De Leon v. Molo-Peckson
REITERATIONFacts
The Antecedents: Plaintiffs-appellees filed a complaint to compel defendants-appellants to convey ten parcels of land in Pasay City for P1.00 per parcel, alleging these lots were willed or donated to them in 1948 by their foster parents, Mariano Molo y Legaspi and Juana Juan, with the understanding that they would sell them to the plaintiffs under stated terms. Procedural History: The defendants disclaimed any legal obligation to sell the properties for a nominal consideration, asserting that a document they executed was based on a mistaken assumption of their foster parents' request. They later executed a document revoking the donation. The trial court, after both parties submitted their case based on documentary evidence, found that a trust was constituted by the late spouses over the lands in favor of the plaintiffs as beneficiaries. The court ordered the defendants to free the lands from mortgage liens, execute a deed of absolute sale, or pay the fair market value, render an accounting of fruits, and pay attorney's fees and costs. The Petition: The defendants appealed the decision of the trial court, assigning several errors.
Issue(s)
Whether the spouses Mariano Molo and Juana Juan constituted a trust over the properties in question with the plaintiffs-appellees as beneficiaries. Whether the document executed on December 5, 1950, constitutes a declaration against interest and an admission by the defendants-appellants. Whether the defendants-appellants had the right to revoke the document of December 5, 1950. Whether the defendants-appellants should be ordered to render an accounting of the fruits of the properties. Whether the defendants-appellants should be ordered to free the properties from mortgage liens. Whether attorney's fees were correctly awarded.
Ruling
The Supreme Court affirmed the decision of the trial court with a modification regarding the date from which accounting should be made. The Court held that the document executed on December 5, 1950, created an express trust in favor of the appellees, which the appellants had no right to revoke unilaterally. The appellants were ordered to free the lands from liens and encumbrances and to render an accounting of the fruits from the date the judgment in G.R. No. L-8774 became final and executory.
Ratio Decidendi
On the existence of an express trust: The Court found that the document executed by the defendants-appellants on December 5, 1950, constituted a recognition of a pre-existing trust or a declaration of an express trust impressed upon the ten parcels of land. This document was executed voluntarily, about two years and six months after they acquired title to the lands through donation inter vivos, and six months after the death of the donor, Juana Juan. The Court reasoned that the document clearly and unequivocally declared the existence of the trust, even if executed subsequent to the death of the trustor, as the right creating or declaring a trust need not be contemporaneous or inter-parties. The Court emphasized that the appellants, having studied in reputable institutions, understood the legal import of the document, and it was reasonable to presume it represented the real wish of their predecessors-in-interest. The Court cited definitions of a declaration of trust and noted that an express trust can be shown by a writing separate from an absolute deed. On the irrevocability of the trust: The Court held that the attempted revocation of the mutual agreement by the defendants-appellants on August 9, 1956, had no legal effect. The general rule is that in the absence of any reservation of the power to revoke, a voluntary trust is irrevocable without the consent of the beneficiary. The Court reasoned that a trust cannot be revoked by the creator alone, nor by the trustee, as was the case here. The document of December 5, 1950, did not contain any reservation of the power to revoke, making it irrevocable without the consent of the cestui que trust (beneficiaries). On the applicability of the New Civil Code: The Court clarified that while the express trust was constituted during the lifetime of the predecessors-in-interest (before the effectivity of the New Civil Code), the instrument recognizing and declaring the trust was executed on December 5, 1950, after the New Civil Code's effectivity. However, the Court stated that the Civil Code of 1889 and previous laws should govern the trust under Article 2253 of the New Civil Code. Despite the silence of the Civil Code of 1889 on specific trust provisions, the Court noted that the principles of trust were derived from Anglo-American jurisprudence based on Roman and Civil Law principles, which were applied by the Supreme Court before the effectivity of the New Civil Code. These same principles were relied upon for the validity of the trust in question. On the accounting of fruits: The Court agreed with the trial court's order for an accounting of the fruits of the properties, considering it covered by the general prayer for relief. However, it modified the date from which the accounting should be made. The trial court ordered accounting from August 11, 1956, but the Supreme Court ruled that it should be from the date the judgment in G.R. No. L-8774 became final and executory, as this was when the conditions for the conveyance were met. The Court cited Article 1164 of the New Civil Code, which grants the creditor the right to fruits from the time the obligation to deliver arises, but linked this to the finality of the prior judgment. On freeing the lands from liens and encumbrances: The Court found no error in the trial court's directive that the appellants, as trustees, must free the lands from the encumbrance created thereon in favor of the Development Bank of the Philippines and Claro Cortez. The Court reasoned that it is the duty of trustees to deliver the properties to the cestui que trust free from all liens and encumbrances. On attorney's fees: The Court affirmed the award of attorney's fees, implicitly agreeing with the trial court's finding that the defendants acted in gross and evident bad faith in refusing to satisfy the plaintiffs' claim, as per Article 2208, sub-paragraph 5 of the New Civil Code.
Main Doctrine
A document executed by donees acknowledging the verbal wish of their deceased foster parents to sell certain properties for a nominal consideration to specific individuals constitutes an express trust, which, once created, is generally irrevocable without the consent of the beneficiaries.