RULE 98TrusteesSection 1. Where trustee appointed. A trustee necessary to carry into effect the provisions of a will on written instrument shall be appointed by the Court of First Instance in which the will was allowed, if it be a will allowed in the Philippines, otherwise by the Court of First Instance of the province in which the property, or some portion thereof, affected by the trust is situated.Section 2. Appointment and powers of trustees under will. Executor of former trustee need not administer trust. If a testator has omitted in his will to appoint a trustee in the Philippines, and if such appointment is necessary to carry into effect the provisions of the will, the proper Court of First Instance may, after notice to all persons interested, appoint a trustee who shall have the same rights, powers, and duties, and in whom the estate shall vest, as if he had been appointed by the testator. No person succeeding to a trust as executor or administrator of a former trustee shall be required to accept such trust.Section 3. Appointment and powers of new trustee under written instrument. When a trustee under a written instrument declines, resigns, dies or removed before the objects of the trust are accomplished, and no adequate provision is made in such instrument for supplying the vacancy, the proper Court of First Instance may, after due notice to all persons interested, appoint a new trustee to act alone or jointly with the others, as the case may be. Such new trustee shall have and exercise the same powers, right, and duties as if he had been originally appointed, and the trust estate shall vest in him in like manner as it had vested or would have vested, in the trustee in whose place he is substituted and the court may order such conveyance to be made by the former trustee or his representatives, or by the other remaining trustees, as may be necessary or proper to vest the trust estate in the new trustee, either or jointly with the others.Section 4. Proceedings where trustee appointed abroad. When land in the Philippines is held in trust for persons resident here by a trustee who derives his authority from without the Philippines, such trustee shall, on petition filed in the Court of First Instance of the province where the land is situated, and after due notice to all persons interested, be ordered to apply to the court for appointment as trustee; and upon his neglect or refusal to comply with such order, the court shall declare such trust vacant, and shall appoint a new trustee in whom the trust estate shall vest in like manner as if he had been originally appointed by such court.Section 5. Trustee must file bond. Before entering on the duties of his trust, a trustee shall file with the clerk of the court having jurisdiction of the trust a bond in the amount fixed by the judge of said court, payable to the Government of the Philippines and sufficient and available for the protection of any party in interest, and a trustee who neglects to file such bond shall be considered to have declined or resigned the trust; but the court may until further order exempt a trustee under a will from giving a bond when the testator has directed or requested such exemption and may so exempt any trustee when all persons beneficially interested in the trust, being of full age, request the exemption. Such exemption may be cancelled by the court at any time and the trustee required to forthwith file a bond.Section 6. Conditions included in bond. The following conditions shall be deemed to be part of the bond whether written therein or not;(a) That the trustee will make and return to the court, at such time as it may order, a true inventory of all the real and personal estate belonging to him as trustee, which at the time of the making of such inventory shall have come to his possession or knowledge;(b) That he will manage and dispose of all such estate, and faithfully discharge his trust in relation thereto, according to law and the will of the testator or the provisions of the instrument or order under which he is appointed;(c) That he will render upon oath at least once a year until his trust is fulfilled, unless he is excused therefrom in any year by the court, a true account of the property in his hands and the management and disposition thereof, and will render such other accounts as the court may order;(d) That at the expiration of his trust he will settle his account in court and pay over and deliver all the estate remaining in his hands, or due from him on such settlement, to the person or persons entitled to thereto.But when the trustee is appointed as a successor to a prior trustee, the court may dispense with the making and return of an inventory, if one has already been filed, and in such case the condition of the bond shall be deemed to be altered accordingly.Section 7. Appraisal. Compensation of trustee. When an inventory is required to be returned by a trustee, the estate and effects belonging to the trust shall be appraised and the court may order one or more inheritance tax appraisers to assist in the appraisement. The compensation of the trustee shall be fixed by the court, if it be not determined in the instrument creating the trust.Section 8. Removal or resignation of trustee. The proper Court of First Instance may, upon petition of the parties beneficially interested and after due notice to the trustee and hearing, remove a trustee if such removal appears essential in the interest of the petitioner. The court may also, after due notice to all persons interested, remove a trustee who is insane or otherwise incapable of discharging his trust or evidently unsuitable therefor. A trustee, whether appointed by the court or under a written instrument, may resign his trust if it appears to the court proper to allow such resignation.Section 9. Proceedings for sale or encumbrance of trust estate. When the sale or encumbrance of any real or personal estate held in trust is necessary or expedient, the court having jurisdiction of the trust may, on petition and after due notice and hearing, order such sale or encumbrance to be made, and the re-investment and application of the proceeds thereof in such manner as will best effect the objects of the trust. The petition, notice, hearing, order of sale or encumbrance, and record of proceedings, shall conform as nearly as may be to the provisions concerning the sale or imcumbrance by guardians of the property of minors or other wards.Art. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary.Art. 1441. Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law.Art. 1442. The principles of the general law of trusts, insofar as they are not in conflict with this Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.CHAPTER 2EXPRESS TRUSTS

