G.R. No. 74449 August 20, 1993
IMELDA A. NAKPIL, petitioner, vs. INTERMEDIATE APPELLATE COURT, CARLOS J. VALDES and CAVAL REALTY CORPORATION, respondents.

FACTS

Petitioner Imelda A. Nakpil, widow of Jose “Pinggoy” Nakpil, filed an action for reconveyance with damages for breach of trust against respondents Carlos “Charlie” Valdes and Caval Realty Corporation over a summer residence in Baguio City called “Pulong Maulap.” The Nakpil and Valdes families had a very close, kinship-like relationship. Petitioner alleged that prior to his death, her husband requested Valdes to purchase Pulong Maulap and hold the title in trust for him. Valdes did so, but after Pinggoy’s death in 1973, Valdes concealed the trust agreement and later transferred the property to Caval Realty Corporation, which he 99.7% owned, in exchange for shares of stock. Valdes denied the existence of a trust, claiming he bought the property for himself with his own funds, merely offering the usufruct to the Nakpils due to their friendship, with the Nakpils agreeing to shoulder maintenance expenses, taxes, and interest on the mortgage.
The property was bought for P150,000.00, with Valdes giving a downpayment of P50,000.00 and assuming a PNB mortgage of P100,000.00, which he later reduced to P75,000.00. The Nakpils moved into the property in May 1965. To service the mortgage, the loan was transferred to the First United Bank (FUB), where Pinggoy Nakpil was a vice-president. Valdes borrowed P75,000.00 from FUB to pay PNB and P65,000.00 for repairs, mortgaging Pulong Maulap to FUB.
Petitioner presented key documents to prove her husband’s ownership: (a) A letter from Valdes’s accounting firm to the Baguio City Treasurer stating payment of real estate taxes “on behalf of our clients, Mr. Jose Nakpil”; (b) A letter from Valdes to petitioner dated August 24, 1973 (Exh. “J”), stating that two FUB loans “while in my name, were obtained by Pinggoy for his person,” and outlining an agreement where Valdes would take over the loans, petitioner would occupy the premises free for five years, and realty taxes would be paid by Valdes while maintenance by petitioner; (c) A letter from Valdes to petitioner dated September 17, 1974 (Exh. “L”), referring to an “Unpaid account” of P75,000.00 initially advanced for the property and calculating a total price of P375,056.64 for petitioner to repurchase.
On February 13, 1978, Valdes assigned the property to Caval Realty Corporation. After petitioner received a purchase offer for the property, she demanded reconveyance. Valdes refused. The Regional Trial Court found that a trust relationship existed based on Exhibits “J” and “L”, either as an express trust or an implied trust under Article 1450 of the Civil Code. However, it dismissed the petition, ruling that petitioner, by conforming to Exh. “J” and acquiescing to Exh. “L”, had waived her rights and agreed to an option to repurchase within five years upon payment of P375,056.64, which she did not exercise. The Intermediate Appellate Court reversed, finding no trust at all. Petitioner’s motion for reconsideration was denied.

ISSUE

Whether a trust relationship existed over Pulong Maulap, and if so, whether petitioner is entitled to its reconveyance.

RULING

Yes. The Supreme Court granted the petition, set aside the decisions of the lower courts, and ordered respondents to reconvey Pulong Maulap to petitioner and the heirs of Jose Nakpil upon reimbursement of Valdes’s advances amounting to P375,056.64 with legal interest from July 31, 1978.
The Court found that an implied trust under Article 1450 of the Civil Code was established. This article provides that if the price of a sale is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the debt, a trust arises by operation of law in favor of the person for whom the money was paid. The evidence, particularly Exhibits “J” and “L”, clearly showed that while the property was registered in Valdes’s name, the purchase money was supplied by or for Jose Nakpil. Exhibit “J” admitted the FUB loans were for Nakpil, and Exhibit “L” treated the P75,000.00 downpayment as an “Unpaid account” of Nakpil. The letter from Valdes’s firm paying taxes on behalf of Nakpil further corroborated Nakpil’s beneficial ownership.
The Court rejected the trial court’s conclusion that petitioner waived her rights through Exhibits “J” and “L”. These documents did not constitute a waiver or a new contract of sale with option to repurchase. Instead, they were confirmatory of the pre-existing trust and an attempt by Valdes to secure repayment of his advances. The Court held that the right to redeem under an Article 1450 trust is not subject to a prescriptive period as long as the property stands in the name of the trustee. Petitioner’s letter of July 31, 1978, was a valid demand for reconveyance, not a resignation to losing the property. The Court ordered reconveyance upon reimbursement of the P375,056.64, with legal interest from the date of demand (July 31, 1978), as this amount represented the advances made by Valdes for the benefit of Nakpil.