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NOTE: The cestui que trust need not be named at the time the
Title V. - TRUSTS (n) trust is created. It is enough that the cestui que trust is
CHAPTER 1 sufficiently certain or identifiable (Pineda, 2006).

GENERAL PROVISIONS
Trust v. Contract
Art. 1440. A person who establishes a trust is called the trustor; Trust Contract
one in whom confidence is reposed as regards property for the always involves ownership, a legal obligation based on an
benefit of another person is known as the trustee; and the embracing a set of rights and undertaking supported by a
person for whose benefit the trust has been created is referred to duties fiduciary in character, consideration by which
as the beneficiary. which may be created by a obligation may or may not be
declaration WITHOUT a fiduciary in character.
consideration.
Trust
Trust v. Sale
 A fiduciary relationship between one person having an
equitable ownership in a property and another owning Trust Sale
the legal title to such property, the equitable An express trust is not seller obliges himself to
ownership of the former entitling him to the perfected by mere consent, transfer ownership and
performance of certain duties and the exercise of but requires the actual deliver possession to the
certain powers by the latter for the benefit of the delivery of the naked or legal buyer.
title to the trustee for the
former.
relationship to legally arise.
Concept of trust (fideicommisso) Trustee in an express trust Buyer takes full ownership of
only takes naked or legal title the subject matter for his sole
 It is a fiduciary relationship created by agreement or by and for the benefit of another benefit.
law where the trustor of the property has the equitable person, the beneficiary.
title while the legal title is vested in another (trustee). Constituted merely as a Entered into for its own end,
preparatory agreement, a the acquiring of title of the
Equitable title - refers to the enjoyment of the property.
medium by which the trustee subject matter by the buyer
Equitable title is the benefits the buyer will get to use and is expected to pursue other
enjoy when he or she becomes the legal owner. Equitable juridical acts for the benefit
ownership is not “true ownership.” of the beneficiary.
 Trust is founded in equity and can never result from acts
violative of law. Trust v. Lease
 Thus, no trust can result from a contract of
Trust Lease
partnership formed for an illegal purpose.
Naked title is transferred to Lessor retains naked title.
Trustee is not an agent of the trust estate the trustee; full beneficial
ownership is for the account
 But he acts for himself in the administration of the trust of the beneficiary.
estate, although subject to the terms of the trust and the Essence of the contract is for Essence of the contract is the
law of trusts. the trustee to manage the enjoyment of the possession
trust property as the legal and use of the leased
Exception: A trustee has been regarded as an agent of the title holder for benefit or property
beneficiaries of the trust at least for certain purposes, interest of the beneficiary.
such as for the purpose of imputing to the beneficiaries of Benefits enjoyed by the Benefits enjoyed by the lessee
the trust notice given to the trustee. beneficiary are usually are only for a limited
permanent nature. contracted period.
Parties in a trust:
1. Trustor who establishes the trust Trust v. Donation
2. Trustee (fiduciary), the one in whom the confidence is
Trust Donation
reposed as regards the property for the benefit of
An existing legal relationship, There is a transfer of
another person
which involves the separation property as well as the the
3. Beneficiary (cestui que trust) is the person for whose of legal and equitable title disposition of both legal and
benefit the trust has been created (Pineda, 2006) equitable ownership except
in cases of gifts in trust.
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The beneficiary of a trust may The donee must comply with Trustor as trustee or beneficiary
demand performance of the the legal requirements in
