Julio vs. Dalandan

An express trust over immovable property may be created without the use of the words "trust" or "trustee," provided the instrument clearly manifests an intention to create the kind of fiduciary relationship known as a trust, and prescription does not run in favor of a trustee who recognizes the trust against the beneficiary seeking recovery of the property.

Victoria Julio is the sole child and heir of Victoriana Dalandan, whose four-hectare riceland in Las Piñas, Rizal was posted as security for an obligation assumed by Clemente Dalandan and was foreclosed when Clemente failed to fulfill that obligation. Clemente Dalandan is the deceased father of defendants Emiliano and Maria Dalandan, who succeeded to possession of his lands. On September 8, 1950, Clemente executed an affidavit ("Salaysay") acknowledging his liability for the foreclosure and promising to replace Victoriana's foreclosed land with another farm of more than four hectares; Victoria Julio joined in executing and swore to the same document, attesting to and accepting all that Clemente stated. A prior sale with pacto de retro involving fifty salt beds between Clemente and Victoriana had already been litigated in a separate case (L-19101), where this Court affirmed dismissal of defendants' complaint for repurchase of those salt beds.

Victoria Julio is the sole child and heir of Victoriana Dalandan, who owned a four-hectare piece of riceland in Las Piñas, Rizal. Before the outbreak of the last war, Victoriana's riceland was posted as security for an obligation assumed by Clemente Dalandan, the father of Emiliano and Maria Dalandan. Clemente failed to fulfill that obligation, and Victoriana's land was foreclosed. On September 8, 1950, Clemente executed an affidavit in the national language titled "SALAYSAY" (Statement), subscribed and sworn to before a notary. In this document, Clemente acknowledged that Victoriana's riceland, whose sole heir is Victoria Julio, was posted as security for his obligation and was foreclosed because of his failure to fulfill it. He declared himself liable to Victoria Julio for the foreclosure and promised to replace the foreclosed land with another farm of more than four hectares, described as one planted to four cavanes of seedlings. Victoria Julio joined in the execution of the document, attesting to the truth of and accepting all that Clemente stated therein.

The document contained two critical provisos: first, that Clemente's children, Emiliano and Maria Dalandan, may not be forced to give up the harvest of the farm mentioned in the deed; and second, that Victoria Julio may not immediately demand the substitute land. After Clemente's death, Victoria Julio requested defendants, as Clemente's legitimate surviving heirs who succeeded to possession of the land, to deliver the same to her. Defendants insisted that, according to the agreement, neither the land nor its fruits could immediately be demanded, and plaintiff acceded to this contention, allowing them to remain in possession. Thereafter, plaintiff made demands upon defendants to fix a period within which they would deliver the parcels of land, but defendants refused.

The complaint identified the land referred to in the document as six small parcels with a total area of barely two hectares — described as the only land owned by Clemente Dalandan at the time of the execution of the document — excluding fifty salt beds previously conveyed to plaintiff's mother by a pacto de retro sale, title to which had already vested in the latter. Defendants met the complaint with a motion to dismiss on three grounds: prescription, pendency of another suit between the same parties for the same cause, and release or abandonment of the claim. The lower court dismissed the complaint on the ground of prescription, finding that the ten-year period from the date of the document had elapsed, and found it unnecessary to rule on the other grounds.

• Nature of the Document: Plaintiff maintained that the "Salaysay" executed by Clemente Dalandan created an express trust in her favor, divesting Clemente of naked ownership of the substitute land while reserving for his children only usufructuary rights over the fruits and physical possession.
• Prescription: Plaintiff argued that prescription does not run against a trustee who recognizes the trust, and that the fiduciary relationship acknowledged by defendants precludes invocation of the statute of limitations.
• Identity of the Land: Plaintiff contended that the uncertainty in the document regarding the description of the land was clarified by the complaint, which identified the land as the only property owned by Clemente at the time of execution, without adding any new term to the writing.
• Alternative Ground — Real Action: Plaintiff asserted that, even assuming no trust was created, her action as an alleged owner to recover possession of immovable property is protected by Article 1141 of the Civil Code, which prescribes real actions over immovables after thirty years.

• Prescription: Defendants argued that plaintiff's action, viewed either as one for specific performance or for fixing of a term, had prescribed because the ten-year period from the date of the document had elapsed.
• Parol Evidence Rule: Defendants averred that recognition of the trust may not be proved by evidence aliunde, invoking Article 1443 of the Civil Code, which provides that no express trusts concerning immovable property or any interest therein may be proved by parol evidence.
• Pending Suit: Defendants contended that the case should also be dismissed on the ground that another action was pending between the same parties for the same cause, specifically Land Registration Case N-706 covering the same land, where plaintiff had opposed registration only as to fifty salt beds and not the entire area.
• Release or Abandonment: Defendants argued that plaintiff's failure to oppose the registration of the bigger portion of the land constituted release or abandonment of her claim thereto.

