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 are proven by an authentic document

Facts: Ramon, Lorenzo and Benjamin are brothers. 

In 1966, Ramon Yap, an accountant, purchased a parcel of land situated in Quezon City from Spouses Nery. The lot was thereupon registered in the name of Ramon Yap. He also declared the property in his name for tax purposes and paid the real estate taxes due thereon from 1966 to 1992.

In 1962 Ramon constructed a two-storey 3-door apartment building for the use of the Yap family. 1/5 of the cost of the construction was defrayed by Ramon while the rest was shouldered by their mother Chua Mia. Upon the request of the old woman, the tax declaration for the real estate was placed under the name of Lorenzo.

Lorenzo died in 1970. Upon his death, petitioners (Lorenzo's wife Sally and their children) were allowed by Ramon to stay in one unit of the apartment building. On March 18, 1992, Ramon Yap sold the land and his share of the 3-door apartment to Benjamin. 

Upon learning of the sale, petitioners advised Ramon of their claim of ownership over the property and demanded that Ramon execute the proper deed necessary to transfer the title to them.

Ramon and Benjamin filed an action with the Regional Trial Court (RTC) of Quezon City, for quieting of title against petitioners. In their answer, petitioner's averred that sometime in 1966 the spouses Nery offered to sell the disputed parcel of land to Lorenzo Yap. Since Lorenzo and Sally Yap were at that time Chinese citizens, Lorenzo requested his brother Ramon to allow the use of the latter's name in the purchase, registration, and declaration for tax purposes of the subject lot to which Ramon Yap consented. It was agreed that the property would remain registered in the name of Ramon Yap until such time as Lorenzo would have acquired Philippine citizenship but that, should Lorenzo predecease, the lot would then be transferred to Lorenzo's heirs upon the latter's naturalization. Petitioners contended that it was Lorenzo who had caused the construction of the 3-door apartment on the property, merely entrusting the money therefor to Ramon. The death of Lorenzo in 1970 prompted petitioners to move in and occupy the apartment and the lot, without any objection from Ramon and Benjamin, although the latter were allowed to stay in the premises since they had no other place to live in. In 1991, petitioners acquired Philippine citizenship and, forthwith, they requested Ramon Yap to have the title to the lot transferred to their names but to their chagrin they discovered that Ramon had sold the lot to Benjamin.

The RTC adjudged Benjamin Yap to be the true and lawful owner of the disputed property. CA affirmed the decision.

Issue: Was Sally's testimony enough to prove the existence of a trust?

Held: It is true that an implied trust may be established by parol evidence. Even then, 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 are proven by an authentic document. An implied trust, in fine, cannot be established upon vague and inconclusive proof.

The evidence submitted by Sally consisting mainly of her self-serving testimony is utterly wanting as against the Deed of Absolute Sale executed by Spouses Nery in favor of Ramon which is public document and is presumed to have been regularly executed. The fact that the business establishment of her husband Lorenzo was razed by fire in 1964 would somehow place to doubt the claim that he indeed had the means to purchase the subject land about two years later from the Nery spouses. Upon the other hand, Ramon Yap was by then an accountant with apparent means to buy the property himself. 

Furthermore, the trust agreement between Ramon and Lorenzo, if indeed extant, would have been in contravention of, in fact, the fundamental law limiting transfer or assignment of land only to citizens of the Philippines. A trust or a provision in the terms of the trust would be invalid if the enforcement thereof is against the law even though its performance does not involve the commission of a criminal tortuous act. (Heirs of Lorenzo Yap et. al. vs. Court of Appeals et. al. G.R. No. 133047 Aug. 17, 1998)

No implied trust if the person to whom the title is conveyed is the child of the one paying the price of the sale

Facts: Alexander Ty died at the age of 34. His wife, Sylvia, files petition for the settlement of his intestate estate. She also asks court to sell or mortgage properties in order to pay the estate tax amounting to 4 million assessed by the BIR. The properties include a parcel of land in EDSA Greenhills, a residential land in Wack Wack, and the Meridien condo unit in Annapolis, Greenhills.

Alejandro Ty, father of Alexander, opposed the move and filed for recovery of the property with prayer for preliminary injunction and/or temporary restraining order. Alejandro claims that he owns the EDSA, Wack Wack and Meridien condo unit because he paid for them. The property was supposedly registered in trust for Alexander’s brothers and sisters in case he dies. He claimed that Alex had no financial capacity to purchase the disputed property, as the latter was only dependent on him.

