon the latter's intent, as set forth in said paragraph. Upon the other hand, the question whether the sum in question is a profit or not within the purview of our internal revenue law depends upon the provisions of the latter, regardless of the will of the decedent. Secondly, the proceeds of the sale of portions of the real estate held in trust, merely take the place of the property sold. What is more, the provision of the will of the decedent explicitly authorizing the trustee to sell the property held in trust and to acquire, with the proceeds of the sale, other property leaves no room for doubt about the intent of the testatrix to keep, as part of the trust, said proceeds of the sale, and not to turn the same over to the beneficiary as net rentals. Thirdly, pursuant to the general law on trust, "a provision in the instrument to the effect that the beneficiary shall be entitled to the 'income and profits of' of the trust estate is not ordinarily sufficient to indicate an intention that he should be entitled to receive gains arising from the sale of trust property ..." The corpus of the estate, no matter what changes of form it undergoes, should be regarded as the same property. That the trust property is originally money, later becomes bonds, and still later real estate, ought not to affect the status of the property as the capital fund. Hence, it is well settled that profits realized in the sale of trust properties are part of the capital held in trust to which the beneficiaries are not entitled as income . money or other property received by the trustee as the proceeds of a sale or exchange of the principal of trust property is principal. Where it is provided by the terms of the trust that the 'income and profits' of the trust estate shall be paid to the life beneficiary, it is a question of interpretation whether the life beneficiary is to receive more than he would receive if it were provided that the 'income' should be paid to him. Ordinarily the inference is that he is not to receive more, and if trust property is sold at a profit, the profit is principal. G.R. No. 96727 August 28, 1996 RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS and TRANSOCEAN TRANSPORT CORPORATION, respondents. Trustor: REPACOM and Transcocean Transport (insured) Trustee: Rizal Surety

FACTS: REPACOM (Reparations Commission) sold to Transocean Transport Corporation the vessel 'M/V TRANSOCEAN SHIPPER' which was insured with Rizal Surety & Insurance Company and which was subsequently, reinsured by Rizal Surety with a foreign insurance firm. Sometime in February 1975, the vessel was lost in the Mediterranean Sea. The 2 insured filed claims for the insurance proceeds. Rizal Surety was authorized to receive the insurance proceeds from the reinsurance firm in foreign currency with any local bank in non-interest bearing account, jointly in the names of Transocean and REPACOM which was subsequently amended to be deposited in the name of Rizal Surety and for the joint account of Transocean and REPACOM. In January 1976--Transocean and REPACOM entered into a partial compromise agreement, wherein they agreed to divide and distribute the insurance proceeds in such a manner that each would receive as its initial share thereof that portion not disputed by the other party (thus, REPACOM US$434,618.00, and private respondent US$1,931,153.00), leaving the balance in dispute for future settlement, either by way of compromise agreement or court litigation, pending which the said balance would continue to be kept in the same bank account in trust for private respondent and REPACOM unless the parties otherwise agree to transfer said balance to another bank account. Copies of this compromise agreement were sent to petitioner. (final compromise agreement executed in 1978 where all rights to the insurance proceeds were transferred to Transocean) In march 1976the 2 insured were authorized to transfer the balance of the insurance proceeds into an interest bearing special dollar account with any local commercial bank. CONTROVERSY: there was delay on the part of Rizal Surety in depositing the remaining dollar deposit in an interestbearing account either by remitting the same to PNB in compliance with the request of the 2 insured, or by transferring the same into an interest bearing account with Prudential Bank (sister company). The authorization was given by CB in 1976 and the actual transfer to the bank they chose was only effected in January 10, 1978 (lapse of 1 year and 9 months). They filed a complaint for the collection of unearned interest on the dollar balance of the insurance proceeds. Contention of Transocean and REPACOM: effective as of the date of your receipt of a copy of the letter of the Central Bank authorizing the deposit of the amount in an interest-bearing special dollar account . . . , the same should bear interest at the authorized rates, and it was their duty as trustee of the said funds to see to it that the same earned the interest authorized by the Central Bank. As trustee, they were morally and legally bound to deposit the funds under terms most advantageous to the beneficiaries. Contention of RIZAL SURETY: that (i) there was no trust relationship, express or implied, involved in the transaction as it never intended to enter into a fiduciary relationship with the 2 insured and that it held on to the dollar balance only as a means to protect its interest. It insists that the Loss and Subrogation Receipt signed by the insureds effectively released it from any and all liabilities including liability to pay interest on the dollar balance of the insurance proceeds. ISSUE: 1. Was a trust relationship established between an insurer and the two insureds over the balance of the insurance proceeds being held by the insurer for the account of the two insureds, pending a final settlement by and between the two insureds of their respective claims to said proceeds? 