G.R. No. 182177 ; March 30, 2011
RICHARD JUAN, Petitioner, vs. GABRIEL YAP, SR., Respondent.

FACTS

On July 31, 1995, spouses Maximo and Dulcisima Cañeda mortgaged two parcels of land in Talisay, Cebu, to petitioner Richard Juan, an employee and nephew of respondent Gabriel Yap, Sr., to secure a loan of ₱1.68 million. The contract was prepared and notarized by Atty. Antonio Solon. On June 30, 1998, petitioner, through Atty. Solon, sought the extrajudicial foreclosure of the mortgage. At the auction sale, the properties were sold to petitioner as the highest bidder for ₱2.2 million, but no certificate of sale was issued due to his failure to pay the commission.
On February 15, 1999, respondent and the Cañeda spouses executed a Memorandum of Agreement (MOA) wherein the Cañeda spouses acknowledged respondent as the “real mortgagee-creditor” and petitioner as “merely a trustee” for respondent. The MOA allowed the Cañeda spouses to redeem the properties for ₱1.2 million and provided for judicial action to annul or reform the mortgage contract or compel petitioner to reconvey the mortgagee’s rights to respondent. Three days later, the Cañeda spouses and respondent sued petitioner in the Regional Trial Court (RTC) of Cebu City to declare respondent as trustee, annul petitioner’s bid, declare the contract superseded by the MOA, and award damages. The Cañeda spouses consigned ₱1.68 million as redemption payment.
The RTC ruled in favor of petitioner, declaring him the “true and real” mortgagee, ordering respondent to pay moral damages and attorney’s fees, and to deliver the titles to petitioner, but allowed the Cañeda spouses to redeem the property. The Court of Appeals (CA) reversed the RTC, declaring respondent as the mortgagee, ordering the release of the redemption payment to respondent, and awarding damages and attorney’s fees to respondent. The CA found that an implied trust existed in favor of respondent based on parol evidence, including Atty. Solon’s testimony that he named petitioner as mortgagee upon respondent’s instructions, Dulcisima Cañeda’s acknowledgment of respondent as the creditor, and respondent’s payment of foreclosure expenses.

ISSUE

1. Whether an implied trust arose between petitioner and respondent, binding petitioner to hold the beneficial title over the mortgaged properties in trust for respondent.
2. Whether respondent is entitled to collect damages.

RULING

The Supreme Court affirmed the decision of the Court of Appeals.
1. On the Existence of an Implied Trust: The Court held that an implied trust existed in favor of respondent. Although the mortgage contract named petitioner as the mortgagee, parol evidence under Article 1457 of the Civil Code proved that respondent was the actual mortgagee-creditor. The Court noted that: (a) the Cañeda spouses acknowledged respondent as the lender in the MOA and in Dulcisima Cañeda’s testimony; (b) when the Cañeda spouses sought a loan extension, they dealt directly with respondent, not petitioner; (c) Atty. Solon testified that he placed petitioner’s name in the contract upon respondent’s instructions, as respondent was often abroad and trusted petitioner to manage his affairs; and (d) respondent shouldered the foreclosure expenses, while petitioner failed to pay the commission for the certificate of sale. These circumstances established that petitioner held the mortgage rights in trust for respondent to prevent unjust enrichment, consistent with the principles of implied trust recognized in jurisprudence (e.g., Tigno v. Court of Appeals).
2. On the Award of Damages: The Court upheld the award of damages to respondent, finding it justified based on petitioner’s refusal to acknowledge the trust relationship and his actions in asserting ownership over the mortgaged properties contrary to the trust agreement.
The Court also addressed the procedural issue, noting that while the existence of an implied trust is a factual question ordinarily outside the scope of a Rule 45 petition, review was justified due to conflicting rulings by the lower courts. The Court found the CA’s reliance on parol evidence proper and sufficient to establish the implied trust.