REVIEW ON

TRUST
TRUSTS UNDER THE NEW CIVIL CODE
The Old Civil Code did not have provisions
on “Trusts.” The Code Commission reports
that the law on trusts in the New Civil Code
incorporates instead a large part of the
American law on truss. Thus, our law on
Trusts will find its impetus from common law
from where it was derived. This can be seen
in the rulings of the Supreme Court.

The doctrines and principles that arise from

the establishment of trusts are rooted in the
Philippine legal system which is based on
American Law principles.
[Government v. Abadilla, 1924] As the law of
trusts has been much more frequently
applied in England and in the United States
than it has in Spain, we may draw freely
upon American precedents in determining the
effect of the testamentary trust here under
consideration.
Tolentino defines trust as “the legal
relationship between one person having an
equitable ownership in 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 exercise of certain
powers by the latter.”
Express trust in particular can be defined
as a legal relationship whereby a person,
called the trustor, conveys the naked or
legal title to a property to another person,
called the trustee, who takes title thereto
under a fiduciary obligation to administer,
manage, and dispose of the property for
the benefit of another person, called the
beneficiary, to whom therefore beneficial
or equitable title pertains.
Parties to a Trust
1. Trustor- the person who establishes a trust
2. Trustee- the person in whom confidence is reposed as regards
the property placed in trust; the person who assumes certain
duties relating to the res or the trust property with respect to
the person for whose benefit the trust is created
3. Beneficiary- the person for whose benefit the trust has been
created; also referred to as cestui que trust
[Philippine National Bank v. Court of Appeals, 1993]
Herein, the typical trust was described to be one wherein
confidence is reposed in one person who is named a
trustee for the benefit of another who is called the cestui
que trust, respecting property which is held by the trustee
for the benefit of the cestui que trust. Further it was held
that while in an express trust, a beneficiary and a trustee
are linked by confidential or fiduciary relations, in a
constructive trust, there is neither a promise nor any
fiduciary relation to speak of. Thus, it is only in an express
trust where the trustee has active duties of management of
the property.
ESSENTIAL CHARACTERISTICS OF EXPRESS TRUSTS
(a) It is a relationship
(b) It is a relationship of fiduciary character
(c) It is a relationship with respect to property, not one involving merely
personal duties
(d) It involves the existence of equitable duties imposed upon the holder
of the title to the property to deal with it for the benefit of another
(e) It arises as a result of a manifestation of intention to create the
relationship
[Morales v. Court of Appeals, 1997] Citing the elements, the Court held that although one
gets the impression that these characteristics pertain to all forms of trusts, they actually
pertain only to express trusts, especially since it has been repeatedly held that the trustee in
a constructive trust owes no fiduciary duty to the cestui que trust. A constructive trust also
arises by operation of law and not as a result of manifestation of intention to create the
relationship.
 Generally speaking, an express trust is essentially contractual in
character because it can only be constituted through contractual
intention on the part of the trustor and requires the acceptance of the
naked title and fiduciary obligations of the trustee. This is further
bolstered by Article 1441 which provides that no particular words are
required for the creation of express trusts as long as trust is clearly
intended.
Constitutions of Express Trusts
1. (a) Deed of Trust
2. (b) Testamentary Trust- if such trust is constituted in a will, the validity of
which would be dependent on the validity of the testamentary
disposition (governed by Law on Succession)
3. (c) Deed of Donation- it should be embodied in a solemn contract
(governed by Law on Donations, and will also constitute a taxable gift or
donation)
ESSENTIAL ELEMENTS OF EXPRESS TRUSTS
As enumerated in Mindanao Development Authority v. CA (1982), the elements of an
express trust are:
(a) Trustee- holds the trust property subject to equitable duties to deal with it for another’s
benefit
(b) Beneficiary- to whom trustee owes equitable duties
(c) Res- the trust property which the trustee manages
Truly, a trust relationship is built on property rights. Without the res or the corpus,
there is no obligation upon the trustee who cannot be expected to manage the
property when he has no control over the such property.