obligation without having accepting donations.  trustor may establish a trust with him, as the trustee or the
formally accepted the benefit beneficiary. He cannot, however, be the sole trustee and
of the trust in public the sole beneficiary of a single trust.
document, upon mere
Trust Property
acquiescence in the formation
of the trust and acceptance  subject matter of trust
 may be any property of value – real, personal, funds or
Trust v. Debt money, or choses in action.
 Must be existing. It must consist of property actually in
Trust Debt existence in which the trustor has a transferable interest
The beneficiary of a trust has A creditor has merely a or title although it may, as a rule, be any kind of
a beneficial interest in the personal claim against the transferable property either realty or personalty including
trust property debtor undivided, future, or contingent interest
There fiduciary relationship No fiduciary relationship therein.
 But trust res cannot be a mere expectancy without right or
Trust v. Stipulation Pour Atrui interest or a mere interest in the performance of a contract
although such interest is in the nature of a property right.
Trust SPA
It can arise either by virtue of It can arise only by virtue of a Ownership by two persons at the same time
a contract or by legal contract and never by
provision operation of law  The trust property is owned by two persons at the same
Always a specific property, Could either be a specific time, the relation between the two owners being such that
whether real or personal, property or other things. one of them with legal title under an obligation to use his
including an undivided ownership for the benefit of the other.
interest therein as in co-
Ownership of trustee, a mere matter of form
ownership or choses in action
Either express or implied Always express and must be  His ownership, therefore, is a mere matter of form rather
accepted by the third person than of substance, and nominal rather than real. If we have
to regard the essence of the matter, a trustee is not an
Stipulation Pour Autrui.: a contract or provision in a contract owner at all, but a sort of an agent, upon whom the law has
that confers a benefit on a third-party beneficiary conferred the power and imposed the duty of
administering the property of another person
(1) there is a stipulation in favor of a third person;
(2) the stipulation is a part, not the whole, of the contract; Trustee, not mere agent
(3) the contracting parties clearly and deliberately  He is a person to whom the property of someone else is
conferred a favor to the third person the favor is not an fictitiously attributed by the law, to the extent that the
incidental benefit; rights and powers thus vested in a nominal owner shall be
(4) the favor is unconditional and uncompensated; used by him on behalf of the real owner.
(5) the third person communicated his or her acceptance of
the favor before its revocation; and Character of office of trustee.
(6) the contracting parties do not represent, or are not 1. As principal
authorized by, the third party.  trustee is not an agent of the trust estate or of the cestui
que trust, but he acts for HIMSELF in the administration of
Trust v. Trust Receipt the trust estate, although subject to the terms of the trust
and the law of trusts.
Trust Trust Receipt  He cannot act as an agent of the trust estate for the reason
The right to the beneficial A commercial document that it lacks juristic personality.
enjoyment of a property but which is connected to the 2. As agent
the legal title to which is importation of goods through
 trustee has been regarded as an agent of beneficiaries of
vested in another letters of credit.
the trust at least for certain purposes, such as for the
Fiduciary enjoyment of a Involves a security
property transaction intended to aid in purpose of imputing to the beneficiaries of the trust notice
financing importers and retail given to the trustee
dealers who not have 3. As fiduciary
sufficient funds or resources  trustee, like an executor or administrator, holds an office of
to finance the iportation trust. The duties of the latter are, however, fixed and/or
limited by law, whereas those of trustee of an express trust

