RIZAL SURETY & INSURANCE COMPANY vs.

COURT OF APPEALS
G.R. No. 96727 August 28, 1996
PANGANIBAN, J.:

Facts:
The Reparations Commission (REPACOM) sold to private respondent Transocean
Transport Corporation the vessel 'M/V TRANSOCEAN SHIPPER’. Said vessel was insured
with petitioner Rizal Surety & Insurance Company for US$3,500,000.00, with stipulated
value in Philippine Currency of P23,763,000.00 under two Marine Hull Policies. The said
policies named REPACOM and herein private respondent as the [Link]
reinsured the vessel with a foreign insurance firm.
Subsequently, the vessel was lost in the Mediterranean Sea. The insured filed claims
against petitioner for the insurance proceeds. Shortly thereafter, a partial compromise
agreement was entered into between the REPACOM and respondent regarding the
insurance proceeds.
Upon the request of petitioner, Central Bank authorized it to receive and deposit the
dollar insurance proceeds in a non-interest bearing account in the name of petitioner and for
the joint account of REPACOM and private respondent.
Petitioner informed private respondent and REPACOM that the entire insurance
proceeds for the loss of the vessel M/V "Transocean Shipper" had been deposited with
Prudential Bank and Trust Company, Escolta Branch, Manila, the latter sum in a non-
interest bearing account as authorized by CB.
Private respondent and REPACOM entered into a partial compromise
agreement, wherein they agreed to divide and distribute the insurance proceeds in such a
manner that each would receive as its initial share thereof that portion not disputed by the
other party (thus, REPACOM — US$434,618.00, and private respondent —
US$1,931,153.00), leaving the balance in dispute for future settlement, either by way of
compromise agreement or court litigation, pending which the said balance would continue to
be kept in the same bank account in trust for private respondent and REPACOM unless the
parties otherwise agree to transfer said balance to another bank account.
Having obtained the CB authorization to transfer the balance of the insurance
proceeds into an interest-bearing special dollar account, REPACOM and private respondent
requested the latter to remit the balance of the insto the Philippine National Bank, Escolta
Branch for their joint account. 15
In a reply, petitioner indicated that it would effect the requested remittance when
both REPACOM and private respondent shall have unconditionally and absolutely released
petitioner from all liabilities under its policies by executing and delivering the Loss and
Subrogation Receipt prepared by petitioner. 16
Because the parties proposed certain amendments and corrections to the Loss and
Subrogation Receipt, a revised version thereof was finally presented to the Office of the
Solicitor General. Then Acting Solicitor General Vicente V. Mendoza wrote petitioner
demanding that it pay interest on the dollar balance per the CB letter-authority.
In a reply, petitioner through counsel rejected the Acting Solicitor General's demand,
asserting that (i) there was no trust relationship, express or implied, involved in the
transaction; (ii) there was no obligation on the part of petitioner to transfer the dollar deposit
into an interest-bearing account because the CB authorization was given to REPACOM and
not to petitioner, (iii) REPACOM did not ask petitioner to place the dollars in an interest-
bearing account, and, (iv) no Loss and Subrogation Receipt was executed.
 Thereafter, respondent and REPACOM sent petitioner the duly executed Loss and
Subrogation Receipt, without prejudice to their claim for interest on the dollar balance from
the time CB authorized its placement in an interest bearing account.
A final compromise agreement was entered into between private respondent and
REPACOM, whereby the latter, in consideration of an additional sum of one million pesos
paid to it by the former, transferred, conveyed and assigned to the former all its rights,
interests and claims in and to the insurance proceeds.
A demand letter for interest on the said dollar balance was sent by private
respondent's counsel to petitioner and Prudential Bank, which neither replied thereto nor
complied [Link], private respondent filed a complaint for collection of unearned
interest on the dollar balance of the insurance proceeds.

Issue: Whether or not a trust relationship was established between an insurer and the two
insureds over the balance of the insurance proceeds being held by the insurer for the
account of the two insureds, pending a final settlement by and between the two insureds of
their respective claims to said proceeds

HELD:
YES. It is fundamental in the law of trusts that certain requirements must exist before
an express trust will be recognized. Basically, these elements include a competent trustor
and trustee, an ascertainable trust res, and sufficiently certain beneficiaries.
Undeniably, all the abovementioned elements are present in the instant case.
Petitioner's argument that it was never a party to the Partial Compromise Agreement is
unavailing, since, upon being furnished a copy of the same, it undoubtedly became aware
— if it was not already aware even prior thereto — that the parties to said agreement
considered petitioner as their trustee in respect of said dollar balance; in short, it is all too
evident that petitioner fully grasped the situation and realized that private respondent and
REPACOM were constituting petitioner their trustee. Yet, petitioner not only did not manifest
any objection thereto, but it instead proceeded to accept its role and responsibility as such
trustee by implementing the compromise agreement. Equally as significant, petitioner never
committed any act amounting to an unequivocal repudiation of its role as trustee.
Petitioner's desperate attempt to establish a viable defense by way of its allegation that no
fiduciary relationship could have existed because of the joint insured's adversary positions
with respect to the insurance proceeds deserves scant consideration. The so-called
adversary positions of the parties had no effect on the trust as it never changed the position
of the parties in relation to each other and to the dollar proceeds, i.e., petitioner held it for
private respondent and REPACOM, which were the real owners of the money.