[Mindanao Development Authority v. Court of Appeals, 1982] The elements of an

express trust include a competent trustor and trustee, an ascertainable res, and
sufficiently certain beneficiaries. There must be a complete and present disposition of
the trust property, notwithstanding that the enjoyment in the beneficiary will take
place in the future.
[Goyanko v. UCPB, 2013] It was held that no trust exists in this case because there
was no competent trustor and trustee, the supposed trustee was not given any
power of administration over the res, and the trustor did not have the right to its
beneficial enjoyment. The intention to create an express trust must be firmly
established.
Express Trusts Establish Contractual Relationships Built Around
Property Relation
[Morales v. Court of Appeals, 1997] It is a relationship with respect to property, not
one involving merely personal duties.
[Mindanao Development Authority v. Court of Appeals, 1982] The Court ruled that no
express trust was constituted since no stipulation categorically created an obligation
on the part of one party to hold the property in trust for the other. Further, the failure
to describe the subject matter of the supposed trust is strong evidence that no trust
was intended.
Acceptance of beneficiary not an essential element
[Cañezo v. Rojas, 2007] The presence of a cestui que trust or beneficiary was
considered as a fourth element of an express trust. It was, however, clarified that the
the requirement is merely to clearly identify the beneficiary, not the acceptance.
From this case of Cañezo v. Rojas (2007), it can be gleaned that the nexus of the
contractual meeting of the minds is that between the trustor and the trustee, and the
acceptance by the beneficiary would constitute a stipulation pour autrui.
Formal acceptance of the benefits of the beneficiary is generally not an essential
element of a valid trust.
NOMINATE AND PRINCIPAL, YET GOVERNED BY EQUITY PRINCIPLES
• An express trust is nominate, having been given a particular name and essentially defined by the
New Civil Code. It is also principal since it does not need another contract to be valid.
• Usually, being a nominate contract brings about the application of the doctrine that when a legal
relationship is created between the parties, then in spite of the intention or nomenclature used by the
contracting parties, it would still be characterized by the law and governed by the Law on Trusts.
However, the principles of the law on trust provide that the duties of the trustee prevail on the basis of
equity and not only upon contractual stipulations.
UNILATERAL AND GRATUITOUS
• An express trust is a unilateral contract since only the trustee assumes obligations to carry on the
trust for the benefit of the beneficiary.
• Article 1446 validates the position that an express trust is a gratuitous contract, supported only by
liberality, when it provides that the acceptance of the beneficiary may be presumed. This is because
generally, the trust relationship imposes no obligation or burden upon the beneficiary.
EXPRESS TRUST AS A PREPARATORY CONTRACT
• Express trust is a preparatory contract because it is not constituted for its own sake but is essentially
a medium established by the trustor to allow full authority and discretion on the part of the trustee to
enter into various juridical acts on the corpus to earn income or achieve other goals indicated for the
benefit of the beneficiary.
• An express trust relationship creates no obligation on the part of the trustor to the beneficiary, nor
does the beneficiary have any right against the trustor. Generally, the fiduciary duties are imposed on
the trustees and the rights of the beneficiary are exercisable against the trustee.
Acceptance of beneficiary required before beneficiary is
considered as such
• Being an act of liberality and following the concept that no person can be
obliged to accept the kindness of another, acceptance by the beneficiary is
necessary.
• In case the beneficiary refuses to accept the benefits of the trust arrangement
but the legal title has already been transferred to the trustee, the trust ceases
to have an objective. Then, the obligation of the trustee is to comply with the
instructions of the trustor, and to dispose of the trust properties in accordance
with the instructions of the trustor.
TRUST CONSTITUTES FIDUCIARY DUTIES ON THE TRUSTEE
• Article 1440 defines the trustee as one in whom confidence is reposed as
regard property for the benefit of another person. This shows that express
trust creates fiduciary obligations in the trustee by virtue of his having
assumed naked or legal title to the properties constituting the corpus, under
express provisions to use, control, administer, and manage them for the
benefit of the beneficiary.
• The Supreme Court has defined an express trust as a fiduciary relationship
with respect to property which involves the existence of equitable duties
Acquisitive Prescription on the Corpus Unavailing to the Trustee
• [Pacheco v. Arro, 1950] A trustee cannot invoke the statute of limitations to bar
the action and defeat the right of the cestui que trust.
• [Escobar v. Locsin, 1943] Plaintiff, who was illiterate, asked defendant to claim
the parcel of land for her, but respondent instead claimed the lot for himself.
The trial court awarded the land to respondent, but the Supreme Court
reversed and ruled that a trust is sacred and inviolable. The Courts have
shielded fiduciary relations against every manner of chicanery or detestable
design cloaked by legal technicalities.
• [Barreto v. Tuazon, 1926] The concept of mayorazgo provides that one person
will preserve the family’s property and will deliver it to the first- born at a
proper time. Thus, the cause of action of the successors-in- interest who
where entitled to the benefits of the mayorazgo could not be defeated by
claims of prescription or failure to file any claims in the proceedings for the
settlement of the estate of the deceased.
• [Yu Tiong v. Yu, 1962] The statute of limitations cannot be invoked by the
trustee with respect to the right of action of the beneficiary.
RULES OF ENFORCEABILITY OF EXPRESS TRUSTS
1. EXPRESS TRUST IS ESSENTIALLY A REAL, NOT CONSENSUAL,
CONTRACT
Discussions on the rules regarding “enforceability” of an express trust may
imply that as a contractual relation between trustor and trustee, it has the
essential characteristic of being consensual and solemn. Although under the
wording of Art. 1444, no particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended, yet by its very
definition, an express trust constitutes a real contract. No trust relationship
exists unless the property constituting the res is conveyed to the trustee.
[Morales v. Court of Appeals]: Trust is a “relationship with respect to property,
not one involving merely personal duties and involves the existence of equitable
duties imposed upon the holder of the title to the property to deal with it for the
benefit of another.”
Trusteeship is essentially a proprietary relationship, not merely from acceptance
of duties and responsibilities. A designated trustee may formally accept such
duties and responsibilities in a Deed of Trust, but no fiduciary obligation arises
without the properties being transferred to his name. Usually, the ideal setting of
trust being a public document constitute the very mode that transfers legal or
naked title to the trust properties in the instrument.
• Art. 1445 provides that “No trust shall fail because the trustee
appointed declines the designation,” this can only mean 2 things: (1)
contractual relationship has been established yet because actual
transfer has been caused and (2) the trust could not be said to fail
because its final establishment may be still implemented by another
person who accepts the trust and to whom naked or legal title to the
corpus may be instituted.
• • May also mean that naked or legal title has been transferred by the
trustor in the name of the trustee before the latter has expressly accepted
his designation; but refusal cannot work to “fail” the trust, because it is
possible to transfer to another person who accepts the trust designation.
• Art. 1445 also recognizes that “unless contrary should appear in the
instrument constituting the trust,” that the designation of a particular
individual was primordial in the establishment of the trust,
trusteeship is essentially a property-based relationship, that the
transfer of naked or legal title of the res or corpus to the
“trustee-as-a-professional- fiduciary” for the benefit of another
person, is the moving spirit behind the trust relationship
• [Pacheco v. Arro]: “The juridical concept of a trust, arises from or is a result of a fiduciary
relation between the trustee and the cestui qui trust as regards a certain real property,
personal, funds or money, or choses in action.”
• [Julio v. Dalandan]: “Trust” as a “method of disposition of property.” Ideal form of an
express trust is constituted pursuant to a written Deed of Trust whereby naked or legal title
to trust property is conveyed to the specified trustee under clear terms and conditions
providing his duties and responsibilities towards the indicated beneficiary of the res. In this
case, the execution of the Deed of Trust as a public document which has the effect, as
between trustor and trustee, of constructive delivery of the covered trust properties.
• When it comes to immovable, especially registered land or any interest therein, express
trusts take the ideal form of legal or naked title being naked registered in the name of
trustee who holds the property for the benefit of the indicated beneficiary. Best form of an
express trust is when trustee is expressly registered as “naked title owner”.
