Philippine National Bank vs. Court of Appeals
In the case of a constructive
Civil Law; Words and Phrases; Trust; Trust defined.—A trust is “a right
of property, real or personal, held by one party for the benefit of another;
that there is a fiduciary relation between a trustee and a cestui que trust as
regards certain property, real, personal, money or choses in action.”
Same; Same; Express and implied trusts distinguished.—To recall, trusts
are either express or implied. While express trusts are created by the
intention of the trustor or of the parties, implied trusts come into being by
operation of law. Implied trusts are those which, without being expressed,
are deducible from the nature of the transaction as matters of intent or
which are superinduced on the transaction by operation of law as matters
of equity, independently of the particular intention of the parties.
Examples of resulting trusts are found in Articles 1448 to 1455 of the
Civil Code.
Same; Same; Same; In a typical trust confidence is reposed in one person
who is named a trustee for the benefit of the cestui que trust.—A deeper
analysis of Article 1456 reveals that it is not a trust in the technical
sense for in a typical trust, confidence is reposed in one person who is
named a trustee for the benefit of another who is called the cestui que
trust, respecting property which is held by the trustee for the benefit
of the cestui que trust. A constructive trust, unlike an express trust, does
not emanate from, or generate a fiduciary relation. While in an express
trust, a beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any
fiduciary relation to speak of and the so-called trustee neither accepts any
trust nor intends holding the property for the beneficiary.
Civil Law; Trust; Solutio Indebiti, defined.—The instant case fulfills the
indispensable requisites of solutio indebiti as defined in Article 2154: that
something (in this case money) has been received when there was no
right to demand it and (2) the same was unduly delivered through
mistake. There is a presumption that there was a mistake in the payment
“if something which had never been due or had already been paid was
delivered; but he from whom the return is claimed may prove that the
delivery was made out of liberality or for any other just cause.”
Same; Same; The framers of the present Civil Code incorporated implied
trust.—While the principle of undue enrichment or solutio indebiti, is not
new, having been incorporated in the subject on quasicontracts in Title
XVI of Book IV of the Spanish Civil Code entitled “Obligations incurred
without contract,” the chapter on Trusts is fairly recent, having been
introduced by the Code Commission in 1949. Although the concept of
trusts is nowhere to be found in the Spanish Civil Code, the framers of
our present Civil Code incorporated implied trusts, which includes
constructive trusts, on top of quasi-contracts, both of which embody the
principle of equity above strict legalism.
Same; Same; In an express trust, the trustee has active duties of
management while in a constructive trust, the duty is merely to surrender
the property.—In analyzing the law on trusts, it would be instructive to
refer to Anglo-American jurisprudence on the subject. Under American
Law, a court of equity does not consider a constructive trustee for all
purposes as though he were in reality a trustee; although it will force him
to return the property, it will not impose upon him the numerous fiduciary
obligations ordinarily demanded from a trustee of an express trust. It must
be borne in mind that in an express trust, the trustee has active duties of
management while in a constructive trust, the duty is merely to surrender
the property.
Same; Same; Distinction between quasi-contract and constructive trust is
more procedural than substantive.—Quasi-contractual obligations give
rise to a personal liability ordinarily enforceable by an action at law,
while constructive trusts are enforceable by a proceeding in equity to
compel the defendant to surrender specific property. To be sure, the
distinction is more procedural than substantive.
Same; Same; Constructive trust is a misnomer as a quasi-contract.—
Further reflection on these concepts reveals that constructive “trust” is as
much a misnomer as a “quasi-contract,” so far removed are they from
trusts and contracts proper, respectively.
trust, as in the case of quasi-contract, a relationship is “forced” by
operation of law upon the parties, not because of any intention on their
part but in order to prevent unjust enrichment, thus giving rise to certain
obligations not within the contemplation of the parties.
Same; Same; Article 1456, Civil Code, does not make any distinction
since mutual mistake is a possibility on either side.—We agree with
petitioner’s stand that under Article 1456, the law does not make any
distinction since mutual mistake is a possibility on either side—on the
side of either the grantor or the grantee. Thus, it was error to conclude
that in a constructive trust, only the person obtaining the property
commits a mistake. This is because it is also possible that a grantor, like
PNB in the case at hand, may commit the mistake.
Same; Same; Prescription; Laches; An action to enforce an implied trust,
whether resulting or constructive, may be barred not only by prescription
but also by laches.—Proceeding now to the issue of whether or not
petitioner may still claim the US$14,000 it erroneously paid private
respondent under a constructive trust, we rule in the negative. Although
we are aware that only seven (7) years lapsed after petitioner erroneously
credited private respondent with the said amount and that under Article
1144, petitioner is well within the prescriptive period for the enforcement
of a constructive or implied trust, we rule that petitioner’s claim cannot
prosper since it is already barred by laches. It is a well-settled rule now
that an action to enforce an implied trust, whether resulting or
constructive, may be barred not only by prescription but also by laches.