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are, usually, governed by the intention of the trustor or of involved

the parties, if established by contract. Cannot be proved by parol May be proved by oral
evidence evidence
Art. 1441. Trusts are either express or implied. Express trusts
Prescription
are created by the intention of the trustor or of the parties. Property cannot be acquired Property can be acquired by
Implied trusts come into being by operation of law. by prescription because the prescription (Pineda, 2006)
possession of the trustee is not
adverse
Classification of Trust
1. As to Creation
a. Express trust - one which can come into existence Art. 1442. The principles of the general law of trusts, insofar as
only by the execution of an intention to create it by they are not in conflict with this Code, the Code of Commerce, the
the trustor or the parties; or Rules of Court and special laws are hereby adopted.
Elements: (CoRB)
1. Competent trustor and trustee
2. Ascertainable trust Res
3. Sufficiently certain beneficiaries CHAPTER 2
b. Implied trust – by operation of law EXPRESS TRUSTS
i. Resulting trust – one in which the
intention to create a trust is implied or
Art. 1443. No express trusts concerning an immovable or any
presumed in law
interest therein may be proved by parol evidence.
ii. Constructive trust – one imposed by law
irrespective of, and even contrary to, any
such intention for the purpose of
Burden of proof
promoting justice, frustrating fraud, or
preventing unjust enrichment.  The proof must be clear and satisfactory and convincing.
Note: Consideration is NOT required. The Parol evidence rule
2. As to Effectivity  forbids any addition to or contradiction of the terms of a
a. Testamentary trust - one which is to take effect written instrument by testimony or other evidence
upon the trustor’s death. purporting to show that, at or before the execution of the
b. trust inter vivos (sometimes called “living trust”) or parties' written agreement, other or different terms were
one established effective during the owner’s life. agreed upon by the parties, varying the purport of the
3. As to revocability written contract
a. Revocable
Failure to object to parol evidence
b. Irrevocable
 the defense that express trusts cannot be proved by parol
Presumption: revocable unless contrary appears
evidence may be waived, either by failure to interpose
Express Trust Implied Trust timely objections against the presentation of oral evidence
As to Creation not admissible under the law or by cross-examining the
One created by the express One which is not created adverse party and his witnesses along the prohibited lines
agreement of the parties, or expressly by the parties or by  To affect third persons, a trust concerning an immovable
by the trustor, but by operation or any interest therein must be embodied in a public
the intention of the trustor of instrument and registered in the Registry of Property
law, there being a law
 An express trust over personal property or any interest
creating it
therein, and an implied trust, whether the property subject
As to manner of creation
Created by the direct and the It is merely deducible from to the trust is real or personal, may be proved by oral
positive acts of the parties, by the evidence.
some writing, deed or by nature of the transaction Kinds of Express Trust (CASS)
words, either expressly or
impliedly, evincing an 1) Charitable trust or one designed for the benefit of a
intention to create a trust segment of the public or of the public in general. It is one
created for charitable, educational, social, religious, or
As to proof needed when immovable or interest therein is scientific purposes, or for the general benefit of humanity. A
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private trust is not for the good of the public in general or Renunciation of a trust after its acceptance
society as a whole;
 Can only be by resignation or retirement with court
2) Accumulation trust or one that will accumulate income to
approval or at least, with agreement of beneficiaries and
be reinvested by the trustee in the trus t for the period of
on satisfaction of all legal liabilities growing out of the
time specified;
acceptance of the trust.
3) Spendthrift trust or one established when the beneficiary
need to be protected, because of his inexperience or
immaturity from his imprudent spending habits or simply
Art. 1446. Acceptance by the beneficiary is necessary.
because the beneficiary is spendrift. Income will be paid to
Nevertheless, if the trust imposes no onerous condition upon the
the beneficiary only when actually necessary. Under some
beneficiary, his acceptance shall be presumed, if there is no proof
circumstances, the trustee will pay directly the creditor for
to the contrary.
obligations of the beneficiary; and
4) Sprinkling trust or one that gives the trustee the right to
determine the income beneficiaries who should receive
NO ACCEPTANCE, NO TRUST CREATED: It is essential that the
income each year and the amount thereof. Income that is not
beneficiary accepts the trust. However, the acceptance in trust
distributed in any given year is added to the corpus, as in an
does not have follow the stringent requisites of acceptance of a
accumulation trust. It is a discretionary trust if it gives the
donation—as this is not so provided. Even if the real property is
trustee the discretion to pay or not to pay the income or
involved. Need not be in public instrument
principal.
When Acceptance Is Presumed
 If the granting of benefit is PURELY GRATUITOUS (no
Art. 1444. No particular words are required for the creation of an
onerous condition), the acceptance by the beneficiary is
express trust, it being sufficient that a trust is clearly intended.
presumed.

Exception: If there is proof that he really did NOT accept.

