TRUSTS

TRUST DEBT
Art. 1440. Beneficiary has beneficial interest in the Creditor has merely a personal claim
Trustor – a person who establishes a trust. trust property. against the debtor.
Trustee – one in whom confidence is reposed as regards property for the benefit of There is a fiduciary relation between a No such relation exists between a
another person; one who holds the legal title to the property in trust. trustee and a beneficiary. creditor and debtor.
Beneficiary – the person for whose benefit the trust has been created; one who holds Refers to a duty to deal with a specific Implies merely an obligation to pay a
the equitable title. property for the benefit of another. certain sum of money.

Trust – the (1) Fiduciary relationship (2) Between one person having an equitable The TRUSTOR may establish a trust with him as the trustee or the beneficiary. He
ownership in property and another owning the legal title to such property, (3) the cannot, however, be the sole trustee and the sole beneficiary of a single trust. In such
Equitable ownership of the former entitling him to the performance of certain duties case, both the legal and equitable titles to the trust property would be merged in the
and the exercise of certain powers by the latter for the benefit of the former. trustee and he would hold the property free of any trust.

Characteristics of a Trust Trust property – the subject-matter of a trust may be any property of value – real,
1. It is a Fiduciary relationship. personal, funds or money, or choses in action.
2. Created by law or agreement. - The trust res must consist of property actually in existence in which the
3. Where the legal Title is held by one, and the equitable title or beneficial title is trustor has transferrable interest or title although it may, as a rule, be any kind
held by another. of transferable property either realty or personalty.
- But a trust res cannot be a mere expectancy without right or interest or a
A trust is founded in equity and can never result from acts violative of law. mere interest in the performance of a contract although such interest is in the
nature of a property right.
TRUST BAILMENT
Involves a transfer of legal title, or at Bailee has possession of, without legal There is ownership by two persons at the same time, the relation between the 2
least a separation of equitable interest title to, the property subject to the owners being such that one of them with legal title under an obligation to use his
and legal title, with the legal title in bailment. ownership for the benefit of the other.
the trustee.
Ownership of a trustee is a mere matter of form rather than of substance, and nominal
TRUST GIFT/DONATION rather than real.
an existing legal interest and involves Transfer of property and except in the
the separation of legal and case of a gift in trust, involves a The trustee is not a mere agent but an owner.
equitable title. disposition of both legal and equitable
ownership. The interest of the beneficiary in trust can, in general, be reached by his creditors, and
he can sell or otherwise dispose of them. The beneficiary can only transfer the interests
TRUST CONTRACT he holds – the equitable title.
Always involves an ownership, Legal obligation based on an undertaking
embracing a set of rights and duties supported by a consideration, which A trust and an agency is distinguishable on the basis of the non-representative
fiduciary in character which may be obligation may or may not be fiduciary in role of the trustee and the representative role of the agent.
created by a declaration without a character.
consideration.
It is not necessary to the creation of a trust that the cestui que trust be named or
identified or even be in existence at the time of its creation; and this is
especially so in regard to CHARITABLE TRUST. Thus, a devise of a land to a father in
trust for his children lawfully begotten at the time of his death is valid although the 4. Under the terms of the trust deed, the Trustor, trustee, or someone else may
father had no children at the time of the creation of the trust. have the power to terminate the trust.
Art. 1441. EXPRESS TRUSTS
Trusts are either express or implied. Art. 1443.
A. Express trust – created by the intention of the trustor or the parties; a trust No EXPRESS TRUSTS concerning an IMMOVABLE or any interest therein may be
intentional in fact. proved by parol (oral) evidence.
B. Implied trust – one which comes into being by operation of law.
1. Resulting trust – one in which he intention to create trust is implied or The burden of proving the existence of a trust is on the party alleging its existence; and
presumed in law; a trust intentional in law. Ex. One who acquires to discharge this burden, it is generally required that his proof be clear and satisfactory
property and registers it in another’s name. and convincing.
2. Constructive trust – one imposed by law irrespective of, and even
contrary to, any such intention for the purpose of promoting justice, The defense that express trusts cannot be proved by parol evidence may be waived,
frustrating fraud or preventing unjust enrichment; one imposed either by: FC
irrespective of intention. Ex. One who has acquired property by 1. Failure to interpose timely objections against the presentation of oral evidence
mistake. not admissible under the law; or
2. Cross-examining the adverse party and his witness along the prohibited lines.
From the viewpoint of its effectivity:
1. Testamentary trust – one which is to take effect upon the trustor’s death. It A trust concerning an immovable or any interest therein must be embodied in a
is usually included as part of the will and does not have a separate trust deed. public instrument and registered in the Registry of Property.
2. Inter Vivos trust – one established effective during the owner’s life. The
grantor executes a “trust deed”. An express trust over personal property or any interest therein, and an implied
trust, whether the property subject to the trust is real or personal, may be proved by
From the viewpoint of its revocability: parol evidence.
1. Revocable trust – can be revoked or cancelled by the trustor or another
individual given the power. Art. 1444.
2. Irrevocable trust – may not be terminated during the specified term of the No particular words are required for the creation of an EXPRESS TRUST, it being
trust. sufficient that a trust is clearly intended.

