Civil Law

TRUST The beneficiary of a trust Must comply with

may demand the legal
DEFINITION performance of the requirements in
obligation without having accepting donations.
formally accepted the
It is the legal relationship between one person
trust in a public
having an equitable ownership in a certain
document, upon mere
property and another person owning the legal
acquiescence in the
title to such property. (Jurado, 2019)
formation of the trust
and acceptance under
NOTE: Trust is founded in equity and can never
Art. 1132(2) of the Civil
result from acts violative of law. (Deluao v.
Code.
Casteel, G.R. No. L-32166 October 18, 1977)
(De Leon, 2019)
Three persons involved in the creation of a TRUST v. CONTRACT
trust TRUST CONTRACT
A trust always involves an Legal obligation
1. Trustor – the person who establishes the ownership, embracing a based on an
trust. set of rights and duties undertaking
2. Trustee – one in whom confidence is fiduciary in character supported by a
reposed as regards property for the benefit which may be created by consideration, which
of another person. a declaration without a obligation may or
3. Beneficiary or cestui que trust – person for consideration. (De Leon, may not be fiduciary
whose benefit the trust has been created. 2019) in character. (De
(NCC, Art. 1440) Leon, 2019)
A trust always involves an Legal obligation
Trust property ownership, embracing a based on an
set of rights and duties undertaking
The subject-matter of trust may be any fiduciary in character supported by a
property of value – real, personal, funds or which may be created by consideration, which
money, or choses in action. (De Leon, 2019) a declaration without a obligation may or
consideration. (De Leon, may not be fiduciary
TRUST DISTINGUISHED FROM OTHER 2019) in character. (De
RELATIONS Leon, 2019)
TRUST v. DEBT
TRUST v. DONATION TRUST DEBT
TRUST DONATION A debt implies merely an A duty to deal with a
An existing legal Transfer of property obligation to pay a certain specific property for
relationship and involves which involves a sum of money. the benefit of
separation of legal and disposition of both another. A creditor
equitable title. legal and equitable has merely a
ownership except personal claim
gift in trust. against the debtor.
There is a fiduciary There is no fiduciary
relation between a relation between a
trustee and a beneficiary. debtor and creditor.
The beneficiary of a trust A creditor has
has a beneficial interest in merely a personal
the trust property. (De claim against the
Leon, 2019) debtor. (De Leon,
2019)
TRUST v. BAILMENT
TRUST BAILMENT
A delivery of a property The bailee has
in trust necessarily possession of
involves a transfer of without legal title to

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 Special Contracts - Trust
legal title, or at least a the property subject the trust.
separation of legal title to the bailment. (De
and equitable interest, Leon, 2019) NOTE: Whether a trust is revocable or
with the legal title in the irrevocable depends on the wordings or
trustee. (De Leon, 2019) language used in the creation of the trust. It will
be presumed revocable unless the creator has
CLASSIFICATION OF TRUST expressed a contrary intention in the trust deed.
(De Leon, 2019)
1. As to Creation – From the viewpoint of the
creative force bringing them into existence, KINDS OF TRUST
they may be either:
Express trust v. Implied trust
a. Express trust (NCC, Arts. 1443-1446) or
one which can come into existence BASIS EXPRESS IMPLIED TRUST
only by the execution of an intention TRUST
to create it by the trustor or the Definition Created by the Comes into being
parties (De Leon, 2019); or (NCC, Art. intention of the by operation of
1441) trustor or of law. It may be
b. Implied trust, or which comes into the parties. either resulting
being by operation of law (NCC, Arts. or constructive.
1447-1457; De Leon, 2014); this latter
trust being either: Manner of Created by the Those which,
creation direct and without being
1. Resulting trust positive acts of expressed, are
2. Constructive trust the parties, by deducible from
some writing the nature of the
2. As to Effectivity – From the viewpoint of or deed or will transaction by
whether they become effective after the or by words operation of law
death of the trustor or during his life, they evidencing an as matters of
may be either (De Leon, 2019): intention to equity,
create a trust. independently of
a. Testamentary Trust – one which is to the particular
take effect upon the trustor’s death. It is intention of the
usually included as part of the will and parties.
does not have a separate trust deed. (De
Leon, 2019) Parole An express An implied trust
evidence trust concerning an
b. Inter Vivos trust or “Living Trust” – one concerning an immovable or
established effective during the owner’s immovable or any interest
life. The grantor executes a “trust deed,” any interest therein may be
and once the trust is created, legal title to therein cannot proved by parole
the trust property passes to the named be proved by evidence. (NCC,
trustee with duty to administer the parole Art. 1457)
property for the benefit of the beneficiary. evidence. (NCC,
(De Leon, 2019) Art. 1443)

