TRUSTS (Rule 98 Parol Evidence Rule 130 Sec 9; Arts.
1440-1457)1. ConceptSOTTO vs. TEVESFACTS:Subject of the
plaintiffs'action for declaration of ownership and/or reconveyance,
and for the recovery of possession, rentals, damages and attorney's
fees, are five (5) parcels of land, all located in Cebu City.
Properties originally belonged to the conjugal partnership of the
spouses FlorentinoRallos and Maria Fadullon. When FlorentinoRallos
died, the parcels of land in question, together with the other
properties comprising the estate of the deceased, descendedto his
sole heirs, his widow, Maria Fadullon, and two children, named
Concepcion and Carmen Rallos. The lawyer to whom the Rallos heirs
entrusted the settlement of the estate was Atty. Filemon
Sotto.Shortly after the closure of the probate proceeding in 1913,
Atty. Sotto married Carmen Rallos. Carmen died in 1945 without
leaving any issue. Concepcion died later leaving many children.
Maria Fadullon predeceased her two daughters. Atty. Sotto died
intestate on October 10, 1966.Competing for the ownership of the
five lots are the direct descendants and blood relatives of
FlorentinoRallos and Maria Fadullon, opposed by the administrator
of the intestate estate of Atty. Sotto. The grandchildren of
FlorentinoRallos and Maria Fadullon, some of whom are assisted by
their spouses, are the plaintiffs in this case. Defendant
administrator represents Atty. Sotto's children out of wedlock. It
is claimed by the defendant that Atty. Sotto was at the time of his
death the owner of the five lots in question.In life, Atty. Filemon
Sotto was a very prestigious man. He wielded tremendous social and
political influence. Successively, he was municipal councilor,
vice-president of Cebu City, Assemblyman, Senator and Delegate to
the Constitutional Convention of 1934. When his life, however, was
almost at an end, he was declared incompetent. All along, the
direct descendants and blood relatives of FlorentinoRallos had
rested on the belief that the properties in question, which are the
fruits of the sweat and toil of their grandfather, would one day be
delivered unto them. The revelation of Cesar Sotto, however, led
the plaintiffs to the discovery that all the properties in question
were now titled in the name of Atty. Sotto. and were in danger of
falling into the hands of his children out of wedlock, who are
total strangers to the spouses Rallos and Fadullon. Upon such
discovery, the plaintiffs initiated the present lawsuit
forthwith."On June 13, 1967, the herein private respondents(heirs
of Concepcion Rallos)filed suit in the Court of First Instance of
Cebu against petitioner Marcelo Sotto, as administrator of the
intestate estate of Filemon Sotto, for the recovery of possession
and ownership of the 5 parcels of land described in the complaint,
with damages. The complaint was based mainly upon the theory that a
trust relation was established and created with respect to the said
properties, with Atty. Filemon Sotto as trustee and as cestuisque
trust, his mother-in-law, Maria FadullonVda. deRallos; his wife,
Carmen Rallos; and his sister-in-law, Concepcion Rallos
(predecessor in interest of herein private respondents); and that
in gross violation of the trust reposed upon him by Concepcion
Rallos and after her death, by her heirs, the said Atty. Filemon
Sotto, through sheer manipulation, fraudulent acts and means,
non-existent and void decrees, fictitious sales and transfers,
succeeded in causing the transfer of the ownership of the
properties to the name of his wife Carmen Rallos, and finally to
his name alone.It is alleged that Atty. Filemon Sotto, having
married Carmen Rallos, thereby virtually making him a member of the
Rallos family, was looked upon as the head of the Rallos family to
look after the properties inherited from the deceased
FlorentinoRallos including the 5 parcels of land hereinbefore
mentioned, thereby establishing a trust relation with Don Filemon
Sotto as trustee of the said properties for the benefit of his
mother-in-law Maria FadullonVda. deRallos, his wife Carmen Rallos
de Sotto and sister-in-law Concepcion Rallos and the heirs of the
latter, as cestuisque trust; Answering the complaint, petitioner
Marcelo Sotto denied that there was any trust relation between Don
Filemon Sotto on one hand and Maria FadullonVda. deRallos, Carmen
Rallos and Concepcion Rallos on the other; that granting that such
relationship existed between Don Filemon Sotto and Concepcion
Rallos, such a relationship could not have endured until the death
of Don Filemon Sotto; ISSUE:Whether or not Don Filemon Sotto became
a co-trustee by virtue of his subsequent marriage to Carmen
Rallos.HELD:The Court that Atty. Sotto can be regarded as the
constructive trustee of his wife and of the widow and descendants
of FlorentinoRallosRATIO:Under the law on Trusts, it is not
necessary, as petitioner insists, that the document expressly state
and provide for the express trust, for no particular words are
required for the creation of an express trust, it being sufficient
that a trust is clearly intended. (Art. 1444, N.C.C.) Petitioner
contends that the Court of Appeals erred in finding that Don
Filemon Sotto became a co-trustee by virtue of his subsequent
marriage to Carmen Rallos. Petitioner, while admitting that as a
lawyer some form of trust devolved upon the shoulders of Filemon
Sotto The trust on the shoulder of Filemon Sotto as the family
lawyer in the intestate proceedings of FlorentinoRallos was only
coterminous with the duration of the proceedings itself. The trust
on the shoulder of Filemon Sotto by virtue of his marriage to
Carmen Rallos was only as much as the trust on the shoulders of the
two husbands of Concepcion Rallos, Mariano Teves and Mariano
Camara, and this trust is not the trust defined in our Civil Code
on express trust." By reason of his marriage to Carmen Rallos, and
on account of his prestige and tremendous social and political
influence, Atty. Sotto enjoyed and exercised a personal, domestic,
social, political and moral ascendancy and superiority not only
over his wife but also over Maria Fadullon, Concepcion Rallos, and
the latter's children. The evidence reveals that the Ralloses
looked up to Atty. Sotto as protector and benefactor, as one on
whom they could repose their trust and confidence and who would
take care of the properties inherited from FlorentinoRallos, and on
his part, Atty. Sotto acknowledged his position as protector of the
rights and interests of the Rallos family. Petitioner assumes that
the respondent Court of Appeals found the existence of an express
trust between Atty. Filemon Sotto and the heirs of
FlorentinoRallos, which is not correct. What the appellate court
held is that Atty. Sotto can be regarded as the constructive
trustee of his wife and of the widow and descendants of
FlorentinoRallos.The relation between parties, in order to be a
fiduciary relation" need not be legal, but may be moral, social,
domestic or merely personal; and where by reason of kinship,
business association, disparity in age or physical or mental
condition or other reason, the grantee is in an especially intimate
position with regard to another and the latter reposes a degree of
trust and confidence in the former, confidential relationship
exists which prohibits the one entrusted from seeking a selfish
benefit for himself during the course of relationship, and affords
a basis for imposing a constructive trust. (89 CJS Art. 151, pp.
