G.R. No. L-58010. March 31, 1993.
Emilia O’Laco and Hugo Luna, petitioners, vs. Valentin Co Cho Chit, O Lay Kia and Court of Appeals, respondents.

FACTS

On May 31, 1943, a parcel of land in Oroquieta St., Sta. Cruz, Manila, was sold by Philippine Sugar Estate Development Company, Ltd., with the Deed of Absolute Sale naming petitioner Emilia O’Laco as the vendee, and Transfer Certificate of Title No. 66456 was issued in her name. On May 17, 1960, private respondents Valentin Co Cho Chit and O Lay Kia (spouses) learned that Emilia O’Laco had sold the property to the Roman Catholic Archbishop of Manila. On June 22, 1960, the respondent-spouses filed a complaint against petitioner-spouses Emilia O’Laco and Hugo Luna before the Court of First Instance of Rizal to recover the purchase price. They asserted that they were the real vendees who paid for the property with their conjugal funds and that the legal title was merely placed in Emilia O’Laco’s name, creating a trust. They contended Emilia O’Laco breached this trust by selling the property. Petitioner-spouses denied any trust relation, claiming Emilia bought the property with her own money and merely left the deed and title with the respondents for safekeeping, and that when she asked for their return, she was told they were lost, leading her to secure a new title.

ISSUE

The primary issue is whether a resulting trust was intended by the parties in the acquisition of the Oroquieta property.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, ruling that a resulting trust was indeed intended under Article 1448 of the New Civil Code. The Court found that the respondent-spouses possessed the document of sale, the owner’s duplicate copy of the certificate of title, insurance policies, and real estate tax receipts for seventeen years after the 1943 purchase. This continuous possession, absent any fraud, strongly indicated that Emilia O’Laco merely held the property in trust for the respondent-spouses. The Court held that the complaint’s defect regarding the lack of an averment of prior earnest efforts toward a compromise (required under Article 222 of the New Civil Code for suits between family members, as Emilia O’Laco and O Lay Kia are half-sisters) was cured as evidence on the attempt was introduced without objection, thereby amending the complaint to conform to the evidence. Furthermore, the Court ruled that the resulting trust was imprescriptible until repudiated. Emilia O’Laco’s act of selling the property constituted a repudiation, converting the trust into a constructive trust. The action for reconveyance, filed two months after the respondents learned of the sale, had not prescribed, as the prescriptive period for such an action based on a constructive trust is ten years.