Same; Same; Distinction between prescription and laches.—While
prescription is concerned with the fact of delay, laches deals with the
effect of unreasonable delay. It is amazing that it took petitioner almost
seven years before it discovered that it had erroneously paid private
respondent. Petitioner would attribute its mistake to the heavy volume of
international transactions handled by the Cable and Remittance Division
of the International Department of PNB. Such specious reasoning is not
persuasive. It is unbelievable for a bank, and a government bank at that,
which regularly publishes its balanced financial statements annually or
more frequently, by the quarter, to notice its error only seven years later.
As a universal bank with worldwide operations, PNB cannot afford to
commit such costly mistakes. Moreover, as between parties where
negligence is imputable to one and not to the other, the former must
perforce bear the consequences of its neglect. Hence, petitioner should
bear the cost of its own negligence.
Lopez vs. Court of Appeals
Civil Law; Trusts; Implied trusts are either resulting or constructive
trusts; Difference between the two kinds of implied trusts.—In Aznar
Brothers Realty Company v. Aying, 458 SCRA 496 (2005), the Court
differentiated two kinds of implied trusts, to wit: x x x In turn, implied
trusts are either resulting or constructive trusts. These two are
differentiated from each other as follows: Resulting trusts are based on
the equitable doctrine that valuable consideration and not legal title
determines the equitable title or interest and are presumed always to have
been contemplated by the parties. They arise from the nature of
circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity
to hold his legal title for the benefit of another. On the other hand,
constructive trusts are created by the construction of equity in order to
satisfy the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold.
Same; Same; A resulting trust is presumed to have been contemplated by
the parties, the intention as to which is to be found in the nature of their
transaction but not expressed in the deed itself.—A resulting trust is
presumed to have been contemplated by the parties, the intention as to
which is to be found in the nature of their transaction but not expressed in
the deed itself. Specific examples of resulting trusts may be found in
the Civil Code, particularly Arts. 1448, 1449, 1451, 1452 and 1453.
Same; Same; A constructive trust is created, not by any word evincing a
direct intention to create a trust, but by operation of law in order to satisfy
the demands of justice and to prevent unjust enrichment.—A constructive
trust is created, not by any word evincing a direct intention to create a
trust, but by operation of law in order to satisfy the demands of justice
and to prevent unjust enrichment. It is raised by equity in respect of
property, which has been acquired by fraud, or where although acquired
originally without fraud, it is against equity that it should be retained by
the person holding it. Constructive trusts are illustrated in Arts. 1450,
1454, 1455 and 1456.

Same; Same; Reconveyance; Prescription; An action for reconveyance

based on implied or constructive trust prescribes in ten (10) years
reckoned from the date of the issuance of the original certificate of title or
transfer certificate of title.—The right to seek reconveyance based on an
implied or constructive trust is not absolute. It is subject to extinctive
prescription. An action for reconveyance based on implied or constructive
trust prescribes in 10 years. This period is reckoned from the date of the
issuance of the original certificate of title or transfer certificate of title.
Since such issuance operates as a constructive notice to the whole world,
the discovery of the fraud is deemed to have taken place at that time.

Same; Same; Same; Same; The rule that a trustee cannot acquire by
prescription ownership over property entrusted to him until and unless he
repudiates the trust applies only to express trusts and resulting implied
trusts.—The rule that a trustee cannot acquire by prescription ownership
over property entrusted to him until and unless he repudiates the trust
applies only to express trusts and resulting implied trusts. However, in
constructive implied trusts, prescription may supervene even if the trustee
does not repudiate the relationship. Necessarily, repudiation of said trust
is not a condition precedent to the running of the prescriptive period.
Thus, for the purpose of counting the ten-year prescriptive period for the
action to enforce the constructive trust, the reckoning point is deemed to
be on 15 September 1969 when Jose registered the disputed properties in
his name. 

TRUSTS
Dela Cruz vs CA
Article 1443 of the Civil Code refers merely to enforceability, not
validity of a contract between the parties. Otherwise stated, for
purposes of validity between the parties, an express trust concerning
an immovable does not have to be in writing. Thus, Article 1443 may
be said to be an extension of the Statute of Frauds.