1054-1057)Atty. Sotto's special relationship with the Rallos heirs
inhibited him from any act or conduct that would put his interests
above, or in direct collision with, the interests of those who had
reposed their trust and confidence in him." 15Private respondents
are entitled to the relief prayed for, which is for the
reconveyance of the properties to them. Since
tMariaFadullonVda.deRallos died in 1938, her pro-indiviso share in
the properties then owned in co-ownership descended by intestacy to
her daughters, Concepcion and Carmen. Upon Carmen's death in 1945
without issue, the properties devolved to Concepcion pursuant to
their agreement in 1925 as testified to by PilarTeves. When
Concepcion Rallos died, her heirs, who are now the private
respondents, are entitled to these properties and should be
declared owners thereof. They are also entitled to the fruits
thereof, the rentals of the properties, including damages and
attorney's fees as assessed by the appellate court, which we find
just and reasonable.
2. ExpressRamos vs. RamosFACTS:Spouses Martin Ramos &
Candida Tanate died and were survived by their 3 legitimate
children named Jose, Agustin and Granada. Martin was also survived
by his 7 natural children: Atanacia, Timoteo, Modesto, Manuel,
Emiliano, Maria & Federico.Martin Ramos left considerable real
estate to include Hacienda Calaza and Hacienda Ylaya, both located
in Negros Occidental.Upon their father's death, his properties were
left under the administration of Rafael Ramos, the younger brother
of their father and their uncle. Rafael Ramos later gathered all
the heirs saying he would return the administration of the
properties. He turned over Hacienda Ylaya to Agustin Ramos and
Hacienda Calaza to Jose Ramos.All said children continued to live
in the same house of their father in Hacienda Ylaya, now under
support of Agustin Ramos. Plaintiffs Modesto, Manuel and Maria
eventually left house. Agustin supported plaintiffs where they
asked money pertaining to their share in the produce of Hacienda
Ylaya and received varied amounts. Jose Ramos gave plaintiffs also
money as their shares. Upon Jose Ramos death, his widow Gregoria
continued to give plaintiffs money pertaining to their shares. She
however stopped doing so in 1951, telling them that the lessee
Estanislao Lacson was not able to pay the lease rental.No
accounting was made to plaintiffs by Jose Ramos, plaintiffs
reposing confidence in their elder brother.Plaintiff Modesto was
informed that a survey of the properties shall be conducted but he
did not intervene since he was promised that Jose and Agustin would
be the ones responsible to have it registered in the names of the
heirs. But apparently, what happened include the following: A
project of partition was submitted. It was signed by the legitimate
children; by the 2 natural children, Atanacia and Timoteo, and by
Timoteo Zayco in representation of the other 5 natural children who
were minors. The conjugal hereditary estate was appraised at
P74,984.93. It consisted of 18 parcels of land, some head of cattle
and the advances to the legitimate children.It was agreed that Jose
Ramos would pay the cash adjudications to Atanacia, Timoteo and
Manuel, while Agustin would pay the cash adjudications to Modesto,
Federico, Emiliano and Maria. It was further agreed that Jose and
Agustin would pay their sister, Granada, the sums of P3,302.36 and
P14,273.78, respectively.The estate had an appraised value of
P74,985, or P37,492brepresented the estate of Martin Ramos. 1/3 was
the free portion or P12,497. The shares of the 7 natural children
were to be taken from that 1/3 free portion. Dividing P12,497 by
seven gives a result of P1,783. The partition was made in
accordance with the old Civil Code.Judge Richard Campbell approved
the project of partition.Judge V. Nepomuceno asked the
administrator to submit a report, complete with the supporting
evidence, showing that the shares of the heirs had been delivered
to them as required in the decision. In a manifestation, which was
signed by Jose, Agustin, Granada, Atanacia and Timoteo, and by
Timoteo Zayco, they acknowledged. However, no receipts were
attached to the manifestation. Apparently, the manifestation was
not in strict conformity with the terms of judge's order.Plaintiffs
did not know that intestate proceedings were instituted for the
distribution of the estate of their father. They never received any
sum of money in cash the alleged insignificant sum of P1,7855 each.
Plaintiffs only discovered later on that the property administered
by their elder brother Jose had a Torrens Title in the name of his
widow and daughter. They were then constrained to bring the present
suit seeking for the reconveyance in their favor by defendants
Gregoria and daughter Candida and husband Jose Bayot of their
corresponding participations in said parcels of land in accordance
with article 840.The petitioners action was predicated on the
theory that their shares were merely held in trust by defendants.
Nonetheless, no Deed of Trust was alleged and proven. Lower court
dismissed the complaint on the ground of res judicata. The
plaintiffs appealed and vigorously pressed on the Court their
theory that they were acknowledged natural children and were
grievously prejudiced by the partition and that the doctrine of res
judicata should not bar their action.ISSUE: W/N plaintiffs action
was barred by prescription, laches and res judicata to the effect
that they were denied of their right to share in their fathers
estate. HELD: Yes. Trial court's judgment is affirmed with the
clarification that defendants' counterclaim is dismissed. No
costsRATIO:The crucial issue is prescription. With it the question
of res judicata and the existence of a trust are inextricably
interwoven. Discussion on Trust:A trust is defined as the right,
enforceable solely in equity, to the beneficial enjoyment of
property, the legal title to which is vested in another, but the
words 'trust' is frequently employed to indicate duties, relations,
and responsibilities which are not strictly technical trusts.A
person who establishes a trust is called the trust or; one in whom
confidence is reposed is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the
beneficiary. Trusts are either express or implied. Express trusts
are created by the intention of the trust or of the parties.