2. Can the insurer whether or not considered a trustee be held liable for interest on the said insurance proceeds, which proceeds the said insurer failed or neglected to deposit in an interest-bearing account, contrary to the specific written instructions of the two insureds? HELD: On the existence of Trust Relationship: RIZAL SURETY WAS A TRUSTEE OF REPACOM AND TRANSOCEAN. EXPRESS TRUST EXISTS. A trust relationship existed. It is basic in law that a trust is the right, enforceable solely in equity, to the 25 beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary 26 relationship concerning property which obliges a person holding it (i.e., the trustee) to deal with the property for the benefit of another (i.e. the beneficiary). The Civil Code provides that: Art. 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. . . . Art. 1444. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. The evidence on record is clear that petitioner held on to the dollar balance of the insurance proceeds because (1) private respondent and REPACOM requested it to do so as they had not yet agreed on the amount of their respective claims, and the Final Compromise Agreement was yet to be executed, and (2) they had not, prior to January 31, 1977, signed the Loss and Subrogation Receipt in favor of petitioner. Furthermore, petitioner's letter dated November 20, 1975 addressed to the CB expressly stated that the deposit in Prudential Bank was being made in its name for the joint account of the private respondent and REPACOM. Petitioner never claimed ownership over the funds in said deposit. In fact, it made several tenders of payment to the private respondent and REPACOM, albeit the latter declined to accept since the dispute as to their respective claims could not yet be resolved at that time. By its own allegation, petitioner held on to the dollar balance of the insurance proceeds to protect its interest, as it was not yet granted the right of subrogation over the total loss of the vessel. As petitioner continued holding on to the deposit for the benefit of private respondent and REPACOM, petitioner obviously recognized its fiduciary relationship with said parties. This is the essence of the trust flowing from the actions and communications of petitioner. In Mindanao Development Authority vs. Court of Appeals, this Court held:. . . It is fundamental in the law of trusts that certain requirements must exist before an express trust will be recognized. Basically, these elements include a competent trustor and trustee, an ascertainable trust res, and sufficiently certain beneficiaries. Stilted formalities are unnecessary, but nevertheless each of the above elements is required to be established, and, if any one of them is missing, it is fatal to the trusts (sic). Furthermore, there must be a present and complete disposition of the trust property, notwithstanding that the enjoyment in the beneficiary will take place in the future. It is essential, too, that the purpose be an active one to prevent trust from being executed into a legal estate or interest, and one that is not in contravention of some prohibition of statute or rule of public policy. There must also be some power of administration other than a mere duty to perform a contract although the contract is for a third-party beneficiary. A declaration of terms is essential, and these must be stated with reasonable certainty in order that the trustee may administer, and that the court, if called upon so to do, may enforce, the trust. (citing Sec. 31, Trusts, Am Jur 2d, pp. 278-279.) Undeniably, all the abovementioned elements are present in the instant case. ON THE ALLEGATION THAT IT WAS NOT A PARTY TO THE PARTIAL COMPROMISE AGREEMENT: Petitioner's argument that it was never a party to the Partial Compromise Agreement is unavailing, since, upon being furnished a copy of the same, it undoubtedly became aware if it was not already aware even prior thereto that the parties to said agreement considered petitioner as their trustee in respect of said dollar balance; in short, it is all too evident that petitioner fully grasped the situation and realized that private respondent and REPACOM were constituting petitioner their trustee. Yet, petitioner not only did not manifest any objection thereto, but it instead proceeded to accept its role and responsibility as such trustee by implementing the compromise agreement. Equally as significant, petitioner never committed any act amounting to an unequivocal repudiation of its role as trustee. ON THE ALLEGATION THAT NO FIDUCIARY RELATIONSHIP EXISTED BECAUSE OF THE JOINT INSUREDS ADVERSARY POSITIONS IN THE INSURANCE PROCEEDS: The so-called adversary positions of the parties had no effect on the trust as it never changed the position of the parties in relation to each other and to the dollar proceeds, i.e., petitioner held it for private respondent and REPACOM, which were the real owners of the money. THE SIGNIFICANCE OF THE LOSS AND SUBROGATION RECEIPT Said receipt absolved the petitioner only from all claims arising from the insurance policies it issued. It did not exculpate petitioner from its liability for the accrued interest as this obligation arose in connection with its role as trustee and its unjustified refusal to deposit the money in an interest-bearing account as required. At most, the signing of the Loss and Subrogation Receipt was a valid pre-condition before petitioner could be compelled to turn over the whole amount of the insurance proceeds to the two insured. Thus, in response to the letter of private respondent and REPACOM to petitioner dated April 21, 1975, petitioner reiterated its offer to pay the balance of the insurance claim provided the former sign the Loss and Subrogation Receipt. But this was done only on October 10, 1977. LIABILITY OF PETITIONER FOR ACCRUED INTEREST Contention of Rizal Surety: Petitioner argues, rather unconvincingly, that it was of the belief that, as it was never the trustee for the insured and thus was under no obligation to execute the instruction to transfer the dollar balance into an interest-bearing account, therefore, it was also not obligated and hence it did not bother to advise private respondent and REPACOM that it would neither remit the dollar balance to the insured's bank of choice as