How an express trust is created?
1. By conveyance to the trustee by an act inter vivos or
mortis causa How Express Trusts Are ENDED (THE-MAD2-BRAMP)
2. By admission of the trustee that he holds the property,
1. Total loss of the object of trust
only as trustee
2. Happening of the resolutory condition , if one had been
When trustee may sue or be sued alone. imposed
3. Expiration of agreed term
 In order that a trustee may sue or be sued alone, It is
4. Mutual agreement of ALL parties
essential that his trust be an express trust
5. Annulment or rescission of the trust
6. Decision of court declaring the trust terminated
7. Death or legal incapacity of the trustee when the trustor
Art. 1445. No trust shall fail because the trustee appointed
intended no other person to administer the trust.
declines the designation, unless the contrary should appear in the
8. Breach of trust
instrument constituting the trust.
9. Revocation by the trustor when such power is reserved
10. Merger of the rights of the trustor and the trustee
11. Accomplishment of the purpose of trust
Effect if Trustee Declines
12. Prescription
 The trust ordinarily continues even if the trustee declines.
NOTE: A testamentary trust for the administration and eventual
 Reason — the court will appoint a new trustee, unless
sale of certain properties of the testator ends not at the time the
otherwise provided for in the trust instrument.
trustee’s petition for the sale of the property is approved by the
 If there is no substitute, and the trustor did not provide
court, but at the time said sale is actually made and the
that the trust will be rendered ineffective in case of the
proceeds thereof distributed to the proper recipients.
death, resignation, removal or refusal of the designated
trustee to assume the responsibility, the court will appoint
a new trustee
Preference in the designation of trustee by the court:
 Between the mother and the uncle, the former is preferred
to the trustee of the proceeds of the insurance policy in the
absence of any showing that the former is incompetent

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1. The trustee has performed unequivocal acts of

CHAPTER 3
repudiation amounting to an ouster of the cestui que
IMPLIED TRUSTS trust
2. Such positive acts of repudiation have been made known
to the cestui que trust
Art. 1447. The enumeration of the following cases of implied 3. The evidence thereon is clear and conclusive
trust does not exclude others established by the general law of 4. The adverse possession of the trustee together with
trust, but the limitation laid down in Article 1442 shall be other elements of prescription, must be at least 10
applicable. years in the concept of an owner. It begins to run from
the time the beneficiary, or trustor gained knowledge of
the repudiation by the trustee
What is an implied trust?
Acts which were held insufficient to constitute Repudiation:
 those which, without being express, are deducible from the
nature of the transaction as matters of intent, or which are 1. A mere silent possession without acts amounting to ouster
superinduced on the transaction by operation of law, as 2. Mere receipt of rents and profits by the trustee and the
matters of equity, independently of the particular intention building
of the parties. 3. Declaration of the property in the trustee’s name for
 Not created voluntarily, but imposed by law or inferred taxation purposes does not constitute acts of repudiation
from the conduct of dealings of the parties Prescriptibility of action for reconveyance based on implied
Kinds of Implied Trust trust

1. Resulting Trust –  Period of prescription - It is now well-settled that an action

 broadly defined as a trust which is raised or created by the for reconveyance to enforce an implied trust in one’s favor
act or construction of law prescribes in ten (10) years
 In its more restricted sense, it is a trust raised by  If based exclusively on fraud – four years from
implication of law and presumed always to have been discovery
contemplated by the parties, the intention as to which is  Where person claiming to be owner in actual possession of
to be found in the nature of their transaction, but not property - The prescriptive rule applies only when the
expressed in the deed or instrument of conveyance. plaintiff or the person enforcing the trust is not in
 based on the equitable doctrine that valuable possession of the contested property
consideration and not legal title determines the equitable  When prescriptive period begins to run - The ten-year
title or interest period of prescription of an action for reconveyance of
2. Constructive trust property (real or personal) based on an implied trust
 trust not created by any words, either expressly or starts from the moment the law creates the trust (when
impliedly, evincing a direct intention to create a trust but the cause of action arises) because the so-called trustee
by the construction of equity in order to satisfy the does not recognize any trust, and has no intention to hold
demands of justice and prevent unjust enrichment. for the beneficiary
 If a person obtains legal title to property by fraud or
Reconveyance - available in case of registration of property
concealment, courts of equity will impress upon the title a
procured by fraud, thereby creating a constructive trust
so called constructive trust in favor of the defrauded
between the parties
party.’’
 Not a trust in technical sense. Where property in possession of third person