Implied trusts come into being by operation of law. No express
trusts concerning an immovable or any interest therein may be
proven by oral evidence. An implied trust may be proven by oral
evidence. No particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly
intended. Express trusts are those which are created by the direct
and positive acts of the parties, by some writing or deed, or will,
or by words either expressly or impliedly evincing an intention to
create a trust. Implied trust are those which, without being
expressed, are deducible from the nature of the transaction as
matters of intent, or which are super induced on the transaction by
operation of law as matters of equity, independently of the
particular intention of the parties. They are ordinarily subdivided
into resulting and constructive trusts A resulting trust is broadly
defined as a trust which is raised or created by the act or
construction of law, but in its more restricted sense it is a trust
raised by implication of law and presumed always to have been
contemplated by the parties, the intention as to which is to be
found in the nature of their transaction, but not expressed in the
deed or instrument of conveyance. On the other hand, a constructive
trust is a trust raised by construction of law, or arising by
operation of law; a trust not created by any words, either
expressly or impliedly evincing a direct intention to create a
trust, but by the construction of equity in order to satisfy the
demands of justice. It does not arise by agreement or intention but
by operation of law. If a person obtains legal title to property by
fraud or concealment, courts of equity will impress upon the title
a so-called constructive trust in favor of the defrauded party. A
constructive trust is not a trust in the technical senseThere is a
rule that a trustee cannot acquire by prescription the ownership of
property entrusted to him, or that an action to compel a trustee to
convey property registered in his name in trust for the benefit of
the cestui qui trust does not prescribed, or that the defense of
prescription cannot be set up in an action to recover property held
by a person in trust for the benefit of another, or that property
held in trust can be recovered by the beneficiary regardless of the
lapse of time. This applies squarely to express trusts. The basis
of the rule is that the possession of a trustee is not adverse. Not
being adverse, he does not acquire by prescription the property
held in trust.Discussion of Case:The plaintiffs did not prove any
express trust in this case. The project of partition, the decision
and the manifestation as to the receipt of shares negatives the
existence of an express trust. Those public documents prove that
the estate of Martin Ramos was settled in that proceeding and that
adjudications were made to his seven natural children. A trust must
be proven by clear, satisfactory, and convincing evidence. It
cannot rest on vague and uncertain evidence or on loose, equivocal
or indefinite declarations. As already noted, an express trust
cannot be proven by parol evidence.Plaintiffs did not also specify
the kind of implied trust contemplated in their action. We have
stated that whether it is a resulting or constructive trust, its
enforcement may be barred by laches. In the cadastral proceedings,
which supervened after the closure of the intestate proceeding, the
lots involved were claimed by Jose Ramos and Gregoria T. Ramos to
the exclusion of the plaintiffs. After the death of Jose Ramos, the
said lots were adjudicated to his widow and daughter. Transactions
following this prove that the heirs of Jose Ramos had repudiated
any trust which was supposedly constituted over Hacienda Calaza in
favor of the plaintiffs. Under Act 190, whose statute of
limitations applies to this case (Art. 116, Civil Code), the
longest period of extinctive prescription was 10 years.Atanacia,
Modesto and Manuel, all surnamed Ramos, were already of age in
1914. From that year, they could have brought the action to annul
the partition. Maria and Emiliano reached the age of 21 in 1917.
They could have brought the action. The actions were filed more
than 40 years after it accrued. The delay was inexcusable. The
instant action is unquestionably barred by prescription and res
judicata. Plaintiffs contend that the partition was not binding on
them. They ask that the case be remanded to the lower court for the
determination and adjudication of their rightful shares. All those
contentions would have a semblance of cogency and would deserve
serious consideration if the plaintiffs had not slept on their
rights. Cuaycong vs. CuaycongFacts:
Eduardo Cuaycong, married to Clotilde de Leon, died in 1936
without issue but with three brothers and a sister surviving him:
Lino, Justo, Meliton and Basilisa. Upon his death, his properties
were distributed to his heirs as he willed except two haciendas the
Haciendas Sta. Cruz and Pusod both known as Hacienda Bacayan.
Hacienda Bacayan is in the name of Luis D. Cuaycong, son of Justo
Cuaycong.
The surviving children of Lino Cuaycong filed a suit against
Justo and Luis Cuaycongfor conveyance of inheritance and
accounting, before the CFI of Negros Occidental alleging that:
1. Eduardo Cuaycong, made known to his brothers and sisters that
he and his wife Clotilde had an understanding and made arrangements
with Luis and Justo, that it was their desire to divide Hacienda
Bacayan among his brothers and sister and his wife Clotilde.
2. The brothers and sister failed to pay for the share in the
hacienda thus it was later acquired by Luis Cuaycong thru clever
strategy, fraud, misrepresentation and in disregard of Eduardo's
wishes by causing the issuance in his name of certificates of title
covering said properties.
3. Plaintiffs demands had been refused and in 1960 during the
estate proceedings of Praxedes Escalon, deceased wife of Luis D.
Cuaycong, the latter fraudulently made it appear that the
plaintiffs had nothing to do with the land; that Luis Cuaycong had
possessed the lands since 1936.
xxx
8. Said two haciendas were then the subject of certain
transactions between the spouses Eduardo Cuaycong and Clotilde de
Leon on one hand, and Justo and Luis D. Cuaycong on the other,
Eduardo Cuaycong told his brother Justo and his nephew, defendant
Luis D. Cuaycong, to hold in trust what might belong to his
brothers and sister as a result of the arrangements and to deliver
to them their shares when the proper time comes, to which Justo and
Luis D. Cuaycong agreed.
CFI ruled that the trust alleged, particularly in paragraph 8 of
the complaint, refers to an immovable which under Article 1443 of
the Civil Code may not be proved by parole evidence. Plaintiffs
were given 10 days to file an amended complaint mentioning or
alleging therein the written evidence of the alleged trust,
otherwise the case would be dismissed.
Plaintiff thereafter manifested that the claim is based on an
implied trust as shown by paragraph 8 of the complaint. They added
that there being no written instrument of trust, they could not
amend the complaint to include such instrument.
Complaint was dismissed. Hence this petition.
Issue:
W/N the trust referred by the plaintiff is implied or
expressed?
