On Donation and Sale of Property Using Loaned

Money In Relation to Implied Trusts

(Arts. 1449 and 1450)

JAYPEE N. ABELLA
 Basic Facts on Donation
• Essentially gratuitous, yet onerous in some instances (see
Comments of Villanueva in his book on Sales)
• Subject to restrictions under the law (e.g. Under Art. 739
(1) of the New Civil Code of the Philippines, donation
cannot be made between persons who were guilty of
adultery or concubinage at the time of donation)
• The selection of donees is also bound to restrictions (e.g.
Under Art. 741 of the same Code stipulates that minors
and those who are incapacitated to enter into contracts
cannot become donnees)
Donation in relation to Implied Trust…

• ART. 1449. There is also an implied trust

when a donation is made to a person but it
appears that although the legal estate is
transmitted to the donee, he nevertheless is
either to have no beneficial interest or only a
part thereof.
 As cited in previous Article
• There is a donor and a donee
• There is a donation in favor of a donee
• HOWEVER:
– The donee has no beneficial interest in said
donation or;
– If the donee has, it is only part and parcel NOT
WHOLE
– There is a beneficiary (person) who actually
benefits the said donation.
 Let us examine…
• In donations in Arts. 735-773 of the NCC:
Donee will accept
the donation
personally or
Donor Donates Donee through authorized
representative

If there is a need to
Donee exclusively register the
enjoys or benefits donation, as to bind
from the donation third parties, then
donee registers
 Whereas
• In Art. 1449….
Donee will accept
the donation
personally or
Donor Donates Donee through authorized
representative

Donee does not If there is a need to

Beneficiary exclusively register the
enjoys or donation, as to bind
benefits from third parties, then
the donation donee registers
 Situations Contemplated
• A donated a parcel of land to B. Actually that
parcel of land is for the benefit of C.
• Here B, although a donee, is a trustee of the
cestui que trust
• C is the beneficiary of the donation
• B, despite being a donee, does not have
beneficial interest over the donation, or, if
there was, only a part thereof.
 Why Is This So?
• The purpose is not to “simulate” a donation
• The donee is made a trustee based on certain
characteristics known by the donor
• The donor preferred the mode of “donating”
to the “donee”, and which actual purpose is to
benefit a beneficiary other than the donee
 Sale in relation to Implied Trust…
• ART. 1450. If the price of a sale of property is
loaned or paid by one person for the benefit
of another and the conveyance is made to
the lender or payor to secure the payment of
the debt, a trust arises by operation of law in
favor of the person to whom the money is
loaned or for whom it is paid. The latter may
redeem the property and compel a
conveyance thereof to him.
 Notes in Sale
• Contract of Sale under Art. 1458 of the New
Civil Code is bilateral, onerous…(see
Villanueva’s Comments on Sales)
• It is whereby vendor transfers ownership and
possession of a determinate thing to the
vendee in exchange for consideration
 The law contemplates…
• In Art. 1458 of the NCC:

Vendor Sells to Vendee

Pays purchase price to

Receives Pays purchase

purchase price price

Benefits from Benefits from

the purchase the received
price received thing
 It seemed different from …
• Art. 1450 of the NCC:
Accepts
conveyed thing

Releases thing
Debtor Loans from Creditor
after
reimbursement
Lends or gives

Receives
Uses loan as Pays purchase price
purchase price Vendor
Delivers or sells
After Benefits from
reimbursing the purchase
Conveys the
creditor, may price received
thing in favor
redeem the
of the creditor
property or
 Situations Contemplated (2)
• A, who has no money, approached B and obtained loan
from the latter.
• A week thereafter, A then bought a car from C using the
money of B.
• A used the car as security for its loan to B.
• Here B is not the beneficiary of the car, even if the
money used in purchasing the said car is B’s.
• B is only a trustee with respect to the car which A can
redeem after reimbursing B the amount of the money
which the latter lend the former.
 According to De Leon
• Even if the money of another person or of a
donor was used in purchasing the property,
that fact of such usage cannot ipso fact create
a trust in favor of the lender.
• However, a trust in favor of the borrower
arises when the property purchased using the
money of the other person or of the donor is
conveyed to the lender or payor.
 Notice…
• De Leon mentioned: “In this case, the real purchaser
is the borrower. After payment of the amount
loaned or paid, he has the right to redeem the
property and compel conveyance thereof to him
(Art. 1450; Trinidad vs. Ricafort, 7 Phil 449 [1907].),
even if there is no mention of the interest of the
borrower in the title of the lender.”
• While the law merely mentioned: “ The latter may
redeem the property and compel a conveyance
thereof.”
 Another situation…
• Supposed that A and B have an agreement that in the event that
A cannot pay its debt, it shall be understood that the purchased
property is considered sold to B, is that agreement allowed
under the law?
• No. According to De Leon: “An agreement between the parties
whereby the property purchased shall be considered sold to the
trustee in case the beneficiary fails to reimburse him is
tantamount to a pactum commissorium, which is expressly
prohibited by Article 2088 of the Civil Code for in such case
there would be automatic appropriation of the property by the
trustee in the event of failure of the beneficiary to pay the loan.
(Nakpil vs. Intermediate Appellate Court, 225 SCRA 456 [1993]).”
 Try these exercises
• Berta and Bert were best friends. Before Bert
died in 2006, Bert donated a parcel of land to
Berta. During that time, Berta knew that Bert
was infatuated with a certain Asiana. Asiana
now appears and claims as the true
beneficiary of the said donation. Berta refutes
on the ground that Berta is a donee in said
donation. Decide.
 Try these exercises
• Lot 1234, somewhere in Batangas, was purchased
using the money of Carlo. Actually, the purchaser
was a certain Carla and the said lot was made a
security in the loan obtained by Carla from Carlo.
Carla defaulted in her obligation to pay. Carlo now
would like to have the title of the said lot (originally
in Carla’s name) in the name of Carlo. Carlo,
knowing that you are one of the Top 10 Examinees
in the recent Bar Exam, consulted you for legal
advice.