[Express Trust]

Case Citation: G.R. No. 162033

Date:  May 8, 2009

Petitioners: HEIRS OF TRANQUILINO LABISTE

Respondents: HEIRS OF JOSE LABISTE

Doctrine: The Court has held that for acquisitive prescription to bar the action of the
beneficiary against the trustee in an express trust for the recovery of the property
held in trust 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.

Subject matter
of controversy:

Antecedent  On 29 September 1919, the late Epifanio Labiste (Epifanio), on his own and
Facts: on behalf of his brothers and sisters who were the heirs of Jose Labiste
(Jose), purchased from the Bureau of Lands Lot No. 1054 of the Banilad Friar
Lands Estate, with an area of 13,308 square meters, located at Guadalupe,
Cebu City for ₱36.00.
 Subsequently, on 9 June 1924, then Bureau of Lands Director Jorge B.
Vargas executed Deed of Conveyance No. 12536 selling and ceding Lot No.
1054 to Epifanio and his brothers and sisters who were the heirs of Jose.
 After full payment of the purchase price but prior to the issuance of the deed
of conveyance, Epifanio executed an Affidavit (in Spanish on 10 July 1923),
affirming that he, as one of the heirs of Jose, and his uncle and petitioners’
predecessor-in-interest, Tranquilino Labiste (Tranquilino), then co-owned Lot
No. 1054 because the money that was paid to the government came from
the two of them. 
 Tranquilino and the heirs of Jose continued to hold the property jointly.
 Sometime in 1928, the Register of Deeds of Cebu City issued Original
Certificate of Title No. 3878 for Lot No. 1054.

On 2 May 1928, Engineer Espiritu Bunagan (Engr. Bunagan), Deputy Public Land
Surveyor, subdivided Lot No. 1054 into two lots:
a. Lot No. 1054-A with an area of 6,664 square meters for Tranquilino and
b. Lot No. 1054-B with an area of 6,664 square meters for Epifanio.

The subdivision plan prepared by Engr. Bunagan was approved by Jose P. Dans,
Acting Director of Lands.

Subsequently, on 18 October 1939, the heirs of Tranquilino purchased the one-half

(1/2) interest of the heirs of Jose over Lot No. 1054 for ₱300.00, as evidenced by
the Calig-onan sa Panagpalit executed by the parties in the Visayan dialect.

 The heirs of Tranquilino immediately took possession of the entire lot.

 When World War II broke out, the heirs of Tranquilino fled Cebu City and
when they came back they found their homes and possessions destroyed.
 The records in the Office of the Register of Deeds, Office of the City Assessor
and other government offices were also destroyed during the war. Squatters
 have practically overrun the entire property, such that neither petitioners nor
respondents possess it.

In October 1993, petitioners learned that one of the respondents, 11 Asuncion

Labiste, had filed on 17 September 1993 a petition for reconstitution of title over
Lot No. 1054.

Petitioners opposed the petition at first but by a compromise agreement between

the parties dated 25 March 1994, petitioners withdrew their opposition to expedite
the reconstitution process.

 Under the compromise agreement, petitioners were to be given time to file a

complaint so that the issues could be litigated in an ordinary action and the
reconstituted title was to be deposited with the Clerk of Court for a period of
sixty (60) days to allow petitioners to file an action for reconveyance and to
annotate a notice of lis pendens. 

 The Register of Deeds of Cebu City issued the reconstituted title, TCT No.
RT-7853, in the name of "Epifanio Labiste, married to Tomasa Mabitad, his
brothers and sisters, heirs of Jose Labiste" on 14 December 1994. However,
respondents did not honor the compromise agreement.

Petitioners filed a complaint for annulment of title seeking the reconveyance of

property and damages.

Petitioner’s
Contention:

Respondent’s Respondents claimed that the Affidavit of Epifanio and the Calig-onan sa Panagpalit
Contention: were forgeries and that petitioners’ action had long prescribed or barred by laches.

MTC/RTC The RTC in a Decision dated 23 August 1999 ruled in favor of petitioners.

Ruling:
 After evaluating the documents presented by petitioners, the RTC found that
they are genuine and authentic as ancient documents and that they are valid
and enforceable.
 it held that the action had not prescribed as the complaint was filed about a
year after the reconstitution of the title by respondents. 
 The RTC further held that the reconstituted title did not give any more right
to respondents than what their predecessors-in-interest actually had as it is
limited to the reconstitution of the certificate as it stood at the time of its
loss or destruction.