Art. 1443. No express trusts concerning an immovable or any interest therein may be proved by parol evidence.Art. 1444. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.Art. 1445. No trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instrument constituting the trust.Art. 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no onerous condition upon the beneficiary, his acceptance shall be presumed, if there is no proof to the contrary.CHAPTER 3IMPLIED TRUSTS

Art. 1447. The enumeration of the following cases of implied trust does not exclude others established by the general law of trust, but the limitation laid down in Article 1442 shall be applicable.Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.Art. 1449. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.Art. 1450. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom its is paid. The latter may redeem the property and compel a conveyance thereof to him.Art. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.Art. 1452. If two or more persons agree to purchase property and by common consent the legal title is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each.Art. 1453. When property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefit is contemplated.Art. 1454. If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him.Art. 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong.Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.Art. 1457. An implied trust may be proved by oral evidence.EMILIA O'LACO and HUCO LUNA v. VALENTIN CO CHO CHIT, O LAY KIA and CAG.R. No. 58010 | March 31, 1993 | BELLOSILLO

FACTS:1. Emilia O'Laco and respondent O Lay Kia are half-sisters2. May 31, 1943 Philippine Sugar Estate Development Company, Ltd., sold a parcel of land[footnoteRef:1] with the Deed of Absolute Sale naming O'Laco as vendee; thereafter, Transfer Certificate of Title No. 66456 was issued in her name. [1: Lot No. 5, Block No. 10, Plan Psu-10038, situated at Oroquieta St., Sta. Cruz, Manila ]

3. May 17, 1960 spouses Valentin Co Cho Chit and O Lay Kia (spouses Valentin) learned from the newspapers that O'Laco sold the same property to the Roman Catholic Archbishop of Manila for P230,000.00, with assumption of the real estate mortgage constituted thereon. 4. June 22, 1960 spouses Valentin sued spouses Emilia O'Laco and Hugo Luna (spouses Hugo) to recover the purchase price of the land before CFI of Rizal.a. Spouses Valentin: Emilia O'Laco knew that they were the real vendees of the Oroquieta property sold in 1943 by Philippine Sugar Estate Development Company, Ltd., and that the legal title thereto was merely placed in her name. i. Emilia O'Laco breached the trust when she sold the land to the Roman Catholic Archbishop of Manila. ii. Asked the trial court to garnish all the amounts still due and payable to spouses Hugo arising from the sale, which was granted on 30 June 1960. b. Spouses Hugo:deny the existence of any form of trust relation. i. O'Laco actually bought the property with her own moneyii. she left the Deed of Absolute Sale and the corresponding title with spouses Valentin merely for safekeeping; iii. when OLaco asked for the return of the documents evidencing her ownership, spouses Valentin told her that these were misplaced or lost; hence, she filed a petition for issuance of a new title. On August 18, 1944 the CFI Manila granted her petition.5. CFI Rizal, September 20, 1976 finding no trust relation between the parties, dismissed the complaint together with the counterclaim. 6. Petitioners and respondents appealed.7. CA, April 9, 1981 (ipapanganak na si Azy nito, hehehe) reversed TC decision. MR denied. Appealed to SC.

CONTENTION OF SPOUSES HUGO (PETITIONERS):1. The complaint fails to allege that earnest efforts toward a compromise were exerted considering that the suit is between members of the same family, and no trust relation exists between them. 2. Spouses Valentin are already barred by laches

ISSUE: 1. WON there was effort on the side of spouses Hugo to settle the controversy - YES2. WON there was an implied trust - YES3. WON laches came in - NO

HELD: YES!!!

