De Leon vs. Molo-Peckson

A voluntary express trust is irrevocable without the consent of the beneficiary where the instrument creating or declaring it reserves no power of revocation; and an express trust may be declared by a writing executed after the legal estate has vested in the trustee, even by an instrument separate from a deed absolute on its face, provided the proof is clear, satisfactory and convincing.

Mariano Molo y Legaspi and Juana Juan, spouses, raised Emiliana Molo-Peckson and Pilar Perez Nable as their foster children. Mariano's will, which bequeathed his entire estate to Juana, was probated in the Court of First Instance of Pasay City and the probate was affirmed by the Supreme Court in G.R. No. L-8774. Juana thereafter executed a will naming several devisees and legatees, among them Guillermo San Rafael, mother of the plaintiffs and of defendant Pilar Perez Nable, and then a donation inter vivos in favor of her two foster children conveying almost her entire estate. The trust at the center of the dispute was constituted during the lifetime of the spouses, before the effectivity of the New Civil Code, so that the governing law is the Civil Code of 1889 and prior laws, which contained no specific provisions on trust and under which the Court applied the Anglo-American trust principles derived from the Roman and Civil Law.

The spouses Mariano Molo y Legaspi and Juana Juan raised Emiliana Molo-Peckson and Pilar Perez Nable as their foster children. Mariano died on January 24, 1941, leaving a will that bequeathed his entire estate to his wife, Juana Juan; the will was probated in the Court of First Instance of Pasay City, Rizal, and the probate was affirmed by the Supreme Court on November 26, 1956 in G.R. No. L-8774. On May 11, 1948, Juana executed her own will naming several devisees and legatees, one of whom was Guillermo San Rafael, the mother of the plaintiffs and of defendant Pilar Perez Nable. Barely a month later, on June 7, 1948, Juana executed a donation inter vivos in favor of her two foster children, Emiliana Molo-Peckson and Pilar Perez Nable, conveying to them almost her entire property and leaving only about P16,000.00 worth of property for the devisees named in the will. Among the properties so conveyed were the ten parcels of land in Pasay City, with an aggregate area of 1,749 square meters, that became the subject of the litigation. Juana died on May 28, 1950.

On December 5, 1950 — about two years and six months after the donation and six months after the donor's death — Emiliana and Pilar executed a document styled "MUTUAL AGREEMENT," acknowledged before Notary Public Leoncio C. Jimenez. The document provided that the lots described in Transfer Certificate of Title No. 28157 should be sold at one peso each to Justa de Leon and Resurreccion de Leon, share and share alike, five lots to each; that the agreement was made "in conformity with the verbal wish of the late Don Mariano Molo y Legaspi and the late Doña Juana Francisco Juan y Molo"; and that those obligations had been repeatedly told to Emiliana Molo Peckson before their death and should be fulfilled after their death.

On August 9, 1956, however, the same defendants, assisted by their husbands, executed another document revoking the so-called mutual agreement and another instrument relating to the same subject matter, reciting that "after matured and thorough study" they had realized that the public instruments did not represent their true and correct interpretation of the verbal wishes of the late spouses. Two days later, on August 11, 1956, the beneficiaries Resurreccion de Leon and Justa de Leon, through counsel, demanded the conveyance of the ten parcels for P1.00 per parcel as stated in the document of December 5, 1950. The defendants refused, and on July 8, 1957 the beneficiaries consigned P10.00 as the consideration for the ten parcels.

On November 13, 1958, Resurreccion De Leon and others filed a complaint before the Court of First Instance of Rizal to compel Emiliana Molo-Peckson and the other defendants to convey the ten parcels upon payment of P1.00 per parcel, on the plea that the lots had been willed or donated in 1948 to the latter by their foster parents with the understanding that they would be sold to the plaintiffs on those terms. In their answer, the defendants disclaimed any legal obligation to sell, alleging that if they executed the document on which the complaint was predicated, it was on the mistaken assumption that their foster parents had requested them to do so. Neither party presented testimonial evidence; both agreed to submit the case upon their respective exhibits, all of which were admitted by the trial court, which found that a trust had been constituted by the late spouses over the ten parcels in favor of the plaintiffs as beneficiaries.

