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Trusts Reviewer

Trusts Reviewer

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Published by roansalanga

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Published by: roansalanga on Oct 15, 2011
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Roan Salanga Trusts Page 1 of 8
BUSINESS TRUSTS
Nature and Classification of TrustsI.
 
Definition and Essential Characteristic of Trust
1440. 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 whosebenefit the trust has been created is referred to as the beneficiary.
 
Trust
legal relationship between one person having anequitable ownership in property and another person owing thelegal title to such property, the equitable ownership of theformer entitling him to the performance of certain duties andthe exercise of certain powers by the latter
 
Characteristics of a trust or express trust: (Morales v. CA)a.
 
It is a relationshipb.
 
It is a relationship of a fiduciary characterc.
 
It is a relationship with respect to property, not one involvingmerely personal dutiesd.
 
It involves the existence of equitable duties imposed upon theholder of the title to the property to deal with it for the benefitof anothere.
 
It arises as a result of a manifestation of intention to create therelationship1.
 
Based on Equity
1442. The principles of the general law of trusts, insofar as they arenot in conflict with this Code, the Code of Commerce, the Rules of Court and Special laws are hereby adopted.
2.
 
Distinguished from AgencyAgency TrustFiduciary in natureEssentially revocable Essentially obligatory in its termsand period and can only berescinded based on breach of trustAgent possesses propertyunder agency for and in thename of the ownerTrustee takes legal or naked title tothe subject matter of trustAgent must act uponinstructions of the ownerTrustee acts on his own businessdiscretionAgent enters into contract inthe name of the principalTrustee enters into contracts in hisown nameAgent cannot be sued Trustee is liable directly and may besued in his trust capacityII.
 
Kinds of Trust
1441. Trusts are either express or implied. Express trusts are createdby the intention of the trustor or of the parties. Implied trusts comeinto being by operation of law.
A.
 
Express Trusts1.
 
Essence and Definition of Express Trusts
 
Express trust
one created by the intention of the trustor orof the parties (Art. 1441)
o
 
Those created by direct and positive acts of the parties, bysome writing or deed or will or by words evidencing anintention to create a trust
 
Essential Characteristics of Express Trustsa.
 
Nominate and Principal
for having been given particularname and essentially defined by the Civil Code, and notneeding another contract to be valid and bindingb.
 
Unilateral
only the trustee assumes obligations to carryon the trust for the benefit of the beneficiaryc.
 
Primarily gratuitous
supported by the consideration of liberality, especially when Art. 1446 provides that
beneficiary’s acce
ptance is presumedd.
 
Real
an express trusts constitute a real contract, that is, itis not merely perfected by a mere meeting of mindsbetween the trustor and trustee to constitute a trust.Indeed, no trust relationship exists, until and unless, theproperty constituting the res is conveyed to the trustee.e.
 
Preparatory
not constituted for its own sake in that thetrust relationship is essentially a medium established bythe trustor to allow full authority and discretion on theparty of the trustee to enter into various juridical acts on
 
Roan Salanga Trusts Page 2 of 8
the
corpus
to earn income or achieve other goals given forthe benefit of the beneficiary
o
 
An express trust may create a form of contract
 pour atrui 
 f.
 
Fiduciarya)
 
Essentially Contractual in Nature; Need No ParticularWordings
1444. No particular words are required for the creation of anexpress trust, it being sufficient that a trust is clearly intended.
 
What important is whether the trustor manifested anintention to create the kind of relationship which in law isknown as trust. (Julio v. Dalandan)
 
A clear intention to create trust must be shown, and theproof of fiduciary relationship must be clear andconvincing. (Canezo v. Rojas)b)
 
Based on Property Relationship
 
What distinguishes a trust from other relations is theseparation of legal title and equitable ownership of theproperty. In a trust relation, legal title is vested in thefiduciary while equitable ownership is vested in a
cestui que trust 
(Canezo)
 
Trust, in its technical sense, is a right of property, real orpersonal, held by one party for the benefit of another. (Guyv. CA)c)
 
Fiduciary
 
The juridical concept of a trust, which in a broad senseinvolves, arises from, or is the result of, a fiduciary relationbetween the trustee and the
cestui que trust 
as regardscertain property
real, personal, funds or money, orchoses in action
must not be confused with an action forspecific performance. A trustee cannot invoke the statuteof limitations to bar the action and defeat the rights of the
cestuis que trustent 
. (Pacheco v. Arro)2.
 
Express Trust must be Proven
 
An express trust cannot be proven by parol evidence.
 
A trust must be proven by clear, satisfactory, and convincingevidence. It cannot rest on vague and uncertain evidence oron loose, equivocal or indefinite declarations.
 
