2010-2011 REVIEWER FOR TRUST

Trust – is the fiduciary relationship between one By Creation

person having equitable ownership in property
and another owning the legal title to such 1. Express – One which came into
property,, the equitable ownership of the former existence only by the execution of an
entitling him to the performance of certain intention to create a trust by the parties.
duties and the exercise of certain power by the
latter. 2. Implied – one which comes ionto being
by operation of law:
1. Trust implies confidence in a relationship a. Resulting – one in which the
2. Trust cannot be established in violation intention to create a trust is implied
of law. (It is founded in equity, thus it or presumed in law.
cannot co-exist with a violation of the b. Constructive – one imposed by law
law) irrespective of,a nd even contrary to,
any such intention for the purpose of
Trust vs. promoting justice, frustrating fraud or
preventing unjust enrichment.
Bailment – bailee has possession of the property
but no legal title. Effectivity
Donation – involves transfer of both legal and 1. Testamentary – to take effect upon the
equitable title (except gift in trust).
trustor’s death.
2. Inter vivos – effective during the owner’s
A beneficiary of a trust can demand performance
life.
of an obligation without having formally accepted
the benefit of the trust in a public document.

Contract – is a legal obligation, which obligation Revocability

may or may not be fiduciary in character.
1. Revocable – can be revoked by the
Debt – creditor has merely a personal claim trustor.
against the debtor. 2. Irrevocable – may not be terminated
during the specified term of the trust.
Persons involved in the creation of trust
1. Trustor Elements of Express Trust
2. Trustee
3. Beneficiary/ cestui que trust 1. A competent trustor and trustee;
2. An ascertainable trust res; and
Subject-matter of a trust may be any property of 3. Sufficiently certain beneficiaries.
value – real, personal, funds, or money or choses
in action. “Consideration is not required to establish trust”

It may include undivided, future or contingent Termination of Express Trust

interest, but it should not be a mere expectancy.
1. Expiration of period fixed
Trustor could be the trustee or beneficiary. He 2. Accomplishment of purpose
could not be a trustee and beneficiary at the 3. Mutual agreement of beneficiaries
same time. 4. Exercise of power to terminate – the
terms of trust deed may provide who can
It is not necessary that the beneficiary be named terminate, it could either by the trustor,
or identified at the creation of a trust (i.e.. trustee or someone else.
charitable trust).
Express trust concerning immovable or interest
therein may not be proved by parol evidence
(NCC 1443).
Classification of Trust

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It can, however, be waived, by the failure of the latter is the beneficiary. However, if the person
opposing party to object when a parol evidence to whom the title is conveyed is a child,
concering a trust of an immovable or interest legitimate or illegitimate, of the one paying
therein is being presented in court. the price of the sale, no trust is implied by
law, it being disputably presumed that there is
Except for immovable or interest therein, express a gift in favor of the child.
trust can be created by writing, deed, will or oral
declaration. No particular words are required or Art. 1449. There is also an implied trust when a
essential for the creation of an express trust donation is made to a person but it appears that
(NCC 1444). although the legal estate is transmitted to the
donee, he nevertheless is either to have no
Kinds of Express Trust beneficial interest or only a part thereof.

1. Charitable Trust Art. 1450. If the price of a sale of property is

2. Accumulation Trust – accumulate loaned or paid by one person for the benefit of
income to be reinvested by the trustee in another and the conveyance is made to the
the trust for the period of time specified. lender or payor to secure the payment of the
3. Spendthrift Trust – to protect the debt, a trust arises by operation of law in favor of
beneficiary from his imprudent spending the person to whom the money is loaned or for
habit. whom its is paid. The latter may redeem the
4. Sprinkling trust – give the trustee the property and compel a conveyance thereof to
right to determine the income him.
beneficiaries who should receive income
each year and the amount thereof. Art. 1451. When land passes by succession to
any person and he causes the legal title to be put
In order that a trustee may sue or be sued alone, in the name of another, a trust is established by
it is essential that his trust be express, that is a implication of law for the benefit of the true
trust created by the direct and positive acts of the owner.
parties, by some writing, deed, or will or by
proceedings in court. Art. 1452. If two or more persons agree to
purchase property and by common consent the
Art. 1445. No trust shall fail because the trustee legal title is taken in the name of one of them for
appointed declines the designation, unless the the benefit of all, a trust is created by force of law
contrary should appear in the instrument in favor of the others in proportion to the interest
constituting the trust. of each.

Art. 1446. Acceptance by the beneficiary is Art. 1453. When property is conveyed to a
necessary. Nevertheless, if the trust imposes no person in reliance upon his declared intention to
onerous condition upon the beneficiary, his hold it for, or transfer it to another or the grantor,
acceptance shall be presumed, if there is no there is an implied trust in favor of the person
proof to the contrary. whose benefit is contemplated.

