TRUSTS

Trust – the fiduciary relationship between Trust Donation

one person having an equitable ownership An existing legal A transfer of
relationship and property and
in property and another owning the legal
involves the except in the case
title to such property, the equitable separation of legal of a gift in trust,
ownership of the former entitling him to and equitable title involves a
the performance of certain duties and the disposition of both
exercise of certain powers by the latter. legal and equitable
ownership.
 Trust implies confidence in a
relationship.
 A trust cannot be established in Trust Contract
Always involves an Legal obligation
violation of a law.
ownership, based on an
Trustor – a person who establishes a embracing a set of understanding
rights and duties supported by a
trust fiduciary in consideration,
character which which obligation
Trustee – one in whom confidence is
may be created by may or may not be
reposed as regards property for the a declaration fiduciary in
benefit of another person without a character.
consideration.
Beneficiary – the person for whose
benefit the trust has been created
Trust property – the subject-matter of a
 May be a natural person or a legal trust which is any property of value (real,
entity. personal, funds or money, or choses in
 The trust may provide for more action)
than one beneficiary.
 The trustor may establish a trust  Trust res must consist of property
with him as the trustee or the actually in existence; cannot be a
beneficiary. mere expectancy without a right or
 The trustor cannot be the sole interest or a mere interest in the
trustee and sole beneficiary. performance of a contract although
such interest is in the nature of a
Trust Bailment property right.
Delivery of property The bailee has
in trust necessarily possession of, CLASSIFICATION OF TRUSTS
involves a transfer without legal title to,
of legal title, or at the property subject 1. As to creation:
least a separation to the bailment
of equitable interest a. Express trust – one which can
and legal title, with come into existence only by the execution
the legal title in the of an intention to create it by the trustor or
trustee the parties
 b. Implied trust one which comes
into being by operation of law. It may be
either:
1. Resulting trust – one in which
the intention to create a trust is
implied or presumed in law
2. Constructive trust – one
imposed by law irrespective of, and
even contrary to, any such
intention for the purpose of
promoting justice, frustrating fraud,
or preventing unjust enrichment.
2. As to effectivity:
a. Testamentary trust – one shich
is to take effect upon the trustor’s death.
b. Trust inter vivos – one
established effective during the owner’s
life.
3. As to revocability:
a. Revocable trust – one which can
be revoked or cancelled by the trustor on
another individual given the power.
b. Irrevocable trust – one which
may not be terminated during the
specified term of the trust.
ELEMENTS OF EXPRESS TRUST
1. A competent trustor and trustee
2. An ascertainable trust res
3. Sufficiently certain beneficiaries
TERMINATION OF EXPRESS TRUST
1. Expiration of period fixed
2. Accomplishment of purpose
3. Mutual agreement of beneficiaries
4. Exercise of power to terminate
Express Trust – those trusts intentionally
created by direct and positive act of the
trustor, by some writing, deed, will or oral
declaration evincing an intention to create
the trust.
 Technical or particular forms of
words or phrases are not essential
to the manifestation of an intention
to create a trust.
KINDS OF EXPRESS TRUSTS
1. Charitable trust – one designed for the
benefit of a segment of the public or of the
public in general.
2. Accumulation trust – one that will
accumulate income to be reinvested by
the trustee in the trust for the period of
time specified.
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.
4. Sprinkling trust – one that gives the
trustee the right to determine the income
beneficiaries who should receive income
each year and the amount thereof.
When trustee may sue or be sued
alone – his trust must be express.
Acceptance of a trustee – necessary to
charge him with the office of trustee and
the administration of the trust and to vest
the legal title in him.
  Not necessary to its existence and
validity.
Declination, refusal or disqualification
of a trustee – unless a contrary intention
appears in the instrument constituting the
trust, it does not operate to defeat or void
the trust, nor does it operate to vest legal
as well as equitable title in the beneficiary.
Renunciation of a trust – can only be by
resignation or retirement with court
approval or agreement of the beneficiaries
and on satisfaction of all legal liabilities
growing out of the acceptance of the trust.
Acceptance of trust by beneficiary –
essential to the creation and validity of a
trust.
 Acceptance is presumed if there is
no proof to the contrary.
 If the trust imposes some onerous
condition, acceptance must be
shown.
 May be express or implied.
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.
KINDS OF IMPLIED TRUST
1. Resulting trust – raised by implication
of law and presumed always to have been
contemplated by the parties.
2. Constructive trust – raised by
construction of law or arising by operation
by law; a trust not created by 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 and
prevent unjust enrichment.
Express Trusts Implied Trusts
Creation of Trust
Created by the Come into being by
intention of the operation of law.
trustor or parties
Proof of Trust
Immovable - Immovable – may
cannot be proved be proved by oral
by parole evidence evidence
Repudiation of Trust
In order that laches Laches constitutes a
or acquisitive bar to actions to
prescription may enforce an implied
bar an action to trust even when
enforce an express there is no
trust, an express repudiation, unless
repudiation made there is
known to the concealment of the
beneficiary is fact giving rise to
required the trust.
 Enumeration of cases of implied
trust not exclusive.
 Implied trust founded upon equity.
 An implied trust may be converted to
an express trust by the recognition
by the implied trustee of the right to