• No Trust Constituted: Appellants (the defendants below, Emiliana Molo-Peckson, et al.) contended that the trial court erred in holding that the spouses Mariano Molo and Juana Juan had constituted a trust over the properties in question with the plaintiffs-appellees as beneficiaries.
• Misapplication of the New Civil Code: Appellants argued that the trial court erred in applying Articles 1440, 1441, 1449, 1453 and 1457 of the New Civil Code to the case.
• Exhibit "A" Not a Declaration Against Interest: Appellants maintained that the trial court erred in holding plaintiffs-appellees' Exhibit "A" to be a declaration against interest and an admission by the defendants-appellants.
• Right to Revoke: Appellants asserted that the trial court erred in holding that they had no right to revoke Exhibit "A," and that the alleged declaration of trust, having been revoked, could not be accepted.
• Accounting of Fruits: Appellants contended that the trial court erred in ordering them to render an accounting of the fruits of the properties in question.
• Freeing the Properties from Liens: Appellants argued that the trial court erred in ordering them to free the properties from the mortgage liens in favor of the Development Bank of the Philippines and Claro Cortez.
• Attorney's Fees: Appellants maintained that the trial court erred in awarding attorney's fees to the appellees.
• Dismissal of the Complaint: Appellants argued that the trial court erred in not dismissing the complaint.

• Existence of an Express Trust: Whether the document executed on December 5, 1950 created an express trust over the ten parcels of land in favor of the plaintiffs-appellees.
• Governing Law: Whether the trial court erred in applying Articles 1440, 1441, 1449, 1453 and 1457 of the New Civil Code to the case.
• Nature of Exhibit "A": Whether Exhibit "A" is a declaration against interest and an admission by the defendants-appellants.
• Revocability of the Trust: Whether the defendants-appellants had the right to revoke Exhibit "A."
• Accounting of Fruits: Whether the defendants-appellants may be ordered to render an accounting of the fruits of the properties in question, and from what date.
• Freeing the Properties from Liens: Whether the defendants-appellants may be ordered to free the properties from the mortgage liens in favor of the Development Bank of the Philippines and Claro Cortez.
• Attorney's Fees: Whether the award of attorney's fees to the plaintiffs-appellees is proper.
• Dismissal of the Complaint: Whether the complaint should be dismissed.

• Existence of an Express Trust: Yes. The December 5, 1950 document is a recognition of a pre-existing trust and a declaration of an express trust over the ten parcels in favor of the appellees, an express trust being capable of declaration by a writing executed after the legal estate has vested in the trustee.
• Governing Law: The Civil Code of 1889 and prior laws govern, not the New Civil Code, the trust having been constituted before the latter's effectivity; the trust is nonetheless valid under the Anglo-American principles derived from the Roman and Civil Law applied in this jurisdiction before the New Civil Code.
• Nature of Exhibit "A": The document operates as a recognition of a pre-existing trust and a declaration of an express trust — an acknowledgment that the property, title to which the appellants hold, is held by them for the use of another.
• Revocability of the Trust: No. A voluntary trust is irrevocable without the consent of the beneficiary in the absence of any reservation of the power to revoke, and no such reservation appears in the document.
• Accounting of Fruits: The order to account stands, being covered by the general prayer, but the accounting must run from the finality of the judgment in G.R. No. L-8774, not from the date of demand.
• Freeing the Properties from Liens: No error. As trustees, the appellants must deliver the properties to the cestui que trust free from all liens and encumbrances.
• Attorney's Fees: No reversible error. The award of P3,000.00 stands as part of the decision affirmed, the trial court having grounded it on Article 2208(5) of the New Civil Code.
• Dismissal of the Complaint: No. The complaint states a demandable claim, the trust having been validly constituted and never effectively revoked.