Held:
NO. It was an express trust. Express and Implied trust can be
understood as:
ExpressImplied
created by the intention of the trustor or of the parties comes
into being by operation of law
direct and positive acts of the parties, by some writing or deed
or will or by words evidencing an intention to create a
trustwithout being expressed, are deducible from the nature of the
transaction by operation of law as matters of equity, in
dependently of the particular intention of the parties
From these and from the provisions of paragraph 8 of the
complaint itself, the court found that the plaintiffs alleged an
express trust over an immovable, especially since it is alleged
that thetrustor expresslytold the defendants of his intention to
establish the trust. Thus, such a situation definitely falls under
Article 1443 (Express) of the Civil Code.
Further, the intention of the trustor to establish the alleged
trust may be seen in paragraphs 5 and 6.Article 1453 (Implied
trust) would apply if the person conveying the property did not
expressly state that he was establishing the trust, unlike the case
at bar where he was alleged to have expressed such intent.
Even assuming the alleged trust to be an implied one, the right
alleged by plaintiffs would have already prescribed since starting
in 1936 when the trustor died, plaintiffs had already been
allegedly refused by the aforesaid defendants in their demands over
the land, and the complaint was filed only in 1961 more than the
10-year period of prescription for the enforcement of such rights
under the trust.
It is settled that the right to enforce an implied trust in
one's favor prescribes in ten (10) years. And even under the Code
of Civil Procedure, action to recover real property such as lands
prescribes in ten years.
LORENZO V.POSADASFacts:On 27 May 1922, Thomas Hanley died in
Zamboanga, leaving a will and considerable amount of real and
personal properties. Hanleys will provides the following: his money
will be given to his nephew, Matthew Hanley, as well as the real
estate owned by him. It further provided that the property will
only be given ten years after Thomas Hanleys death. Thus, in the
testamentary proceedings, the Court of First Instance of Zamboanga
appointed P.J.M. Moore as trustee of the estate. Moore took oath of
office on March 10, 1924, and resigned on Feb. 29, 1932. Pablo
Lorenzo was appointed in his stead. Juan Posadas, Collector of
Internal Revenue, assessed inheritance tax against the estate
amounting to P2,057.74 which includes penalty and surcharge. He
filed a motion in the testamentary proceedings so that Lorenzo will
be ordered to pay the amount due. Lorenzo paid the amount in
protest after CFI granted Posadas motion. He claimed that the
inheritance tax should have been assessed after 10 years. He asked
for a refund but Posadas declined to do so. The latter
counterclaimed for the additional amount of P1,191.27 which
represents interest due on the tax and which was not included in
the original assessment. However, CFI dismissed this counterclaim.
It also denied Lorenzos claim for refund against Posadas. Hence,
both appealed.Issue: 1. Whether or not Hanley intended to create a
trust in his will?Held:Yes. Ratio:The defendant maintains that it
was the duty of the executor to pay the inheritance tax before the
delivery of the decedent's property to the trustee. Stated
otherwise, the defendant contends that delivery to the trustee was
delivery to thecestui que trust, the beneficiery in this case,
within the meaning of the first paragraph of subsection (b) of
section 1544 of the Revised Administrative Code. This contention is
well taken and is sustained. The appointment of P. J. M. Moore as
trustee was made by the trial court in conformity with the wishes
of the testator as expressed in his will. It is true that the word
"trust" is not mentioned or used in the will but the intention to
create one is clear. No particular or technical words are required
to create a testamentary trust. The words "trust" and "trustee",
though apt for the purpose, are not necessary. In fact, the use of
these two words is not conclusive on the question that a trust is
created. "To create a trust by will the testator must indicate in
the will his intention so to do by using language sufficient to
separate the legal from the equitable estate, and with sufficient
certainty designate the beneficiaries, their interest in the
ttrust, the purpose or object of the trust, and the property or
subject matter thereof. Stated otherwise, to constitute a valid
testamentary trust there must be a concurrence of three
circumstances: (1) Sufficient words to raise a trust; (2) a
definite subject; (3) a certain or ascertain object; statutes in
some jurisdictions expressly or in effect so providing." There is
no doubt that the testator intended to create a trust. He ordered
in his will that certain of his properties be kept together
undisposed during a fixed period, for a stated purpose. The probate
court certainly exercised sound judgment in appointment a trustee
to carry into effect the provisions of the will.
3. ImpliedJUAN VS. YAPFactsSpouses Maximo and Dulcisima
Castaneda mortgaged to petitioner Richard Juan, employee and nephew
of respondent Gabriel Yap, Sr. (respondent), two parcels of land in
Talisay, Cebu to secure a loan of P1.68 million, payable within one
year. The Contract was prepared and notarized by Atty. Antonio
Solon.
Petitioner, represented by Solon, sought the extrajudicial
foreclosure of the mortgage. Although petitioner and respondent
participated in the auction sale, the properties were sold to
petitioner for tendering the highest bid of P2.2 million. No
certificate of sale was issued to petitioner, however, for his
failure to pay the sale's commission.Respondent and the Castaneda
spouses executed a memorandum of agreement (MOA) where (1) the
Castaneda spouses acknowledged respondent as their "real
mortgagee-creditor x xx while Richard Juan [petitioner] is merely a
trustee" of respondent; (2) respondent agreed to allow the
Castaneda spouses to redeem the foreclosed properties for P1.2
million; and (3) the Castaneda spouses and respondent agreed to
initiate judicial action "either to annul or reform the [Contract]
or to compel Richard Juan to reconvey the mortgagee's rights" to
respondent as trustor. Three days later, the Castaneda spouses and
respondent sued petitioner in the RTC of Cebu City to declare
respondent as trustee of petitionervisa visthe Contract, annul
petitioner's bid for the foreclosed properties, declare the
Contract "superseded or novated" by the MOA, and require petitioner
to pay damages, attorney's fees and the costs. The Castanedaspouses
consigned with the trial court the amount of P1.68 million as
redemption payment.
