The unreliable trustee

Between close relatives especially between blood brothers, the element of trust is quite prevalent and strong that oftentimes no writing or document is executed between them concerning some transactions. This is again illustrated in this case of Mando and Nick.

Mando and Nick were brothers reared in the Filipino tradition of a closely knit family. Mando was the older one and a successful executive while Nick was jobless and, at one time or another, financially supported by Mando.

Desiring to help his brother Nick, Mando thought of buying some fish ponds in their home province which Nick can develop and operate for his own support. And sure enough, Nick was able to find three owners in their hometown who were ready and willing to sell their fishponds with an area of 3,006 square meters each for the price of P10,000.

While the preparation of all the papers were being done, Mando already agreed to pay each owner a down payment of P5,000 each. After giving the down payment, Mando instructed their lawyer, to prepare the Deed of Sale and place the name of Nick as the "buyer". This instruction was given to enable Nick to mortgage the properties with a bank for appropriate funds for the development of the fishponds since Mando was then preparing to leave for the United States and had no time to tend to the fish farm on a daily basis or to follow-up the loan.

Thus when the Deeds were prepared, the name of Nick appeared as the buyer. And when these documents were shown to Mando, the latter gave his check to the agent in payment of the balance of the purchase price, the capital gains tax and the agent’s commission.

And so Nick was able to get hold of the title, mortgaged the land and developed the fishponds. All with the help of Mando. The brotherly harmony lasted for nine years during which Nick managed the fishponds. But it was sadly ruined when Mando learned that Nick was negotiating for the sale of the portion of the fishpond measuring about 500 square meters to one of their kababayans. In fact upon further verification, Mando discovered that his brother had indeed already sold said portion of the land!

So Mando was forced to sue his own brother Nick and the buyers of the land for the cancellation of the sale. Mando claimed that he was the real owner of the land having provided the funds with which to purchase the same and that he merely entrusted them to his brother Nick who violated said trust. Nick, on the other hand, said that he was the absolute and exclusive owner of the land as shown by the Deed and the title which are in his name and he, therefore, had the right to dispose a portion thereof as owner. Was Nick correct?

No. There is an implied trust created between Nick and Mando. Implied trust are those which are deducible by operation of law from the nature of the transaction as matters of equity independently of the particular intention of the parties. An implied trust arises where a person purchased land with his own money and takes conveyance thereof in the name of another. In such a case, the property is held on resulting trust in favor of the one furnishing the money to buy the property like Mando in this case. The trust, which results under such circumstances, does not arise from the contract but because of equity and it arises by implication or operation of law. By express provision of law (Art. 1457 Civil Code), oral evidence is admissible to establish this trust relationship. In this case, it is clear that Nick appeared in the Deed of Sale not for the purpose of transferring ownership to him but only to enable him to hold the property in trust for his brother, Mando. Although the Deeds of Sale were in the name of Nick, the purchase price was paid by Mando who, therefore, is the real owner of the property. So Nick has no right to sell the property. Nick is the trustee and Mando is the beneficiary (Tigno, et. al. vs. Court of Appeals, et. al., G.R. 110115, Oct. 8, 1997).

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