• Interpretation of the Document: Whether the "Salaysay" executed by Clemente Dalandan created an express trust transferring naked ownership of the substitute land to Victoria Julio.
• Statutory Bar on Parol Evidence: Whether the express trust may be recognized notwithstanding Article 1443 of the Civil Code's prohibition on proving express trusts over immovables by parol evidence.
• Prescription: Whether plaintiff's action has prescribed.
• Pending Action: Whether the existence of Land Registration Case N-706 between the same parties warrants dismissal on the ground of litis pendentia.
• Release or Abandonment: Whether plaintiff's failure to oppose registration of the larger portion of the land constitutes release or abandonment of her claim.

• Interpretation of the Document: Yes. The document, read as a whole, created an express trust; Clemente Dalandan divested himself of naked ownership of the substitute land in favor of Victoria Julio, retaining for his children only the right to enjoy the fruits and physical possession until a period for delivery was fixed.
• Statutory Bar on Parol Evidence: No bar applies. No oral evidence is necessary because the express trust appears in the document itself; Article 1444 of the Civil Code provides that no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.
• Prescription: No. Prescription does not run against a trustee who recognizes the trust; alternatively, the action is protected by Article 1141, which prescribes real actions over immovables after thirty years.
• Pending Action: No. With the exception of the fifty salt beds, plaintiff filed no opposition to defendants' land registration application, so there is no case between the parties regarding the larger portion in that proceeding.
• Release or Abandonment: No. The complaint alleges an existing agreement to defer delivery and defendants' refusal to fix a period, negating any release or abandonment; even if defendants obtain title in the registration case, plaintiff may still require them to convey the property as trustees.

• Interpretation of the Document: The Court applied familiar rules of document interpretation, holding that all parts of a writing must be considered together and that doubtful provisions should be given the sense that results from the whole. Defendants' position that Clemente merely "promised" a replacement farm overlooked paragraphs 5 and 6 of the deed, which provide that Clemente's children may not be forced to give up the harvest and that Victoria Julio may not immediately demand the substitute land. These provisos convey the dominant purpose of the instrument: the naked ownership of the substitute land was transferred to Victoria Julio, while the enjoyment of fruits and physical possession were withheld for the time being. The right to demand fruits and physical possession being attributes of ownership, the only coherent reading is that ownership had passed to Victoria Julio, subject to a usufruct in favor of Clemente's children. Since Clemente divested himself of ownership, he could not transmit it to his heirs; nemo dat quod non habet. The document, being a declaration by Clemente against his own proprietary interests, is binding upon his heirs under Section 32, Rule 130 of the Rules of Court.

• Statutory Bar on Parol Evidence: Defendants' reliance on Article 1443 was misplaced because no oral evidence is needed — the trust appears on the face of the document itself. While the deed did not in definitive words institute defendants as trustees, a duty is imposed upon them to turn over both fruits and possession to Victoria Julio when the proper time comes. Article 1444 of the Civil Code provides that no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. The Court cited Lorenzo vs. Posadas for the proposition that the use of words such as "trust" or "trustee" is neither essential nor conclusive; what matters is whether the trustor manifested an intention to create the fiduciary relationship known in law as a trust. The trust is effective against defendants and in favor of Victoria Julio, who accepted it in the document itself, pursuant to Article 1446 of the Civil Code.

• Prescription: Given the fiduciary relation recognized by defendants in the complaint — they insisted that according to the agreement neither land nor fruits could immediately be demanded — defendants may not invoke the statute of limitations. The Court cited Pacheco vs. Arro, Manalang vs. Canlas, Cuison vs. Fernandez, and De Buencamino vs. Matias for the principle that prescription cannot be set up as a defense in an action to recover property held in trust, especially where the trustee recognizes the trust. Even assuming no trust was created, plaintiff's action as an alleged owner for recovery of possession of immovable property is protected by Article 1141, which prescribes real actions over immovables after thirty years. The motion to dismiss was directed at prescription of the action, not acquisitive prescription.

• Pending Action: The Court found no basis for dismissal on litis pendentia. Except for the fifty salt beds — which the complaint expressly excludes from the deed — plaintiff filed no opposition to defendants' land registration application. Failure to object to registration of the larger portion means there is no case between the parties in the land registration proceeding regarding that area. The prior decision in L-19101 had already resolved the ownership of the fifty salt beds in plaintiff's favor, affirming dismissal of defendants' complaint for repurchase.

• Release or Abandonment: The complaint alleges an agreement between plaintiff and defendants to defer delivery and defendants' subsequent refusal to fix a period for such delivery, which negates release or abandonment. Even if defendants succeed in obtaining title in the land registration case, such would not bar Victoria Julio from requiring them to execute a conveyance in her favor if she prevails in the present case, because defendants could be declared mere trustees.