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specifically instructed, nor just deposit the same in an interest-bearing account at Prudential Bank. Petitioner's other contention that it was not bound by the CB order, despite its having been informed thereof and copy furnished by private respondent and REPACOM, simply because said order was not directed to it, is even more ridiculous and undeserving of further comment. HELD: Originally, petitioner, as shown by its November 25, 1975 letter, only agreed to receive and deposit the money under its name for the joint account of the private respondent and REPACOM in a non-interest bearing account. At that point, as trustee, it could have easily discharged its obligation by simply transferring and paying the dollar balance to private respondent and REPACOM and by so doing, would have dissolved the trust. However, when the trustors instructed petitioner as trustee to deposit the funds in an interest-bearing account, the latter ought, as a matter of ordinary common sense and common decency, to have at least informed the insured that it could not or would not, for whatever reason, carry out said instructions. This is the very least it could have done if indeed it wanted to repudiate its role as trustee or be relieved of its obligations as such trustee at that point. Instead of doing thus, petitioner chose to remain silent. After petitioner's receipt of the April 21, 1976 letter of private respondent and REPACOM requesting petitioner to remit the the dollar balance to an interest-bearing account, petitioner merely tendered payment of the said dollar balance in exchange for the signed Loss and Subrogation Receipt. This falls far short of the requirement to clearly inform the trustor-beneficiaries of petitioner's refusal or inability to comply with said request/instruction. Such silence and inaction in the face of specific written instructions from the trustors-beneficiaries could not but have misled the latter into thinking that the trustee was amenable to and was carrying out their instructions, there being no reason for them to think otherwise. This in turn prevented the trustors-beneficiaries from early on taking action to discharge the unwilling trustee and appointing a new trustee in its place or from otherwise effecting the transfer of the deposit into an interest-bearing account. The result was that the trustors-beneficiaries, private respondent and REPACOM, suffered prejudice in the form of loss of interest income on the dollar balance. As already mentioned, such prejudice could have been prevented had petitioner acted promptly and in good faith by communicating its real intentions to the trustors. ISSUE ON UNDUE ENRICHMENT: The dollar balance of US$718,078.20 was certainly a large sum of money. Leaving such an enormous amount in a non-interest bearing bank account for an extended period of time about one year and nine months would undoubtedly have not only prejudiced the owner(s) of the funds, but, equally as true, would have resulted to the immense benefit of Prudential Bank (which happens to be a sister company of the petitioner), which beyond the shadow of a doubt must have earned income thereon by utilizing and relending the same without having to pay any interest cost thereon. However one looks at it, it is grossly unfair for anyone to earn income on the money of another and still refuse to share any part of that income with the latter. And whether petitioner benefited directly, or indirectly as by enabling its sister company to earn income on the dollar balance, is immaterial. The fact is that petitioner's violation of its duty as trustee was at the expense of private respondent, and for the ultimate benefit of petitioner or its stockholders. This we cannot let pass. G.R. No. L-26107 November 27, 1981 THE HEIRS OF PEDRO MEDINA, represented by MARGARITA MEDINA, petitioners vs. THE HON. COURT OF APPEALS, * RESTITUTA ZURBITO VDA. DE MEDINA and ANDRES NAVARRO, JR.,respondents. FACTS: Deceased: Francisco Medina (who has 8 children: namely, Gregorio, Sotero, Narciso, Victorina, Simona, Carmen, Pedro and Hospicia, all of whom are deceased) Petitioner: Margarita Medina (daughter of Pedro Medina who predeceased his father Francisco Medina) Private respondents: Restituta Zurbito Vda. de Medina (the widow of Sotero Medina who is the brother of Pedro Medina); and Andres Navarro, Jr.,(grandson) Contention of Medina: Margarita Medina filed the complaint seeking to recover a parcel of land alleging that she inherited with her sister Ana Medina the said parcel of land from their father Pedro Medina; that upon their father's death, she and her sister Ana Medina being then minors were placed under the care and custody of the spouses Sotero Medina and Restituta Zurbito, as guardians of their persons and property; that the land in dispute was placed under the management of Sotero Medina as administrator thereof, and upon Sotero's death under the management of his widow, Restituta Zurbito; that she later discovered that the land in question was surreptitiously declared for taxation purposes in the name of Andres Navarro, Jr., grandson of Restituta Zurbito; that said respondents as defendants had without color of title denied petitioners' ownership and instead had claimed ownership thereof since the year 1948 and exercised acts of possession and ownership thereon to the exclusion of petitioners. That respondent never rendered an accounting of the income of the property in question in spite of their repeated demands and instead appropriated all the income therefrom to her personal use and benefit.