RATIO:

1. Procedural -- Contention no. 1a. The complaint must show that there were efforts towards compromise, pursuant to Art. 222 of the New Civil Code[footnoteRef:2], or a motion to dismiss could have been filed under Sec. 1, par. (j), Rule 16, of the Rules of Court. [2: Superseded by the Family Code, I didnt try to look for the exact provision: No suit shall be filed or maintained between members of the same family unless it should appear that earnest efforts toward a compromise have been made, but that the same have failed, subject to the limitations in Article 2035.]

b. An attempt to compromise as well as the inability to succeed is a condition precedent to the filing of a suit between members of the same family. c. But plaintiff may be allowed to amend his complaint to correct the defect if the amendment does not actually confer jurisdiction on the court in which the action is filed, i.e., if the cause of action was originally within that court's jurisdiction. d. Spouses Valentin did not formally amend their complaint. They were allowed to introduce evidence purporting to show that earnest efforts toward a compromise had been made.[footnoteRef:3] Hence, the complaint was deemed accordingly amended to conform to the evidence. [3: That is, O Lay Kia pressed O'Laco for the transfer of the title of the Oroquieta property in the name of spouses Valentin, just before OLacos marriage to Hugo. But, instead of transferring the title as requested, Emilia sold the property to the Roman Catholic Archbishop of Manila. This testimony was not objected to by spouses Hugo.]

e. If the defendant permits evidence to be introduced without objection and which supplies the necessary allegations of a defective complaint, then the evidence is deemed to have the effect of curing the defects of the complaint.

2. (ISSUE NO. 2) Substantial existence of trust relationsa. Trust relations between parties may either be express or implied. i. Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words evincing an intention to create a trust. ii. Implied trusts are those which, without being express, 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.b. Implied trusts may either be resulting or constructive trusts, both coming into being by operation of law.[footnoteRef:4] [4: Specific examples of resulting trusts may be found in the Civil Code, particularly Arts. 1448, 1449, 1451,1452 and 1453, 23 while constructive trusts are illustrated in Arts. 1450, 1454, 1455 and 1456.]

i. 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. 1. They arise from the nature or 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. ii. Constructive trusts are created by the construction of equity in order to satisfy the demands of justice and prevent unjust enrichment. 1. 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.c. Express trusts concerning immovables or any interest therein cannot be proved by parol evidence. Implied trusts may be established by oral evidence.i. In order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation were proven by an authentic document. It cannot be established upon vague and inconclusive proof.

3. (APPLICATION OF NO. 2) There is a resulting trust was indeed intended by the parties under Art. 1448 of the NCC:a. As stipulated by the parties, the document of sale, the owner's duplicate copy of the certificate of title, insurance policies, receipt of initial premium of insurance coverage and real estate tax receipts ware all in the possession of respondent spouses which they offered in evidence. As per O Lay Kia, the reason why these documents of ownership remained with her is that the land in question belonged to her.i. The only possible reason for these documents to be possessed by the spouses Valentin for 17 years after the purchase of the property in 1943 is OLaco only held the property for the former. b. Before buying the property, spouses Valentin purchased another property situated in Kusang-Loob, Sta. Cruz, Manila, where the certificate of title was placed in the name of Ambrosio O'Laco, older brother of Emilia, under similar or identical circumstances. i. Spouses Valentin: The reason why they did not place these properties in their name was that being Chinese nationals at the time of the purchase they did not want to execute the required affidavit to the effect that they were allies of the Japanese. 1. Spouses Valentin even filed an action for reconveyance against Ambrosio when he claimed the Kusang-Loob property as his own, which they won. 2. Ambrosio O'Laco filed a case against the Anti-Dummy Board, because of this, there was an implied admission by Ambrosio that his sister Emilia, like him, was merely used as a dummy. c. The circumstances by which O'Laco obtained a new title by reason of the alleged loss of the old title then in the possession of spouses Valentin cast serious doubt on the veracity of her ownership. i. The petitions respectively filed by Emilia and Ambrosio for both properties were both granted on the same day by the CFI of Manila. 1. It really looks that there was conspiracy between the siblings to defraud and deprive spouses Valentin of their properties.d. Until the sale of the contested property to the Roman Catholic Archbishop of Manila, Emilia O'Laco actually recognized the trust. i. Specifically, when spouses Valentin learned that Emilia was getting married to Hugo, O Lay Kia asked Emilia to have the title to the property already transferred to her and her husband Valentin, and Emilia assured her that "would be arranged (maaayos na)" after her wedding. e. The TC determined that spouses Valentin had some money with which they could buy the property." i. Valentin was the Chief Mechanic of the Paniqui Sugar Mills. Emilia failed to convince the Court that she was financially capable of purchasing the property. 1. In fact, she opened a bank account only in 1946 and likewise began filing income tax returns that same year, 39 while the property in question was bought in 1943.

