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TITLE V.

TRUSTS

Distinguished from Stipulation Pour Autrui

Chapter 1. GENERAL PROVISIONS


ART. 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 whose benefit the trust has been created
is referred to as the beneficiary.

TRUST
- Right to the beneficial enjoyment of property
- The legal title to which is vested in another
- It is a fiduciary relationship subjecting the person holding the
same to the obligation for another persons benefit.
ELEMENTS
1) PARTIES to the trust
a) TRUSTOR or settler establishes the trust
b) TRUSTEE holds property in trust for anothers benefit
c) BENEFICIARY (CESTUI QUE TRUST) person for whose
benefit the trust has been created
NOTE: The trustor may also be the beneficiary.
2) TRUST PROPERTY or trust estate or subject matter of the trust
CHARACTERISTICS
1) FIDUCIARY RELATIONSHIP
2) CREATED BY LAW OR BY AGREEMENT
3) LEGAL TITLE HELD BY ONE, and EQUITABLE/BENEFICIAL TITLE
HELD BY ANOTHER
Distinguished from Guardianship/Executorship
Trust
Has Legal Title
to the property

Guardianship
Executorship
Does not have any legal title over
the property

Trust
May exist because of a
legal provision or
agreement.
Refers to a specific
property

Stipulation Pour Autrui


(Contract that confers
benefit on a third-party
beneficiary)
Can arise only in the
case of contracts.
Refers to specific
property or other things.

ART. 1441 Trusts are either express or implied. Express trusts are created by
the intention of the trustor or of the parties. Implied trusts come into being by
operation of law.

CLASSES OF TRUST
1) EXPRESS: created by assent of the parties, or by the intention of the
trustor
2) IMPLIED: created by operation of law
a) RESULTING TRUSTS: imposed by law to carry out actual or
presumed intent of the parties, where the express trust fails
b) CONSTRUCTIVE TRUSTS: est. by law, regardless of intention, to
prevent fraud, oppression, or unjust enrichment
Salao, et al v. Salao
Property in question was a fishpond bought by brother and sister,
Ambrosia and Juan Salao as co-owners. After the death of Ambrosia, the
heirs of the nephew of the co-owners sued for reconveyance claiming that
the property was held to be in trust to their father. All they presented was
oral testimony.
No Express Trust Oral testimony cannot prove
No Implied
o No Resulting No intent from the trustor or the parties
o No Constructive Torrent title was not initiated by fraud

ART. 1442 The principles of the general law of trusts, insofar as they are not in
conflict with this Code, the Code of Commerce, the Rules of Court and special
laws are hereby adopted.

PRINCIPLES OF GEN. LAW OF TRUSTS MERELY SUPPLETORY.


Must not be in conflict with those enumerated in the provision.
Gelano v CA
Lawyer of a company continued to be a trustee with regard to matters of
litigation despite expiration of the 3year period after dissolution of the
company. This is in substantial compliance to the Corporation Code.

Chapter 2. EXPRESS TRUSTS


ART. 1443 No express trusts concerning an immovable or any interest therein
may be proved by parol evidence.

ADMINISTRATION OF TRUST (BI [g] MAC)


a) Trustee must file a Bond
b) Trustee must make an Inventory of the real and personal property
in trust
c) Trustee must Manage and dispose of the estate and faithfully
discharge his trust in relation thereto.
d) Trustee must render a true and clear Account
e) Trustee Cannot acquire the property held in trust by prescription
as long as trust is admitted.

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

EFFECT OF DECLINATION BY TRUSTEE


General Rule: Trust continues. Court appoints new trustee.
Exception: Contrary should appear in the instrument.