• It is legally possible to still have an express trust even when the registered title in the name
of the trustee is full ownership as distinguished from naked or legal title.
• In Julio, the evidence of an express trust was in the form of an affidavit by the purported
trustee Clemente Dalandan. Dalandan acknowledged that the four-hectare piece of
riceland belonging to Victoriana Dalandan was foreclosed due to an obligation he assumed
but failed to fulfill. Lower court ruled that plaintiff’s suit had prescribed since the 10-year
period from the date of the document had elapsed. Court ruled that the document
embodied an express trust, and that prescription could not commence unless there was an
express repudiation of the trust.
• • Mere fact that the word “trustee” or “trust” was employed would not necessarily
prove intention to create a trust. What is important is whether trustor manifested
intention to create a trust relationship. Here, that trust is effective as against
defendants and in favor of the beneficiary, plaintiff Julio, who accepted the
document itself.
• [Cuaycong v. Cuaycong]: The Civil Code defines an express trust as one
created by intention of parties and implied trust as one that comes into being
by operation of law. Express trusts are created by direct and positive acts of
the parties, by some writing, deed or will or words evidencing such intent.
Clear that plaintiffs alleged an express trust over an immovable, especially
since it is alleged that the trustor expressly told defendants his intention to
establish the trust.
• [Heirs of Tranquilino Labiste v. Heirs of Jose Labiste]: An affidavit executed by
eventual registered owner of a registered land “that the lot brought in his
name was co-owned by him, as one of the heirs. And by agreement, each of
them has been in possession of half the property,” qualifies it to be as an
express trust, and “prescription and laches will only run from time that the
express trust is repudiated.”
• SC has upheld that express trusts may still be constituted outside of formal
designation of trustee as naked or legal title holder of the corpus and can be
2. EXPRESS TRUSTS MUST NEVERTHELESS BE CLEARLY SHOWN TO
HAVE BEEN INTENDED
• Under Art. 1444, an express trust will never be presumed to exist; that the party
who claims any right under a trust arrangement msut prove the existence thereof.
• [De Leon v. Molo Peckson]: Reiterated that to establish a trust the proof must be
clear, satisfactory and convincing. It cannot rest on vague, uncertain evidence or
on loose, equivocal or indefinite declaration.” Hoever, when the trustees
themselves have executed a declaration of trust (act of acknowledging that the
property, title to which he holds is held by him for the use of another), constituted
clearly and unequivocally the trust “even if it was executed subsequent to the
death of the trustor, Juana Juan, for it has been held that the right creating or
declaring a trust need not be contemporaneous or inter-parties. Even held that an
express trust may be declared by a writing made after the legal estate has been
vested in the trustee.”
• [Canezo v. Rojas]: Burden of proving the existence of a trust is on the party
asserting its existence, and such proof must be clear and satisfactorily show the
xistence of the trust and its elements.
ESSENCE OF THE RELATIONSHIP BETWEEN TRUSTOR AND TRUSTEE PRIOR
TO THE CONVEYANCE OF THE RES
• A private Deed of Trust setting up the trust relationship providing for the duties and
responsibilities and designating a beneficiary would not give rise to a true trust
relationship even with the formal acceptance of the designated trustee, unless and until
the property that would constitute the corpus of the trust relationship is actually
conveyed with the Deed constituting constructive delivey.
• What is the status of a private Deed of Trust duly executed and accepted by the
beneficiary, before title to the designated trust property is actually placed in the name of
the trustee?
• One answer is that before delivery, there is no valid contract of trust, but only a nominate
contract contract of do ut facia, essentially trustor has contractually bound himself to
delivery and transfer title over the trust property to the trustee (essentially a real
obligation to give) and trustee has bound himself to accept delivery and to manage the
properties to be delivered for interests of the beneficiary (essentially a personal
obligation “to do”)
• If the so-called contract of trust is valid at this point, then in order to be a real contract, it
must mean that it creates a binding obligation. But only the enforceable obligation so far
created by the meeting of the minds is that of the trustor to deliver legal title to the trust
property. The trustor of a true trust does not assume any obligation; he is the creator of
the trust.
EXPRESS TRUSTS OVER IMMOVABLES MUST BE IN WRITING
• Art. 1443 indicates that an express trust concerning movables or any interst therein may
be proved by parol evidence; meaning that a mere meeting of minds over the creation of
an express trust over movables creates a valid and enforceable contract of trust once
Villanueva notes that Art. 1443 constitutes a lame provision and really serves
no useful purpose in the realm of express trusts arrangements involving
immovables or any interest therein.
FIRST: 1443 does not render the express trusts over immovable void when it is not
effected in writing, merely renders the contractual relationship unenforceable. Since
only grantor would have rights to enforce under the contractual relationship, it is he
who is unfavorably affected by the provisions. He cannot adduce parol evidence in
order to enforce the fiduciary duties and obligations of the trustee through court
action. Art. 1443 constitutes a mere species of the Statute of Frauds.
[Peñalber v. Ramos]: The requirement in Art. 1443 that the express trust
concerning an immovable or an interest therein be it writing is merely for
purposes of proof, not for the validity. Therefore, said article is in the nature of
a statute of frauds. Thus, it merely regulates the formalities necessary to
render it enforeceable. Effect of non- compliance is simply that not action can
be proved unless the requirement is complied with. But if not timely objected
to during trial, it will be binding upon the parties. Nevertheless, Peñalbar did
not fine for the establishment of an express trust from the oral testimony
given, on the ground that the parol evidence failed to prove clearly than an
express trust ahd been constituted.
The Statute of Frauds is meant to prevent fraud and cannot be used to perpetuate fraud,
has no application to contract that have either been partially or fully executed. Thus, since
express trust over an immovable presents a real contract where ownership has in fact
been conveyed to the purported trustee, then it is exempted from the coverage of the
Statute of Frauds, and parol evidence may now be adduced to to prove the existence of
such express trust.
• SECOND: Considering that express trust over immovables are necessarily covered by
the characteristic of being a real contract, then no express trust over immovables can be
constituted by mere meeting of the minds. For its validitiy, an express trust over an
immovable requires delivery. Under current legislation, not title to registered land may be
registered with the Register of Deeds and title transferred, unless deeds are in a public
instrument and all taxes have been paid.
Art. 1445 supports the proposition that a contract of express trust is not consensual but
essentially requires transfer of title to the trust properties for its valid constitution. Under
Art. 1441, an express trust can be created by the intention of the trustor alone while Art.
1445 follows up by stating that the express trust cannot simply fail because the trustee
appointed declines the designation, which can only mean that the intention of the trustor to
create the trust can only be manifested by the act of placing title in the trust properties in
the name of the designated trustee for the benefit of the designated beneficiary. Refusal of
the designated trustee does not make the express trust involving immovables void for lack
of consent.
• THIRD: Jurisprudence shows that when an express trust over immovable is not in
writing, it can still be proven by clear and convincing parol evidence to be a resulting trust,
• Even under the terms of a private instrument creating an express trust,
mere physical delivery of possession or control over land and any interest
therein to the designated trustee would not create a valid and binding
express trust because naked or legal title has not yet been transferred.
• If there has been no effective transfer of naked or legal title to the properties
constituting the corpus of an express trust, there is as yet no real express
trust that has arisen. Such purported express trust over immovables cannot
even said to be unenforceable, for it is as yet non- existent.
• Foregoing discussions are really for academic purposes since even when
the express trust has not been legally constituted by non-transfer of naked
or legal title to the trustee, the intentions of the parties may still be pursued
to equitable ends under the principles of implied trusts. Yet even for implied
trusts, particulary resulting trusts, no fiduciary relationship will arise in the
person of the trustee unless and until title to property is transferred in his
name.
• Villanueva interprets Art. 1443 to mean that an oral agreement between
trustor and the trustee to constitute a trust over an immovable or any
interest therein which is not followed-up with an actual conveyance of the
covered res is not enforceable by parol evidence.
AGENCY TRUST
Fiduciary in nature

