G.R. No. 140203 - People vs. Ferdez

Plaintiffs-Appellants: Miguel Palad, Fe Palad, Victoria Queano, Jose Palomera, Concepcion Palomera, Edgardo Obciana, Galo Nosce, Celso Zafranco, and Ernesto Zafranco, who claim to be the remaining immediate heirs and/or successors-in-interest of the deceased Luis Palad.
Defendants-Appellees: The governor of Quezon Province and the Municipality of Tayabas, Tayabas, Quezon, alleged to act as trustee and beneficiary respectively of certain parcels of land.
Jurisdiction: The case stems from a complaint originally filed on April 20, 1958, challenging the continued trusteeship and use of two lots (Nos. 3464 and 3469) covered by O.C.T. Nos. 6448 and 6656.

The deceased Luis Palad’s last will and testament, dated January 25, 1892 and protocolized on July 27, 1897, created a trust for the establishment and maintenance of a high school in the town of Tayabas using the income from the two designated lots.
The trust’s purpose was fully contemplated to serve a public benefit—the continuous support for what is now known as Luis Palad High School—which was established around 1932 and has been maintained through the income generated from the lots.
Plaintiffs argue that, having enjoyed the benefits for over five decades and with the school in operation, they are entitled to the reversion of the lots and a dissolution of the trusteeship, citing a violation of Article 605 of the Civil Code.

The defendants contend that the lots were devised unconditionally in trust for establishing and perpetually maintaining the high school, as intended by the testator.
They assert that relevant legislative acts (Acts Nos. 3232, 3462, and 3757) validate the trusteeship and confirm the permanent nature of the trust for the benefit of the town’s high school.
Defendants further claim that the natural heirs (plaintiffs) have no remaining interest in the land except a reversionary right, which would only materialize if the trust were to fail.
Additional defenses include allegations that the claim has prescribed, estoppel applies, and a counterclaim for damages is justified due to the groundless suit.

The trial court of Quezon dismissed the original complaint and related intervention motions on December 28, 1964.
Plaintiffs later appealed the decision on January 15, 1965, challenging both the factual findings and the application of legal principles regarding trusteeship.
Issues relating to the exclusion of certain parties from the complaint and subsequent interventions by co-plaintiffs also complicated the proceedings.

The Supreme Court decision in Government of the Philippine Islands vs. Anastacia Abadilla (Dec. 10, 1924) is heavily cited. The decision clarified that the testator’s intent was to create a trust for the benefit of a secondary school, with the trustee holding legal title and natural heirs having only a reversionary right should the trust fail.
Legislative measures enacted to implement the trust include:

Act No. 3232 (approved November 27, 1925) establishing the Luis Palad Rural High School as an agricultural high school.
Act No. 3462 (amended on December 7, 1928), which provided for a disbursement mechanism involving a board comprising the Director of Education, the provincial governor, and the municipal president of Tayabas.
Act No. 3757 (approved November 26, 1930) converting the school into a regular high school.

Whether the testamentary trust created by the will of Luis Palad for the benefit of the high school is valid and perpetual under the law.
Whether the trust, being perpetual, violates the rule against perpetual trusts or any statutory limitation such as Article 870 of the New Civil Code.

Whether the completion of the high school’s initial construction in 1932 conclusively terminated the trust.
Whether the ongoing operations, maintenance, and expansion of the high school require the continued existence of the trust.

Whether natural heirs, by virtue of being designated as successors-in-interest, retain any interest in the income or reversion rights once the legal title has been vested in the trustee.
Whether the reversionary rights may be enforced despite the established statutory and judicial framework supporting the trust.

Whether Article 605 (as a proxy for usufruct provisions) applies to the trusteeship established by the will.
Whether the interpretation of the term “established” in the will should be confined solely to the physical construction of the school or extended to include its ongoing operation.

The legitimacy of excluding certain parties from the original complaint and the effect of their subsequent intervention as co-plaintiffs.
Whether the counterclaims and defenses of prescription and estoppel raised by the defendants warrant a dismissal of plaintiffs’ claims.