IssueWhether an implied trust arose between petitioner and
respondent, binding petitioner to hold the beneficial title over
the mortgaged properties in trust for respondent
RulingYes. The question of the existence of an implied trust is
factual, hence, ordinarily outside the purview of a Rule 45 review
of purely legal questions. Nevertheless, our review is justified by
the need to make a definitive finding on this factual issue in
light of the conflicting rulings rendered by the courts below.An
implied trust arising from mortgage contracts is not among the
trust relationships the Civil Code enumerates. The Code itself
provides, however, that such listing "does not exclude others
established by the general law on trust x x x." Under the general
principles on trust, equity converts the holder of property right
as trustee for the benefit of another if the circumstances of its
acquisition makes the holder ineligible "in x xx good conscience
[to] hold and enjoy [it]." As implied trusts are remedies against
unjust enrichment, the "only problem of great importance in the
field of constructive trusts is whether in the numerous and varying
factual situations presented x xx there is a wrongful holding of
property and hence, a threatened unjust enrichment of the
defendant."Applying these principles, this Court recognized
unconventional implied trusts in contracts involving the purchase
of housing units by officers of tenants' associations in breach of
their obligations, the partitioning of realty contrary to the terms
of a compromise agreement, and the execution of a sales contract
indicating a buyer distinct from the provider of the purchase
money. In all these cases, the formal holders of title were deemed
trustees obliged to transfer title to the beneficiaries in whose
favor the trusts were deemed created. We see no reason to bar the
recognition of the same obligation in a mortgage contract meeting
the standards for the creation of an implied trust.Kiel vs. Estate
of SabertFactsAlbert F. Kiel commenced to work on certain public
lands situated in the municipality of Parang, Cotabato, known as
Parang Plantation Company. In 1910, Kiel and P. S. Sabert entered
into an agreement to develop the plantation. Sabert was to furnish
the capital and Kiel was to manage it. It seems that this
partnership was formed so that the land could be acquired in the
name of Sabert, Kiel being a German citizen and not deemed eligible
to acquire public lands in the Philippines. During the World War,
Kiel was deported from the Philippines. Five persons, including P.
S. Sabert, organized the Nituan Plantation Company, to which Sabert
transferred all the rights and interests of the Parang Plantation
Company. Kiel appears to have tried to secure a settlement from
Sabert. But Sabert's death came before any amicable arrangement
could be reached and before an action by Kiel against Sabert could
be decided. So these proceedings against the estate of Sabert.
IssueWhat is the nature of the proceeding? Is this an action to
establish a resulting trust in the land of Sabert? NOHeldThe court
held that a ruling on the issue of establishing trust is not
needed. Note that the complaint as framed asks for a straight money
judgment against an estate. In no part of the complaint did
plaintiff allege any interest in land, claim any interest in land,
or pretend to establish a resulting trust in land. This is not an
action to establish trust in the land, because a trust will not be
created when, for the purpose of evading the law prohibiting one
from taking or holding real property, he takes a conveyance thereof
in the name of a third person.Also, no partnership agreement in
writing was entered into by Kiel and Sabert. Thus the real issue is
whether or not the alleged verbal copartnership formed by Kiel and
Sabert has been proved. The court held that declarations of one
partner, not made in the presence of his copartner, are not
competent to prove the existence of a partnership between them, and
that the existence of a partnership cannot be established by
general reputation, rumor, or hearsay.Although we feel that
competent evidence exists establishing the partnership, Kiel under
the facts had no standing in court to ask for any part of the land
and in fact he does not do so. His only legal right is to ask for
what is in effect an accounting with reference to its improvements
and income when Sabert became the trustee of the estate on behalf
of Kiel. Kiel is not entitled to any share in the land itself, but
he has clearly shown his right to one-half of the value of the
improvements and personal property on the land. The value of these
improvements and of the personal property cannot be ascertained
from the record and the case must therefore be remanded for further
proceedings. Thomson vs. CAFACTSPetitioner Marsh Thomson (Thomson)
was the EVP and, later on, the Management Consultant of private
respondent, the American Chamber of Commerce of the Philippines,
Inc. (AmCham) for over ten years, 1979-1989.While petitioner was
still working with private respondent, his superior, A. Lewis
Burridge, retired as AmChams President.Before Burridge decided to
return to his home country, he wanted to transfer his proprietary
share in the Manila Polo Club (MPC) to petitioner.However, private
respondent insisted on paying for the share but had it listed in
petitioners name, with the condition that Thomson should execute
such necessary documents to acknowledge beneficial ownership
thereof by the Chamber. Burridge then transferred said proprietary
share to petitioner, as confirmed in a letter of notification to
the MPC.Upon his admission as a new member of the MPC, petitioner
paid the transfer fee ofP40,000.00 from his own funds; but private
respondent subsequently reimbursed this amount.MPC issued
Proprietary Membership Certificate in favor of petitioner.But
petitioner, however, failed to execute a document recognizing
private respondents beneficial ownership over said share.When
petitioners contract of employment was up for renewal in 1989, he
notified private respondent that he would no longer be available as
EVP.Still, the private respondent asked the petitioner to stay on
for another six (6) months.Petitioner indicated his acceptance of
the consultancy arrangement with a counter-proposal in his letter
stipulating his intention to retain the Polo Club share, subject to
his reimbursing the purchase price to the Chamber, or
P110,000.Private respondent rejected petitioners
counter-proposal.Pending the negotiation for the consultancy
arrangement, private respondent executed on a Release and
Quitclaim, stating that the chamber intended to release Thomson
from any and all existing claims that it (Amcham) may have against
the latter (Thomson). The quitclaim however failed to mention the
MPC share.In April 1990, private respondent, through counsel sent a
letter to the petitioner demanding the return and delivery of the
MPC share. Failing to get a favorable response, private respondent
filed a complaint against petitioner.The trial court awarded the
MPC share to Thomson on the ground that the Articles of
Incorporation and By-laws of Manila Polo Club prohibit artificial
persons, such as corporations, to be club members. The CA reversed
the trial courts judgment and ordered herein petitioner to transfer
the MPC share to the nominee of private respondent. Hence this
petition for review.ISSUES(1) W/N AmCham was the beneficial owner
of the disputed share(2) W/N it was right for Thomson to transfer
said share to Amchams nominee
DECISION and RATIOYESPetitioner claims ownership of the MPC
share, asserting that he merely incurred a debt to respondent when
the latter advanced the funds for the purchase of the share. On the
other hand, private respondent asserts beneficial ownership whereby
petitioner only holds the share in his name, but the beneficial
title belongs to private respondent.To resolve the first issue, we
must clearly distinguish a debt from atrust.
TRUSTDEBT
Beneficiary of a trust has beneficial interest in the trust
propertyCreditor has merely a personal claim against the debtor
There is a fiduciary relation b/w a trustee and a
beneficiaryThere is no such relation b/w a debtor and creditor
Trust refers to a duty to deal w/ a specific property for the
benefit of anotherDebt implies merely an obli to pay a certain sum
of money
If a creditor-debtor relationship exists, but not a fiduciary
relationship between the parties, there is no express trust.