Contention of Restituta: she alleged that Margarita and her deceased sister Ana were but illegitimate children of Pedro Medina and for that reason did not enjoy the status of recognized natural children, such that when Pedro died intestate, Francisco Medina, Pedro's father who was still living, succeeded to his properties; that upon the death of Francisco, his children succeeded to his properties and the land in dispute was adjudicated to Gregorio, Sotero, and Narciso Medina; that in a deed of extrajudicial partition the land was later adjudicated solely to Narciso Medina; that Narciso Medina having become sole and exclusive owner of the land in question by virtue of said partition sold the same to Restituta and her husband Sotero Medina on June 29, 1924, as evidenced by a deed of sale; that from that day, respondents had actually possessed the land in question in the concept of owners, publicly, openly and continuously and adversely against the whole world so that whatever right, interest, title or participation petitioners had or might have had in the property had been lost by extinctive prescription and by virtue of the 33 years of exclusive actual possession in the concept of owner of the spouses Sotero and Restituta Medina who had thereby acquired title thereto by acquisitive prescription, even granting arguendo that petitioners had some title, right or interest over the land. ISSUE: 1. WON there exists an express trust--NO 2. WON Medinas action for recovery has been barred by prescriptionYES. HELD: NO EXPRESS TRUST. Petitioners failed to prove their claim that respondents were holding the property on the basis of an express trust, the existence of which, according to law and to established jurisprudence, cannot be proven by mere parol evidence and cannot rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations. Rationale: As provided by our Civil Code, "Trusts are either express or implied. Express trusts are created by the intention of the trusts are of the parties. Implied trusts come into being by operation of law." (Art. 1441) "No express trusts concerning an immovable or any interest therein may be proven by parol evidence." (Art. 1443) "An implied 3 trust may be proven by oral evidence." (Art. 1457) Applied to the case at bar, if an express trust had been constituted upon the occupancy of the property by respondents in favor of the petitioners, prescription of action would not lie, the basis of the rule being that the possession of the trustee is not adverse to the beneficiary. But if there were merely a constructive or implied trust, the action to recover may be barred by prescription of action or by acquisitive prescription by virtue of respondents' continuous and adverse possession of the property in the concept of owner-buyer for thirty-three years. The facts and evidence of record do not support petitioners' claim of the creation of an express trust and imprescriptibility of their claim, ruling squarely that "the facts do not warrant the conclusion that an express trust was created over the land in dispute. Although no particular words are required for the creation of an express trust, a clear intention to create a trust must be shown; and the proof of fiduciary relationship must be clear and convincing. Express trusts are those intentionally created by the direct and positive act of the trustor, by some writing, deed or win, or oral declaration. 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. Nowhere in the record is there any evidence, and the plaintiffs do not even raise the pretention, that the original owner of the property Pedro Medina, father of plaintiff Margarita Medina, appointed, designated or constituted Sotero Medina (the husband of defendant Restituta Zurbito Medina) as the trustee of the land in dispute. Plaintiffs' contention that there was an express trust must, therefore, fail." Concretely, petitioners anchor their claim of an express trust on the following circumstances: (1) respondents' possession of the titulo real covering the land; (2) the deed of partition of the estate of the common predecessor Francisco Medina dated February 3, 1924, adjudicating the land solely to his son Narciso Medina; (3) the deed of sale of the land dated June 29, 1924, executed by Narciso Medina in favor of his brother Sotero Medina; and (4) the testimony of respondent Restituta Zurbito Vda. de Medina (Sotero's wife) to the effect that her husband used to "administer" and then later on, she herself "administered" the land. These circumstances do not make out the creation of an express trust. Respondents' possession of the Spanish title issued in the late Pedro Medina's name may just be the consequence of the sale of the land by Narciso (to whom it had been adjudicated in the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by no means an evidence of an express trust created for the benefit of petitioners. Spanish titles are defeasible, and 5 "although evidences of ownership . ... may be lost through prescription." Neither is the deed of partition (which apparently excluded Pedro Medina) entered into earlier any indication of an express creation of a trust. In fact, these

