Trust

Definition: The legal relationship between one person having an equitable ownership of property and another person owning
the legal title to such property, the equitable ownership of the former entitling him to the performance of certain
duties and the exercise of certain powers by the latter.

Parties: Trustor – person who establishes a trust

Trustee – one with whom confidence is reposed
Beneficiary – the person for whose benefit the trust (cestui que trust)

Characteristics: 1. Relationship
2. Fiduciary
3. With respect to property
4. Existence of equitable duties imposed upon the holder of the title
5. Arises as a result of a manifestation of intention to create the relationship

Kinds: 1. Express trust – created by intention of the trustor or of the parties by direct and positive acts, some writing or
deed, will, or words either expressly or impliedly evincing an intention to create a trust
2. Implied trust – trusts by operation of law, indirect trusts, and involuntary trusts, arising by legal implications
based on the presumed intention of the parties or on equitable principles independent of the particular intention of
the parties. Deducible from the nature of the transaction without being expressed

Distinction
a. Express trust – by intention of the parties; implied trust – by operation of law
b. Express trust – no immovable or any interest may be proved by oral evidence; implied trust – may be proven by oral
evidence provided that it is trustworthy and received by the courts with extreme caution
c. Prescription follows an implied trust

Express trust
Elements
1. A trustor or settlor who executes the instrument creating the trust
2. A trustee who is the person expressly designated to carry out the trust
3. The trust res consisting of duly identified and definite real properties
4. The cestui que trust or beneficiaries whose identity must be clear

 Beneficiary must accept the trust.

 Such acceptance is presumed unless proven otherwise if the trust imposes no onerous condition upon him.
 Notice is not relevant to the acceptance.
 Consent of beneficiary is also not relevant in the creation of the trust.
 The general rule is that the beneficiary is presumed to have accepted the trust.

If trust is declined by TRUSTEE – no trust shall fail, unless the contrary appears in the instrument constituting the trust

Creation
 Clear intention of the parties to create the trust is sufficient
 Proof of fiduciary relationship must be clear and convincing
 Creation of an express trust must be manifested with reasonable certainty
 Cannot be inferred from loose and vague declarations or from ambiguous circumstances

Express trust over Immovable property

 May not be established by parol evidence
 Must be proven by some writing or deed
 Ringor vs. Ringor – oral testimony was allowed to prove existence of trust partially performed - stressed
that what is important is that there is an intention to create a trust
o Under the doctrine of partial performance recognized in this jurisdiction, the objection to the oral
character of a trust may be overcome or removed where there has been partial performance of the
terms of the trust as to raise an equity in the promise. A trustee may perform the provisions of the
 trust, and if he does, the beneficiary is protected in the benefits that he has received from such
performance. Thus, when a verbal contract has been completed, executed or partially consummated,
its enforceability will not be barred by the Statute of Frauds, which applies to an executory agreement.

Prescription: Non-adversity of the possession of the trustee does not allow him to acquire by prescription the property held
 A trustee cannot acquire by prescription the ownership of property entrusted to him
 An action to compel a trustee to convey property registered in his name in trust for the benefit of the
beneficiary does not prescribe
 The defense of prescription cannot be set up in an action to recover property held by a person in trust for
the benefit of another
 Property held in trust can be recovered by the beneficiary regardless of the lapse of time
Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust for the
recovery of the property held in trust where:
a. The trustee has performed unequivocal acts of repudiation amounting to an ouster of the beneficiary
b. Such positive acts of repudiation have been made known to the beneficiary
c. The evidence is clear and conclusive

Implied Trust
- Enumeration is not exclusive, must not be in conflict with the New Civil Code, the Code of Commerce, the Rules of
Court, and other special laws

Kinds: Constructive trusts and resulting trusts

Constructive trust
By operation of law and not by agreement or intention, arising in order to satisfy the demands of justice
 Also known as trusts el maleficio, trusts ex delicto, trusts de son tort
 Construed against one who by actual or constructive fraud, duress, abuse of confidence, commission of a
wrong or any form of unconscionable conduct, artifice, concealment of questionable means, or who in any
way against equity and good conscience has obtained or holds the legal right to property which he ought
not hold and enjoy
 Characterized as fraud-rectifying trust, imposed by equity to satisfy the demands of justice and to defeat or
prevent the wrongful act of one of the parties
 Article 1450
Requisites:
1. A property was purchased by one in behalf of another
2. The purchaser used his own funds because the other person does not have sufficient funds
3. The property is then transferred in the name of the lender or payer to secure the payment of the debt
Effects:
1. Results in favor of the person to whom the money is loaned or for whom it is paid (beneficiary); the
person who paid for the property is deemed as the trustee
2. Beneficiary may redeem the property and compel a conveyance to him only after he reimburses the
trustee of the purchase price
 Article 1454
Requisites:
1. An absolute conveyance of property is made by the grantor in favor of the grantee
2. The conveyance is made to secure the performance of an obligation of the grantor to the grantee
Effects:
1. A constructive trust is established
2. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the
reconveyance of the property to him
 Article 1455
Requisites:
1. A property is purchased by a trustee, guardian, or other person holding a fiduciary relationship
2. He uses trust funds in said transactions
3. He causes the conveyance to be made to him or to a third person
Effects:
1. A constructive trust is established by operation of law
2. The beneficiary of the trust is the person to whom the funds belong
  Article 1456
Requisites:
1. A property is acquired
2. Either through mistake or fraud (by either the grantor or the grantee)
Effects:
1. A constructive trust is established by a force of law
2. The person obtaining the property is considered a trustee for the benefit of the person for whom the
property comes
 Period of prescription
10 years – from the date of the issuance of the transfer certificate of title which operates as constructive notice