However, it is understood that when the purported trustee of funds
is entitled to use them as his or her own (and commingle them with
his or her own money), a debtor-creditor relationship exists, not a
trust.
In the present case, as the EVP of AmCham, petitioner occupied a
fiduciary position in the business of Amcham. AmCham released the
funds to acquire a share in the Club for the use of petitioner but
obliged him to execute such document as necessary to acknowledge
beneficial ownership thereof by the Chamber. A trust relationship
is, therefore, manifestly indicated.
Moreover, petitioner failed to present evidence to support his
allegation of being merely a debtor when the private respondent
paid the purchase price of the MPC share. Applicable here is the
rule that a trust arises in favor of one who pays the purchase
money of property in the name of another, because of the
presumption that he who pays for a thing intends a beneficial
interest therein for himself.
Although petitioner initiated the acquisition of the share,
evidence on record shows that private respondent acquired said
share with its funds.Petitioner did not pay for said share,
although he later wanted to.
Private respondents evident purpose in acquiring the share was
to provide additional incentive and perks to its chosen executive,
the petitioner himself.
Although the share was placed in the name of petitioner, his
title is limited to the usufruct, that is, to enjoy the facilities
and privileges of such membership in the club appertaining to the
share. Such arrangement reflects a trust relationship governed by
law and equity.
While private respondent paid the purchase price for the share,
petitioner was given legal title thereto.Thus, a resulting trust is
presumed as a matter of law.Petitioner could have negated the trust
agreement by contrary, consistent and convincing evidence on
rebuttal.However, on the witness stand, petitioner failed to do so
persuasively.We, therefore, find no reversible error in the
respondent Courts holding that private respondent, AmCham, is the
beneficial owner of the share in dispute.
(1) YES
Turning now to the second issue, the petitioner contends that
the Articles of Incorporation and By-laws of Manila Polo Club
prohibit corporate membership. However, private respondent does not
insist nor intend to transfer the club membership in its name but
rather to its designated nominee.
In this case, the petitioner was the nominee of the private
respondent to hold the share and enjoy the privileges of the
club.But upon the expiration of petitioners employment as officer
and consultant of AmCham,the incentives that go with the position,
including use of the MPC share, also ceased to exist.It now
behooves petitioner to surrender said share to private respondents
next nominee, another natural person.Obviously this arrangement of
trust and confidence cannot be defeated by the petitioners citation
of the MPC rules to shield his untenable position, without doing
violence to basic tenets of justice and fair dealing.
However, we still have to ascertain whether the rights of herein
parties to the trust still subsist.It has been held that so long as
there has been no denial or repudiation of the trust, the
possession of the trustee of an express and continuing trust is
presumed to be that of the beneficiary, and the statute of
limitations does not run between them. With regard to a
constructive or a resulting trust, the statute of limitations does
not begin to run until the trustee clearly repudiates or disavows
the trust and such disavowal is brought home to the other
party,cestui que trust. The statute of limitations runs generally
from the time when the act was done by which the party became
chargeable as a trustee by operation of law or when the beneficiary
knew that he had a cause of action in the absence of fraud or
concealment.
Noteworthy in the instant case, there was no declared or
explicit repudiation of the trust existing between the parties.
Such repudiation could only be inferred as evident when the
petitioner showed his intent to appropriate the MPC share for
himself. The statute of limitation could start to set in at this
point in time.But private respondent took immediate positive
action.Since the private respondent filed the necessary action on
time and the defense of good faith is not available to the
petitioner, there is no basis for any purported claim of
prescription, after repudiation of the trust, which will entitle
petitioner to ownership of the disputed share.As correctly held by
the respondent court, petitioner has the obligation to transfer now
said share to the nominee of private respondent.
Uy Aloc vs. Cho Jan LingFACTSA number of Chinese merchants
raised a fund by voluntary subscription with which they purchased a
valuable tract of land and erected a large building to be used as a
sort of club house for the mutual benefit of the subscribers to the
fund. The subscriber organized themselves into an irregular
association, which had no regular articles in the commercial
registry or elsewhere. The association did not have any existence
as a legal entityIt was agreed to have the title to the property
placed in the name of one of the members, the defendant, Cho Jan
Ling, who on his part accepted the trust, and agreed to hold the
property as the agent of the members of the association.After the
club building was completed with the funds of the members of the
association, Cho Jan Ling collected some P25,000 in rents for which
he failed and refused to account, and upon proceedings being
instituted to compel him to do so, he set up title in himself to
the club property as well as to the rents accruing therefrom,
falsely alleging that he had bought the real estate and constructed
the building with his own funds, and denying the claims of the
members of the association that it was their funds which had been
used for that purpose.The plaintiffs, being prejudiced filed a case
against the defendant and the lower court favored Uy Aloc and his
companions and granted relief to the damages they suffered. Hence,
this appeal.ISSUEWhether or not there was an implied trust in the
agreement of the associationHELDYes. There was an implied trust.
The decree entered by the court below should be affirmed with costs
against the appellants.RATIOWe are nevertheless unable to see that
any real or substantial right of the appellants Cho Jan Ling, et
al. was prejudiced thereby. Due, doubtless, to the inherent
difficulties which must be anticipated in the conduct of a case
wherein a large number of the parties are Chinese persons, unable
to speak any tongue but their own, some formal or technical
irregularities seem to have crept into the proceedings in the court
below but none of these irregularities or amendments in any wise
prejudiced the defense set up by the appellants in the court below
and assignments of error based thereon can not be sustained under
section 503 of the Code of Civil Procedure, which provides that "No
judgment shall be reversed on formal or technical grounds, or for
such error as has not prejudiced the real rights of the excepting
party."Accepting, as we do, the truth and accuracy of the facts
found by the trial court there can be no shadow of doubt that the
plaintiffs are entitled to the relief furnished them by the decree.
In the case at bar we think that the evidence clearly discloses not
only that the funds with which the property in question was
purchased were furnished by the members of the association, but
that Cho Jan Ling, in whose name it was registered, received and
holds the property as the agent and trustee of the association;
that on at least one occasion he admitted the beneficial ownership
to be in the association; and that while the legal registered title
is in his name the beneficial ownership is in the association. In
this case, the legal title of the holder of the registered title is
not questioned. It is admitted that the members of the association
voluntarily obtained the inscription in the name of Cho Jan Ling
and that they have no right to have that inscription cancelled.