• Existence of an Express Trust: The document was executed on December 5, 1950, about two years and six months after the appellants acquired title by virtue of the donation inter vivos and six months after the death of the donor. No one could cajole them into executing it, nor was there any force that could coerce them, except the constraining mandate of their conscience to comply with the obligations repeatedly told to Emiliana Molo Peckson before the death of their foster parents; the acknowledgment appended to the document states that it was their own free act and voluntary deed. Both appellants had studied in reputable centers of learning, one being a pharmacist and the other a member of the bar, and they had more than ample time — the six months intervening between the donor's death and the execution of the document — to ponder the wish of their predecessors-in-interest and the propriety of putting the mandate in writing. It is therefore reasonable to presume that the document represents the real wish of their predecessors-in-interest, leaving only its real import and legal implications to be determined. A declaration of trust is an act by which a person acknowledges that the property, title to which he holds, is held by him for the use of another (Griffith vs. Maxfield); that is precisely the nature of the will of the donor, which conveyed the titles to the appellants with the duty to hold them in trust for the appellees, a duty the appellants obligingly complied with by executing the document. Proof of a trust must be clear, satisfactory and convincing and cannot rest on vague, uncertain evidence or on a loose, equivocal or indefinite declaration (In re Tuttle's Estate); here the document clearly and unequivocally declares the existence of the trust even if executed subsequent to the death of the trustor, for the right creating or declaring a trust need not be contemporaneous or inter-parties (Stephenson vs. Stephenson; In re Corbin's Trust). An express trust may be declared by a writing made after the legal estate has been vested in the trustee (Kurtz vs. Robinson). The contention that the will and the donation were absolute because they contained no hint of a trust does not merit weight, since the fact that an express trust was created by a deed absolute on its face may be shown by a writing separate from the deed itself (Mugan vs. Wheeler). Neither the beneficiaries' lack of notice nor their failure to accept affects the validity of the trust (Stoehr vs. Miller; Wockwire-Spencer Steel Corporation vs. United Spring Mfg. Co.); acceptance by the beneficiary is presumed (Article 1446, New Civil Code; Cristobal vs. Gomez).
• Governing Law: The express trust was constituted during the lifetime of the appellants' predecessors-in-interest, that is, before the effectivity of the New Civil Code, although the instrument recognizing and declaring the trust was executed on December 5, 1950, after the effectivity of that Code. Under Article 2253 of the New Civil Code, the Civil Code of 1889 and previous laws and authorities on the matter therefore govern. The Civil Code of 1889 contains no specific provisions on trust, and the Code of Civil Procedure of 1901 merely provides for the proceeding to be followed relative to trusts and trustees (Chapter XVIII). That silence does not mean that the juridical institution of trust was then unknown in this jurisdiction, for the principles relied upon by the Supreme Court before the effectivity of the New Civil Code were those embodied in Anglo-American jurisprudence as derived from the Roman and Civil Law (Government vs. Abadilla, 46 Phil. 42). Those are the principles on which the ruling rests.
• Nature of Exhibit "A": The trial court treated Exhibit "A" as a declaration against interest and an admission by the appellants. The affirmance rests on the document's operative effect as a recognition of a pre-existing trust and a declaration of an express trust, defined as an act by which a person acknowledges that the property, title to which he holds, is held by him for the use of another (Griffith vs. Maxfield). The document declares the existence of the trust clearly and unequivocally, and it was executed by parties who understood its legal import.
• Revocability of the Trust: The appellants contended that the alleged declaration of trust was revoked and, having been revoked, could not be accepted. The attempted revocation had no legal effect. In the absence of any reservation of the power to revoke, a voluntary trust is irrevocable without the consent of the beneficiary (Allen vs. Safe Deposit and Trust Co. of Baltimore). It cannot be revoked by the creator alone, nor by the trustee (Fricke vs. Weber; Hughes vs. C.I.R.; Ewing vs. Shannahan). No such reservation appears in the document.
• Accounting of Fruits: The trial court ordered an accounting of the fruits even though the appellees did not expressly ask for it in their prayer for relief; this is covered by the general prayer "for such other relief just and equitable under the premises." What matters is the date from which the accounting should be made. The trial court fixed it from the time the appellees demanded conveyance on August 11, 1956, in accordance with Article 1164 of the New Civil Code, which gives the creditor a right to the fruits of the thing from the time the obligation to deliver arises. But this cannot be done without first submitting proof that the conditions stated in the mutual agreement had been complied with, and that only happened when the decision of the Supreme Court in G.R. No. L-8774 became final and executory. The ruling of the trial court on this point was accordingly modified so that the accounting runs from the date of the finality of that decision.
• Freeing the Properties from Liens: No error attends the directive that the appellants free the lands in question from the encumbrance they created in favor of the Development Bank of the Philippines and Claro Cortez, for as trustees it is their duty to deliver the properties to the cestui que trust free from all liens and encumbrances.
• Attorney's Fees: The remaining assigned errors were not sustained. The dispositive portion affirms the decision appealed from with a modification only as regards accounting, leaving intact the award of P3,000.00 in attorney's fees, which the trial court grounded on Article 2208(5) of the New Civil Code in view of the appellants' gross and evident bad faith in refusing to satisfy a plainly valid, just and demandable claim.
• Dismissal of the Complaint: The complaint was correctly not dismissed. The document executed on December 5, 1950 created an express trust in favor of the appellees; the appellants had no right to revoke it without the consent of the cestui que trust; and the obligation to convey the ten parcels for P1.00 each, after all the conditions imposed in Exhibit A have been complied with, subsists.