documents are adverse to petitioners' cause, and are evidences of transfer of ownership of the land from one owner/owners to another or others and they in fact negate the creation or existence of an express trust. Neither does the testimony of Sotero's widow, Restituta Zurbito, to the effect that her husband and then later she herself "administered" the land support petitioners' claim of an express trust. There is no showing that the term "administration" as used by said respondent in her testimony is by reason of an appointment as such on behalf of another owner or beneficiary, such as to support the existence of an express trust. On the contrary, it appears clear from the context of her testimony that her use of the term "administer" was in the concept of an owner-buyer "administering" and managing his/her property, ACTION FOR RECOVERY HAS ALREADY PRESCRIBED. absent the existence of an express trust, that "The legal construction most favorable to (petitioners) that can be impressed upon the facts of the case is that a constructive or implied trust was created by operation of 7 law upon the property in question," but petitioners' cause of action had prescribed upon the lapse of the ten8 year period of acquisitive prescription provided by the then applicable statute (section 41 of Act 190) for unregistered lands such as the land herein involved. the land was sold to Sotero Medina on June 29, 1924 from which date Sotero and his wife took open, public, continuous and adverse possession of the land in the concept of owner. In 1957 when the present action was filed, thirty-three (33) years, much more than the 10-year statutory period for acquisitive prescription, had already elapsed. In addition, the appellate court further held that petitioners' action to recover was likewise time-barred, pointing out that "the ten-year period under the statute of limitation within which plaintiffs could file an action for recovery of real property commenced to run, in 1933 when plaintiff Margarita Medina was informed that the land in dispute belonged to her father Pedro Medina, for in that year she could have brought an action for reconveyance. The period of prescription commences to run from the day the action may be brought (Article 1150, Civil Code of the Philippines), and in an action based on fraud, as is the basis of the present action, the period of prescription begins from the discovery of the fraud; the reasons a party might have had for not immediately taking judicial action is immaterial and does not stop the running of the period. Respondent court had referred to such non-action as "perhaps in deference to the defendants who had raised and clothed her." G.R. No. L-38018 October 31, 1978 MARCELO SOTTO, Administrator of the Estate of Filemon Sotto, petitioner, vs. PILAR TEVES, FLORENTINO TEVES, DULCE TEVES KIAMKO assisted by husband FELIPE KIAMKO DOLORES TEVES ARCENAS, assisted by husband MARIANO ARCENAS, MARIA CAMARA GUMBAN, assisted by husband NICANOR GUMBAN, BELEN CAMARA BROWN, assisted by husband ROGER BROWN and the HONORABLE COURT OF APPEALS, respondents. FACTS: 5 parcels of land were owned by spouses Florentino Rallos and Maria Fadullon. When Florentino died, the land in question was inherited by his widow, Maria and 2 children: Concepcion and Carmen Rallos. The lawyer to whom the RAllos heirs entrusted the settlement of the estate was atty. Filemon Sotto. Shortly after the closure of the probate proceeding in 1913, Atty. Sotto married Carmen Rallos. In 1913atty. Sotto, not only for the widow Maria but also for the 2 daughters: Concpecion and Carmen filed a motion in the probate proceedings of the estate of Florentino providing that they desire to conserve pro-indiviso the subject properties. IN 1925they entered into an oral agreement providing that the 5 lots would remain in co-ownership of the 3 heirs with Carmen having been entitled a lifetime usufruct but upon her death, ownership would devolve to concepcion and he heirs. Maria Rallos predeceased her 2 daughters. Concepcion and Carmen died. It was alleged that at the time of Florentinos death, he was the owner of the subject 5 parcels of land. Competing for the ownership of the five lots are the direct descendants and blood relatives of Florentino Rallos and Maria Fadullon, opposed by the administrator of the intestate estate of Atty. Sotto. The children of Concepcion Rallos, or the grandchildren of Florentino Rallos and Maria Fadullon, some of whom are assisted by their spouses, are the plaintiffs in this case. Defendant administrator represents Atty. Sotto's children out of wedlock. Contention of the HEIRS: The complaint was based mainly upon the theory that a trust relation was established and created with respect to the said properties, with Atty. Filemon Sotto as trustee and as cestuis que trust, his mother-inlaw, Maria Fadullon Vda. de Rallos; his wife, Carmen Rallos; and his sister-in-law, Concepcion Rallos (predecessor in interest of herein private respondents); and that in gross violation of the trust reposed upon him by Concepcion Rallos