Resulting trust
From the nature or circumstances of the consideration involved in a transaction whereby one person becomes
invested with legal title but is obliged in equity to hold his title for the benefit of another
 Based on the equitable doctrine that valuable consideration and not legal title is determinative of equitable
title or interest and is always presumed to have been contemplated by the parties
 Intent is presumed as it is not expressed in the instrument or deed of conveyance and is to be found in the
nature of their transactions
 Described as “intention-enforcing trusts”
 Article 1448
Purchase money resulting trust – created in order to effectuate what the law presumes to have been the
intention of the parties in the circumstances that the person to whom the land was conveyed holds it as
trustee for the person who supplied the purchase money
Requisites:
1. An actual payment of money, property or services, or an equivalent, constituting valuable
consideration
2. Such consideration must be furnished by the alleged beneficiary of a resulting trust
Effects:
1. A purchase money resulting trust is established
2. The person to whom the title is conveyed is the trustee; the person who furnished the consideration is
the beneficiary
Exceptions:
1. If the person to whom the title is conveyed is a child of the one paying the price of the sale (presumed
as a gift)
2. When actual contrary intention is proved
3. Where the purchase is made in violation of an existing statute and in evasion of its express provision,
no trust can result in favor of the party who is guilty of the fraud
 Article 1449
Requisites:
1. A donation is made to a person and legal title is conveyed to done
2. Done does not have beneficial interest of the property donated or only a part thereof
Effect:
Creates a resulting trust where the done becomes the trustee of the real beneficiary
 Article 1451
Requisites:
1. A parcel of land passes by succession to any person
2. The transferee causes the legal title to be put in the name of another
Effect:
A resulting trust is established by implication of law where the one who succeeds is the beneficiary and the
one to whom the land has been registered is the trustee
 Article 1452
Requisites:
1. Two or more persons agree to purchase property
2. By common consent, the legal title is conveyed in the name of one of them for the benefit of all
Effect:
A resulting trust is created by force of law where the registered owner is the trustee in favor of the others in
proportion to the interest of each
 Note:
The trustor-beneficiary is not estopped from proving its ownership over the property held in trust when the
purpose is not to contest the disposition or encumbrance of the property in favor of an innocent purchaser
Art. 1452 recognizes the lawful ownership of the trustor-beneficiary over the property registered in the
name of the trustee
The Torrens system was not established to foreclose a trustor or beneficiary from proving its ownership of a
property titled in the name of another person when the rights of an innocent purchaser are not involved
 Article 1453
Requisites:
1. A property is conveyed to a person
2. In reliance upon the declared intention of the transferee to hold the property for, or transfer it to
another or the grantor
Effect:
A resulting trust is created in favor of the person whose benefit is contemplated
Example:
In a simulated conveyance of a real property, the vendee acquires no title but merely becomes a trustee for
the benefit of its real owner. The beneficiary is entitled to enforce the trust notwithstanding the
irrevocability of the Torrens title.
Note:
As an exception to the law on trust, a trust or a provision in its terms is invalid if the enforcement of the
trust or provision would be against public policy, even though its performance does not involve the
commission of a criminal or tortuous act by the trustee
Parties must necessarily be subject to the same limitations on allowable stipulations in ordinary contracts
Contracts must not be contrary to law, morals, good customs, public policy, and public order
 Effect of repudiation
The rule of imprescriptibility may apply as long as the trustee has not repudiated the trust
Once the trust is repudiated, it is converted into a constructive trust and is therefore subject to prescription
Repudiation requires that:
a. The trustee has performed unequivocal acts of repudiation amounting to an ouster of the beneficiary
b. Such positive acts of repudiation have been made known to the beneficiary
c. The evidence thereon is clear and convincing

Distinction
 In resulting trust, a trustee cannot acquire by prescription a property entrusted to him unless he repudiates the
trust; in constructive trust, prescription may supervene even if the trustee does not repudiate the relationship
 A constructive trust does not emanate from, or generate a fiduciary relation; an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relation
 In a constructive trust, there is neither a promise nor any fiduciary relation and the trustee neither accepts any trust
nor intends holding the property for the beneficiary, the relation of the trustee and the beneficiary does not in fact
exist and the holding of a constructive trust is for the trustee himself and is at all times adverse

Laches
- The failure to assert a right for an unreasonable and unexplained length of time, warranting a presumption of the
party entitled to assert it has either abandoned or declined to assert it
- Based upon public policy which requires the discouragement of stale claims for the peace of society
 Both constructive and resulting trust may be barred by laches (question of inequity in permitting a claim to be
enforced, applying independently of prescription which is a question of time
 Prescription is statutory, laches is equitable

 Effect of death of trustee – terminates the trust (especially if the trust is personal and the trustor intended the trustee to
administer it)
 Trustee obtaining Torrens title cannot repudiate by relying on registration
 Trust pursuit rule – where certain property entrusted to an agent and impressed by the law with a trust in favor of the
principal is wrongfully diverted, such trust follows the property in the hands of a third person and the principal is
ordinarily entitled to pursue and recover it so long as the property can be traced and identified and no superior equities
have intervened.