Heirs of Maximo Labanon vs.

Heirs of Constancio Labanon,

FACTS:
1. During the lifetime of Constancio Labanon, prior to the outbreak of WWII, he settled upon a
piece of alienable and disposable public agricultural land situated at Brgy. Lanao, Kidapawan,
Cotabato x x x. Constancio cultivated the said lot and introduced permanent improvements that
still exist up to the present.
2. Being of very limited educational attainment, he found it difficult to file his public land
application over said lot. Constancio then asked his brother, Maximo Labanon who was better
educated to file the corresponding public land application under the express agreement that
they will divide the said lot as soon as it would be feasible for them to do so.
3. The offer was accepted by Maximo. During the time of the application it was Constancio who
continued to cultivate the said lot in order to comply with the cultivation requirement set forth
under Commonwealth Act 141, as amended, on Homestead applications.
4. After which, on June 6, 1941, due to industry of Constancio, Homestead Application No.
244742 (E-128802) of his brother Maximo was approved with Homestead Patent No. 67512.
Eventually, Original Certificate of Title No. P-14320 was issued by the Register of Deeds of
Cotabato over said lot in favor of Maximo Labanon.
5. On February 11, 1955, Maximo Labanon executed a document denominated as "Assignment
of Rights and Ownership" and was executed to safeguard the ownership and interest of his
brother Constancio Labanon.
6. On April 25, 1962, Maximo Labanon executed a sworn statement reiterating his desire that his
elder brother Constancio, his heirs and assigns shall own the eastern portion of the Lot
7. After the death of Constancio Labanon, his heirs executed an [e]xtra-judicial settlement of
estate with simultaneous sale over the aforesaid eastern portion of the lot in favor of Alberto
Makilang, the husband of Visitacion Labanon, one of the children of Constancio.
8. However, in March 1991, the defendants heirs of Maximo Labanon namely, Alicia L.
Caniedo, Leopoldo Labanon, Roberto Nieto and Pancho Labanon, caused to be cancelled from
the records of the defendant Provincial Assessor of Cotabato the aforesaid TD No. 11593
9. Further, after discovering that the defendant-heirs of Maximo Labanon were taking steps to
deprive the heirs of Constancio Labanon of their ownership over the eastern portion of said lot,
the latter, thru Alberto Makilang, demanded the owner’s copy of the certificate of title covering
the aforesaid Lot to be surrendered to the Register of Deeds of Cotabato so that the ownership of
the heirs of Constancio may be fully effected but the defendants refused and still continue to
refuse to honor the trust agreement entered into by the deceased brothers.
10. Thus, on November 12, 1991, petitioners filed a complaint5 for Specific Performance,
Recovery of Ownership, Attorney’s Fees and Damages with Writ of Preliminary Injunction and
Prayer for Temporary Restraining Order against respondents.
ISSUE:
Whether or not there exist a trust?
RULING:
Contrary to petitioners’ interpretation, the aforequoted legal provision does not totally deprive a
party of any remedy to recover the property fraudulently registered in the name of another.
Section 32 of PD 1529 merely precludes the reopening of the registration proceedings for titles
covered by the Torrens System, but does not foreclose other remedies for the reconveyance of
the property to its right-ful owner. As elaborated in Heirs of Clemente Ermac v. Heirs of Vicente
Ermac, 403 SCRA 291 (2003) While it is true that Section 32 of PD 1529 provides that the
decree of registration becomes incontrovertible after a year, it does not altogether deprive an
aggrieved party of a remedy in law. The acceptability of the Torrens System would be impaired,
if it is utilized to perpetuate fraud against the real owners.

Former Vice-President and Senator Arturo Tolentino, a noted civilist, explained the nature and
import of a trust: Trust is the legal relationship between one person having an equitable
ownership in property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the exercise of
certain powers by the latter. This legal relationship can be distinguished from other relationships
of a fiduciary character, such as deposit, guardianship, and agency, in that the trustee has legal
title to the property. In the case at bench, this is exactly the relationship established between the
parties.
Civil law expert Tolentino further elucidated on the express trust, thus:
No particular form of words or conduct is necessary for the manifestation of intention to create a
trust. It is possible to create a trust without using the word "trust" or "trustee". Conversely, the
mere fact that these words are used does not necessarily indicate an intention to create a trust.
The question in each case is whether the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the
relationship which he intends to create is called a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust.
Yes. The Supreme court held that in the instant case, such intention to institute an express
trust between Maximo Labanon as trustee and Constancio Labanon as trustor was
contained in not just one but two written documents, the Assignment of Rights and
Ownership as well as Maximo Labanon’s April 25, 1962 Sworn Statement. In both
documents, Maximo Labanon recognized Constancio Labanon’s ownership and possession
over the eastern portion of the property covered by OCT No. P-14320, even as he
recognized himself as the applicant for the Homestead Patent over the land. Thus, Maximo
Labanon maintained the title over the property while acknowledging the true ownership of
Constancio Labanon over the eastern portion of the land. The existence of an express trust
cannot be doubted nor disputed.
Same; Same; Trust classified as either express or implied.—Trusts are classified under the Civil
Code as either express or implied. Such classification determines the prescriptive period for
enforcing such trust. Article 1444 of the New Civil Code on express trust provides that “[n]o
particular words are required for the creation of an express trust, it being sufficient that a trust is
clearly intended.”

Same; Same; 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.—We ruled in Estate of
Edward Miller Grimm v. Estate of Charles Parsons and Patrick C. Parsons, 504 SCRA 67 (2006)
that: 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.
Same; Same; Prescription; Unrepudiated written express trusts are imprescriptible; The
prescriptive period for the enforcement of an express trust of ten (10) years starts upon the
repudiation of the trust by the trustee.—On the issue of prescription, we had the opportunity
to rule in Bueno v. Reyes, 27 SCRA 1179 (1969), that unrepudiated written express trusts are
imprescriptible. This principle was amplified in Escay v. Court of Appeals, 61 SCRA 369 (1974)
this way: “Express trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al.
vs. Carmen Gorricho, et al., 54 O.G. p. 8429, Sec. 40, Code of Civil Procedure).” In the more
recent case of Secuya v. De Selma, 326 SCRA 244 (2000), we again ruled that the prescriptive
period for the enforcement of an express trust of ten (10) years starts upon the repudiation of the
trust by the trustee.
In the case at bar, Maximo Labanon never repudiated the express trust instituted between
him and Constancio Labanon. And after Maximo Labanon’s death, the trust could no
longer be renounced; thus, respondents’ right to enforce the trust agreement can no longer
be restricted nor prejudiced by prescription.
While there are some decisions which hold that an action upon a trust is imprescriptible, without
distinguishing between express and implied trusts, the better rule, as laid down by this Court in
other decisions, is that prescription does supervene where the trust is merely an implied one. The
reason has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal,
SCRA 84, 88, as follows:
Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property
prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229,
March 29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the
Code of Civil Procedure referred only to express unrepudiated trusts, and did not include
constructive trusts (that are imposed by law) where no fiduciary relation exists and the trustee
does not recognize the trust at all.