and after her death, by her heirs, the said Atty. Filemon Sotto, through sheer manipulation, fraudulent acts and means, non-existent and void decrees, fictitious sales and transfers, succeeded in causing the transfer of the ownership of the properties to the name of his wife Carmen Rallos, and finally to his name alone. Contention of Sotto: denied the existence of any trust relation; the title to the lots in question were issued in the name of Carmen pursuant to an agreement among the heirs of Florentino. It argued on the ff. points: 1. No express trust because the Mocion presented in 1913 did not expressly state and provide that it was to constitute an express trust. It cannot be implied from such document. 2. He is not a co-trustee by virtue of the subsequent marriage with Carmen because the trust given to him as family lawyer was coterminous with the duration of proceedings itself. When he married Carmen, the trust is not the trust that civil code refers to. ISSUES: 1. WON there exists an express trust relation exists; 2. WON there was actual partition between them whereby the 5 lots were given to Carmen Rallos as her share; 3. Won Concepcion Rallos and her children after her death were thus notified constructively and actually by Carmen Rallos de Sotto's raising the flag of exclusive ownership and repudiation of the trust relation, if there was any, and since then the period of prescription of 10 years for bringing the action tolled against an implied trust. Laches or inaction on the part of Concepcion Rallos and her heirs have thus rendered their demand sale or no longer enforceable. HELD: On the MOCION filed in 1913 created an express trust: It may be true that the heirs of Florentino Rallos intended and desired to keep the properties in co-ownership proindiviso when they signed the Mocion filed in their behalf by Atty. Filemon Sotto in the probate proceedings to terminate the same but the legal effect of said agreement to preserve the properties in co-ownership as expressed in writing and embodied in the Mocion was to create a form of an express trust among themselves as co-owners of the properties. In the case of Castrillo, et al. vs. Court of Appeals, et al., 10 SCRA 549, the Supreme Court, speaking thru Chief Justice Makalintal, said that "co-ownership is a form of trust and every co-owner is a trustee for the other." In co-ownership, the relationship of each co-owner to the other co-owners is fiduciary in character and attribute. Whether established by law or by agreement of the co owners, the property or thing held pro-indiviso is impressed with a fiducial nature that each co-owner becomes a trustee for the benefit of his co-owners and he may not do any act prejudicial to the interest of his co-owners. Under the law on Trusts, it is not necessary, as petitioner insists, that the document expressly state and provide for the express trust, for no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. (Art. 1444, N.C.C.) An express trust is created by the direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust. an express trust was created by the heirs of Florentino Rallos in respect to the properties in litigation when they agreed to preserve said properties in co-ownership among themselves as manifested and expressed into writing and filed as a pleading captioned Mocion Sobre la Disposicion de los Bienes. Incidentally, this is the same finding of the original decision of the Eight Division, same Court which was, however, reconsidered on other grounds. We find no reason to disturb this finding of the respondent Court, the same being in accordance with law and the facts as clearly established. ATTY. FILEMON SOTTO WAS A CO-TRUSTEE Atty. Sotto can be regarded as the constructive trustee of his wife and of the widow and descendants of Florentino Rallos. there existed more than mere professional relationship of attorney and client between Atty. Sotto and the members of the family of Florentino Rallos. Shortly after the closure of the testate proceeding, Atty. Sotto contracted marriage with one of the daughters of Florentino Rallos. The attorney thereby became not only a family lawyer but also an actual member on the Rallos family by affinity. By reason of his marriage to Carmen Rallos, and on account of his prestige and tremendous social and political influence, Atty. Sotto enjoyed and exercised a personal, domestic, social, political and moral ascendancy and superiority not only over his wife but also over Maria Fadullon, Concepcion Rallos, and the latter's children. The evidence reveals that the Ralloses looked up to Atty. Sotto as protector and benefactor, as one on whom they could repose their trust and confidence and who would take care of the properties inherited from Florentino Rallos, and on his part, Atty. Sotto acknowledged his position as protector of the rights and interests of the Rallos family. Like a pater familias, he attended to the financial and medical needs of the direct descendants of Florentino Rallos and Maria Fadullon.