• Express Trust — No Particular Words Required — Under Article 1444 of the Civil Code, no particular words are required for the creation of an express trust; it is sufficient that a trust is clearly intended. The use of the words "trust" or "trustee" is neither essential nor conclusive. What is important is whether the trustor manifested an intention to create the kind of fiduciary relationship known in law as a trust, regardless of whether the trustor knows the relationship is called a trust or knows its precise characteristics. The Court applied this by holding that the "Salaysay" created an express trust despite the absence of the word "trust," because the instrument imposed upon Clemente's heirs a duty to turn over fruits and possession to Victoria Julio.

• Prescription Does Not Run Against a Recognized Trust — Prescription cannot be set up as a defense in an action that seeks to recover property held in trust for the benefit of another. Where a fiduciary relation exists and the trustee recognizes the trust, continuous recognition precludes any defense of prescription or laches. The Court applied this by holding that defendants, who acknowledged the agreement deferring delivery, could not invoke prescription to bar plaintiff's action.

• Nemo Dat Quod Non Habet — One cannot transfer what one does not have. Because Clemente Dalandan divested himself of naked ownership of the substitute land through the trust deed, he could not transmit ownership to his heirs; they received only the usufruct. The Court cited Articles 774, 775, 776, and 781 of the Civil Code in support.

• Holistic Interpretation of Documents — In ascertaining the intention of the parties, the contents of a document should not be interpreted piecemeal; all parts, provisions, and terms are to be considered together, each clause read in the light of the entire writing, and doubtful provisions given the sense that results from the whole.

• "No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended." — This quotation reproduces Article 1444 of the Civil Code as cited by the Court, articulating the controlling principle that the intention to create a trust, not the use of specific terminology, is the touchstone for establishing an express trust.

• "What is important is whether the trustor manifested an intention to create the kind of relationship which in law is known as a trust. It is unimportant that the trustor should know 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.'" — This passage defines the subjective-objective standard for trust creation: the trustor's actual intention to create a fiduciary relationship, not technical knowledge of trust law, is what matters.

• "Prescription cannot be set up as a defense in an action that seeks to recover property held in trust for the benefit of another." — This statement, drawn from Cuison vs. Fernandez, encapsulates the rule that prescription is unavailing against a recognized trust, which the Court applied to bar defendants from invoking the statute of limitations.

• "These last two statements in the deed express the dominant purpose of the instrument. They convey the idea that the naked ownership of the land in substitution was, indeed, transferred to Victoria Julio. Else there would have been no sense in the proviso that the fruits as well as the physical possession of the land could not immediately be demanded by Victoria Julio from Clemente's children, the herein defendants." — This passage sets out the Court's interpretive reasoning, explaining why the provisos withholding fruits and possession confirm, rather than negate, the transfer of naked ownership to the beneficiary.

• Lorenzo vs. Posadas, 64 Phil. 353 — Cited for the proposition that the use of the words "trust" or "trustee" is not essential to the creation of a trust, nor does the use of such words necessarily prove an intention to create one.
• Pacheco vs. Arro, 85 Phil. 505 — Cited for the principle that a trustee cannot invoke the statute of limitations to bar an action and defeat the right of the cestui que trust.
• Manalang vs. Canlas, 94 Phil. 776 — Cited for the rule that an action to compel a trustee to convey property held in trust does not prescribe.
• Cuison vs. Fernandez, 56 O.G. No. 33 — Cited for the doctrine that prescription cannot be set up as a defense in an action to recover property held in trust, and that laches similarly cannot be invoked.
• De Buencamino vs. Matias, L-19397, April 30, 1966 — Cited for the principle that continuous recognition of a resulting trust precludes any defense of laches.
• Atun vs. Nuñez, 97 Phil. 762 — Cited for the proposition that possession is a mere consequence of ownership.

• Article 1443, Civil Code — Provides that no express trusts concerning immovable property or any interest therein may be proved by parol evidence. Defendants invoked this provision, but the Court held it inapplicable because the trust appears in the document itself and no oral evidence is necessary.
• Article 1444, Civil Code — Provides that no particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended. The Court applied this provision to uphold the creation of an express trust through the "Salaysay" despite the absence of the word "trust."
• Article 1446, Civil Code — Cited in support of the proposition that the trust is effective against defendants and in favor of the beneficiary who accepted it in the document itself.
• Article 1141, Civil Code — Provides that real actions over immovables prescribe after thirty years. The Court applied this as an alternative ground: even absent a trust, plaintiff's action for recovery of possession as owner would be protected by this thirty-year period.
• Articles 774, 775, 776, 781, Civil Code — Cited in support of the principle of nemo dat quod non habet, under which Clemente, having divested himself of ownership, could not transmit it to his heirs.
• Section 32, Rule 130, Rules of Court — Cited for the proposition that a declaration against one's own proprietary interests is binding upon one's heirs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Castro, Angeles, and Fernando, JJ., concurred.