the property of the owner.
 The rule that a trustee cannot
acquire by prescription ownership
over property entrusted to him until
and unless he repudiates the trust,
applies to express trust and resulting
implied trust.
 In constructive implied trusts,
prescription may supervene even if
the trustee does not repudiate the
relationship.
 Possession by trustee is, in law,
possession of the cestui que trust
and, therefore, it cannot be a good
ground for title by prescription.
 Trustee may claim title by
prescription founded on the adverse
possession where it appears that:
a. he has performed open and
unequivocal acts of repudiation
amounting to an ouster of the cestui
que trust or the other co-owners;
b. such positive acts of repudiation
have been made known to the cesui
que trust or the other co-owners;
c. the evidence thereon should be
clear and conclusive or convincing.
d. the period fixed by law has
prescribed
 The statute of limitations runs
between the trust and third
persons.
SPECIFIC ACTS WHICH ARE
CONSIDERED AS ACTS OF
REPUDIATION
a. Filing by a trustee of an action in
court against the trustor to quiet title to
property, or for recovery of ownership
thereof;
b. The issuance of the certificate of
title;
c. Issuance of such title;
d. Filing of the complaint for recovery
of possession;
e. One who is an apparent
administrator of property causes the
cancellation of the title thereto in the
name of the apparent beneficiaries
and gets a new certificate of title in his
own name.
f. Execution of a deed of partition and
on the strength thereof obtained the
cancellation of the title.
 An action for reconveyance to
enforce an implied trust in one’s
favor prescribes in 10 years from
the time the right of action accrues,
the action being based upon an
obligation created by law.
 The prescriptive rule applies only
when the plaintiff or the person
enforcing the trust is not in
possession of the contested party.
LACHES IN ACTION TO ENFORCE
TRUST
1. In case of express trusts – laches
applies from the time the trustee
openly denies or repudiates the trust
and the beneficiary is notified thereof.
2. In case of implied trust – may be
barred not only by prescription but also
by laches.
SALE TO A PARTY BUT PRICE PAID
BY ANOTHER
General rule: A resulting trust arises
in favour of a person from whom a
consideration comes for a conveyance
of property, to another.
 The trust created is sometimes
referred to as a purchase money
resulting trust.
 It is essential that (a) there be an
actual payment of money,
property, or service, or an
equivalent constituting valuable
 consideration and (b) such
consideration must be furnished
by the alleged beneficiary of a
resulting trust.
Exception: No trust is implied if the
person to whom the consideration
conveyed is a child, legitimate or
illegitimate, of the payor, because it is
presumed that a gift or donation was
intended in favor of the child.
 This presumption is rebuttable
by proof of a contrary intention,
and on such rebuttal, a
resulting trust arises.
PURCHASE BY A PERSON WITH HIS
OWN FUNDS FOR ANOTHER
A conveyance to one person on a
consideration from another raises a
resulting trust in favour of the latter, while
purchase by one person, on a
consideration furnished by himself, where
he takes the conveyance in the name of
another, raises a resulting trust in favour
of the former. (Art. 1448)
DONATION TO A PERSON BUT
BENEFICIAL INTEREST VESTED IN
ANOTHER – an implied trust arises. (Art.
1449)
PURCHASE WITH BORROWED FUNDS
1. Trust in favour of lender – purchase
does not raise a resulting trust in favour of
lender.
2. Trust in favour of borrower – a resulting
trust in the property, binding the lender or
payor (trustee) in favour of the borrower
(beneficiary) arises.
LEGAL TITLE TO LAND INHERITED BY
HEIR PLACED IN NAME OF ANOTHER
When a person who has acquired land by
inheritance causes the legal title to be
placed in the name of another, a resulting
trust is presumed in law in favour of the
true owner, the heir. (Art. 1451)
LEGAL TITLE TO PROPERTY
PURCHASED TAKEN IN ONE CO-
OWNER
When property is purchased by two or
more persons and by common consent
the legal title is placed in the name of only
one of the co-owners for the benefit of all,
a trust arises by implication of law in
favour of the others in proportion to the
interest of each. (Art. 1452)
CONVEYANCE UNDER A PROMISE TO
HOLD FOR, OR TRANSFER TO
ANOTHER
The trust established by virtue of Article
1453 is based on the promise or
representation of the grantee to hold the
property conveyed for, or transfer of the
grantor.
ABSOLUTE CONVEYANCE TO A
PERSON TO SECURE PERFORMANCE
OF GRANTOR’S OBLIGATION
The mortgagee or pledgee does not
become a trustee. But if an absolute
conveyance of property is made instead in
order to guarantee the performance of an
obligation of the grantor toward the
grantee, an implied trust is creaed by
operation of law for the benefit of the
grantor. (Art. 1454)
PURCHASE OF PROPERTY WITH USE raise the presumption of fraud. (Art.
OF TRUST FUNDS 1457)

A purchase by a trustee, guardian or other

person holding a fiduciary relationship of
property, where he takes the conveyance
in his own or third person’s name, using
trust funds for the purchase, establishes a
resulting trust for the benefit of the person
to whom the funds belong. (Art. 1455)

ACQUISITION OF PROPERTY
THROUGH MISTAKE OR FRAUD

 Where a party acquires through

mistake or fraud a legal title to
property to which another has a better
right, there is created by law what is
termed in jurisprudence as
constructive trust in favour of the
aggrieved party.
 The remedy of the landowner is to
bring an ordinary action in the
ordinary court of justice for
reconveyance or, if the property has
passed into the hands of an innocent
purchaser for value, for damages (Art.
1456)

PROOF OF IMPLIED TRUST

 An implied trust may be proved by

oral evidence.
 An implied trust cannot be
established contrary to the recitals of
a Torrens Title, upon vague and
inconclusive proof.
 The doctrine of implied trust finds no
application where there are no
proven facts to support it.
 The bare existence of confidential
relation between grantor and
grantee does not, standing alone,