EMILIA O'LACO and HUCO LUNA, vs.

VALENTIN CO CHO CHIT, O LAY KIA and COURT OF APPEALS

DOCTRINE: "ARTICLE 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 . . ." (emphasis supplied).

FACTS:

1. 31 May 1943, the Philippine Sugar Estate Development Company, Ltd., sold a parcel of land, situated at
Oroquieta St., Sta. Cruz, Manila, with the Deed of Absolute Sale naming Emilia O'Laco as vendee; thereafter,
Transfer Certificate of Title No. 66456 was issued in her name.
2. On 17 May 1960, private respondent-spouses Valentin Co Cho Chit and O Lay Wa learned from the
newspapers that Emilia 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.
3. On 22 June 1960, respondent-spouses Valentin Co Cho Chit and O Lay Kia sued petitioner-spouses Emilia
O'Laco and Hugo Luna to recover the purchase price of the land before the then Court of First Instance of
Rizal, asserting that petitioner 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. They contend that Emilia O'Laco breached the trust when she sold the land to the Roman
Catholic Archbishop of Manila.
4. Petitioner-spouses deny the existence of any form of trust relation. They aver that Emilia O'Laco actually
bought the property with her own money; that she left the Deed of Absolute Sale and the corresponding
title with respondent-spouses merely for safekeeping; that when she asked for the return of the documents
evidencing her ownership, respondent-spouses told her that these were misplaced or lost; and, that in view
of the loss, she filed a petition for issuance of a new title, and on 18 August 1944 the then Court of First
Instance of Manila granted her petition.

TRIAL COURT: Dismissed the complaint together with the counterclaim.

COURT of APPEALS: Ordered the defendants-appellees to pay plaintiffs-appellants jointly and severally the sum of
P230,000.00 representing the value of the property subject of the sale with assumption of mortgage to the Roman
Catholic Archbishop of Manila with legal interest from the filing of the complaint until fully paid, the sum of
P10,000.00 as attorney's fees, plus costs.

ISSUE: Whether there is a trust relation between the parties in contemplation of law.

HELD:

Yes, there is. Trust relations between parties may either be express or implied. 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. 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.

Implied trusts may either be resulting or constructive trusts, both coming into being by operation of law.
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 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. 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.
 Unlike express trusts concerning immovables or any interest therein which cannot be proved by parol
evidence, implied trusts may be established by oral evidence. However, 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.

We hold that a resulting trust was indeed intended by the parties under Art. 1448 of the New Civil Code
which states
"ARTICLE 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 . . ." (emphasis supplied).

First. 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 emphatically asserted by respondent O Lay
Kia, the reason why these documents of ownership remained with her is that the land in question belonged to her.

Indeed, there can be no persuasive rationalization for the possession of these documents of ownership by
respondent-spouses for seventeen (17) years after the Oroquieta property was purchased in 1943 than that of
precluding its possible sale, alienation or conveyance by Emilia O'Laco, absent any machination or fraud. This
continued possession of the documents, together with other corroborating evidence spread on record, strongly
suggests that Emilia O'Laco merely held the Oroquieta property in trust for respondent-spouses.

Second. Before buying the Oroquieta property, respondent-spouses 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. They explained that the reason why they did not place
these Oroquieta and Kusang-Loob 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 . Since
O Lay Kia took care of Emilia who was still young when her mother died, respondent-spouses did not hesitate to
place the title of the Oroquieta property in Emilia's name

Third. The circumstances by which Emilia O'Laco obtained a new title by reason of the alleged loss of the
old title then in the possession of respondent-spouses cast serious doubt on the veracity of her ownership.

Fourth. Until the sale of the Oroquieta property to the Roman Catholic Archbishop of Manila, petitioner
Emilia O'Laco actually recognized the trust. Specifically, when respondent spouses learned that Emilia was getting
married to Hugo, O Lay Kia asked her 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. Her answer was an
express recognition of the trust, otherwise, she would have refused the request outright. Petitioners never objected
to this evidence; nor did they attempt to controvert it.

Fifth. The trial court itself determined that "Valentin Co Cho Chit and O Lay Kia had some money with
which they could buy the property." In fact, Valentin was the Chief Mechanic of the Paniqui Sugar Mills, was engaged
in the buy and sell business, operated a gasoline station, and owned an auto supply store as well as a ten-door
apartment in Caloocan City. In contrast, Emilia O'Laco failed to convince the Court that she was financially capable
of purchasing the Oroquieta property. In fact, she opened a bank account only in 1946 and likewise began filing
income tax returns that same year, while the property in question was bought in 1943. Respondent-spouses even
helped Emilia and her brothers in their expenses and livelihood. Emilia could only give a vague account on how she
raised the money for the purchase of the property. Her narration of the transaction of sale abounds with "I don't
know" and "I don't remember."