Heirs of Labanon vs Heirs of Labanon
An express trust is created by the direct and positive acts of the
parties, by some writing or deed or by words evidencing an intention
to create a trust; the use of the word trust is not required or essential
to its constitution, it being sufficient that a trust is clearly intended.
Ty vs Ty
An express trust is created by the direct and positive acts of the
parties, by some writing or deed or by words evidencing an intention
to create a trust; the use of the word trust is not required or essential
to its constitution, it being sufficient that a trust is clearly intended.
Article 1448 of the Civil Code is clear. If the person to whom the title
is conveyed is the child of the one paying the price of the sale, and in
this case this is undisputed, no trust is implied by law. The law,
instead, disputably presumes a donation in favor of the child.
Spouses Huang vs CA and Ramos vs CA
In Huang, the prohibition is on a subdivision-level. While, in Ramos,
the prohibition is by a statute, which cannot be tolerated.
What is said to be “contrary to law or public policy…” must be really
a statute of the land. Remember, in Ramos came from PHHC, which
has a law, charter, creating that commission.
Adaza vs CA
The property is common even if Violeta’s name was the only name
there. So there is an admission that Violeta holds the property in trust
in favor of her brother. She basically holds the property in trust.
Nakpil vs IAC
It is evident from these letters that while the balance of P75,000.00
on the mortgage of the vendors with PNB was liquidated from the
proceeds of a loan respondent obtained from FUB, such loan was
actually secured by the late Nakpil by merely using Valdes' name.
Angcog vs CA
Registration of Land in Rosario’s name created an Implied Trust in
Favor of Gregorio Yap, Jr. - Instead, the registration of the land in
Rosario Diez's name created an implied trust in his favor by analogy
to Art. 1451.
In this case, the records disclose that the intention of the parties to the
extrajudicial settlement was to establish a trust in favor of petitioner
Yap, Jr. to the extent of his share.
Lopez vs CA
The right to seek reconveyance based on an implied or constructive
trust is not absolute. It is subject to extinctive prescription. An action
for reconveyance based on implied or constructive trust prescribes in
10 years. This period is reckoned from the date of the issuance of the
original certificate of title or transfer certificate of title. Since such
issuance operates as a constructive notice to the whole world, the
discovery of the fraud is deemed to have taken place at that time.
Saludares vs CA
Nevertheless, prescription cannot be invoked in an action for
reconveyance when the plaintiff is in possession of the land to be
reconveyed.
Samonte vs CA
An action for reconveyance and recovery of possession does not
constitute an indirect or collateral attack on the validity of the subject
certificate of title which is proscribed by law
It is not an indirect attack because the legality of the title is not
questioned. What is questioned is the validity of the holder’s claim to
the title.
AGENCY
Eurotech vs Cuizon
The position of manager is unique in that it presupposes the grant of
broad powers with which to conduct the business of the principal.
The powers of an agent are particularly broad in the case of one
acting as a general agent or manager. In the absence of an agreement
to the contrary, a managing agent may enter into any contracts that he
deems:
1. Reasonably necessary
2. requisite for the protection of the interests of his principal entrusted
to his management.
Banate vs PCRB
Although a branch manager, within his field and as to third persons,
is the general agent and is in general charge of the corporation, with
apparent authority commensurate with the ordinary business
entrusted him and the usual course and conduct thereof, yet the power
to modify or nullify corporate contracts remains generally in the
board of directors. Being a mere branch manager alone is insufficient
to support the conclusion that Mondigo has been clothed with
"apparent authority" to verbally alter terms of written contract.
Yun Kwan Byung vs PAGCOR
Implied Agency; Agency by Estoppel
Article 1869 of the Civil Code states that implied agency is derived
from the acts of the principal, from his silence or lack of action, or his
failure to repudiate the agency, knowing that another person is acting
on his behalf without authority. Implied agency, being an actual
agency, is a fact to be proved by deductions or inferences from other
facts.
On the other hand, apparent authority is based on estoppel and can
arise from two instances. First, the principal may knowingly permit
the agent to hold himself out as having such authority, and the
principal becomes estopped to claim that the agent does not have
such authority. Second, the principal may clothe the agent with the
indicia of authority as to lead a reasonably prudent person to believe
that the agent actually has such authority.
In an agency by estoppel, there is no agency at all, but the one
assuming to act as agent has apparent or ostensible, although not real,
authority to represent another. The law makes no presumption of
agency and proving its existence, nature and extent is incumbent
upon the person alleging it. Whether or not an agency has been
created is a question to be determined by the fact that one represents
and is acting for another.
Doctrine of Apparent Authority
An agency by estoppel, which is similar to the doctrine of apparent
authority requires proof of reliance upon the representations, and that,
in turn, needs proof that the representations predated the action taken
in reliance.