3. As to Revocability – From the viewpoint of Laches or An action to An action to

whether they may be revoked by the trustor, extinctive enforce an enforce an
they may be either: prescription express trust, implied trust
so long as there even when there
a. Revocable trust – one which can be is no express is no express
revoked or cancelled by the trustor or repudiation of repudiation of
another individual given the power; or the trust by the the trust by the
trustee and trustee and
b. Irrevocable trust – one which may not be made known to made known to
terminated during the specified term of the beneficiary, the beneficiary,

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 Civil Law
cannot be may be barred
barred by by laches or by
laches or extinctive
extinctive prescription.
prescription.
EXPRESS TRUST
One which come into existence only by the
execution of an intention to create it by the
trustor or the parties. (De Leon, 2019)
Elements of express trust
1. A competent trustor and trustee;
2. An ascertainable trust res; and
3. Sufficiently certain beneficiaries
NOTE: All of the above elements are required to
be established. (De Leon, 2019)
Evidence to prove express trust
No express trust concerning an immovable or
any interest therein may be proved by parol
evidence. (NCC, Art. 1443)
NOTE: The defense that express trusts cannot be
proved by parol evidence may be waived, either
by failure to interpose timely objections against
presentation of oral evidence not admissible
under the law or by cross- examining the
adverse party and his witnesses along the
prohibited lines. (Philippines v. Cojuangco G.R.
No. 139930, June 26, 2012)
An express trust over personal property or any
interest therein, and an implied trust, whether
the property subject to the trust is real or
personal, may be proved by oral evidence. (NCC.,
Art. 1457)
NOTE: The general rule is that the burden of
proving the existence of a trust is on the party
alleging its existence; and to discharge the
burden, it is generally required that his proof be
clear and satisfactory and convincing. (Heirs of
Donata Ortiz Briones v. Heirs of Maximino R.
Briones s, G.R. No. 150175, March 10, 2006)
NOTE: To affect third persons, a trust
concerning an immovable or any interest therein
must be embodied in a public instrument and
registered in the Registry of Property. (De Leon,
2019)
547
Creation of express trust
Express trust are those trust voluntarily and
intentionally, created by direct and positive act
of the trustor, by some writing, deed, will, or
oral declaration evincing an intention to create
trust. (NCC, Art. 1444; De Leon, 2019)
NOTE: Technical or particular form of words or
phrases are not essential to the manifestation of
an intention to create a trust. It is possible to
create a trust without using the word “trust” or
“trustee.” (De Leon, 2019)
No trust shall fail because the trustee appointed
declines the designation, unless the contrary
should appear in the instrument constituting the
trust. (NCC, Art. 1445)
Acceptance by the beneficiary is necessary.
Nevertheless, if the trust imposes no onerous
condition upon the beneficiary, his acceptance
shall be presumed, if there is no proof to the
contrary. (NCC, Art. 1446)
Kinds of express trust
1. Eleemosynary or Charitable trust – one
designed for the benefit of a segment of the
public or of the public in general. Created for
charitable, educational, social, religious, or
scientific purposes, or for the general benefit
of the humanity. (De Leon, 2019)
2. Accumulation trust – one that will
accumulate income to be reinvested by the
trustee in the trust for the period of time
specified. (De Leon, 2019)
3. Spendthrift trust – one established when the
beneficiary needs to be protected because of
his inexperience or immaturity from his
imprudent, spending habits or simply
because the beneficiary is spendthrift. (De
Leon, 2019)
4. Sprinkling trust – one that gives the trustee
the right to determine the income of the
beneficiaries who should receive income
each year and the amount thereof. (De Leon,
2019)
Termination of express trust
