HUANG vs. COURT OF APPEALS

FACTS:

In 1965 respondent Dolores Sandoval wanted to buy two (2) lots in Dasmariñas Village, Makati, but was advised by petitioner Milagros Huang, wife of her brother, petitioner Ricardo Huang, that the policy of the subdivision owner forbade the acquisition of two (2) lots by a single individual. Consequently, Dolores purchased Lot 21 and registered it in her name. She also purchased the adjacent lot, Lot 20, where the deed of sale was placed in the name of Ricardo and Registered in his name under TCT No. 204783. Ricardo requested her permission to construct a small residential house on Lot 20 to which she agreed inasmuch as she was then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo to mortgage Lot 20 to the Social Security System to secure the payment of his loan of P19,200.00 to be spent in putting up the house. However, she actually financed the construction of the house, the swimming pool and the fence thereon on the understanding that the Huang spouses would merely hold title in trust for her beneficial interest, because of this Dolores requested the Huangs to execute in her favor a deed of absolute sale with assumption of mortgage over the property. The latter obliged. However, after sometime, the lessees started prohibiting the Sandoval family from using the swimming pool and the Huangs then began challenging the Sandovals' ownership of the property.

On the basis of the evidence presented, in the deed of sale with assumption of mortgage, the trial court found that it was signed voluntarily by the Huang spouses so much so that their claim that they were misled into signing it was unbelievable. Judgment was rendered in favor of Dolores. On appeal to the Court of Appeals, the decision of the trial court was affirmed. Hence, the instant recourse.

ISSUE:

1)      W/N there was trust between Dolores and spouses Huang reguarding Lot 20.

2)      W/N the action to compel the trustee to convey the property registered in his name for the benefits of the cestui que trust shall prescribe.

HELD:

1)      YES. There was a trust created. Dolores provided the money for the purchase of Lot 20, and it was only the corresponding deed of sale and TCT were placed in the name of Ricardo. Ricardo, the trustee of Lot 20 and its improvements for the benefit of Dolores as owner.

The pertinent law is Art. 1448 of the New Civil Code which provides that 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 for the property. A resulting trust arises because of the presumption that he who pays for a thing intends a beneficial interest therein for himself.

2)      NO. The action filed by Dolores has not prescribed. It is only when the trustee repudiates the trust that the period of prescription commences to run. The prescriptive period is ten (10) years from the repudiation of the trust. It is ten (10) years because just as a resulting trust is an offspring of the law, so is the corresponding obligation to convey the property and the title thereto to the true owner. In this context, and vis-a-vis prescription, Art. 1144 of the New Civil Code, which is the law applicable, provides: "The following actions must be brought within ten years from the time the right of action accrues: (a) Upon a written contract; (b) Upon an obligation created by law; (c) Upon a
judgment."

However, before the period of prescription may start, it must be shown that:
(a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such positive acts of repudiation have been made known to the cestui que trust; and, (c) the evidence thereon is clear and conclusive.

Firstly, Ricardo has not performed any unequivocal act of repudiation amounting to an ouster of Dolores. The only acts which may be considered as indicative of his intention not to respect the trust anymore were his leasing the house without the prior knowledge of Dolores; his refusal to carry out the demand of Dolores that he must ask the lessees to vacate the house; and, his refusal to give the necessary papers to Dolores to enable her to get the title from the SSS. Secondly, the foregoing acts are not positive acts of repudiation; and, thirdly, the evidence on such acts is unclear and inconclusive. But even if the foregoing acts were manifest acts of repudiation made known to Dolores, the fact remains that they were done at the earliest only on 15 March 1980 when Ricardo leased Lot 20 and its improvements to Deltron. Dolores' complaint before the trial court was filed on 19 February 1981, or within the 10-year prescriptive period.

Note: Although, in Laguna v. Levantino and Valdez v. Olorga, we held that acts which may be adverse to strangers may not be sufficiently adverse to the cestui que trust. A mere silent possession of the trustee unaccompanied by acts amounting to an ouster of the cestui que trust cannot be construed as an adverse possession. Mere perception of rents and profits by the trustee, and erecting fences and buildings adapted for the cultivation of the land held in trust, are not equivalent to unequivocal acts of ouster of the cestui que trust.