• Declaration of trust; express trust — A declaration of trust is an act by which a person acknowledges that the property, title to which he holds, is held by him for the use of another. The Court held that the December 5, 1950 "Mutual Agreement" executed by the donees was a recognition of a pre-existing trust and a declaration of an express trust impressed on the ten parcels in favor of the appellees, the donor's will having conveyed title to the appellants with the duty to hold the lands in trust for the appellees.
• Quantum of proof to establish a trust — To establish a trust, the proof must be clear, satisfactory and convincing; it cannot rest on vague, uncertain evidence, or on a loose, equivocal or indefinite declaration. The document in question satisfied this standard because it clearly and unequivocally declared the existence of the trust.
• Trust may be declared after the legal estate has vested — The right creating or declaring a trust need not be contemporaneous or inter-parties, and an express trust may be declared by a writing made after the legal estate has been vested in the trustee. Thus, the fact that an express trust was created by a deed absolute on its face may be shown by a writing separate from the deed itself.
• Irrevocability of a voluntary trust — In the absence of any reservation of the power to revoke, a voluntary trust is irrevocable without the consent of the beneficiary. It cannot be revoked by the creator alone, nor by the trustee. The attempted revocation of August 9, 1956 was therefore without legal effect.
• Presumed acceptance by the beneficiary — It is not essential to the existence of a valid trust, or to the right of the beneficiaries to enforce it, that they had knowledge of it at the time of its creation; neither is the beneficiary's consent necessary. In a voluntary trust, the assent of the beneficiary is not necessary to render it valid because acceptance by the beneficiary is presumed.
• Transitory application of the New Civil Code to trusts — Under Article 2253 of the New Civil Code, a trust constituted before the effectivity of that Code is governed by the Civil Code of 1889 and previous laws. Although the Civil Code of 1889 contained no specific provisions on trust and the Code of Civil Procedure of 1901 merely provided the proceeding relative to trusts and trustees, the institution was not unknown in this jurisdiction, the principles applied being those embodied in Anglo-American jurisprudence as derived from the Roman and Civil Law.
• Trustee's duty to deliver free from liens — As trustees, the appellants were bound to deliver the properties to the cestui que trust free from all liens and encumbrances, and the directive to free the lands from the mortgages in favor of the Development Bank of the Philippines and Claro Cortez was upheld.
• Accounting of fruits and Article 1164 — The creditor has a right to the fruits of the thing from the time the obligation to deliver arises, but where the obligation is conditioned on compliance with the terms of the agreement, the accounting runs only from the time compliance became possible — here, from the finality of the judgment in G.R. No. L-8774.

• "A declaration of trust has been defined as an act by which a person acknowledges that the property, title to which he holds, is held by him for the use of another (Griffith v. Maxfield, 51 S.W. 832, 66Ark. 513, 521)." — This is the Court's canonical formulation of a declaration of trust, the doctrinal anchor for holding that the December 5, 1950 document created an express trust in favor of the appellees.
• "True it is that to establish a trust the proof must be clear, satisfactory and convincing. It cannot rest on vague, uncertain evidence, or on a loose, equivocal or indefinite declaration (In re Tuttle's Estate, 200 A. 921, 132 Pa. Super 356); but here the document in question clearly and unequivocally declares the existence of the trust even if the same was executed subsequent to the death of the trustor, Juana Juan, for it has been held that the right creating or declaring a trust need not be contemporaneous or inter-parties (Stephenson v. Stephenson, 171 S.W. 2d 265, 351 Mo. 8; In re Corbin's Trust Orhp., 57 York Leg. Rec. 201)." — This passage states both the evidentiary standard for proving a trust and the rule that the declaring instrument need not be contemporaneous with the creation of the trust.
• "The 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 (Allen v. Safe Deposit and Trust Co. of Baltimore, 7 A. 2d 180, 177 Md. 26). It cannot be revoked by the creator alone, nor by the trustee (Fricke v. Weber, C.C.A. Ohio, 145 F. 2d 737; Hughes v. C.I.R., C.C.A. 9, 104 F. 2d 144; Ewing v. Shannahan, 20 S.W. 1065, 113 Mo. 188)." — This is the ratio decidendi on revocability, disposing of the appellants' claim that their August 9, 1956 revocation defeated the trust.
• "The fact that the beneficiaries were not notified of the existence of the trust or that the latter have not been given an opportunity to accept it is of no importance, for it is not essential to the existence of a valid trust and to the right of the beneficiaries to enforce the same that they had knowledge thereof the time of its creation (Stoehr v. Miller, 296 F. 414)." — This passage establishes that notice to and acceptance by the beneficiary are not prerequisites to the validity or enforceability of a voluntary trust.