Elements of EXPRESS TRUST: CAS-Express The creation of an express trust cannot be assumed from loose or vague declarations
1. Competent trustor and trustee or circumstances capable of other interpretations.
2. Ascertainable trust res
3. Sufficiently certain beneficiaries. Consideration is not required to establish a trust.

Art. 1442. Terminology used is not controlling. It is possible to create a trust without using the
The principles of the general law of trusts, insofar as they are not in conflict with word “trust” or “trustee.” Conversely, the mere fact that the word “trust: or “trustee” is
this Code, the Code of Commerce, the Rules of Court and special laws are hereby employed does not necessarily indicate or prove an intention to create at trust.
adopted.
What is important is whether the trustor or the party manifested an intention to create
How is an express trust terminated? By: the kind of relationship which in law is known as a trust.
1. Expiration of the period fixed
2. Accomplishment of purpose Kinds of EXPRESS TRUST
3. Mutual agreement of all the beneficiaries 1. Charitable trust – one designed for the benefit of a segment of the public or
of the public in general.
 2. Accumulation trust – one that will accumulate income to be reinvested by
the trustee in the trust for the period or time specified.
3. Spendthrift trust – one established when the beneficiary needs to be
protected, because of his inexperience or immaturity from his imprudent
spending habits or simply because the beneficiary is spendthrift.
4. Sprinkling trust – one that gives the trustee the right to determine income
beneficiaries who should receive income each year and the amount thereof.
Discretionary trust – if it gives the trustee the discretion to pay or not to
pay the income or principal.

In order that a trustee may sue or be sued alone, it is essential that his trust be
express, that is, a trust created by the direct and positive acts of the parties, by some
writing, deed, or will or by proceedings in court.

Art. 1445.
No trust shall fail because the trustee appointed declines the designation,
unless the contrary should appear in the instrument constituting the trust.

If he declines the trust, the courts will appoint a trustee to fill the office that he
declines.

Renunciation of a trust after its acceptance can only be by resignation or

Art. 1446.
Acceptance of the beneficiary is necessary. Nevertheless, if the trust imposes no
onerous condition upon the beneficiary, his acceptance shall be presumed, if
there is no proof to the contrary.

The trust being beneficial to the beneficiary, his acceptance is presumed if there is no
proof to the contrary. However, if the trust imposes some onerous condition,
acceptance must be shown. Such acceptance may be express or implied.

IMPLIED TRUSTS
 In RESULTING TRUSTS, the rule if imprescriptibility may apply for as long as the
Art. 1447. trustee has not repudiated the trust. Once the resulting trust is repudiated,
The enumeration of the following cases of implied trust does not exclude others however, it is converted into a constructive trust and is subject to prescription.
established by the general law of trust, but the limitation laid down in article 1442 shall
be applicable. No prescription shall run in favor of a co-owner against his co-owners or co-heirs as
long as he expressly or impliedly recognizes the co-ownership.
Kinds of Implied Trust:
1. Resulting trust – a trust which is created by the act or construction of law and The trustee may claim title by prescription founded on ADVERSE POSSESSION
presumed to have been contemplated by the parties, the intention as to which is to where it appears that:
be found in the nature of their transaction, but not expressed in the deed or 1. he has performed Open and unequivocal acts of repudiation amounting to an
instrument of conveyance. ouster of the cestui que trust or other co-owners;
- Based on the equitable doctrine that valuable consideration and not legal 2. such positive acts of repudiation have been Made known to the cestui que
title determines the equitable title or interest. trust or the other co-owners;
3. the Evidence thereon should be clear and conclusive or convincing.
2. Constructive trust – is not created by any words, either expressly or impliedly, 4. The Period fixed by law has prescribed.
evincing a direct intention to create a trust but by the construction of equity in
order to satisfy the demands of justice and prevent unjust enrichment. A THIRD PERSON who holds actual, open, public, and continuous possession of a
- it is not a trust in a technical sense. It is substantially an equitable remedy land, adversely to the trust, acquires title to the land by prescription as against such
against unjust enrichment. trust.