4. (ISSUE NO. 3) In resulting trust, the rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust. Once the resulting trust is repudiated, however, it is converted into a constructive trust and is subject to prescription.a. A resulting trust is repudiated if the following requisites concur: i. the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; ii. such positive acts of repudiation have been made known to the cestui qui trust; and,iii. the evidence thereon is clear and convincing.b. The Court categorically ruled that an action for reconveyance based on an implied or constructive trust must perforce prescribe in ten (10) years, and not otherwise, thereby modifying previous decisions holding that the prescriptive period was four (4) years.

5. (APPLICATION OF NO. 5) Neither the registration of the property in the name of Emilia O'Laco nor the issuance of a new Torrens title in 1944 in her name in lieu of the alleged loss of the original may be made the basis for the commencement of the prescriptive period. a. As late as 1959, or just before she got married, Emilia continued to recognize the ownership of spouses Valentin over the Oroquieta property. b. Immediately after Emilia sold the Oroquieta property spouses Valentin instituted the present suit for breach of trust. Correspondingly, laches cannot lie against them.

Heirs of Yap vs. CA9/10/20140 CommentsFacts: Lorenzo, Ramon and Benjamin are sons of Chua Mia. Sometime in February 1966, Ramon Yap purchase a parcel of land situated at 123 Batanes Street, Galas, and Quezon City from the spouses Carlos and Josefina Nery, then Ramon registered the parcel of lot he bought under his name.

In 1967 Ramon Yap constructed a two storey 3-door apartment building on the said property for the use of Yap family. One-fifth of the cost of the construction was shouldered by Ramon while the rest was shouldered by their mother. Upon its completion the improvement was declared for real estate tax purpose in the name of Lorenzo, upon the request or the wish of their mother.

On July 11, 1970 Lorenzo Yap died, months later petitioner moved to Manila to reside their permanently. Ramon Yap allowed them to used one unit of the apartment. On March 18, 1992 Ramon Yap sold his land and share in the 3-dor apartment to his brother Benjamin Yap in the amount of Php 337, 500.00.

The controversy started when, on June 8, 1992 petitioner sent a letter of advice Ramon yap with regards to their claim of ownership over the property and demanded to execute proper deed to transfer the ownership of the property to them.

On July 22, 1992 Benjamin Yap filed an action with the RTC of Quezon City for quieting of title against petitioner. The petitioner averred that in 1966 spouses Carlos and Josefina Nery offered to sell the parcel of land to Lorenzo Yap in the amount of Php 15,000.00. Since Lorenzo and his wife Sally were both Chinese citizens, they requested Ramon to use his name for the purchase which the latter consented. It was agreed that the lot would remain under his name until they acquire Philippine Citizenship or should he, until his heirs acquires Philippine Citizenship.

Petitioner further contented that it was Lorenzo who finance for the construction of the apartment, but during trial Sally Yap admitted to the court that their business was razed by fire in 1964 two year before the purchased of the disputed land.

After assessing the evidence presented the trial court adjudged that Benjamin Yap to be the lawful owner of the property, this was later affirmed by the Court of Appeals, giving full credit to the Deed of Sale executed by spouses Nery in favor of Ramon Yap.

Now petitioner is seeking the reversal of the decision of the Court of Appeals before the Supreme Court.

Issue:

Whether or not, the trust agreement between Lorenzo Yap and his brother are enforceable.

Held:

The Supreme Court held that the trust agreement between brothers is an implied trust which can be established by parol evidence. To establish it in real property the parol evidence should be fully convincing and proven by authentic documents.