1. Destruction of the corpus;
2. Revocation by the trustor;
3. Achievement of the objective, or happening
of the condition, provided for in the trust
instrument;
 Special Contracts - Trust
4. Death or legal incapacity of the trustee;
5. Confusion or merger of legal title and
beneficial title in the same person; and
6. Breach of trust.
Requisites for acquisition of property by
trustee through prescription
1. The trustee must expressly repudiate the
right of the beneficiary;
2. Such act of repudiation must be brought to
the knowledge of the beneficiary;
3. The evidence thereon must be clear and
conclusive; and
4. Expiration of the period prescribed by law.
(Heirs of Donata Ortiz Briones v. Heirs of
Maximino R. Briones, G.R. No. 150175, March
10, 2006)
IMPLIED TRUST
Those which, without being express, are
deducible from the nature of the transaction as
matters of intent, or which are superinduced on
the transaction by operation of law, as matters
of equity, independently of the particular
intention of the parties. (Tong v. Kun, G.R. No.
196023, April 21, 2014)
Kinds of implied trust
1. Resulting trust – broadly defined as a trust
which is raised or created by the act or
construction of law, but in its more
restricted sense, it is a trust raised by
implication of law and presumed always to
have been contemplated by the parties, the
intention as to which is to be found in the
nature of their transaction, but not
expressed in the deed or instrument of
conveyance. (Heirs of Donata Ortiz Briones v.
Heirs of Maximino R. Briones, G.R. No. 150175,
March 10, 2006)
Examples of resulting trust:
a. There is an implied trust when property is
sold, and the legal estate is granted to one
party but the price is 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
UNIVERSITY OF SANTO TOMAS
2021 GOLDEN NOTES
presumed that there is a gift in favor of the
child. (NCC, Art. 1448)
b. 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 done, he nevertheless is either to
have no beneficial interest or only a part
thereof. (NCC, Art. 1449)
c. 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 it is paid. The latter
may redeem the property and compel a
conveyance thereof to him. (NCC, Art. 1450)
Q: “X” being unable to pay the purchase
price of a house and lot for his residence has
requested “Y,” and “Y” agreed to lend him
the money under one condition, that the
Certificate of Title be transferred to him, in
Y’s own name for his protection and as
security of the loan. Later on, “Y” mortgaged
the property to the bank without the
knowledge of “X.” When the mortgage
became due, “Y” did not redeem the
mortgage and the property was advertised
for sale. “X” retained you as his lawyer. What
advise would you give your client and what
legal ground provided by the Code would
you assert to defend his rights? Give
reasons. (1959 BAR)
A: It is clear that in the instant problem, the
provision of Art. 1450 of the Civil Code is
applicable. It must be observed, however, that
the mortgage of the property by “Y” to the bank
is perfectly valid inasmuch as the bank was not
aware of any flaw or defect in the title or mode
of acquisition by “Y” since the right of “X” has
not been annotated in the Certificate of Title.
Consequently, the only way by which I would be
able to help “X” would be to advice him to
redeem the mortgaged property from the bank.
After this is done, “X” can then institute an
action to compel “Y’” to reconvey the property
to him pursuant to Art. 1450 of the Civil Code. In
this action for reconveyance, the amount paid
by “X” to the bank in redeeming the property
can then be applied to the payment of his debt to
“Y.” If there is an excess, he can recover the
amount from “Y.” (Jurado, 2019)
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 Civil Law
d. 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. (NCC, Art. 1452)
e. 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 contemplated. (NCC.
Art. 1453)
2. Constructive trust – a trust raised by
construction of law or arising by operation
of law. It is a trust not created by any words,
either expressly or impliedly evincing a
