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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 person’s benefit.
ELEMENTS
1) PARTIES to the trust
a) TRUSTOR or settler – establishes the trust
b) TRUSTEE – holds property in trust for another’s 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

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. if there is no proof to the contrary.FOR ENFORCEABILITY . 1445 No trust shall fail because the trustee appointed declines the designation. if the ART. the Rules of Court and special laws are hereby adopted.FOR TRUST OVER PERSONAL PROP. Court appoints new trustee. Must not be in conflict with those enumerated in the provision. EFFECT OF DECLINATION BY TRUSTEE General Rule: Trust continues. implied. 1442 The principles of the general law of trusts.RE 3 PERSONS: trust in PUBLIC INSTRUMENT & REGISTERED in Registry of Property if it concerns real property ART. EXPRESS TRUSTS ART.may be express. PRINCIPLES OF GEN. Exception: Contrary should appear in the instrument. 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. 1444 No particular words are required for the creation of an express trust. Nevertheless. 1446 Acceptance by the beneficiary is necessary. unless the contrary should appear in the instrument constituting the trust.Benefit is PURELY GRATUITOUS Chapter 3. This is in substantial compliance to the Corporation Code. . his acceptance shall be presumed. but the limitation laid down in Article 1442 shall be applicable. IMPLIED TRUSTS ART 1447 The enumeration of the following cases of implied trust does not exclude others established by the general law of trust.ART. ORAL AGREEMENT IS VALID & ENFORCEABLE BET. ART. THE PARTIES RD . 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.TRUSTOR capacitated to TRANSFER PROPERTY . NECESSITY OF ACCEPTANCE BY THE BENEFICIARY . EXPRESS TRUSTS DOES NOT PRESCRIBE MAY NOT BE PROVED BY ORAL EVIDENCE FORMALITIES RE EXPRESS TRUSTS .TRUSTEE capacitated to HOLD PROPERTY & OBLIGATE HIMSELF . 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. 1443 No express trusts concerning an immovable or any interest therein may be proved by parol evidence. insofar as they are not in conflict with this Code. the Code of Commerce. LAW OF TRUSTS MERELY SUPPLETORY.BENEFICIARY capacitated to RECEIVE GRATUITOUSLY FROM TRUSTOR trust imposes no onerous condition upon the beneficiary. 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 . Chapter 2. or presumed WHEN ACCEPTANCE IS PRESUMED .

it is presumed to be a gift. legitimate or illegitimate. WHEN DONEE DOESN’T GET FULL OWNERSHIP OF BENEFIT Resulting trust Example: A donated land to B. IMPLIED TRUSTS as are specified by the Code don’t exclude others est. No implied trust if document expresses different intent Resulting trust Example: A buys land from B. of the merchandise imported or purchased ART. 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. A Pays to have beneficial interest but legal title is given to C. C is the trustee and A is the beneficiary. insofar as they’re not in conflict w/ the CC & special laws. 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. The Land was given in C’s name. RoC. Leunberger SG. 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. & special laws Victoria v. No implied trust is created. 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. C is trustee. a trust arises by operation of law in favor of the person to whom the money is loaned or for whom its is paid. a trust is created by force of law in favor of the others in proportion to the interest of each. but it was agreed that B is supposed to only have 1/3 of the products. 1451 When land passes by succession to any person and he causes the legal title to be put in the name of another. as collateral. if the person to whom the title is conveyed is a child. In this case. it being disputably presumed that there is a gift in favor of the child. 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. The latter may redeem the property and compel a conveyance thereof to him. The former is the trustee. However. SG died. suppose C is the child of A. sold a lot to the Municipality of Victoria to be used as a cemetery. Court ruled that she has no right and no ownership. no trust is implied by law. law.TRUSTS RECOGNIZED ONLY IF NOT IN CONFLICT W/ CC. TRUST RECEIPT: security transaction intended to aid in financing importers & retail dealers who don’t have sufficient funds to finance importation or purchase of merchandise. Municipality failed to register the sale. WHEN TITLE TO LAND ISN’T TO OWNER’S NAME Resulting trust Example: A inherited a piece of land from his father. soon after her granddaughter NL claimed to have inherited the land asserting that Torrens Title protects the property. Code of Commerce. Torrens Title was not established as means of acquisition. while the latter is the beneficiary. A is beneficiary. and who may not be able to acquire credit except thru utilization. A asked C to pay B. However. only to confirm and register. but A caused the legal title to be put in the name of X. of the one paying the price of the sale. he nevertheless is either to have no beneficial interest or only a part thereof. by gen. Land is held in Trust by NL and the Municipality as the Beneficiary. WHEN PROPERTY IS IN THE NAME OF ONLY ONE OF THE COBUYERS Resulting trust . a trust is established by implication of law for the benefit of the true owner. 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. administratix of property. Land is supposed to be a security till A’s debts are paid. ART 1448 There is an implied trust when property is sold. B is a trustee.

ART 1455 When any trustee. 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. 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. Sing Joco v. Thinking that the purchase seems good. PROPERTY ACQUIRED THRU MISTAKE OR FRAUD Constructive trust Nature of Mistake – Mistake made by third person. she may demand the resale of her property to her. Vizcaya) . In order to guarantee her debt. Should be filed within four years upon discovery of the fraud. the Principal may bring an action for rconveyance.Example: Uy Aloc v. and is therefore obliged to render proper accounting. bought the hacienda. a trust is established by operation of law in favor of the person to whom the funds belong. Al v. to prejudice B. ABSOLUTE CONVEYANCE MADE FOR SECURITY PURPOSE Constructive trust Example: M was indebted to S. ART 1453 When property is conveyed to a person in reliance upon his declared intention to hold it for. The property was registered under the name of only one of them. 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. Sunyantung. PROOF OF IMPLIED TRUST – applies whether property is real or personal ORAL EVIDENCE FOR TRUST MUST BE TRUSTWORTHY (Salao v. A was held to be guilty of breach of trust. no trust is created. not made by a party to a contract. there is an implied trust in favor of the person whose benefit is contemplated. Salao) PRESCRIPTION (Ramos et. Upon M’s payment. If the fulfillment of the obligation is offered by the grantor when it becomes due. in his wife’s name. (Spouses Dico v. he may demand the reconveyance of the property to him. Note: The shares or interest of co owners are presumed to be equal. A. If made by the party. or transfer it to another or the grantor. ART 1456 If property is acquired through mistake or fraud. A was a confidential employee of B. M sold her parcel of land to S. ART 1457 An implied trust may be proved by oral evidence. by force of law. The beneficiaries are all of the members of the club. Nature of Fraud – Extra-contractual Right of Action – exercised against the trustee. The registered owner is a mere trustee. Example: M gave B a car. 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. Cho Jan Jing Chinese Merchants bought a lot with a house to be used as their clubhouse. 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. B intented to purchase an hacienda and he told A about it and of his option to buy the same. et al. a trust by virtue of law is established. the person obtaining it is. which should have been E’s. 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. B is merely a trustee and may be ordered to reconvey the property to the proper beneficiary. considered a trustee of an implied trust for the benefit of the person from whom the property comes.