CHAPTER 3 Art. 1454. If an absolute conveyance of property

IMPLIED TRUSTS is made in order to secure the performance of an
obligation of the grantor toward the grantee, a
Art. 1447. The enumeration of the following trust by virtue of law is established. If the
cases of implied trust does not exclude others fulfillment of the obligation is offered by the
established by the general law of trust, but the grantor when it becomes due, he may demand
limitation laid down in Article 1442 shall be the reconveyance of the property to him.
applicable.
Art. 1455. When any trustee, guardian or other
Art. 1448. There is an implied trust when person holding a fiduciary relationship uses trust
property is sold, and the legal estate is granted to funds for the purchase of property and causes
one party but the price is paid by another for the the conveyance to be made to him or to a third
purpose of having the beneficial interest of the person, a trust is established by operation of law
property. The former is the trustee, while the in favor of the person to whom the funds belong.

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 2010-2011 REVIEWER FOR TRUST

the trustee and constructive

Art. 1456. If property is acquired through mistake such trust only)
or fraud, the person obtaining it is, by force of repudiation is
law, considered a trustee of an implied trust for made known to
the benefit of the person from who the beneficiary.

m the property comes. Art. 1457. An implied trust

may be proved by oral evidence. Implied trust can be converted into an Express
Trust
Enumeration of cases of implied trust in Chapter
3 is not exclusive Necessary Elements for the acquisition of the
trustee of the Trust Res
Other Cases of Implied Trust not cited in
Chapter 3 1. He has performed open and unequivocal
acts of repudiation amounting to an
1. Registration in the Torrens System of a ouster of the cestui que trust or the other
land in the name of another but actually co-owners;
owned by another person. 2. Such positive acts of repudiation have
2. Registration of vehicle placed in the been made known to the cestui que trust
name of another, but price thereof is paid of the other co-owners.
by another person. 3. The evidence thereon should be clear
3. Mortgagee holds in trust for the and conclusive or convincing; and
mortgagor the surplus in the proceeds of 4. The period fixed by law has prescribed.
the foreclosure sale (excess of what the
mortgagor owes from the mortgagee) Acts that may be considered as Repudiation
4. Agent who willfully violated the trust
reposed in him by the principal when he 1. Filing by a trustee of an action in court
bought for himself the property which he against the trustor to quiet title to
was supposed to buy for the principal. property, or for recovery of ownership
5. Trust fund doctrine in Corporation Law. thereof, held in possession by the former;
6. Security Deposit under Sections 129, 2. Issuance of the Certficate of Title and in
203 and 414 of the insurance code. the lapse of more than 20 years, open
and adverse possession as owner;
Distinctions between Express 3. Administartor of the property causes the
and Implied Trust cancellation of the property in the name
of the beneficiaries to his name;
Express Implied
For prescriptive period to apply against the
Creation By direct Deductible from person seeking the reconveyance, he must not
positive acts of the nature of be in possession of the property. If he is in
the parties by the transaction possession, then it will not prescribe for he may
some writing or or imposed by wait until his possession is disturbed or his title is
deed or will or operation of attached before taking steps to vindicate his
by words law, rights.
evidencing the independently
intention to of the particular When prescriptive period begins to run for
create trust intention of the action for reconveyance of property
parties.
1. Constructive Trust – date of registration
Proof on Cannot be Can be proven of the deed or the date of issuance of
Immovables proven by parol by oral said new certificate of title of the property
Evidence evidence. which constitutes constructive notice to
the public.
Prescription Imprescriptible Laches and 2. In case of fictitious sale to avoid
unless prescription can foreclosure of mortgage, from the date of
repudiated by set in (for
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recording of the release of mortgage

(Tongoy vs. CA, 123 SCRA 99)
3. If registration under the Torrens System
was secured through fraudulent
misrepresentation, period is reckoned not
from the date of registration but from the
discovery of fraud by the actual owner.
(Ramos vs. IAC, 175 SCRA 70). Person
acting in bad faith in securing title over
real property is not entitled for the
protection of law for the law cannot be
used as sheildfor frauds (GSIS vs.
Santiago, 4141 SCRA 563)

Continuous recognition of a resulting trust

precludes any defense of prescription or
laches.

If title of the property is already in the hands

of an innocent purchaser for value, actual
owner can no longer ask for the
reconveyance of the land. His only remedy is
to file for damages. (Bagayos vs. Guilao, 64
Phil 347; Khemani vs. Heirs of Trinidad, 540
SCRA 83)

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