TRUST
Module 3
Concept,
Nature, and Parties
Trust is a fiduciary relationship between one person having an equitable ownership in property and
another owning the legal title to such property.
Trust is a legal arrangement, whereby a person transfers his or her legal title to property to another
to be administered by the latter for the benefit of a third party (De Leon, et al., Comments and
Cases on Partnership, Agency and Trusts, 2019 Edition, p. 638).
Parties
A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards
property for the benefit of another person is known as the trustee; and the person for whose benefit
the trust has been created is referred to as the beneficiary (Article 1440).
Classification and Rules
A. Express Trusts – created by the intention of the trustor or of the parties (Article 1441).
1. No express trust concerning an immovable or any interest therein may be proved by
parol evidence (Article 1443). In contrast, an express trust over personal property or
any interest therein, and an implied trust, whether or not the property, subject of the
trust is real or personal, may be proved by oral evidence (Article 1457).
2. No particular words are required for the creation of express trust, it being sufficient that
a trust is clearly intended (Article 1444). It is possible to create trust without using the
word “trust” or “trustee.” Conversely, the mere fact that these words are used does not
necessarily indicate an intention to create a trust (Torbela, et al. v. Spouses Rosario, et
al., G.R. No. 140528, December 7, 2011).
3. Unless a contrary intention appears in the instrument constituting the trust (Article
1145), declination, or refusal, or disqualification of a trustee does not operate to defeat
or void the trust; nor does it operate to vest legal and equitable title in the beneficiary
(De Leon, et al., Comments and Cases on Partnership, Agency and Trusts, 2019
Edition, pp. 659-660).
4. No trust shall fail because the trustee appointed declines the designation, unless the
contrary should appear in the instrument constituting the trust (Article 1445). However,
acceptance by the beneficiary is necessary. Nevertheless, if the trust imposes no
onerous condition upon the beneficiary, his or her acceptance shall be presumed, if
there is no proof to the contrary (Article 1446).
B. Implied Trusts – come into being by operation of law (Article 1441).
There is an implied trust when:
1
1. A property is sold, and the legal estate is granted to one party, but the price is paid by
another for the purpose of having the beneficial interest of the property. The former is
the trustee, while the latter is the beneficiary (Article 1448);
2. A donation is made to a person, but it appears that although the legal estate is
transmitted to the done, he or she, nevertheless, is either to have beneficial interest or
only a part thereof (Article 1449);
3. The price of a sale of property is loaned or paid by one person for the benefit of another
and the conveyance is made to the lender or payor to secure the payment of the debt
(Article 1450);
4. Land passes by succession to any person, and he or she causes the legal title to be put
in the name of another (Article 1451);
5. Two or more persons agree to purchase property, and by common consent, the legal
title is taken in the name of one of them for the benefit of all (Article 1452);
6. A property is conveyed to a person in reliance upon his declared intention to hold it for,
or transfer it to another or the grantor (Article 1453);
7. An absolute conveyance of property is made in order to secure the performance of an
obligation of the grantor toward the grantee (Article 1454);
8. Any trustee, guardian, or other person holding a fiduciary relationship uses trust funds
for the purchase of property and causes the conveyance to be made to him or to a third
person (Article 1455); and
9. A property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes (Article 1456).
The presence of fraud or mistake creates an implied trust for the benefit of the rightful
and legal owner giving him the right to seek reconveyance of the property. All that
must be alleged in the complaint are two (2) facts: (a) that the plaintiff was the owner
of the property; and (b) that the defendant had illegally dispossessed him of the same.
The creation of constructive trust is an appropriate remedy against unjust enrichment
(De Leon, et al., Comments and Cases on Partnership, Agency and Trusts, 2019
Edition, p. 696).
Reference: De Leon, et al., “Comments and Cases on Partnership, Agency, and Trust”
(Rex Book Store, 2019 Edition)