Essentially revocable Essentially obligatory in its terms and period and

can only be rescinded based on breach of trust

gent possesses property under agency for and in Trustee takes legal or naked title to the subject
the name of the owner matter of trust

Agent must act upon instructions of the owner Trustee acts on his own business discretion

Agent enters into contract in the name of the Trustee enters into contracts in his own name
principal

Agent cannot be sued Trustee is liable directly and may be sued in his
trust capacity
Kinds of Trust
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.
• A. Express Trusts
Essence and Definition of Express Trusts
Express trust—one created by the intention of the trustor or of the parties (Art. 1441)
Those created by direct and positive acts of the parties, by some writing or deed or will or by words evidencing an
intention to create a trust
Essential Characteristics of Express Trusts
1. Nominate and Principal—for having been given particular name and essentially defined by the Civil Code, and not
needing another contract to be valid and binding
2. Unilateral—only the trustee assumes obligations to carry on the trust for the benefit of the beneficiary
3. Primarily gratuitous—supported by the consideration of liberality, especially when Art. 1446 provides that beneficiary’s
acceptance is presumed
4. Real—an express trusts constitute a real contract, that is, it is not merely perfected by a mere meeting of minds between
the trustor and trustee to constitute a trust. Indeed, no trust relationship exists, until and unless, the property
constituting the res is conveyed to the trustee.
5. Preparatory—not constituted for its own sake in that the trust relationship is essentially a medium established by the
trustor to allow full authority and discretion on the party of the trustee to enter into various juridical acts on the corpus to
earn income or achieve other goals given for the benefit of the beneficiary
An express trust may create a form of contract pour atrui
f. Fiduciary
Essentially Contractual in Nature; Need No Particular Wordings
1444. No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.
What important is whether the trustor manifested an intention to create the kind of relationship which in law is
known as trust. (Julio v. Dalandan)
A clear intention to create trust must be shown, and the proof of fiduciary relationship must be clear and
convincing. (Canezo v. Rojas)
• Based on Property Relationship
􏰀 What distinguishes a trust from other relations is the separation of legal title and equitable ownership of the
property. In a trust relation, legal title is vested in the fiduciary while equitable ownership is vested in a cestui que
trust (Canezo)
• 􏰀 Trust, in its technical sense, is a right of property, real or personal, held by one party for the benefit of another.
(Guy v. CA)
1. Fiduciary
2. 􏰀 The juridical concept of a trust, which in a broad sense involves, arises from, or is the result of, a fiduciary
relation between the trustee and the cestui que trust as regards certain property—real, personal, funds or money,
or choses in action—must not be confused with an action for specific performance. A trustee cannot invoke the
statute of limitations to bar the action and defeat the rights of the cestuis que trustent. (Pacheco v. Arro)
 Express Trust must be Proven
An express trust cannot be proven by parol evidence.
• A trust must be proven by clear, satisfactory, and convincing evidence. It cannot rest on vague and
uncertain evidence or on loose, equivocal or indefinite declarations.
• 􏰀 Rule: the burden of proving the existence of a trust is on the party asserting its existence
• 􏰀 The presence of the following elements must be proved:
1. a) a trustor or settler who executes the instrument creating the trust
2. b) a trustee, who is the person expressly designated to carry out the trust
3. c) the trust res, constituting of duly identified and definite real properties
4. d) the cestui que trust, or beneficiaries whose identity must be clear
3. Kinds of Express Trust
A. 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 property may not be established by parol evidence;
thus, it must be proven by some writing or deed
• o However, if the parties to the action, during the trial, make no objection to the admissibility of the oral
evidence to support the contract, there is deemed to be a waiver
• 􏰀 The requirement that express trust over immovable must be in writing should be added as being
governed by the Statute of Frauds (Gamboa v. Gamboa)
• Contractual/Inter vivos Trust
􏰀 An inter vivos trusts are expressed trust pursued in the form of donation, and which
therefore become solemn contracts which must comply with the solemnities mandated by
the Law on Donations
• Testamentary Trust
• When an express trust is created under the terms of the last will and testament of the
testator, it is a testamentary trust and is governed by the Law on Succession
• o Unless the will conforms with the solemnities and conditions set by law, it will be void
together with the testamentary trust sought to be created therein
• A testamentary trust was created by a provision in the will whereby the testator proposed to
create trust for the benefit of a secondary school to be established in the town of Tayabas,
naming as trustee the ayutamiento of the town or if there be none, then the civil governor of
the Province of Tayabas. (Gov’t of the Phil. Islands v. Abadilla)
• Pension or Retirement Trusts
Publicly-regulated trusts would be those where the State provides the vehicle by which
institutions are allowed to administer large funds for the benefit of the public. Among such
funds created under the law would be the pension and benefits funds administered by the
GSIS, the SSS and the Pag-Ibig Fund. Tax laws provide for incentives to the setting-up of
retirement funds for employees. All such funds are really being administered for the
beneficiaries thereof through the medium of trust.
• Charitable Trusts
•Parties to the Express trust
a) Trustor—a person who establishes a trust (Art. 1440)
b) Trustee—one in whom confidence is reposed as regards property for
the benefit of another person (Art. 1440)
Trustee must have legal capacity to accept the trust
Failure of Trustee to Assume the Position
1445. No trust shall fail because the trustee appointed declines the designation,
unless the contrary should appear in the instrument constituting the trust.
In case of refusal to accept the trust by the trustee, the court will appoint a
trustee
• But, if the appointment of the trustee is a material provision, the trustor
can provide that a refusal of the trustee to accept the trust shall result in
the failure or nullification of the same
Obligations of the Trustee (Rule98 of Rules of Court)
Sec. 1. Where trustee appointed. - A trustee necessary to carry into effect the provisions
of a will or written instrument shall be appointed by the Court of First Instance in which
the will was allowed if it be a will allowed in the Philippines, otherwise by the Court of
First Instance of the province in which the property, or some portion thereof, affected
by the trust is situated.
Sec. 2. Appointment and powers of trustee under will; Executor of former trustee need
not administer trust. - If a testator has omitted in his will to appoint a trustee in the
Philippines, and if such appointment is necessary to carry into effect the provisions of
the will, the proper Court of First Instance may, after notice to all persons interested,
appoint a trustee who shall have the same rights, powers, and duties, and in whom the
estate shall vest, as if he had been appointed by the testator. No person succeeding to a
trust as executor or administrator of a former trustee shall be required to accept such
trust.
• Sec. 3. Appointment and powers of new trustee under written instrument. - When a trustee
under a written instrument declines, resigns, dies, or is removed before the objects of the trust
are accomplished, and no adequate provision is made in such instrument for supplying the
vacancy, the proper Court of First Instance may, after due notice to all persons interested,
appoint a new trustee to act alone or jointly with the others, as the case may be. Such new
trustee shall have and exercise the same powers, rights, and duties as if he had been originally
appointed, and the trust estate shall vest in him in like manner as it had vested or would have
vested, in the trustee in whose place he is substituted; and the court may order such
conveyance to be made by the former trustee or his representatives, or by the other remaining
trustees, as may be necessary or proper to vest the trust estate in the new trustee, either alone
or jointly with the others.