The testimony given by Sally Yap wife of deceased Lorenzo Yap is self-serving. She herself admitted that in 1964 that their business was razed by fire that would place somehow doubt, as to their capacity to purchase the land in about two years, while Ramon Yap is an Accountant who has all the means to purchase property.

Wherefore the petition is denied and the decision of the respondent Court of Appeals was affirmed by the Supreme Court.

G.R. No. 46390 September 30, 1939Testate estate of Petrona Francisco, deceased. CASIMIRO TIANGCO and MARIA TIANGCO,fiduciaries-appellants,vs.PROCESO FRANCISCO,petitioner-appellee.Ortega and Ortega for appellant.Clemente E. Felix for appellee.LAUREL,J.:Petrona Francisco provided in her last will that the income derived from the one-half portion of her fishpond in the barrio of Gasak, Navotas, Rizal, shall be devoted to the celebration of the "Flores de Mayo" in Malabon, Rizal, and for other religious activities mentioned in the will. Upon probate of the will the Court of First Instance of Rizal appointed Casimiro Tiangco as trustee. Shortly afterwards, on March 16, 1922, Maria Tiangco was also appointed co-trustee to act with Casimiro Tiangco in supervising the affairs of the trust. The records of the case disclose that from the beginning the submission of annual reports to the court was very irregular. When the accounts for the year 1935 were submitted, Proceso Francisco, the herein oppositor-appellee, filed an opposition. Meanwhile, the court appointed the clerk of court as commissioner to make a detailed examination of the accounts already submitted, and declared its order of January 30, 1937, approving the said accounts over the objection of Proceso Francisco, of no legal force and effect. The trustees entered an opposition to this decree. Upon the other hand, the oppositor-appellee, on March 22, 1937, requested for the temporary substitution of the trustees. The report for the year 1936 having been filed on April 13, 1937, an order for the joint hearing of the two annual accounts was issued. Again, Proceso Francisco made several objections to the accounts for the year 1936 with reference to certain items. In the meantime, the clerk of court submitted his report. On April 26, 1938, the court issued the following order requiring the resignation of the trustees within ten days, and appointed Father L.R. Arcaira as temporary trustee:It appearing from the evidence submitted by the commissioner, regarding the account of the trustees, that the said trustees have not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship, they are hereby given ten days within which to submit their resignation. It is understood that action on the resignation will be taken by the court upon the filing and settlement of their account to be submitted by the trustees pursuant to the order of this court dated April 20, 1938. In the meantime, the parish priest of Malabon, Father L.A. Arcaira is hereby appointed temporarily trustee to take immediate possession of the property under trust and manage the same until regular trustee is duly appointed. So ordered.Pasig, Rizal, Philippines, April 26, 1938.SIXTO DE LA COSTAJudge

Appellants assign various errors, the principal bearing on the power of the lower court to require the resignation of the trustees and the legal sufficiency of the above-questioned order for this purpose.The will of the deceased, Petrona Francisco, created a continuing trust, but no particular persons were named as beneficiaries. The appellants themselves did not have anything to do with the trust until their appointment by the lower court, and they were so commissioned not because of any beneficial interest they had in the estate but t because their selection was approved by the lower court in the belief that they would faithfully perform their obligations. The same court found later that they "have not faithfully discharged their duties and that their continuance in office would cause further prejudice to the estate under trusteeship," and we cannot, on appeal, override the action of the lower court by reversing its finding, and indirectly sanction the violation of an unquestioned and legally existing trust.It is also contended that the order appealed from does not contain a finding of facts, as required by section 133 of the Code of Civil Procedure, and for this reason, the order is ineffectual. We find that the order read in conjunction with the report of the clerk of court as commissioner, exhibits a finding upon all the evidence presented during the trial, and is sufficient compliance with the requirements of the law. (Aringovs.Arena, 14 Phil., 263, 266.)The appellants likewise contend that the trial court committed grave abuse of discretion in ordering the resignation of the trustees-appellants. The power to appoint a trustee is discretionary with the court before whom application is made, and this court will decline to interfere except in case of clear abuse. Thereafter, upon proper showing that the interests of justice would be adequately served with the removal of the incumbent trustees, it is likewise within its discretion to do so (section 587, Code of Civil Procedure), and this court will refuse to interfere in the absence of a showing of grave abuse or whimsical and capricious exercise of that discretion.The order appealed from is confirmed, with costs against the appellants. So ordered.