• Griffith vs. Maxfield, 51 S.W. 832, 66 Ark. 513 — Cited for the definition of a declaration of trust as an act by which a person acknowledges that property, title to which he holds, is held for the use of another; it supplied the doctrinal test applied to the December 5, 1950 document.
• Government vs. Abadilla, 46 Phil. 42 — Cited for the proposition that before the effectivity of the New Civil Code the Supreme Court applied the trust principles embodied in Anglo-American jurisprudence as derived from the Roman and Civil Law, notwithstanding the silence of the Civil Code of 1889 on trusts.
• Cristobal vs. Gomez, 50 Phil. 810 — Cited for the rule that in a voluntary trust the assent of the beneficiary is not necessary to render it valid because acceptance by the beneficiary is presumed.
• Allen vs. Safe Deposit and Trust Co. of Baltimore, 7 A. 2d 180, 177 Md. 26 — Cited as the controlling authority that a voluntary trust is irrevocable without the consent of the beneficiary in the absence of a reserved power of revocation.
• Mugan vs. Wheeler, 145 S.W. 462, 241 Mo. 376 — Cited for the rule that the fact an express trust was created by a deed absolute on its face may be shown by a writing separate from the deed itself.
• Kurtz vs. Robinson, Tex. Civ. App. 256 S.W. 2d 1003 — Cited for the rule that an express trust may be declared by a writing made after the legal estate has been vested in the trustee.
• In re Tuttle's Estate, 200 A. 921, 132 Pa. Super 356 — Cited for the quantum of proof required to establish a trust, which must be clear, satisfactory and convincing and cannot rest on vague or equivocal declarations.
• Stephenson vs. Stephenson, 171 S.W. 2d 265, 351 Mo. 8 — Cited for the rule that the right creating or declaring a trust need not be contemporaneous or inter-parties.

• Article 2253, New Civil Code — The transitory provision governing the effectivity of the New Civil Code. Applied to hold that because the express trust was constituted during the lifetime of the appellants' predecessors-in-interest, before the effectivity of the New Civil Code, the Civil Code of 1889 and previous laws govern, notwithstanding that the instrument recognizing and declaring the trust was executed on December 5, 1950.
• Article 1446, New Civil Code — Provides for the presumption of acceptance by the beneficiary of a trust. Cited in support of the ruling that the beneficiaries' lack of knowledge of, or consent to, the trust at the time of its creation does not affect its validity or their right to enforce it.
• Article 1164, New Civil Code — Provides that the creditor has a right to the fruits of the thing from the time the obligation to deliver arises. Invoked by the trial court to fix the accounting from August 11, 1956, but the Court held that the accounting cannot begin until proof of compliance with the conditions of the mutual agreement, which occurred only upon the finality of the judgment in G.R. No. L-8774.
• Article 2208(5), New Civil Code — Authorizes the recovery of attorney's fees where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim. This was the ground of the trial court's award of P3,000.00 in attorney's fees, which was left undisturbed by the affirmance.
• Articles 1440, 1441, 1449, 1453 and 1457, New Civil Code — The trust provisions of the New Civil Code relied upon by the trial court. The Court held their application to be erroneous because the trust was constituted before the effectivity of the New Civil Code.
• Chapter XVIII, Code of Civil Procedure of 1901 — Provided the proceeding to be followed relative to trusts and trustees. Cited to show that, although the Civil Code of 1889 contained no specific provisions on trust, the institution was not unknown in this jurisdiction before the New Civil Code.
• Civil Code of 1889 — The law governing the trust in this case under Article 2253 of the New Civil Code. It contains no specific provisions on trust, so the Court applied the Anglo-American principles derived from the Roman and Civil Law that it had relied upon before the New Civil Code took effect.

Labrador, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur. Padilla and Concepcion, JJ., took no part.