• Sec. 5. Trustee must file bond. Before entering on the duties of his trust, a trustee shall file
with the clerk of the court having jurisdiction of the trust a bond in the amount fixed by the
judge of said court, payable to the Government of the Philippines and sufficient and available
for the protection of any party in interest, and a trustee who neglects to file such bond shall be
considered to have declined or resigned the trust; but the court may until further order exempt
a trustee under a will from giving a bond when the testator has directed or requested such
exemption, and may so exempt any trustee when all persons beneficially interested in the trust,
being of full age, request the exemption. Such exemption may be cancelled by the court at any
time and the trustee required to forthwith file a bond.
• Sec. 6. Conditions included in bond. - The following conditions shall be deemed to be a
part of the bond whether written therein or not:
• (a) That the trustee will make and return to the court, at such time as it may order, a true
inventory of all the real and personal estate belonging to him as trustee, which at the
time of the making of such inventory shall have come to his possession or knowledge;
• (b) That he will manage and dispose of all such estate, and faithfully discharge his trust in
relation thereto, according to law and the will of the testator or the provisions of the
instrument or order under which he is appointed;
• (c) That he will render upon oath at least once a year until his trust is fulfilled, unless he
is excused therefrom in any year by the court, a true account of the property in his hands
and of the management and disposition thereof, and will render such other accounts as
the court may order;
• (d) That at the expiration of his trust he will settle his accounts in court and pay over and
deliver all the estate remaining in his hands, or due from him on such settlement, to the
person or persons entitled thereto.
• But when the trustee is appointed as a successor to a prior trustee, the
court may dispense with the making and return of an inventory, if one has
already been filed, and in such case the condition of the bond shall be
deemed to be altered accordingly.
 • Generally, trustee does not assume personal liability on the trust as to properties
outside the trust estate
• When the transaction at hand could have been entered into by a trustee either as
such or in its individual capacity, then it must be clearly indicated that the
liabilities arising therefrom shall be chargeable to the trust estate, otherwise they
are due from the trustee in his personal capacity (Senguan v. Phil. Trust Co.)
Trustee generally entitled to receive a fair compensation for his services
Under Section 7 of Rule 98 of the Rules of Court, if the compensation of the trustee
is not determined in the instrument creating the trust, his compensation shall be
fixed by the court that appointed him.
1. Beneficiary—the person for whose benefit the trust has been created (Art. 1440)
2. In regard to private trusts, it is not always necessary that the cestui que trust
should be named, or even be in esse at the time the trust is created in his favor
(Abadilla) Acceptance by beneficiary of gratuitous trust is not subject to the rules
for the formalities of donations
3. The Corpus or the Res
The subject matter of the trust
How Express Trust Terminated
Destruction of the Corpus
When the entire trust estate is loss or destroyed, the trust is extinguished since the underlying proprietary
basis no longer exists to warrant any legal relationship between the trustee and the beneficiary.
Revocation by the Trustor
In a revocable express trust, the trustee may simply invoket he revocation or termination clause found in the
deed of
trust thereby revoking the trust and conveying notice thereof to the trustee. Unless there is reserved power to
revoke, the general rule is that an express trust is irrevocable.
Achievement of Objective, or Happening of the Condition Provided for in the Trust Instrument
When the trust instrument provides the objective or the condition upon which the trust shall be extinguished,
say when the trust instrument provides that full ownership in the trust properties shall be consolidated in the
person of the beneficiary once he reaches the age of majority, the happening of the condition shall terminate
the trust
Confusion or Merger of Legal Title and Beneficial Title in the Same Person
When the trustee of an existing trust becomes the beneficiary thereof, or vice versa, the trust relation is ipso
jure extinguished, for it is difficult to see how a person can owe fiduciary duties to himself.
Breach of Trust
When a trustee breaches his duty of loyalty, it would constitute legal basis by which to terminate the trust
This operates as a renunciation of the trust and the persons interested as beneficiaries in the property are
entitled to maintain an action to declare their right and remove the unfaithful trustee.
Upon the Death of Trustee
Unless otherwise expressly stipulated in the trust instrument, the death, civil
interdiction, insanity or insolvency of the trustee does not necessarily terminate the
trust but a new trustee will be appointed
The reason why a trust does not fail for want of a trustee is that to permit it to fail for
this reason would be contrary to the intention of the trustor in creating the trust. The
trustor is primarily interested in the disposition of the beneficial interest in the
property, and the matter of its administration is a subsidiary consideration.
(Tolentino, at p. 676.)
A trust terminates upon the death of the trustee where the trust is personal to the
trustee in the sense that the trustor intended no other person to administer it
o After Crispulo’s death, the respondent had no right to retain possession of the
property. At such point, a constructive trust would be created over the property by
operation of law
o Where one mistakenly retains property which rightfully belongs to another, a
constructive trust is the proper remedial devise to correct the situation
• Generally Express Trusts Not Susceptible to Prescription
• 􏰀 When there exists an express trust, prescription and laches will run
only from the time the express trust is repudiated
The rule requires a clear repudiation of the trust duly communicated to the
beneficiary
For acquisitive prescription to bar the action of the beneficiary against the
trustee, in an express trust, for the recovery of the property, it must be
shown that:
a) Trustee has performed unequivocal acts of repudiation
amounting to an ouster of the cestui que trust
b) Such positive acts of repudiation have been made known to the
cestui qui trust
c) Evidence thereon is clear and conclusive
implied Trusts
1. Listing of Implied Trusts Not Exclusive; Founded on Equity
1447. The enumeration of the following cases of implied trust does not exclude other established by
the general law of trust, but the limitation laid down in Art. 1442 shall be applicable.
• Implied trusts—from the facts and circumstances of a given case, the existence of a trust
relationship is inferred inorder to effect the presumed intention of the parties or to satisfy
the demands of justice or to protect against fraud
• Those which are deducible from the nature of the transactions 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
a) Resulting Trusts
A trust which is raised or created by the act or construction of law
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
Based on the equitable doctrine that valuable consideration and not legal title determines the
equitable title or interest and are presumed always to have been contemplated by the parties
 Constructive Trusts
• 􏰀 A trust raised by construction of law, or arising by operation of law
• 􏰀 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
A constructive trust is not a trust in technical sense
There is neither promise nor fiduciary relations
The so-called trustee does not recognize any trust and has no intent to hold the property for
the beneficiary
Otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary
trust, or an implied trust
􏰀 A trust by operation of law which arises contract to intention and in invitum, against on who,
by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or
by any form of unconscionable conduct, artifice, concealment, or questionable means, or who
in any way against equity and good conscience, either has obtained or holds the legal right to
property which he ought not, in equity and good conscience, hold and enjoy Constructive trusts
are fictions of equity that the courts use as devices to remedy any situation in which the holder
of the legal title may not, in good conscience, retain the beneficial interest
RESULTING TRUST CONSTRUCTIVE TRUST