The doctrine of implied trusts is founded upon equity. Being founded in equity, trust Acts NOT considered as acts of repudiation:
can never result from acts violative of the law. The doctrine of implied trust if based on 1. Silent possession of the trustee unaccompanied with acts amounting to an
an illegal contract cannot be invoked. ouster of the cestui que trust.
2. Mere receipt of rents and profits from the property, erection of fences and
In order that laches or acquisitive prescription may bar an action to enforce an buildings adapted for cultivation of the land held in trust, and the payment of
express trust, an express repudiation made known to the beneficiary is required. taxes.
3. An action to compel the trustee to convey property registered in his name for
Laches constitutes a bar to actions to enforce an implied trust even when there is the benefit of the cestui que trust does not prescribe unless the trustee
no repudiation, unless there is concealment of the fact giving rise to the trust. repudiates the trust.
4. A denial of the trust made by a trustee to one who at the time of such
An implied trust may be converted to an express trust by the recognition by the repudiation is a minor.
implied trustee of the right to the property of the owner.
Acts considered as acts of repudiation:
The rule that a trustee cannot acquire by prescription ownership over a 1. Filing by a trustee of an action in court against the trustor to quiet title to
property entrusted to him until and unless he repudiates the trust, applies to property, for recovery of ownership thereof, held in possession by the former.
EXPRESS TRUSTS and RESULTING TRUSTS. 2. Issuance of the certificate of title.
3. When an apparent administrator of property causes the cancellation of the title
The settled rule in CONSTRUCTIVE TRUSTS is that prescription may supervene even thereto in the name of the apparent beneficiaries and gets a new certificate of
if the trustee does not repudiate the relationship. The repudiation of the said trust is title in his own name.
not a condition precedent to the running of the prescriptive period. It is incumbent 4. Alleged co-owners of the property in question executed a deed of partition and
upon the beneficiary to bring an action for reconveyance before prescription bars the on the strength thereof obtained the cancellation of the title in the name of
same. their predecessor and the issuance of a new one wherein they appear as the
new owners of a definite area each.
Prescriptibility of action for reconveyance based on implied trust Art. 1448.
The prescriptive rule applies only when the plaintiff or the person enforcing the trust is There is an implied trust when property is sold, and the legal estate is granted to
not in possession of the contested property. Where a party is in actual possession of one party but the price is paid by another for the purpose of having beneficial
the property, the action to enforce the trust and recover the property and thereby interest of the property. The former is the trustee, while the latter is the
quiet title thereto, is IMPRESCRIPTIBLE. beneficiary.

When prescriptive period of an action for reconveyance begins to run: However, if the person to whom the title is conveyed is a child, legitimate or
 Generally, an action for reconveyance of real property based exclusively on illegitimate, of the one paying the price of the sale, no trust is implied by law, it
fraud prescribes in 4 years from the discovery of the fraud; such being disputably presumed that there is a gift in favor of the child.
discovery is deemed to have taken place upon the issuance of the certificate of ^This presumption of a gift is rebuttable by proof of a contrary intention, and on such
title over the property. rebuttal, a resulting trust arises.

 If the action is based on IMPLIED or CONSTRUCTIVE TRUST, it prescribes The presumption is that he who pays for a thing intends a beneficial interest
in 10 years from the alleged fraudulent registration or date of therein for himself. It is essential that:
issuance of the certificate of title over the property. 1. There by an actual payment of money, property, or service, or an equivalent
constituting valuable consideration; and
 Where the defendant acted in bad faith in securing title over the property, 2. Such consideration must be furnished by the alleged beneficiary of a resulting
the prescriptive period for the filing of the action for reconveyance based on trust.
implied trust must be reckoned from the ACTUAL DISCOVERY of the
fraud where such discovery was made after the date of registration. If the purpose of the payor of the consideration in having title placed in the name of
another was to evade some rule of law, the courts will not assist the payor in
 Where the rights of the beneficiary are recognized by the trustee, the achieving his improper purpose by enforcing a resulting trust for him in accordance with
10-year period of prescription commences to run from the time the trustee the “clean hands” doctrine.
begins to assert his title or repudiate the trust, or to hold adversely, as when
the trustee files an ejectment suit against the beneficiary. Art. 1449.
There is also an implied trust when a donation is made to a person but it appears
 “A promise to pay made by C interrupted his possession as a source of that although the legal estate is transmitted to the donee, he nevertheless is
prescriptive rights. It manifested his continuing recognition of the right of A, either to have (1) no beneficial interest or (2) only a part thereof.
etc. as long as the promise was not expressly withdrawn. To constitute the
failure to pay as promised as an act of repudiation of the trust, or as a Art. 1450.
manifestation of adverse possession, there should be an unequivocal act of If the price of a sale of property is loaned or paid by one person for the
refusal to make payment, or a definite reneging from the promise.” benefit of another and the conveyance is made to the LENDER or PAYOR to
secure the payment of the debt, a trust arises by operation of law in favor of the
Laches in action to enforce trust person to whom the money is loaned or for whom it is paid. The latter may
1. In case of EXPRESS TRUSTS – Laches applies from the time the trustee REDEEM the property and COMPEL a conveyance thereof to him.
openly denies or repudiates the trust and the beneficiary is notified thereof, or
is otherwise plainly put on guard against the trustee. The repudiation must be When money is borrowed to purchase property, and the conveyance is made, not to
clearly proved by the trustee. the borrower, but to the lender who takes title to the property in his own name in order
2. In case of IMPLIED TRUSTS – Implied trusts may be barred not only by to secure the loan, a resulting trust in the property, binding the lender or payor
prescription, but also by laches. Express repudiation is not required, unless the (trustee) in favor of the borrower (beneficiary), arises.
trustee fraudulently and successfully conceals the facts giving rise to the trust.