They do not seek such cancellation, and on the contrary they allege
and prove that the duly registered legal title to the property is
in Cho Jan Ling, but they maintain, and we think that they rightly
maintain, that he holds it under an obligation, both express and
implied, to deal with it exclusively for the benefit of the members
of the association and subject to their will.Muller vs
MullerFACTS:This petition for review on certiorari assails the
February 26, 2001 Decision of the Court of Appeals affirming with
modification the August 12, 1996 Decision 3 of the Regional Trial
Court of Quezon City which terminated the regime of absolute
community of property between petitioner and respondent, as well as
the Resolution 4 dated August 13, 2001 denying the motion for
reconsideration.Petitioner Elena Buenaventura Muller and respondent
Helmut Muller were married in Hamburg, Germany on September 22,
1989 and resided in Germany at a house owned by respondent's
parents but decided to move and reside permanently in the
Philippines in 1992. By this time, respondent had inherited the
house in Germany from his parents which he sold and used the
proceeds for the purchase of a parcel of land in Antipolo, Rizal at
the cost of P528,000.00 and the construction of a house amounting
to P2,300,000.00. The Antipolo property was registered in the name
of petitioner under Transfer Certificate of Title No. 219438 5 of
the Register of Deeds of Marikina, Metro Manila.Due to
incompatibilities and respondent's alleged womanizing, drinking,
and maltreatment, the spouses eventually separated. Respondent
filed a petition for separation of properties before the Regional
Trial Court of Quezon City.On August 12, 1996, the trial court
rendered a decision which terminated the regime of absolute
community of property and decreed the separation of properties
between them, ordering the equal partition of personal properties
located within the country, excluding those acquired by gratuitous
title during the marriage. With regard to the Antipolo property,
the court held that it was acquired using paraphernal funds of the
respondent.However, the part of that inheritance used by the
petitioner for acquiring the house and lot in this country cannot
be recovered by the petitioner, its acquisition being a violation
of Section 7, Article XII of the Constitution which provides that
"save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations or
associations qualified to acquire or hold lands of the public
domain." The law will leave the parties in the situation where they
are in without prejudice to a voluntary partition by the parties of
the said real property.The CA held that respondent merely prayed
for reimbursement for the purchase of the Antipolo property, and
not acquisition or transfer of ownership to him. It also considered
petitioner's ownership over the property in trust for the
respondent. As regards the house, the Court of Appeals ruled that
there is nothing in the Constitution which prohibits respondent
from acquiring the same. Respondent Elena Buenaventura Muller is
hereby ordered to REIMBURSE the petitioner the amount of
P528,000.00 for the acquisition of the land and the amount of
P2,300,000.00 for the construction of the house situated in
Antipolo, Rizal, deducting therefrom the amount respondent spent
for the preservation, maintenance and development of the aforesaid
real property. ISSUES:W/N the Ca erred in granting reimbursement to
the respondent (contested by the petitioner as a circumvention of
the Constitutions prohibition on aliens acquiring real properties
in the Philippines)RULING:The petition has merit.Section 7, Article
XII of the 1987 Constitution states:Save in cases of hereditary
succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain. Aliens, whether
individuals or corporations, are disqualified from acquiring lands
of the public domain. Hence, they are also disqualified from
acquiring private lands. "Sec. 5.Save in cases of hereditary
succession, no private agricultural land will be transferred or
assigned except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain in the
Philippines."This constitutional provision closes the only
remaining avenue through which agricultural resources may leak into
aliens' hands. It would certainly be futile to prohibit the
alienation of public agricultural lands to aliens if, after all,
they may be freely so alienated upon their becoming private
agricultural lands in the hands of Filipino citizens. . . .If the
term "private agricultural lands" is to be construed as not
including residential lots or lands not strictly agricultural, the
result would be that "aliens may freely acquire and possess not
only residential lots and houses for themselves but entire
subdivisions, and whole towns and cities," and that "they may
validly buy and hold in their names lands of any area for building
homes, factories, industrial plants, fisheries, hatcheries,
schools, health and vacation resorts, markets, golf courses,
playgrounds, airfields, and a host of other uses and purposes that
are not, in appellant's words, strictly agricultural." (Solicitor
General's Brief, p. 6.) That this is obnoxious to the conservative
spirit of the Constitution is beyond question.Respondent was aware
of the constitutional prohibition and expressly admitted his
knowledge thereof to this Court. He declared that he had the
Antipolo property titled in the name of petitioner because of the
said prohibition. His attempt at subsequently asserting or claiming
a right on the said property cannot be sustained.The Court of
Appeals erred in holding that an implied trust was created and
resulted by operation of law in view of petitioner's marriage to
respondent. Save for the exception provided in cases of hereditary
succession, respondent's disqualification from owning lands in the
Philippines is absolute. Not even an ownership in trust is allowed.
Besides, where the purchase is made in violation of an existing
statute and in evasion of its express provision, no trust can
result in favor of the party who is guilty of the fraud. To hold
otherwise would allow circumvention of the constitutional
prohibition.Respondent cannot seek reimbursement on the ground of
equity where it is clear that he willingly and knowingly bought the
property despite the constitutional prohibition. Further, the
distinction made between transfer of ownership as opposed to
recovery of funds is a futile exercise on respondent's part. To
allow reimbursement would in effect permit respondent to enjoy the
fruits of a property which he is not allowed to own. Petition is
GRANTED. The Decision ordering petitioner Elena Buenaventura Muller
to reimburse respondent Helmut Muller are REVERSED and SET ASIDE.
Decision of the Regional Trial Court of Quezon City terminating the
regime of absolute community between the petitioner and respondent,
decreeing a separation of property between them and ordering the
partition of the personal properties located in the Philippines
equally, is REINSTATED.