Based on equitable doctrine that valuable Created by the construction of equity in order to
consideration, and not legal title, determines the satisfy the demands of justice and prevent unjust
equitable title or interest enrichment

Presumed always to have been contemplated by Arise contrary to intention against who [in bad faith]
the parties ought to hold the legal right to property
How to Prove Implied Trust
􏰀 Must be proven by clear, satisfactory and convincing evidence, and cannot
rest on vague and uncertain evidence or on loose, equivocal or indefinite
declarations
􏰀May be proven by oral evidence, but the evidence must be trustworthy and
received by the courts with extreme caution, and should not be made to rest
on loose, equivocal or indefinite declarations
Distinguished from Quasi-Contracts
Both embody the principle of equity above strict legalism
• Purchase of Property where Beneficial Title in One Person, but Price Paid by
Another Person
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 mplied
by law, it being disputably presumed that there is a gift in favor of the child.
• Rationale: one who pays for something usually does so for his own benefit
Purchase of Property where Title is Placed in the Name of Person who Loaned
the Purchase Price
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 it is paid. The latter may redeem the
property and compel a conveyance thereof to him.
It is only after the beneficiary reimburses the trustee of the purchase price that
the former can compel conveyance of the property from the latter
When Absolute Conveyance of Property Effected only as Means to Secure
Performance of Obligation of the Grantor—Equitable Mortgage
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.
 • Two or More Persons Purchase Property Jointly, but Places Title in One of Them
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.
• Property Conveyed to Person Merely as Holder thereof
• 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.
• Under this, the implied trust is enforceable even when the agreement is not in
writing
• This article applies if the person conveying the property did not expressly state
that he was establishing the trust but such is the intention
7. Donation of Property to a Donee who shall have No Beneficial Title
8. 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.
7. Land Passes by Succession but Heir Places Title in a Trustee
8. 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.
9. When Trust Fund Used to Purchase Property which is Registered in Trustee’s Name
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.
• 10. When Property is Acquired through Mistake or Fraud
• 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.
• When a person through fraud succeeds in registering the property in his name, the law creates what
is called a “constructive or implied trust” in favor of the defrauded party and grants the latter the
right to recover the property fraudulently registered within a period of 10 years (Heirs of Patiwayon
v. Martinez)
• o The period reckoned from the issuance of the adverse title to the property which operates as a
constructive notice
• Public policy demands that a person guilty of fraud or, at least, of breach of trust, should not be
allowed to use a Torrens title as a shield against the consequences of his wrongdoing
1.Does Implied Trust Prescribe or may it be Defeated by Laches
The prescriptive period of 10 years for an action of reconveyance applies only if there is an actual
need to reconvey the property as when the plaintiff is not in possession thereof

Point of reference is the date of registration of the deed or the date of the issuance
of the certificate of title of the property provided that the property has not been
acquired by an innocent purchaser for value
When plaintiff is in possession of the subject property, the action, being in effect that of quieting of
title to the property, does not prescribe
Prescription cannot apply when title of Trustee is Void due to Forgery
In constructive trusts, prescription may supervene even if the trustee does not repudiate the
relationship
Repudiation of the said trust is not a condition precedent to the running of the prescriptive period
Close relationship and Continued recognition of Trust relationship
• The doctrine of laches is not to be applied mechanically as between the near relatives which
would tend to excuse what otherwise may be considered a long delay in taking action Moreover,
continued recognition of the existence of the trust precludes the defense of laches
Though the Statute of Limitations does not run between the trustee and cestui que trust as long as
the trust relations subsist, it does run between the trust and third persons Prescription cannot apply
against a Minor Beneficiary in Implied Trust
 • PRESCRIPTION FOR EXPRESS TRUSTS
• GR: NOT SUSCEPTIBLE TO ACQUISITIVE PRESCRIPTION
• 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 makes such repudiation known to the beneficiary or
cestui que trust [Diaz v. Gorricho and Aguados].
• Summary of Prescription Rules for Express Trusts [Ramos v. Ramos]
1. a) A trustee cannot acquire by prescription the ownership of the property entrusted to him; or
2. b) An action to compel a trustee to convey property registered in his name in trust for the benefit of the cestui que trust
does not prescribe; or
3. c) The defense of prescription cannot be set up n an action to recover property held by a person in trust for the benefit
of another; or
4. d) The property held in trust can be recovered by the beneficiary regardless of the lapse of time
• The basis of the rule is that the possession of the trustee is not adverse. Not being adverse, he do
• XPN: WHEN ACQUISITIVE PRESCRIPTION MAY ARISE IN EXPRESS TRUSTS
• The trustee who is in adverse possession may claim title by prescription where it appears that:

a. The trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust
b. Such positive acts of repudiation have been made known to the cestui que trust
c. The evidence thereon is clear and conclusive
• These conditions were provided in Cortez v. Oliva and were also recognized in Ramos.
Valid "Repudiation" In Express Trusts
• An open disavowal of trust must be made by positive acts amounting to an ouster
of, and made known to the cestui que trust, in order that the latter may be affected
[Siumira v. Vista]
• A trustee who obtains a Torrens title over property held in trust by him for another
cannot repudiate the trust by relying on the registration. Clear repudiation of the
trust duly communicated to the beneficiary is required, such as when a petition for
reconstitution of title is filed [Heirs of Tranquilino Lebiste v. Heirs of Jose Lebiste]
• Registration of full ownership (distinguished from registration of only naked
ownership or legal title) does not amount to an act of repudiation.
• PRESCRIPTION FOR IMPLIED TRUSTS
• Doctrines on prescription of implied trusts took a long time to crystallize because
the SC was trying to make a single set of rules for both resulting and constructive
trusts. Only when SC started to treat
• Resulting trusts as similar to express trusts did the rule on constructive trusts start
to become clear.
OLD CIVIL CODE JURISPRUDENCE
• Under the OCC which did not have provisions on trusts, the right of the cestui que trust
against the trustee in implied trusts to demand a reconveyance of the property was derived
from decisions of the SC.
• In those decisions, it was laid down that prescription CANNOT be set up as a defense in an
action that seeks to recover property held in trust for another. Still, there were a few
decisions that diverged from the main rule of imprescriptibility.
• [Claridad v. Benares] Plaintiffs were made to sign deeds of sale using fraud, in favor of
Benares, believing them to be mere lease contracts. The fraud was discovered in 1940. The
action was brought in 1945. The Court held that the action was barred since the action could
be brought only within 4 years from discovery of fraud.
• [Marabiles vs Quinto – JBL Reyes dissent] In constructive trusts, based on fraud or tort, the
element of trust and confidence is not present, and the authorities are agreed that NO
REPUDIATION IS REQUIRED for the application of extinctive prescription.
• [Diaz vs. Gorricho and Aguado] For express trusts, prescription cannot be used as a
defense unless there is an open repudiation of the trust. In constructive trusts, laches
constitute a bar to actions to enforce the trust.
• The reason for this difference in treatments is the existence of promise or fiduciary relation.
In constructive trusts, these are inexistent. The trustee does not recognize any trust and has
no intent to hold for the beneficiary. Therefore, the latter (beneficiary) is not justified in
delaying action to recover his property.
• SC however, was not firm in either position during this period
 Continuing Relevant Jurisprudence under the OCC Regime
1. Defense of prescription or laches by the trustee cannot be accepted when the cestui que
trust is a minor since the latter was not in a position to defend himself [Castro v. Castro]
2. Prescription cannot arise in favor of a trustee who still acknowledges the rights of the
cestui que trust [Geronimo and Isidro v. Nava]
JURISPRUDENCE UNDER THE NEW CIVIL CODE
• In this regime there were two streams of decisions: those following the doctrine of
imprescriptibility and those acknowledging that prescription requires clear repudiation.
• [Alonza vs. Capunitan] The prescriptibility of an action for reconveyance based on implied
or constructive trust is settled to be in 10 years
• [Juan vs. Zuhiga] Actions to enforce a trust are imprescriptible
• [Gerona v. de Guzman] When the underlying basis of the implied trust is fraud, the
prescriptive period is 4 years, beginning to run from the inscription of the title in the name
of the purported trustee
• [Gonzales v Jimenez Sr, Fabian v. Fabian, Dela Cerna v. Dela Cerna] The 10-year
prescriptive period is to be followed for all types of trusts
• [Bueno v. Reyes] The better rule is that prescription does supervene where the trust is
merely an implied one
When Prescription Is Allowed, What Is the Period Applicable?
• [Bueno v. Reyes] Since the constructive trust arises from reason of bad faith or mistake,
the cause of action upon such trust must be deemed to have accrued only upon the
discovery of such bad faith or mistake. A 10 year prescriptive period is to be used.
• An action for the enforcement of a constructive trust, the ultimate object of which is the
reconveyance of a property lost through breach of fiduciary relations and/or fraud, must be
filed within 4 years from discovery of the fraud [Miguel v. CA]
• [Ramos v. Ramos]
a) The rule of imprescriptibility of action to recover property held in trust may apply to
resulting trusts as long as the trustee has not repudiated the trust
b) The rule of imprescriptibility was misapplied to constructive trusts
c) With respect to constructive trusts, prescriptibility of an action for reconveyance is now
settled
d) Prescription may supervene in a n implied trust
e) Whether the trust is resulting or constructive, its enforcement may be barred by laches
• The prescriptibility of an action for reconveyance based on implied or constructive trust is
now settled. It prescribes in 10 years. Express trusts prescribe 10 years from repudiation
of the trust [Escay v. CA]
• Since this case, the 10-year prescriptive period for implied trusts has been affirmed on a
consistent basis
When Does the 10-Year Prescriptive Period Begin to Run?
• Majority of the recent SC decisions point to the registration of title for registered land as the reckoning time.
• Some decisions however use the actual date of discovery of the fraud as the reckoning time when implied
trusts is founded on fraud
When Registration in the Name of Trustee Was Integral Part of the Trust Arrangement
• [Tongoy v. CA] The implied trust ITC resulted from simulated sales which were made for the purpose of
enabling the transferee to save the properties from foreclosure in favor of the co-owners. The Court did not
apply the theory of constructive notice resulting from registration on ground that “during that period the
subsisting trust was unrepudiated and the cestui que trustants could not be expected to demand transfer of
title in their names”. The period was counted from the date of recording the release of mortgage in the
Registry of Deeds
When Cestui Que Trust is in Possession of the Res
• [Caragay-Layno v. CA] If the legitimate owner of land has always been in possession thereof, but the land
was fraudulently registered to another, the constructive notice and 10-year prescriptive period rules based
on issuance of title are not applicable. This is because the action brought by the cestui que trustant is really
one for quieting of title which under the Civil Code is imprescriptible.
When Prevailing Circumstances Did Not Grant Cestui Que Trust Sufficient Time to Discover
the Fraud
• [Adille v. CA] Petitioner misrepresented that he was the only heir and child of the decedent, but actually had
half-brothers and sisters whose names were not included in the TCT. The title was issued in 1955, the action
was filed in 1974. SC held that while actions to enforce a constructive trust prescribes in 10 years from
registration, it is not prepared to count the period from such date in this case. It held that the right
commenced from the time of actual discovery
• Adaza v. CA] A Deed of Donation of land was executed by a father in favor of his daughter
on the condition that the land be shared with her siblings. The daughter registered the
land in her name with the intention that she would hold one-half in favor of her brother. At
the time the action was instituted, 12 years had passed since the OCT was issued and
more than 19 years since the Deed was executed. SC held that the existence of a
confidential relationship based upon (such as consanguinity ITC) is an important