Enumeration of cases of implied trust not exclusive  The only limitation upon the right of the beneficiary to
recover title over the property held in trust is that the
 intended to be illustrative of situations in which implied
same must not have been transferred to an innocent
trust is needed in order to correct a wrong or prevent an
purchaser for value in which event, his remedy is to ask for
unjust enrichment.
damages.
May an implied trust be converted into an express trust?
Laches in action to enforce a trust.
 Yes, if the implied trustee recognizes the right of the owner
1. In case of express trusts - A cestui que trust is entitled
over the property
to rely upon the fidelity of the trustee. Laches applies
Acquisitive prescription as a mode of acquiring ownership: from the time the trustee openly denies or repudiates
the trust and the beneficiary is notified thereof, or is
GR: A trustee cannot acquire by prescription the ownership of otherwise plainly put on guard against the trustee. (54
property entrusted to him Am. Jur. 558-559.) The repudiation of the trust must be
XPN: Provided the ff. requisites are present: (PACK) clearly proved by the trustee.

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2. In case of implied trusts - It is well-established in Property is donated by A to B but only the legal title is
American law of trusts (expressly made applicable by transmitted to B, the beneficial ownership of the whole property
Art. 1442.) that implied trusts, as distinguished from or a part thereof being vested in C. Here, a trust is established by
express trusts, may be barred not only by prescription implication of law with B as the trustee and C, the beneficiary.
but also by laches.

Art. 1450. If the price of a sale of property is loaned or paid by

PRESCRIPTION LACHES one person for the benefit of another and the conveyance is made
to the lender or payor to secure the payment of the debt, a trust
Effect of delay Fact of delay
arises by operation of law in favor of the person to whom the
Matter of time Question of inequity of money is loaned or for whom its is paid. The latter may redeem
permitting a claim to be the property and compel a conveyance thereof to him.
enforced, this inequity being
founded on some change in the
condition of the property or Purchase with borrowed funds
the relation of the parties Trust in favor of lender - The general rule is that the use of
Statutory Not statutory borrowed money in making a purchase does not raise a resulting
trust in favor of the lender, even where the money is loaned to
Applies at law Applies at equity enable the borrower to purchase the property in question and
the borrower promises, but fails, to execute a mortgage on the
Based on a fixed time Not fixed time property after it is purchased to secure the loan. Nor does the use
of money given to one for the purchase of property raise a
resulting trust on the property in favor of the donor.
Trust in favor of borrower - When money is borrowed to purchase
Art. 1448. There is an implied trust when property is sold, and property, and the conveyance is made, not to the borrower, but to
the legal estate is granted to one party but the price is paid by the lender who takes title to the property in his own name in
another for the purpose of having the beneficial interest of the order to secure the loan, a resulting trust in the property,
property. The former is the trustee, while the latter is the binding the lender or payor (trustee) in favor of the
beneficiary. However, if the person to whom the title is conveyed borrower (beneficiary), arises.
is a child, legitimate or illegitimate, of the one paying the price of
the sale, no trust is implied by law, it being disputably presumed  An agreement between the parties whereby the property
that there is a gift in favor of the child. purchased shall be considered sold to the trustee in case
the beneficiary fails to reimburse him is tantamount to a
pactum commissorium, which is expressly prohibited by
Sale to a party but price paid by another Article 2088 of the Civil Code for in such case there would
be automatic appropriation of the property by the trustee
 General rule. — A resulting trust arises in favor of a in the event of failure of the beneficiary to pay the loan
person from whom a consideration comes for a
conveyance of property, whether realty or personalty, to
another. The presumption is that he who pays for a thing Art. 1451. When land passes by succession to any person and he
intends a beneficial interest therein. (purchase money causes the legal title to be put in the name of another, a trust is
resulting trust) established by implication of law for the benefit of the true
 Exceptions. — However, no trust is implied if the person to owner.
whom the legal estate is conveyed is a child, legitimate or
illegitimate, of the payor, because it is presumed that a gift
or donation was intended in favor of the child. This Legal title to land inherited by heir placed in name of
presumption of a gift is rebuttable by proof of a contrary another
intention, and on such rebuttal, a resulting trust arises  Where a person who has acquired land by inheritance
causes the legal title to be placed in the name of another, a
resulting trust is presumed in law in favor of the true
Art. 1449. There is also an implied trust when a donation is owner, the heir.
made to a person but it appears that although the legal estate is
transmitted to the donee, he nevertheless is either to have no
beneficial interest or only a part thereof. Art. 1452. If 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, a trust is created by force of law in
EXAMPLE: favor of the others in proportion to the interest of each.
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Legal title to property purchased taken in one co-owner Marlene was indebted to Susan. For the sole purpose of
guaranteeing her debt, Marlene sold her parcel of land to Susan.
Ex.
Here, a trust has been created. If Marlene pays her debt when it
Uy Aloc v. Cho Jan Jing becomes due, Marlene may demand the resale of the property to
her.
19 Phil. 202
FACTS: Some Chinese merchants bought a lot with a house on it
so that the same could be used as their clubhouse. The property Art. 1455. When any trustee, guardian or other person holding a
was registered under the name of only one of them. The fiduciary relationship uses trust funds for the purchase of
registered owner leased the property, collected rents therefor, property and causes the conveyance to be made to him or to a
and when asked for an accounting, refused to so account on the third person, a trust is established by operation of law in favor of
ground that he was the owner thereof. the person to whom the funds belong.