4. Prescription
AMEROL vs. BAGUMBARAN
FACTS
This is a petition for review on certiorari of the decisionof
the then Court of First Instance of Lanao del Sur, Branch III,
Marawi City. Lot No. 524, Pls-126 is the tract of land alleged by
the plaintiff to have been forcibly entered into by the defendants
and which plaintiff now wishes to recover possession thereof. The
same lot was covered by two free patent applications: (1) that of
defendant Liwalug Datomanong (erroneously surnamed Amerol) which he
filed on the 4th day of September, 1953, and (2) that of Molok
Bagumbaran which was filed on December 27, 1954. As to these two
free patent applications, that of plaintiff Molok Bagumbaran was
given due course as a result of which Free Patent No. V-19050 was
issued on August 16,1955 and duly registered with the office of the
Register of Deeds of the Province of Lanao whereupon Original
Certificate of Title No. P-466 was duly issued. Defendant Liwalug
Datomanong had never known of plaintiff's free patent application
on the land in question nor was he ever notified or participated in
the administrative proceedings relative to plaintiff's free patent
application. In the meantime, said defendant has been and up to the
present in continuous occupation and cultivation of the same. Said
defendant did not take appropriate action to annul the patent and
title of the plaintiff within one year from issuance thereof and
that the first step taken by him to contest said patent and title
was a formal protest dated April 24, 1964, filed before the Bureau
of Lands after the lapse of 9 years from the issuance of patent in
favor of the plaintiff. The second step he took was his
counterclaim filed with this court on December 4, 1964, wherein
defendant reiterated his stand that plaintiff secured patent on the
land by means of deceit and fraud. Proofs are sufficient to support
defendant's contention that plaintiff is guilty of fraud and
misrepresentation. On or before filing his free patent application,
plaintiff knew that the land in question which was covered by his
free patent application was then actually occupied and cultivated
by defendant Liwalug Datomanong. Notwithstanding the aforequoted
findings, the trial court denied the counterclaim of the
defendants, now petitioners, for the affirmative relief of
reconveyance on the ground of prescription. The trial court held
that, since the answer and counter-claim was filed on December 4,
1964, 9 years from the date of registration of the patent, the
defendants right to reconveyance within the period of 4 years from
the date of registration of said patent had prescribed.
ISSUE: Whether or not the trial court erred in holding that the
petitioners right of action for reconveyance for violation of an
implied trust prescribed after 4 years from the registration of the
patent of respondent
HELD: YES. An action for reconveyance for violation of an
implied trust prescribes in 10 YEARS.
The act of respondent in misrepresenting that he was in actual
possession and occupation of the property in question, obtaining a
patent and Original Certificate of Title No. P- 466 in his name,
created an implied trust in favor of the actual possessor of the
said property. The land in question was patented and titled in
respondent's name by and through his false pretenses. Molok
Bagumbaran fraudulently misrepresented that he was the occupant and
actual possessor of the land in question when he was not because it
was Liwalug Datomanong. Bagumbaran falsely pretended that there was
no prior applicant for a free patent over the land but there was
Liwalug Datomanong. By such fraudulent acts, Molok Bagumbaran is
deemed to hold the title of the property in trust and for the
benefit of petitioner Liwalug Datomanong. Notwithstanding the
irrevocability of the Torrens title already issued in the name of
respondent, he, even being already the registered owner under the
Torrens system, may still be compelled under the law to reconvey
the subject property to Liwalug Datomanong. In an action for
reconveyance, the decree of registration is respected as
incontrovertible. What is sought instead is the transfer of the
property, in this case the title thereof, which has been wrongfully
or erroneously registered in another person's name, to its rightful
and legal owner,or to one with a better right.
It is now well-settled that an action for reconveyance based on
an implied or constructive trust prescribes in ten years from the
issuance of the Torrens title over the property. The only
discordant note, it seems, isBalbin vs. Medalla,which states that
the prescriptive period for a reconveyance action is four
years.
However, this variance can be explained by the erroneous
reliance onGerona vs. de Guzman.But in Gerona, the fraud was
discovered on June 25, 1948, hence Section 43(3) of Act No. 190,
was applied, the new Civil Code not coming into effect until August
30, 1950 as mentioned earlier. It must be stressed, at this
juncture, that Article 1144 and Article 1456, are new provisions.
They have no counterparts in the old Civil Code or in the old Code
of Civil Procedure, the latter being then resorted to as legal
basis of the four-year prescriptive period for an action for
reconveyance of title of real property acquired under false
pretenses. The action of petitioner Datomanong for reconveyance, in
the nature of a counterclaim filed on December 4, 1964, has not yet
prescribed. Between August 16, 1955, the date of reference, being
the date of the issuance of the Original Certificate of Title in
the name of the respondent, and December 4, 1964, when the period
of prescription was interrupted by the filing of the Answer cum
Counterclaim, is less than ten years.
Marquez v. CAFacts:Spouses Rafael and Felicidad Marquez had 12
children. In 1945, the spouses acquired a parcel of land in Rizal
where they constructed their conjugal home. When Felicidad died,
Rafael Sr. executed an Affidavit of Adjudication vesting unto
himself sole ownership to the property. In 1983, Rafael donated the
property to 3 of his children --- petitioner Rafael JR, Alfredo
(respondent) and Belen (respondent) to the exclusion of his other
children.From 1983-1991, private repondentes (Alfredo and Belen)
were in actual possession of the land. When petitioners learned
about the title of the land, they demanded that since they are also
children of Rafael SR, they are entitled to their respective
shares. Respondents ignored petitioners demands.According to
petitioners, the Deed of Donation executed by their father was
fraudulent since the respondents took advantage of their fathers
advanced age. Respondents contend that the petitioners action was
already barred by the statute of limitations since the same should
have been filed within 4 years from the date of discovery of the
alleged fraud.Issue:Whether the action for reconveyance had
prescribedHeld: NO
Ruling:Petitioners contention:By virtue of the fraudulent deed
of donation, a constructive trust was created, and that an action
for reconveyance based on implied or constructive trust prescribes
in 10 years.Held:Indeed, when Rafael SR. obtained an affidavit
stating that he was the only heir of his wife when in fact their
children were still alive, and managed to secure a transfer of
certificate of title under his name, a constructive trust was
established.On whether the reconveyance had prescribed:An action
for reconveyance based on an implied or constructive trust
prescribes in 10 years from the issuance of the Torrens title over
the property.The prescriptive period runs from the date when the
transfer of certificate of title was issued in favor of Rafael SR
which was on June 16, 1982. The action for reconveyance was filed
on May 31, 1991 = 9 years later, which means that prescription had
not yet barred the action.
Additional:Rafael SR, as trustee to his wifes share, cannot
donate this portion to the private respondents.
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