EXPRESS TRUSTS DOES NOT PRESCRIBE


MAY NOT BE PROVED BY ORAL EVIDENCE
FORMALITIES RE EXPRESS TRUSTS
- FOR ENFORCEABILITY
- FOR TRUST OVER PERSONAL PROP, ORAL AGREEMENT IS VALID
& ENFORCEABLE BET. THE PARTIES
RD
- RE 3 PERSONS: trust in PUBLIC INSTRUMENT & REGISTERED in
Registry of Property if it concerns real property

ART. 1446 Acceptance by the beneficiary is necessary. Nevertheless, if the

ART. 1444 No particular words are required for the creation of an express trust,

TERMINATION OF EXPRESS TRUST (LO-RAMMER)


a) LOSS (physical loss or legal impossibility) OF SUBJECT
b) ORDER OF THE COURT
c) RESCISSION OR ANNULMENT
d) ACCOMPLISHMENT OF PURPOSE OF THE TRUST
e) MUTUAL AGREEMENT by ALL PARTIES
f) MERGER
g) EXPIRATION OF the TERM
h) RESOLUTORY CONDITION

it being sufficient that a trust is clearly intented.

CREATION OF EXPRESS TRUST


1) DECLARATION OF TRUSTOR THAT HE HOLDS PROPERTY IN
TRUST
2) CONVEYANCE TO TRUSTEE INTER VIVOS OR BY TESTAMENT
CLEAR INTENTION is needed to create a trust
CAPACITY
- TRUSTOR capacitated to TRANSFER PROPERTY
- TRUSTEE capacitated to HOLD PROPERTY & OBLIGATE HIMSELF
- BENEFICIARY capacitated to RECEIVE GRATUITOUSLY FROM
TRUSTOR

trust imposes no onerous condition upon the beneficiary, his acceptance shall be
presumed, if there is no proof to the contrary.

NECESSITY OF ACCEPTANCE BY THE BENEFICIARY


- may be express, implied, or presumed
WHEN ACCEPTANCE IS PRESUMED
- Benefit is PURELY GRATUITOUS

Chapter 3. IMPLIED TRUSTS


ART 1447 The enumeration of the following cases of implied trust does not
exclude others established by the general law of trust, but the limitation laid down
in Article 1442 shall be applicable.

TRUSTS RECOGNIZED ONLY IF NOT IN CONFLICT W/ CC, Code of


Commerce, RoC, & special laws
Victoria v. Leunberger
SG, administratix of property, sold a lot to the Municipality of Victoria to be
used as a cemetery. Municipality failed to register the sale. SG died, soon
after her granddaughter NL claimed to have inherited the land asserting
that Torrens Title protects the property. Court ruled that she has no right
and no ownership. Torrens Title was not established as means of
acquisition, only to confirm and register. Land is held in Trust by NL and
the Municipality as the Beneficiary.
IMPLIED TRUSTS as are specified by the Code dont exclude others est.
by gen. law, insofar as theyre not in conflict w/ the CC & special laws.
Provable by oral evidence
RESULTING TRUSTS (ACIDD)
1448 Property Where Title Is Not Given to Payer but to Another
1452 Property is in the Name of Only One of the Co-Buyers
1451 Title to Inherited land is not in owners name
1453 Person Declares his intent to hold property for someone else
1449 Donee does not get full ownership of Benefit
CONSTRUCTIVE (S-STF-M)
1450 Conveyance of Property to serve as Security
1454 Absolute Conveyance for Security
1455 Use of Trust Fund
1456 Property acquired through Mistake or Fraud.

ART 1448 There is an implied trust when 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. However, if the person to whom the title is conveyed 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 that there is a gift in favor of the child.

No implied trust if document expresses different intent


Resulting trust
Example: A buys land from B. A Pays to have beneficial interest but legal
title is given to C. C is trustee, A is beneficiary. However, suppose C is
the child of A. No implied trust is created, it is presumed to be a gift.

ART 1449 There is also an implied trust when a donation is 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.
WHEN DONEE DOESNT GET FULL OWNERSHIP OF BENEFIT
Resulting trust
Example: A donated land to B. but it was agreed that B is supposed to
only have 1/3 of the products. B is a trustee.