CA Ruling: the Court of Appeals, while affirming petitioners’ right to the property, nevertheless
reversed the RTC’s decision on the ground of prescription and laches.

 It affirmed the RTC’s findings that the Affidavit and the Calig-onan sa
Panagpalit are genuine and authentic, and that the same are valid and
enforceable documents.
 Citing Article 1144 of the Civil Code, it held that petitioners’ cause of action
had prescribed for the action must be brought within ten (10) years from the
time the right of action accrues upon the written contract which in this case
was when petitioners’ predecessors-in-interest lost possession over the
property after World War II.
 Also, the lapse of time to file the action constitutes neglect on petitioners’
part so the principle of laches is applicable.

Issue: Whether or not petitioners’ cause of action has prescribed. NO

SC Ruling: The genuineness and authenticity of the Affidavit of Epifanio and the Calig-onan sa
Panagpalit are beyond cavil. As we have ruled in a litany of cases, resort to judicial
review of the decisions of the Court of Appeals under Rule 45 is confined only to
errors of law.

The findings of fact by the lower court are conclusive absent any palpable error or
arbitrariness.

It is a long settled doctrine that findings of fact of the trial court, when affirmed by
the Court of Appeals, are binding upon the Court. It is not the function of the
Supreme Court to weigh anew the evidence already passed upon by the Court of
Appeals for these are deemed final and conclusive and may not be reviewed on
appeal.

The Court of Appeals erred in applying the rules on prescription and the
principle of laches because what is involved in the present case is an
express trust.

 Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another.
 It is a fiduciary relationship that obliges the trustee to deal with the property
for the benefit of the beneficiary.
 Trust relations between parties may either be express or implied. An express
trust is created by the intention of the trustor or of the parties. An implied
trust comes into being by operation of law.

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.

 Under Article 1444 of the Civil Code, "[n]o particular words are required for
the creation of an express trust, it being sufficient that a trust is clearly
intended."
 The Affidavit of Epifanio is in the nature of a trust agreement. Epifanio
affirmed that the lot brought in his name was co-owned by him, as one of
the heirs of Jose, and his uncle Tranquilino. And by agreement, each of them
has been in possession of half of the property.
 Their arrangement was corroborated by the subdivision plan prepared by
Engr. Bunagan and approved by Jose P. Dans, Acting Director of Lands.

As such, prescription and laches will run only from the time the express trust is
repudiated.

The Court has held that for acquisitive prescription to bar the action of the
beneficiary against the trustee in an express trust for the recovery of the property
held in trust it must be shown that:

d. the trustee has performed unequivocal acts of repudiation amounting to an

ouster of the cestui que trust;
e. such positive acts of repudiation have been made known to the cestui que
trust, and
f. the evidence thereon is clear and conclusive.

Respondents cannot rely on the fact that the Torrens title was issued in the name of
Epifanio and the other heirs of Jose. It has been held that a trustee who obtains a
Torrens title over property held in trust by him for another cannot repudiate the
trust by relying on the registration.
  The rule requires a clear repudiation of the trust duly communicated to the
beneficiary. The only act that can be construed as repudiation was when
respondents filed the petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause of action has
not yet prescribed, laches cannot be attributed to them.
 It is hornbook doctrine that laches is a creation of equity and its application
is controlled by equitable considerations. Laches cannot be used to defeat
justice or perpetrate fraud and injustice. Neither should its application be
used to prevent the rightful owners of a property from recovering what has
been fraudulently registered in the name of another.

However, to recover the other half of the property covered by the private Calig-
onan sa Panagpalit and to have it registered on the title of the property, petitioners
should have filed an action to compel 30 respondents, as heirs of the sellers in the
contract, to execute a public deed of sale. A conveyance of land made in a private
document does not affect its validity. 

 But even assuming that such action was filed by petitioners, the same had
already prescribed.

It is settled that only laws existing at the time of the execution of a contract are
applicable thereto and not later statutes, unless the latter are specifically intended
to have retroactive effect.

Consequently, it is the Old Code of Civil Procedure (Act No. 190) which applies in
this case since the Calig-onan sa Panagpalit was executed on 18 October 1939 while
the New Civil Code took effect only on 30 August 1950.