The acts and conduct of the Ralloses and Atty. Sotto fostered a close and fiduciary relationship between them. Upon the facts and under the law, Atty. Sotto can be regarded as the constructive trustee of his wife and of the widow and descendants of Florentino Rallos. For the settled rule is that: The relation between parties, in order to be a fiduciary relation" need not be legal, but may be moral, social, domestic or merely personal; and where by reason of kinship, business association, disparity in age or physical or mental condition or other reason, the grantee is in an especially intimate position with regard to another and the latter reposes a degree of trust and confidence in the former, confidential relationship exists which prohibits the one entrusted from seeking a selfish benefit for himself during the course of relationship, and affords a basis for imposing a constructive trust. Atty. Sotto's special relationship with the Rallos heirs inhibited him from any act or conduct that would put his 15 interests above, or in direct collision with, the interests of those who had reposed their trust and confidence in him." Atty. Sotto became a constructive trustee not only by reason of his marriage to Carmen Rallos but also on account of his prestige and tremendous social and political influence, also because Atty. Sotto enjoyed and exercised a personal, domestic, social, political and moral ascendancy and superiority over his wife, over Maria Fadullon, Concepcion Rallos and the latter's children, besides being the protector of the rights and interests of the Rallos family acting like a pater familias attending to their financial and medical needs, as well as the family lawyer. THERE WAS NO ADJUDICATION OF THE 5 LOTS TO CARMEN IN 1925 The evidence shows that they went to concepcion to pay a visit by saying that the lots were allowed to be given to her and her children upon carmens death. EXISTENCE OF EXPRESS TRUST DULY SUPPORTED BY EVIDENCE In the first place, the respondent Court did not find that an express trust existed by the use of parol evidence. Actually, the Court, on this point said: "On the basis of undisputed facts, we held in our decision that the heirs of Florentino Rallos, by manifesting to the probate court that it was their desire to preserve and maintain the coownership over the inherited properties, thereby intended and created, by direct positive acts, an express trust among themselves. It is our view that this holding should be maintained because it is in conformity with the evidence and the 17 law." In a later portion of the Resolution appealed from, the Court said: "As early as in 1913, the Rallos heirs had already agreed expressly and in writing that the five parcels shall remain in co-ownership, and that in regard to them 18 each one of the heirs shall be a trustee for the others." In the second place, the oral testimony of Pilar Teves simply affirmed the existence of such trust relation; it gave proof that the heirs desired to continue the express trust and co-ownership over the five lots. It was not necessary that the heirs create a new agreement of co-ownership over the said properties. They merely reiterated their written agreement made in 1913 that the five parcels would be preserved in co-ownership but made provisions for their administration, collection of rentals and final disposition upon the death of Carmen Rallos. There is, therefore, no violation of Art. 1443, N.C.C which provides that "no express trust concerning an immovable or any interest therein may be proved by parol evidence," as the same is not applicable herein. As to the pretension that the respondent appellate court disregarded the weight of a torrens title and a public document mutually admitted by the parties, the latter refering to the will executed by Carmen Rallos in 1942 bequeathing all her properties to her husband, Atty. Filemon Sotto, petitioner's reasoning holds no water because from the very nature of a trust relation which existed between Carmen Rallos and her co-owners, she cannot obtain and secure a torrens title to the properties in her name much less dispose of them by testament to her husband, a constructive trustee, to the prejudice and deprivation of the rights and interests of said co-heirs. A fiduciary relationship may exist even if the title to the property subject to the trust appears in the name of the trustee alone, because in cases of trusteeship, the legal title usually appears in the name of the trustee, while the equitable title remains with the cestui que trust. (Palma vs. Cristobal, 77 Phil. 712). True it is that Torrens titles were issued in the name of Carmen Rallos, but the principle holds that a trustee who takes a Torrens title in his name cannot repudiate the trust by relying Neither an the will executed by Carmen Rallos deprive the private respondents of their ownership over the five parcels of land. These lots were trust properties; Carmen Rallos was holding them in trust for her sister Concepcion Rallos and the latter's children. Not being the absolute owner thereof, Carmen Rallos could not legally convey their ownership by including them in their will. To all intents and purposes, the will and last testament of Carmen Rallos was merely a vehicle of an existing trust and therefore, Atty. Filemon Sotto must be deemed to have received the properties not for himself but for the benefit of the cestui que trust. And as a trustee of these trust properties, Atty.