direct intention to create a trust, but by the
construction of equity in order to satisfy the
demands of justice. It does not arise by
agreement or intention but by operation of
law. (Ramos v. Ramos, G.R. No. L-19872
December 3, 1974)
NOTE: A constructive trust is not a trust in a
technical sense. (Heirs of Donata Ortiz Briones v.
Heirs of Maximino R. Briones, G.R. No. 150175,
March 10, 2006) It is substantially an equitable
remedy against unjust enrichment. (Tong v.
Kun, G.R. No. 196023, April 21, 2014)
NOTE: It is otherwise known in American law as
a trust ex maleficio, trust ex delicto, and de son
tort. (Tong v. Kun, G.R. No. 196023, April 21,
2014)
Q: Explain the following concepts and
doctrines and give an example of each:
a. Concept of trust de son tort (Constructive
trust) (2007 BAR)
A: A constructive trust is a trust not created by
any word or phrase, either expressly or
impliedly, evincing a direct intention to create a
trust, but is one that arises in order to satisfy
the demands of justice. It does not come about
by agreement or intention but mainly by
operation of law and constructed as a trust
against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to
property which he ought not, in equity and
good conscience, to hold. (Cañezo v. Rojas, G.R.
No. 148788, November 23, 2007)
549
The following are examples of constructive
trust:
1. 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. (NCC, Art. 1451)
2. 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. (NCC,
Art. 1454)
3. 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. (NCC, Art. 1455)
4. 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. (NCC, Art. 1456)
Prescriptibility of actions to enforce trust
under Art. 1456
An action for reconveyance of real property
based upon a constructive or implied trust,
resulting from fraud, may be barred by the
statute of limitations. An action may be filed
from the discovery of the fraud. In some cases,
the discovery is deemed to have taken place
when new certificates of title were issued
exclusively in the name of another person. (Uy
v. CA, September 16, 2015, G.R. No. 173186)
Period of prescription
BASIS PRESCRIPTIVE
PERIOD
Annulment of voidable
Four (4) years from the
contract based on
discovery of the fraud.
fraudulent registration
[Art. 1391 (4), Civil
of the subject property.
Code]
Declaration of nullity Imprescriptible. (Art.
 Special Contracts - Trust
or inexistence of a void 1410, Civil Code)
or inexistent contract
based on fraudulent
registration of the
subject property.
Based on fraudulent
registration of the Ten (10) years from
subject property but the discovery of the
the action does not fraud. [Art. 1144(2),
involve annulment of Civil Code]
contract.
If the legitimate owner
of the subject property An action to quiet title.,
which was fraudulently therefore,
registered in the name imprescriptible. (Heirs
of another had always of Tappa v. Heirs of
been in possession Malupeg, G.R. No.
thereof. 187633, April 4, 2016)

Laches may bar action

The express trusts disable the trustee from

acquiring for his own benefit the property
committed to his management or custody, at
least while he does not openly repudiate the
trust and make such repudiation known to the
beneficiary. But in constructive trusts, the rule
is that laches constitutes a bar to actions to
enforce the trust, and repudiation is not
required, unless there is a concealment of the
facts giving rise to the trust. (Guaranteed
Homes, Inc. v. Heirs of Valdez, G.R. No. 171531
January 30, 2009)

Acquisition of property by trustee through

prescription in implied trusts

Express repudiation of the trust by the trustee

is not required. All that is required is that he
must set up a title which is adverse to that of the
beneficiary. In other words, the normal
requisites for extraordinary acquisitive
prescription must be present. (Jurado, 2019)

Conversion of implied trust to express trust

An implied trust may be converted to an

express trust through recognition by the
implied trustee of the right to the property of
the owner.

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