Policarpio v CA (Obligations and Contracts)

Policarpio v CA 

GR No. 116211 

March 7, 1997  

TRUSTS  

FACTS: 

(1) Petitioner (along with his co-plaintiffs in the antecedent cases, namely, Rodolfo Gayatin, Jose Villacin and Jocelyn Montinola) and private respondent Rosito Uy were former tenants of the 30-door Barretto Apartments formerly owned by Serapia Realty, Inc..  

(2) Sometime in April 1984, private respondent was elected President of the Barretto Tenants Association (hereafter referred to as the "Association") which was formed, among others, "to promote, safeguard and protect the general interest and welfare of its members." 

(3) In a letter dated July 30, 1984, private respondent as president of the Association sought the assistance of the then Minister of Human Settlements to cause the expropriation of the subject property under the Urban Land Reform Program for subsequent resale to its tenants.  

(4) Failing to get the assistance of the government, the tenants undertook to negotiate directly with the owners of the Barretto Apartments. Initially, Private Respondent Rosito Uy orally expressed to Mrs. Rosita Barretto Ochoa the tenants' desire to purchase their respective units. Later, in a letter dated May 29, 1985, signed by thirty (30) tenants of the commercial and residential units, the tenants formally expressed to Mrs. Ochoa their intent to purchase. 

(5) One and a half years later, on March 12, 1987, petitioner and his co-plaintiffs were notified that private respondent was the new owner of the apartment units occupied by them.  

Applicable Laws:  

(1) Article 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. (n)  

(2) Article 1447. The enumeration of the following cases of implied trust does not exclude others established by the general law of trust, but the limitation laid down in article 1442 shall be applicable.  

(3) Article 1442. The principles of the general law of trusts, insofar as they are not in conflict with this Code, the Code of Commerce, the Rules of Court and special laws are hereby adopted.  

ISSUE: Whether or not a constructive trust existed between the plaintiffs and the defendant.  

RTC: The trial court found that private respondent had been designated and entrusted by plaintiffs to negotiate with the Barretto family for the sale of the units. It also found that a constructive trust was created between the private respondent as "the cestui que trust [should be trustee] and plaintiffs as beneficiaries [or cestuis que trust] vis-a-vis the subject units."  

CA: Reversed the RTC decision and denied the subsequent motion for reconsideration.  

HELD: There was a constructive trust.  

RATIO: (1) Implied trust was created by the agreement between petitioner (and the other tenants) and private respondent. Implied trusts are those which, without being expressed, are deducible from the nature of the transaction by operation of law as matters of equity, independently of the particular intention of the parties. Constructive trusts are created in order to satisfy the demands of justice and prevent unjust enrichment. They arise against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in equity and good conscience, to hold. 

(2) The tenants could not be faulted for not inquiring into the status of private respondent's negotiation with the owners of the apartments. They had a right to expect private respondent to be true to his duty as their representative and to take the initiative of informing them of the progress of his negotiations.  

OTHER NOTES: 

(1) "A constructive trust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where although acquired originally without fraud, it is against equity that it should be retained by the person holding it." 

(2) "Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him."