Rule: the burden of proving the existence of a trust is on theparty asserting its existence
 
The presence of the following elements must be proved:a)
 
a trustor or settler who executes the instrument creatingthe trustb)
 
a trustee, who is the person expressly designated to carryout the trustc)
 
the
trust res
, constituting of duly identified and definitereal propertiesd)
 
the
cestui que trust 
, or beneficiaries whose identity mustbe clear3.
 
Kinds of Express TrustA.
 
Express Trust involving Immovable
1443. No express trusts concerning an immovable or any interest therein may be proved by parol evidence.
 
The existence of express trusts concerning real propertymay not be established by parol evidence; thus, it must beproven by some writing or deed
o
 
However, if the parties to the action, during the trial,make no objection to the admissibility of the oralevidence to support the contract, there is deemed to bea waiver
 
The requirement that express trust over immovable mustbe in writing should be added as being governed by theStatute of Frauds (Gamboa v. Gamboa)B.
 
Contractual/
Inter vivos
Trust
 
An
inter vivos
trusts are expressed trust pursued in theform of donation, and which therefore become solemncontracts which must comply with the solemnitiesmandated by the Law on Donations
 
Roan Salanga Trusts Page 3 of 8
C.
 
Testamentary Trust
 
When an express trust is created under the terms of thelast will and testament of the testator, it is a testamentarytrust and is governed by the Law on Succession
o
 
Unless the will conforms with the solemnities andconditions set by law, it will be void together with thetestamentary trust sought to be created therein
 
A testamentary trust was created by a provision in the willwhereby the testator proposed to create trust for thebenefit of a secondary school to be established in the townof Tayabas, naming as trustee the
ayutamiento
of the townor if there be none, then the civil governor of the Province
of Tayabas. (Gov’t of the Phil. Islands v. Abadilla)
 D.
 
Pension or Retirement Trusts
 
Publicly-regulated trusts would be those where the Stateprovides the vehicle by which institutions are allowed toadminister large funds for the benefit of the public. Amongsuch funds created under the law would be the pensionand benefits funds administered by the GSIS, the SSS andthe Pag-Ibig Fund. Tax laws provide for incentives to thesetting-up of retirement funds for employees. All suchfunds are really being administered for the beneficiariesthereof through the medium of trust.E.
 
Charitable Trusts4.
 
Parties to an Express Trusta)
 
Trustor
a person who establishes a trust (Art. 1440)b)
 
Trustee
one in whom confidence is reposed as regardsproperty for the benefit of another person (Art. 1440)i.
 
Trustee must have legal capacity to accept the trustii.
 
Failure of Trustee to Assume the Position
1445. No trust shall fail because the trustee appointed declinesthe designation, unless the contrary should appear in theinstrument constituting the trust.
 
In case of refusal to accept the trust by the trustee, thecourt will appoint a trustee
 
But, if the appointment of the trustee is a materialprovision, the trustor can provide that a refusal of thetrustee to accept the trust shall result in the failure ornullification of the sameiii.
 
Obligations of the Trustee (Rule 98 of Rules of Court)
Sec. 1. Where trustee appointed. - A trustee necessary to carry into effect the provisions of a will or written instrument shallbe appointed by the Court of First Instance in which the will was allowed if it be a will allowed in the Philippines, otherwiseby the Court of First Instance of the province in which theproperty, or some portion thereof, affected by the trust issituated.Sec. 2. Appointment and powers of trustee under will;Executor of former trustee need not administer trust. - If atestator has omitted in his will to appoint a trustee in thePhilippines, and if such appointment is necessary to carry intoeffect the provisions of the will, the proper Court of FirstInstance may, after notice to all persons interested, appoint atrustee who shall have the same rights, powers, and duties,and in whom the estate shall vest, as if he had been appointedby the testator. No person succeeding to a trust as executor oradministrator of a former trustee shall be required to acceptsuch trust.Sec. 3. Appointment and powers of new trustee under writteninstrument. - When a trustee under a written instrumentdeclines, resigns, dies, or is removed before the objects of thetrust are accomplished, and no adequate provision is made insuch instrument for supplying the vacancy, the proper Courtof First Instance may, after due notice to all personsinterested, appoint a new trustee to act alone or jointly withthe others, as the case may be. Such new trustee shall haveand exercise the same powers, rights, and duties as if he hadbeen originally appointed, and the trust estate shall vest in himin like manner as it had vested or would have vested, in thetrustee in whose place he is substituted; and the court may order such conveyance to be made by the former trustee orhis representatives, or by the other remaining trustees, as may 

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hahaha. galing. thanks roan! :))
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