HELD: He is a mere trustee, and is therefore obliged to render

proper accounting. The beneficiaries are all the members of the
Purchase of property with use of trust funds
club.
 Resulting trust
Presumption That Shares Are Equal
 an agent is bound to return to the principal the property
 The shares or interest of co-owners are presumed to be acquired with the funds and at the instance of the
equal. principal. He holds the property in trust for his employer
or principal who can bring an action to compel a
conveyance to him subject to the rights of an innocent
Art. 1453. When property is conveyed to a person in reliance
purchaser for value.
upon his declared intention to hold it for, or transfer it to another
or the grantor, there is an implied trust in favor of the person This article applies to
whose benefit is contemplated.
1. any trustee
 trust established by virtue of this article is based on the 2. guardian
promise or representation of the grantee to hold the 3. or other person holding a fiduciary relationship (Art.
property conveyed for, or transfer it to another or the 1455) (like an agent; therefore, the acquisitions of the
grantor. The grantee is estopped from asserting agent inure to the benefit of his principal).
ownership in himself by denying his representation as
Example
against the person for whose benefit the implied trust is
created. An agent using his principal’s money purchases land in his own
name. He also registers it under his name. Here, he will be
Example: Jose bought from Pedro a parcel of land and it was
considered only a trustee, and the principal is the beneficiary.
conveyed to him (Jose) on Jose’s statement or declaration that he
The principal can bring an action for conveyance of the property
would hold it in behalf of Carlos. Here, Jose is merely the trustee,
to himself, so long as the rights of innocent third persons are not
while Carlos is the beneficiary.
adversely affected.

Art. 1454. If an absolute conveyance of property is made in order

Art. 1456. If property is acquired through mistake or fraud, the
to secure the performance of an obligation of the grantor toward
person obtaining it is, by force of law, considered a trustee of an
the grantee, a trust by virtue of law is established. If the
implied trust for the benefit of the person from whom the
fulfillment of the obligation is offered by the grantor when it
property comes.
becomes due, he may demand the reconveyance of the property
to him.  Constructive trust
 Ordinarily, the creditor will require the execution by the Example:
debtor of a mortgage (see Art. 2124.) or a pledge (see Art.
Bella was given a car by Mina although it should have been given
2093.) as security for the fulfillment of the latter’s
to Erlinda. Bella is considered as merely the trustee of the car for
obligation. In this case, the mortgagee or pledgee does not
the benefit of Erlinda.
become a trustee. But if an absolute conveyance of
property is made instead in order to guarantee the
performance of an obligation of the grantor toward the
Art. 1457. An implied trust may be proved by oral evidence.
grantee, an implied trust is created by operation of law for
the benefit of the grantor.
Example:

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