Sotto never alienated or disposed any of these properties during his lifetime, thereby recognizing his position as trustee and that he held them for the benefit and interest of the cestuis que trust. NO REPUDIATION OF THE EXPRESS TRUST We affirmed that the express trust and co-ownership over the 5 parcels of land created and agreed in 1913 by and among the Rallos heirs did not terminate in 1925 but subsisted and was maintained by them thereafter. We also declared that the registration of the 4 lots in the names of Carmen Rallos and Maria Fadullon Vda. de Rallos and 1 lot in favor of Carmen Rallos alone was done in their capacities as trustees and not as absolute or exclusive owners, and not only in their own behalf and benefit but also for the other co-owner, Concepcion Rallos. The registration of the property in the name of the trustee in possession thereof must be deemed to have been effected for the benefit of the cestui que trust. Petitioner points to the fact that Concepcion Rallos had expressly repudiated the trust by selling the Basak properties which were converted into a subdivision, as well as to acts of exclusive ownership over the properties of the estate by each of the co-owners to show that the trust relationship and co-ownership was repudiated, renounced and terminated when the parties agreed to an actual partition of the estate. Petitioner's advocation is futile. Besides the falsity of its basis for the reason that We found no partition as theorized by petitioner and that the trust relation subsisted and was maintained in 1925 and thereafter, the acts of exclusive ownership pointed by petitioner do not appear to be clear, open and unequivocal repudiation of the trust. The issuance of titles and the execution of the purported sales and transfers, which all culminated in Atty. Sotto's acquisition of titles in his name, occurred during the existence of the express trust, and were shrouded by a cloud of secrecy, at least as far as Concepcion Rallos was concerned. AU the papers and documents pertaining to the issuance of titles and to the transfers and sales were kept in Atty. Sotto's possession, and concealed from the knowledge of Concepcion Rallos. At the time Concepcion Rallos was being deprived of a valuable share in the inheritance, she was kept completely in the dark. Under the facts, appellee cannot rely on the certificates of title in the 19 names of Atty. Sotto to defeat the plaintiffs' right and cause of action," clearly appears to be correct and wellfounded that the same will not be disturbed by Us in the present petition for review on certiorari. 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 do not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. And from the standpoint of acquisitive prescription, or prescription of ownership, this Court has held in numerous decisions involving fiduciary relations such as those occupied by a trustee with respect to the cestui que trust that as a general rule the former's possession is not adverse and therefore cannot ripen into a title by prescription. Adverse possession in such a case requires the concurrence of the following circumstances: (a) that the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) that such positive acts of repudiation have been made known to the cestui que trust and (c) that the evidence thereon should be clear and conclusive." We rule that the registration of the lots in the names of Carmen Rallos and her mother Maria Fadullon Vda de Rallos and their subsequent transfers and consolidation to Carmen Rallos' name alone in a manner shown to be fictitious, fraudulent and secretive, thereby keeping the cestuis que trust in the dark did not constitute acts of repudiation of the express trust. Such registrations were ineffective and not binding upon the cestui que trust. We are persuaded and convinced that the circumstances required by said decisions are not present in the case at bar. NO LACHES AND ESTOPPEL Because in fiduciary relationship, the beneficiaries have the right to rely on the trust and confidence reposed in the trustee. In the case at bar, there being no effective repudiation of the express trust created by and among the Rallos heirs, the defense of laches invoked by petitioner is unvailing. Moreover, under the facts established and showing the complete dominance of Atty. Sotto over the heirs and descendants of the Rallos family, the confidential relationship between the parties connected by ties of marriage and the reliance of the heirs with complete and absolute confidence in their uncle-in-law, Atty. Sotto, who, however, kept the heirs in total ignorance and suppressed from them the real truth regarding said properties that they were already registered in Atty. Sotto's name as finally revealed to them by Cesar Sotto, the nephew and protegee of Atty. Sotto and were in danger of being lost to total strangers, the doctrine of laches is not strictly applicable. Furthermore, Atty. Sotto received from his wife, Carmen Rallos, the properties under her will fully impressed with their fiduciary

character and in the full knowledge that said properties were trust properties as far back in 1913 when he drafted and prepared the Mocion Sobre la Disposicion de los Bienes and filed the same in the probate proceedings. This knowledge he carried into his marriage with Carmen Rallos and throughout his lifetime so that the will executed by Carmen Rallos bequeathing the properties to her husband, Atty. Sotto, was merely a vehicle of an existing trust. He thereby became a trustee of the trust properties, not as an innocent third party and neither for a valuable consideration. Notwithstanding the fact that the titles to the properties were ultimately transferred to the name of Atty. Filemon Sotto, widower, through administrative proceedings, the titling thereof must be regarded as for the benefit and interest of the cestui que trust, the private respondents herein.