ART 1450 If 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, a trust arises by operation of law in favor of the
person to whom the money is loaned or for whom its is paid. The latter may
redeem the property and compel a conveyance thereof to him.

CONVEYANCE OF PROPERTY SO IT MAY SERVE AS SECURITY


Constructive trust
Example: A wants to buy a piece of land from B but A has no money. A
asked C to pay B. The Land was given in Cs name. Land is supposed to
be a security till As debts are paid. In this case, C is the trustee and A is
the beneficiary.
TRUST RECEIPT: security transaction intended to aid in financing
importers & retail dealers who dont have sufficient funds to finance
importation or purchase of merchandise, and who may not be able to
acquire credit except thru utilization, as collateral, of the merchandise
imported or purchased

ART. 1451 When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established by implication of
law for the benefit of the true owner.

WHEN TITLE TO LAND ISNT TO OWNERS NAME


Resulting trust
Example: A inherited a piece of land from his father, but A caused the
legal title to be put in the name of X.

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 favor of the others in proportion to the interest of
each.

WHEN PROPERTY IS IN THE NAME OF ONLY ONE OF THE COBUYERS


Resulting trust

Example: Uy Aloc v. Cho Jan Jing


Chinese Merchants bought a lot with a house to be used as their
clubhouse. The property was registered under the name of only one of
them. The registered owner is a mere trustee, and is therefore obliged to
render proper accounting. The beneficiaries are all of the members of the
club.
Note: The shares or interest of co owners are presumed to be equal.

ART 1453 When property is conveyed to a person in reliance 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 whose benefit is contemplated.

WHEN A PERSON DECLARES HIS INTENT TO HOLD PROPERTY


FOR SOMEONE ELSE
Resulting trust
Example: A bought from B a parcel of land and was conveyed to him. A
declared he would hold it in behalf of B.

ART 1454 If an absolute conveyance of property is made in order to secure the


performance of an obligation of the grantor toward the grantee, a trust by virtue of
law is established. 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.

ABSOLUTE CONVEYANCE MADE FOR SECURITY PURPOSE


Constructive trust
Example: M was indebted to S. In order to guarantee her debt, M sold her
parcel of land to S. Upon Ms payment, she may demand the resale of her
property to her.

ART 1455 When 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, a trust is established by
operation of law in favor of the person to whom the funds belong.

USE OF TRUST FUNDS


Constructive trust
Example: An agent using his principals money purchases the land in his
own name and registers it under his own name. the Principal may bring
an action for rconveyance.
Sing Joco v. Sunyantung, et al.
A was a confidential employee of B. B intented to purchase an hacienda
and he told A about it and of his option to buy the same. Thinking that the
purchase seems good, A, in his wifes name, bought the hacienda, to
prejudice B. A was held to be guilty of breach of trust.

ART 1456 If 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.

PROPERTY ACQUIRED THRU MISTAKE OR FRAUD


Constructive trust
Nature of Mistake Mistake made by third person, not made by a party to
a contract. If made by the party, no trust is created.
Nature of Fraud Extra-contractual
Right of Action exercised against the trustee. Should be filed within four
years upon discovery of the fraud.
Example: M gave B a car, which should have been Es. B is merely a
trustee and may be ordered to reconvey the property to the proper
beneficiary.

ART 1457 An implied trust may be proved by oral evidence.


PROOF OF IMPLIED TRUST applies whether property is real or
personal
ORAL EVIDENCE FOR TRUST MUST BE TRUSTWORTHY
(Salao v. Salao)
PRESCRIPTION
(Ramos et. Al v. Gregoria Ramos)
Express Trust Does not prescribe
Exception: trustee repudiated trust
Implied Trust
Resulting Trust Does not Prescribe
Exception: may prescribe if the trustee has expressly
repudiated the trust.
Constructive Prescribes (Justified merely by equity to satisfy the
demands of justice)
Prescription for the reconveyance of real property based on implied trust
is 10 years. (Spouses Dico v. Vizcaya)