Sylvia countered that Alexander had purchased the property with his money. Alexander was financially capable of purchasing it because he had been managing the family corporations since he was 18 years old and was also engage in other profitable businesses.

The RTC granted the application for preliminary injunction and decides in favor of Alejandro regarding the recovery of the property. CA reversed the RTC stating that the implication created by law under Art. 1448 does not apply if the property was in the name of the purchaser’s child. They agreed that Alejandro partly paid for the EDSA property. Alejandro appealed.

Issue: Whether there was an implied trust under Art. 1448 of the Civil Code?

Held: No, there was no implied trust created in relation to the EDSA property. Article 1448 of the Civil Code is clear. If the person to whom the title is conveyed is the child of the one paying the price of the sale, NO TRUST IS IMPLIED BY LAW. The law, instead, disputably presumes a donation in favor of the child.

Regarding the Meridien Condo and Wack Wack property, the court said that plaintiff failed to prove that purchase money came from him. They also said that Alexander was capable of purchasing the property as he had been working for nine years, had a car care business, and was actively engaged in the business dealings of several family corporations from which he received emoluments and other benefits. Hence, no implied trust created because there was no proof that plaintiff had paid for said properties. (Alejandro Ty vs Sylvia Ty, G.R. No. 165696, April 30, 2008)

Sale by a husband in favor of a concubine is null and void

The proscription against sale of property between spouses applies to common law relationships

Facts: Joseph and Epifania were married. During the marriage, they acquire a certain property in Cebu. In 1993, Joseph executed a deed of sale over the property in favor of his common-law-wife Maria. After Joseph's death, his children with Epifania discovered the sale. They thus filed with a complaint for recovery of property and damages against Maria, praying for the nullification of the deed of sale and of the TCT and the issuance of a new one in favor of their father Joseph. Was the contract of sale executed by Joseph in favor of Maria null and void?

Held: Yes. The contract of sale was null and void for being contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of the family, a basic social institution which public policy cherishes and protects.

Article 1409 of the Civil Code states inter alia that: contracts whose cause, object, or purposes is contrary to law, morals, good customs, public order, or public policy are void and inexistent from the very beginning.

Article 1352 also provides that: “Contracts without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or public policy.”

Additionally, the law emphatically prohibits the spouses from selling  property to each other subject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership, a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherwise, “the condition of those who incurred guilt would turn out to be better than those in legal union.”

As the conveyance in question was made by Joseph in favor of his common- law-wife, it was null and void. [Ching vs Goyanko, Jr., G.R. No. 165879, November 10, 2006 citing Calimlim-Canullas v. Fortun, G.R. No. L-57499, June 22, 1984]

Surety distinguished from a guaranty

● A contract of surety is an accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation if the debtor does not. A contract of guaranty, on the other hand, is a collateral undertaking to pay the debt of another in case the latter does not pay the debt.

Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to both. However, under our civil law, they may be distinguished thus: A surety is usually bound with his principal by the same instrument, executed at the same time, and on the same consideration. He is an original promissor and debtor from the beginning, and is held, ordinarily, to know every default of his principal. Usually, he will not be discharged, either by the mere indulgence of the creditor to the principal, or by want of notice of the default of the principal, no matter how much he may be injured thereby. On the other hand, the contract of guaranty is the guarantor's own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often supported on a separate consideration from that supporting the contract of the principal. The original contract of his principal is not his contract, and he is not bound to take notice of its non-performance. He is often discharged by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal.

Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay while a surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay. [E. Zobel, Inc. vs CA, G.R. No. 113931, May 6, 1998]

● There is a sea of difference in the rights and liabilities of a guarantor and a surety. A guarantor insures the solvency of the debtor while a surety is an insurer of the debt itself. A contract of guaranty gives rise to a subsidiary obligation on the part of the guarantor. It is only after the creditor has proceeded against the properties of the principal debtor and the debt remains unsatisfied that a guarantor can be held liable to answer for any unpaid amount. This is the principle of excussion. In a suretyship contract, however, the benefit of excussion is not available to the surety as he is principally liable for the payment of the debt. As the surety insures the debt itself, he obligates himself to pay the debt if the principal debtor will not pay, regardless of whether or not the latter is financially capable to fulfill his obligation. Thus, a creditor can go directly against the surety although the principal debtor is solvent and is able to pay or no prior demand is made on the principal debtor. A surety is directly, equally and absolutely bound with the principal debtor for the payment of the debt and is deemed as an original promissor and debtor from the beginning. [Ong vs PCIB, G.R. No. 160466, January 17, 2005]