consideration. The doctrine of laches does not apply as between near relatives. The
relationship tends to explain what otherwise appears as long delay.
• [Gonzales vs. IAC] Property was registered to one Fausto Soy with understanding that he
would hold it for and in behalf of other co- owners. SC characterized the relationship as an
implied trust under NCC 1456. It said that the trust in this case is a constructive trust
arising by operation of law, and is not a trust in the technical sense. It was therefore held
to be subject to the prescription period of 10 years reckoned from the issuance of the
adverse title.
• LAND WITHOUT REGISTRATION - 10 YEAR PERIOD DOES NOT EVEN BEGIN
TO RUN
• [Pedrano v. Heirs of Benedict Pedrano] An action for reconveyance of land based on
implied or constructive trust prescribes in 10 years from the date of registration of the
deed or date of issuance of certificate of title. Without an OCT, the reckoning date cannot
be determined. Accordingly, it also cannot be determined whether the period already
lapsed or not.
• [Lopez v. CA] The right to seek reconveyance based on implied or constructive trust is not
absolute. It is subject to extinctive prescription. It prescribes in 10 years reckoned from
date of issuance of OCT or TCT. Since such issuance operates as a constructive notice to
the world, discovery of fraud is deemed to have taken place at that time.
• WHEN REGISTRATION COVERS A VOID TITLE
• [Macababbad Jr v. Masirag] An Extrajudicial Settlement with Simultaneous Sale of
Registered Land was executed by forging the signature of some forced heirs. This allowed
the transfer of land to Macababbad in 1967. The forced heirs learned of this in 1999 and
filed the action on the same year. SC held that since the nullity of the extrajudicial
settlement of estate was the primary issue, the action does not prescribe pursuant to NCC
1410
• [Ferrer v. Bautista] Implied trust doctrines apply only when title of the purported trustee is
valid (reiterated in Macababbad). A free patent and later OCT was issued in favor of an
occupant of land that accumulated by way of accretion. It shuld’ve been awarded to the
owner of an adjacent land who registered the title. SC did not apply the prescriptive period
of 10 years on the ground that no constructive trust had arisen.
• RULES OF PRESCRIPTION ON RESULTING TRUSTS FOLLOW THOSE OF
EXPRESS TRUSTS
• [O’Laco v. Co Cho CM] In resulting trusts, prescription does not begin to run until there is
an express repudiation of the trust by the purported trustee. Requisites of effective
repudiation:
• a) Trustee performs unequivocal acts of repudiation amounting to ouster of cestui que
trust
• b) Such acts are made known to cestui que trust c) Evidence is clear and convincing
• [Cahezo v. Rojas] In express and resulting trusts, the trustee cannot acquire property
entrusted by prescription unless he repudiates the trust. Repudiation is condition
precedent for the running of the period. In constructive trusts however, no repudiation is
required for the running of the prescriptive period. Such is because constructive trusts do
•WHEN RES HAS PASSED ON TO A BUYER IN GOOD
FAITH FOR VALUE
• [Khemani vs. Trinidad] An action for reconveyance based on implied
trust prescribes in 10 years from issuance of certificate of title. Such
action cannot prosper however when the property has not been
acquired by an innocent purchaser for value.
• [Caviie v. Litania-Hong] When the registered owner to whom the land
was transferred knew that the land described belonged to another,
and was never in possession thereof, the true owner may bring an
action to have the ownership of the title of the land to be judicially
settled. An action for reconveyance may be filed which prescribes in
10 years from the date of issuance of certificate of title, provided that
the property has not been acquired by an innocent purchaser for
value. ITC, the action for reconveyance was filed more than 12 years
after issuance of the Torrens title and the remedy was therefore “time-
barred”.
TRUST
1.Q: On 01 January 1980, Redentor and Remedies entered into an agreement by virtue of which the
former was to register a parcel of land in the name of Remedies under the explicit covenant to
reconvey the land to Remigio, son of Redentor, upon the son’s graduation from college. In 1981, the
land was registered in the name of Remedies.
• Redentor died a year later or in 1982. In March 1983, Remigio graduated from college. In February
1992, Remigio accidentally found a copy of the document so constituting Remedies as the trustee of
the land. In May 1994, Remigio filed a case against Remedies for the reconveyance of the land to
him. Remedies, in her answer, averred that the action already prescribed. How should the matter be
decided?
• A: The matter should be decided in favor of Remigio (trustee) because the action has not prescribed. The
case at bar involves an express trust which does not prescribe as long as they have not been repudiated by
the trustee (Diaz vs. Gorricho, 103 Phil, 261).
2. Q: Joaquin Reyes bought from Julio Cruz a residential lot of 300 square meters in Quezon City for
which Joaquin paid Julio the amount of P300, 000.00. When the deed was about to be prepared
Joaquin told Julio that it be drawn in the name of Joaquina Roxas, his acknowledged natural child.
Thus, the deed was so prepared and executed by Julio. Joaquina then built a house on the lot where
she, her husband and children resided. Upon Joaquin’s death, his legitimate children sought to
recover possession and ownership of the lot, claiming that Joaquina Roxas was but a trustee of their
father. Will the action against Joaquina Roxas prosper? (1993 BAR)
A: Yes, because there is a presumed donation in favor of Joaquina under Art. 1448 of the Civil Code
( Civil Code (De Los Santos v. Reyes, 27 January 1992, 206 SCRA 437 ). However, the donation
should be collated to the hereditary estate and the legitime of the other heirs should be preserved.
• Q: In 1980, Maureen purchased two lots in a plush subdivision registering
Lot 1 in her name and Lot 2 in the name of her brother Walter with the latter’s
consent. The idea was to circumvent a subdivision policy against the
acquisition of more than one lot by one buyer. Maureen constructed a house
on Lot 1 with an extension on Lot 2 to serve as a guest house. In 1987,
Walter who had suffered serious business losses demanded that Maureen
remove the extension house since the lot on which the extension was built
was his property. In 1992, Maureen sued for the reconveyance to her of Lot 2
asserting that a resulting trust was created when she had the lot registered
in Walter’s name even if she paid the purchase price. Walter opposed the suit
arguing that assuming the existence of a resulting trust the action of
Maureen has already prescribed since ten years have already elapsed from
the registration of the title in his name. Decide. Discuss fully. (1995 BAR)
• A: This is a case of an implied resulting trust. If Walter claims to have acquired
ownership of the land by prescription or if he anchors his defense on extinctive
prescription, the ten year period must be reckoned from 1987 when he demanded
that Maureen remove the extension house on Lot No. 2 because such demand
amounts to an express repudiation of the trust and it was made known to Maureen.
The action for reconveyance filed in 1992 is not yet barred by prescription.
• Q: Explain the 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 operation of law and construed 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 (Heirs of Lorenzo Yap v. Court of Appeals, 371 Phil. 523 [1999]). The
following are examples of constructive trust:
• 1. Article 1456 NCC which provides: “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.”
• 2. Article 1451 NCC which provides: “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.”
• 3. Article 1454 NCC which provides: “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.”
• 4. Article 1455 NCC which provides: “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 to whom the findings belong.