Estate of Olaguer vs Ongjoco
While the law requires a special power of attorney, the general power
of attorney was sufficient in this case, as Jose A. Olaguer was
expressly empowered to sell any of Virgilio’s properties; and to sign,
execute, acknowledge and deliver any agreement therefor.
On its face, the written power of attorney contained the signature of
Virgilio Olaguer and was duly notarized. As such, the same is considered
a public document and it has in its favor the presumption of authenticity
and due execution, which can only be contradicted by clear and
convincing evidence.
Dominion vs CA
Guevarra, having deviated from the instructions of Dominion, the
expenses that he incurred in the settlement of the claims of the insured
may not be reimbursed from petitioner Dominion (Article 1918).
People vs Carpo
The Court ruled that the defense counsel had no authority to enter into a
compromise agreement, without the prior special power of attorney.
BPI vs Laingo
Notice to the agent is notice to the principal. Since BPI is the agent of
FGU insurance, then such notice of death to BPI is considered a notice to
FGU insurance as well.
Spouses Villaluz vs Land Bank
Substitute by the Agent
The law creates a presumption that an agent has the power to appoint a
substitute. The consequence of the presumption is that, upon valid
appointment of a substitute by the agent, there ipso jure arises an agency
relationship between the principal and the substitute, i.e., the substitute
becomes the agent of the principal. As a result, the principal is bound by
the acts of the substitute as if these acts had been performed by the
principal’s appointed agent. Concomitantly, the substitute assumes an
agent’s obligations to act within the scope of authority, to act in
accordance with the principal’s instructions, and to carry out the agency,
among others. In order to make the presumption inoperative and relieve
himself from its effects, it is incumbent upon the principal to prohibit the
agent from appointing a substitute.
Although the law presumes that the agent is authorized to appoint a
substitute, it also imposes an obligation upon the agent to exercise this
power conscientiously. To protect the principal, Article 1892 allocates
responsibility to the agent for the acts of the substitute when the agent
was not expressly authorized by the principal to appoint a substitute; and,
if so authorized but a specific person is not designated, the agent appoints
a substitute who is notoriously incompetent or insolvent. In these
instances, the principal has a right of action against both the agent and the
substitute if the latter commits acts prejudicial to the principal.
Salfic Aclan vs Imperial Vegetable
The doctrine of apparent authority favors only those who deal in good
faith.
If the third person knew that the agent was acting beyond his power or
authority, the principal cannot be held liable for the acts of the agent. If
the said third person is aware of such limits of authority, he is to blame,
and is not entitled to recover damages from the agent, unless the latter
undertook to secure the principal's ratification.
Lim vs Saban
In an agency coupled with interest, the agent’s interest must be in the
subject matter of the power conferred and not merely an interest in the
exercise of the power because it entitles him to compensation. Interest
must not be incidental to a contract of agency.
Republic vs Evangelista
Agents coupled with interest are not true agents
An exception to the revocability of a contract of agency is when it is
coupled with interest, i.e., if a bilateral contract depends upon the agency.
The reason for its irrevocability is because the agency becomes part of
another obligation or agreement. It is not solely the rights of the principal
but also that of the agent and third persons which are affected. Hence, the
law provides that in such cases, the agency cannot be revoked at the sole
will of the principal.
Rallos vs CA
Under Article 1931, an act done by the agent after the death of his
principal is valid and effective only under 2 conditions:
1. The agent acted without the knowledge of the death of the principal;
and
2.) The 3rd person who contracted with the agent himself acted in good
faith.
Good faith means that the third person was not aware of the death of the
principal at the time he contracted with said agent.
SPECIFIC OBLIGATIONS OF THE AGENT
1) To carry out the agency as accepted;
2) To answer for damages which, through his nonperformance, the
principal may suffer;
3) To finish the business already begun on the death of the principal,
should delay entail any danger;
4) To observe the diligence of a good father of a family in the custody
and preservation of the goods forwarded to him by the owner until the
latter should appoint an agent;
5) To advance the necessary funds if there’s obligation to do so;
6) To act in accordance with the instruction of the principal. In default
thereof, he shall do all that a good father of a family would do;
7) To not carry out the agency if its execution would manifestly result in
loss or damage to the principal;
8) To answer for damages when there is conflict between his interests and
those of the principal, should he prefer his own;
9) To not borrow money if he has been authorized to lend money and
interest;
Why? Kasi conflict of interest. The interest of the agent may not be
necessarily the same with the interest of the principal.
10) To render an account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency;
11) To be responsible for the acts of the substitutes appointed by him;
12) To pay interests on funds he has applied to his own use.